Norwegian fertiliser maker Yara International has seen recent signs of an improved outlook in key markets, its CEO said today after its earnings fell short of expectations in the last quarter due to falling prices.
Chief executive Svein Tore Holsether said part of the reason for falling fertiliser prices was that farmers had been delaying purchases, due to the uncertain economic outlook and high fertiliser prices last year.
Bbut this trend was starting to reverse, he added.
Farmers were no longer putting off purchases, Holsether said in an interview.
"It changed towards the end of June," he said. "From mid-June to around right now, we have seen a rebound in urea prices of about 22% and a further increase earlier this week as well."
Urea fertiliser is the main nitrogen-based fertiliser farmers use.
"So there has been a rebound now. And if you look at farmer economics, the ratio between fertiliser and crop prices, they are very healthy," Holsether added. "So we do see positive signs and a tighter nitrogen fertiliser market ahead."
Some analysts however noted the earnings shortfall. In a note to clients Norne Securities said the latest results featured a major miss to estimates for the second straight quarter and reiterated a "sell" recommendation.
"We are yet to see the stabilisation of earnings post super profits last year and uncertainty is very high," the analysts said.
Vast amounts of gas are required to produce fertilisers, so when gas prices surged last year following Russia's invasion of Ukraine, fertilisers became more costly to produce and thus more expensive for farmers to buy.
In 2023 fertiliser prices began falling, in step with declining gas prices, and Yara's earnings continue to be negatively affected.
The company said its second-quarter earnings before interest, tax, depreciation, amortisation and excluding one-off items fell to $252m from $1.48 billion a year earlier, missing the $550m expected by analysts.
