Fertilizer maker Yara has benefited from the ongoing run-up in agricultural commodities, mainly stemming from a record drought in the United States Midwest Corn Belt that is turning a bumper crop into a below average one. The share has climbed 20% in a month even when the Norwegian krone has also performed very well. This has pretty much erased the losses it took in the preceding couple of months. It is not so simple of course but the current thinking is that higher commodity prices will support fertilizer demand going forward. Yara thinks this is actually a longer term trend.
Strong second quarter result backed by 14% higher fertilizer deliveries with revenue up to 21.4 billion NOK and increased margins allowed the upswing to continue during this week. When taking into account special items and currency effect, earnings per share fell just below 10 NOK from over 10.5 in the previous quarter but still handily bested
7.73 from one year ago. When cleaning that effect, the quarter is at record levels.
Third quarter outlook is also positive although Chinese urea exports are a question mark since the punitive tax rate that is typically in place from November to June is down for the off-season and then comes back to 110% again in November (in previous years the off-season has actually been couple months longer). This can halt the rally in those off months if the exporters see it fit to ship this energy intensive product. Still domestic price has also stayed strong suggesting there is no large oversupply.
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