OSLO, Norway (Reuters) — Yara has idled more than half of its European ammonia production capacity because of a steep drop in fertilizer prices and reported first-quarter earnings well below forecasts on April 28, as farmers delayed purchases hoping for even lower prices.
The weaker results were due to steep market price declines, impacting both sales volumes and margins, the Norwegian company said, while flagging demand had returned in April.
The momentum has fizzled out for European fertilizer makers following a supply squeeze of essential crop nutrients last year because of the war in Ukraine. Furthermore, global production capacity is expected to increase above the historical trend in 2023-24.
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Yara said on April 28 it had continued to curb production in Europe, idling an annual capacity of 2.8 million tonnes of ammonia, or 58 percent of its European capacity, and 3.9 million tonnes of finished products, or 23 percent of its European capacity, by end-April.
In the first quarter, 44 percent of its European ammonia capacity, and 52 percent of finished fertilizer capacity, was shut.
“Even though energy prices have been lower than last year, prices on ammonia and finished products are down even more, and that is reflected in our numbers,” chief executive officer Svein Tore Holsether said.
Farmer economy metrics are now very favourable, however, with food prices in relation to fertilizer prices historically high, indicating higher nitrogen application rates.
“(The farmers) have waited to buy fertilizer and every day they have waited they have gotten a lower price, but now the market is tightening, there is a rush and then there is a risk for bottlenecks,” Holsether added.
Yara said January-March earnings before interest, tax, depreciation and amortization (EBITDA), excluding one-offs, fell to US$487 million from $1.35 billion a year earlier. Analysts in a company-provided poll had expected a profit of $858 million.
Revenues dropped 30 percent in the quarter.
One of the world’s biggest fertilizer makers, Yara last year capped its European ammonia production because of a surge in gas costs. Natural gas is a key feed stock in ammonia production.
