Dec 09, 2008
"The long-term fundamentals for our business remain strong, but no industry can expect to be unaffected by the ongoing slow-down in the global economy. Yara's fertilizer deliveries in October and November are down from last year. Although a large part of the fertilizer slow-down could be temporary delays of deliveries created by wait-and-see attitude and difficult financing for the customers, Yara is taking actions to mitigate this situation. Yara's flexible business model, combining a unique global distribution system and own production with third-party purchasing, enable us to handle demand volatility in an optimal way", says President and CEO Jørgen Ole Haslestad.
In 2008, Yara will deliver strong results, with return on capital far above its profitability target. Fertilizer margins increased substantially for the three first quarters in a strong demand-driven market. The Industrial segment continued to grow in all product areas, driven mainly by environmental legislation and strong demand from the mining industry.
Yara presents new scenarios for future earnings at the Capital Markets Day. The scenarios are not a prediction of future results, but are "what if" examples based on forward prices for energy and selected fertilizer price scenarios. The energy prices used are forward market prices as of 27 November 2008. The earnings reflect the current business portfolio without any future growth.
A supply-driven market with a European swing scenario at this energy price level translates into an estimated Earnings Per Share (EPS) of NOK 14. The swing scenario is relevant if the fertilizer market is oversupplied and Europe is the highest cost producer. A continuation of the current slow-down in fertilizer deliveries could give such a market situation. Low grain inventories and substantial production curtailments increase the probability of a return to a demand-driven market. A demand-driven scenario with USD 100 urea margin yields an estimated EPS of NOK 31.
"The current slow-down in deliveries and unprecedented decline in international fertilizer prices has led to substantial production curtailments by the fertilizer industry. Since food demand is relatively inelastic to lower economic growth, the curtailments increase concerns about global food supply going forward. Based on strong long-term fertilizer fundamentals, Yara's growth ambition remains firm to achieve a 10% global market share, up from close to 8% today. However, long-term financing at acceptable terms must be available before Yara is ready for major growth beyond the already announced project pipeline", says President and CEO Jørgen Ole Haslestad.
Torgeir Kvidal, Investor Relations
Telephone (+47) 24 15 72 95
Cellular (+47) 91 339 832
Bente Slaatten, Media Relations
Cellular (+47) 91 60 62 15
Yara International ASA is a leading chemical company that converts energy, natural minerals and nitrogen from the air into essential products for farmers and industrial customers. As the number one global supplier of mineral fertilizers and agronomic solutions, we help provide food for a growing world population. Our industrial product portfolio includes environmental protection agents that safeguard air and water purity and preserve food quality. Yara's global workforce of more than 8,000 employees represents great diversity and talent enabling Yara to remain a leading performer in its industry.