Fertiliser manufacturer Yara International has reported lower Q1 operating income and revenues in line with reduced product prices and deliveries.
The company made an operating profit of NOK3.4 billion on sales of NOK25.05bn in the first three months of 2016, compared to NOK3.99bn and NOK27.77bn in Q1 2015. However, net income after non-controlling interests was NOK2.8bn in the latest period, up from NOK 729 million.
Yara's margins fell as realized prices dropped faster than input costs. The company’s average realized urea prices decreased by 20%, nitrates by 15% and compound NPK prices by an average 12%. Its average global gas cost was 32% lower year-on-year.
Globally, Yara’s fertilizer deliveries were 5% lower at 6.23 million tonnes, compared to 6.57m tonnes in the previous period, reflecting lower nitrate and compound NPK sales and reduced country sales in all markets except Brazil.
European fertilizer deliveries were 9% down, with nitrates falling by 18% and NPK compounds by 5%. The company expects European deliveries to catch up in Q2, and for full season deliveries to be close to last year's level. Globally, it says the farm margin outlook and incentives for fertilizer application remain supportive.
"Yara reports strong results in a challenging market environment, even as weaker fertilizer prices and lower deliveries impacted earnings," comments Svein Tore Holsether, Yara president and chief executive. "Our operational performance improved, compared with the Q4 2015, with both ammonia and finished fertilizer production running at high levels. In addition, the lower natural gas cost in Europe continued to improve Yara's competitive position during the quarter."