Norwegian fertiliser maker Yara International has today reported quarterly core earnings above analysts' expectations and said it plans to cut costs and capex by $300m by 2025 to improve financial performance and shareholder returns.
A quarterly return of 6.1% on invested capital is not satisfactory, CEO Svein Tore Holsether told Reuters in an interview, adding that the costs were a result of various programmes that did not evolve as fast as expected.
Jefferies questioned the net retention of these savings amid rising operational costs and said these savings might only offset recent inflation.
Shares in Yara were last up 3.7%, outperforming a 0.5% fall in the pan-European STOXX 600 index.
Yara made $513m in earnings before interest, tax, depreciation, and amortisation (EBITDA), excluding one-off items, in the second quarter that ended in June.
That was higher than the year-earlier period's $252m and $457m expected by analysts in a company-provided poll.
The company said key fertiliser ingredient natural gas was expected to be $15m and $70m cheaper in the third and fourth quarters, respectively, than at the same time a year ago.
Yara's sales in Europe still remain significantly below the levels seen before Russia's full-scale invasion of Ukraine in 2022, as higher prices of key raw materials such as natural gas eat into profit margins.
Rising urea production in China, India, Iran, Russia and Europe has increased supply, although industry projections suggest a significant slowdown in supply growth from 2024 onwards, Yara said.
Yara is trying to mitigate the impact of higher production costs stemming from Western sanctions on Russia and Belgium, by replacing natural gas with renewable hydrogen and green ammonia.
The fertiliser maker opened last month a green ammonia production plant in Norway to reduce dependence on Russian imports, as well as cut emissions.
CEO Holsether underscored the need for more government and public subsidies to scale up the hydrogen sector, saying the green transition has to make financial sense.
