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Yara will release its Q1 results on 26th April, and we expect an EBITDA (Yara definition) of USD 478m vs consensus at USD 536m. While we continue to see uncertainty related to volume deliveries, we have witnessed stable to firm urea prices despite lower EU gas prices year-to-date. We expect the lower EU gas prices and declining farmers' affordability to increase pressure on fertilizer prices in H1, offset by improved weather conditions in Europe and a strong market balance in the US. While we expect the pickup in demand to postpone from Q1 to Q2 due to weather challenges in Europe, we continue to expect pent-up demand following low inventory and strong demand heading into the peak planting/seeding season. We continue to expect a tighter market going forward following slower supply growth (excluding China) and limited export volumes from China. We reiterate our Buy recommendation with a TP of NOK 400 (410), implying a 2025 P/E of 11x, in line with the historical average of 11x.
YARA INTERNATIONAL Yara International ASA
We penclil in EBITDA of USD 594m for Q1'24. Negative changes to estimates for 24-26e. Lowering TP to NOK 415 (450).
Yara delivered a Q4/23 EBITDA (Yara definition) excl. special items of USD 566m, USD 197m above consensus at USD 369m and above our estimated USD 346m. The positive deviation vs our estimate was explained by a price/margin effect of USD -455m vs our estimated USD -784m, offset by a volume effect of USD -40m vs our estimated USD 70m. We have witnessed improved purchasing activity YTD, explained by pent-up demand and a flatter and less volatile gas price curve. We continue to be positive entering the main season in the Northern hemisphere with a potential volume catch-up and solid farmer affordability. Furthermore, with peak additional capacity (excluding China) behind us and limited export volumes from China, we find the current/risk reward profile attractive. We reiterate our Buy recommendation with a TP of NOK 410 (400), Yara is currently valued at a 2024e P/E of 9.6x below the historical average of 11.0x.
Q3: Strong EBITDA beat but cash flows disappoint Yara reported a large beat on Q3 EBITDA, driven by outperformance on pricing realisations. Crop Nutrition deliveries increased y/y though negative mix mostly offset this. Free cash flows came in at -$262m, significantly below consensus at -$50m with no drop through from the beat on earnings. Working capital drove most of the miss with some capex projects removed from the FY23 budget. Dividend cut significantly Yara also announced a c90% cut to its base dividend (NOK5/share for FY23), the lowest pay out in more than a decade. We think consensus expectations for the FY24 dividend may also have to be cut (currently cNOK17). Even if Yara sees substantial earnings upgrades (which we think is unlikely), capex is set to rise over the coming years as management looks to proceed with its growth strategy in clean ammonia. Spread expansion may only be temporary; structural issues not reflected in valuation Lower European gas prices and seasonal fertiliser demand have led to an expansion in spot urea + nitrate margins. We don''t think this is sustainable considering i) marginal European supply will return and ii) soft commodities continue to trend down (corn and soy hit 3yr lows on Friday). As such, we forecast FY24 EBITDA of c$1.9bn (c5% below consensus). Moreover, as we outlined last year, Yara faces mid-long term headwinds from changes to the European ETS and rising capex. We don''t believe this reconciles with the stock''s current valuation on a range of metrics (c8x FY24 EV/EBITDA, negative FCF yield and c0.3% dividend yield). Estimate changes Our FY24 EBITDA estimates increase by c5%, driven by higher Q1 spreads. Our price target increases to NOK315 (previously NOK310). We retain our Underperform rating on the shares.
Large deviation from consensus continues. EBITDA 24e up 7%, ABGSCe 17% above InFront consensus. Earnings improvement ahead: we reiterate BUY, TP of NOK 450.
Q4 adj. EBITDA of USD 566m (Arctic: USD 346m, Cons.: USD 369m)The positive deviation was explained by price/margins, offset by volumeYAR expects increased buying activity and higher pricesCapEx guidance for 2024 of USD 1.3bnThe BoD propses a DPS of NOK 5.0
Yara will release its Q4 results on 09 February, and we expect an EBITDA (Yara def.) of USD 346m vs consensus at USD 397m. Although we see uncertainty related to volume deliveries and lower EU gas prices that have sent nitrate prices lower, we remain positive following strong urea price momentum going into the season in the northern hemisphere, and we expect a tighter market going forward following slower supply growth (excl. China) and limited export volumes from China. We reiterate our Buy recommendation with a TP of NOK 400 (420), implying a 2025 P/E of 10.4x, in line the with historical average of 10.6x.
We are above consensus on Q4e. DPS of NOK 9.5 expected. Earnings improvement ahead; we reiterate BUY, TP NOK 450.
Time lag effects increase volatility in earnings. NPK will be tailwind in 2024; EBIT'24e up 15%. Earnings improvement ahead; we reiterate BUY, TP NOK 450
The margin squeeze continued at Yara and remained stronger than anticipated by analysts (consensus – sales: -12.6%; EBITDA -37.0%; net income: -99%). Sales prices had fallen more strongly, not being offset by lower energy prices. The margin deterioration remained strong. The underlying agro fundamentals look positive, but the current geopolitical situation might weigh on the order pattern in Q4.
Strong 2022 followed by a weak 2023. European farmers traded down in 2022. Earnings improvement ahead, Stick to BUY, TP NOK 450 (475).
Yara delivered a Q3/23 EBITDA (Yara definition) excl. special items of USD 396m, USD 234m below consensus at USD 630m and USD 228m below our estimated USD 624m. The negative deviation vs our estimate was explained by a positive volume effect of USD 70m vs our estimated USD 230m and a USD 1,420m negative price/margin effect vs our estimated negative USD 1,383m. The price/margin deviation can be attributed to 10% lower realized nitrate price vs average observed price in the market during the quarter explained by sales occurring in the beginning of the quarter. Although fertilizer prices trended lower at the beginning of the quarter, we have seen fertilizer values increase >15% since Q3 (1m lag) low and 8% above Q3 average (1m lag). We expect a strong nitrogen market going into the new season following a tighter fertilizer market. We reiterate our Buy recommendation with a target price of NOK 420 (440) as we have made estimate changes in this update. Yara is currently valued at a 2024e P/E of 9.3x below the historical average of 10.6x.
Q3 miss driven by volumes and softer mix Yara reported Q3 EBITDA of $396M, c35% below consensus expectations. This represented the company''s third consecutive earnings miss this year. Unlike previous quarters, underperformance was driven by volume / mix rather than inventory write downs. Price and energy cost deltas were largely in line, though nitrate realizations continued to lag benchmarks. FCF was strong, driven by a substantial working capital release. Management also cut its capex guide for FY23 from c$1.7 to $1.3-1.4bn. Volumes becoming a cause for concern While deliveries may have increased 15% y/y, operating leverage was much lower than we had anticipated. We think this is largely due to mix with European volumes (which are higher margin) up by less vs other regions. However, it is now hard to deny that Yara may be facing structural challenges in Europe from market share losses and lower nitrogen application. Despite operating rates back to a normalised level, Q3 deliveries remained 10% below long-term averages. The dividend dilemma will now be in focus Yara is facing a number of challenges. The nitrogen fertiliser market has normalised following an unprecedented up cycle between 2020-22. At the same time, Yara may face substantially higher capex if it chooses to deploy capital towards two clean ammonia projects in the US. Furthermore, changes to the EU ETS may create another longer term headwind for Yara (see CHEMICALS: Chemicals and ESG: From beakers to a better world?). As such we see net debt / EBITDA climbing to 2x by FY24 and are c50% below consensus on average for FY23 and 24 DPS. Estimates changes; retain Underperform We lower our FY23/ 24 EBITDA estimates by c10%. Our price target falls to NOK330 (previously NOK350). At 8x FY24 EV/EBITDA, we think the shares are expensive especially with increasing risk to the dividend. We reiterate our Underperform rating.
Q3 adj. EBITDA of USD 396m (Arctic: USD 624m, Cons.: USD 630m)The negative deviation was explained by price/margins and volumeYAR expects tighter market for full seasonStrong operating cash flow due to WC releaseEstimate changes expected
Yara will release its Q3 results on 20 October, and we expect an EBITDA of USD 584m vs consensus at USD 605m. Although we see uncertainty related to volume deliveries and lower EU gas prices that have sent nitrate prices lower, we remain positive following strong urea price momentum since the end of Aug/23, and we expect a tighter market near-term. We reiterate our Buy recommendation with a TP of NOK 440, implying a 2024 P/E of 11x, in line the with historical average of 11x.
Finding a higher floor. Capacity growth outside China limited. Up to BUY (Hold), TP raised to 475.
Q2 hurt by write-downs and impairments. Improved urea market, but be aware of lower supply curve. Stick to HOLD, TP unchanged at NOK 400.
Yara delivered a Q2/23 EBITDA (Yara definition) excl. special items of USD 252m, USD 298m below consensus at USD 550m. The negative deviation vs our estimate was explained by USD 2,130m in negative price/margin effects vs our estimated USD -1,830m and a USD 140m inventory write-down, offset by positive volume effects of USD 240m vs our estimated USD 200m, explained by higher premium product deliveries. Although fertilizer prices have trended seasonally lower during H1, we expect a continued positive price development in Q3 following strong demand and a tighter fetilizer market. Furthermore, strong farmer affordability and profitability and low producer stocks in Europe should benefit the nitrate markets. We reiterate our Buy recommendation and our target price of NOK 440 as we have made modest estimate changes in this update, lower energy prices and higher end product prices as the fertilizer market tightens. Yara is currently valued at a 2024e P/E of 11.0x in line with the historical average.
Sizeable Q2 earnings miss on further inventory write downs Yara reported Q2 EBITDA of $252m, c52% below consensus expectations of $532m. Management flagged a negative $230m position effect which included $140m of inventory write downs. Yara had already written down c$170m of inventory in Q1 with fertiliser prices having declined considerably ytd. Q2''s write down was feared, though the magnitude much greater than expected. Volumes were up modestly, led by European deliveries with operating rates and demand recovering. Pricing and energy impacts were largely in line. FCF was c$433m, also below consensus. Outlook beginning to look more positive though risks persist on FY24 downgrades Management signalled that its order book has started to fill up in Q3 as farmers come back to re-stock. Urea prices have also bounced in recent weeks, while nitrates seem to have found a floor. However, we think any positive sentiment will be short lived. We expect the cost curve to stay low during FY24 and limit any upward pricing pressure even as demand improves. Hence we see Yara returning to a more normalised level of earnings next year and sit c30% below consensus. This implies the stock trades on c8.3x FY24 EV/EBITDA, a premium to the rest of the fertiliser sector. Structural challenges building As we outlined in our deep dive on clean ammonia, Yara is likely to face a structural decline in competitiveness and may face a steep capex bill to decarbonise without any significant return. Tying in to this, our ESG team published a detailed report last week on the impact of EU''s plan to phase out free carbon allowances. Yara stood out as the most negatively impacted name in European Chemicals with one of the highest carbon intensities and number of free allowances. Numbers changes We lower our FY23 EBITDA estimates by c9% but leave our FY24/25 estimates relatively unchanged and remain 25% below consensus for the period on average. Our price target falls...
Yara’s profitability was between a rock and a hard place in the Q2. A significant fall in sales prices smashed profitability, which was not fully offset by lower energy prices. Volumes showed some recovery. This scenario had been broadly anticipated although its magnitude was far greater (miss to consensus -sales: -13.5%; Yara’s EBITDA: -56.9%; net result: loss of USD-298m vs: USD185m consensus estimate). The management indicated that the worst could be over. Curtailments have been lowered and demand seems to be picking up.
Q2 adj. EBITDA of USD 252m (Arctic: USD 563m, Cons.: USD 550m)The negative deviation was explained by price/marginsYAR expects tighter market in Q3/23Estimate changes expected
Yara will release its Q2 results on 19 July, and we expect an EBITDA of USD 527m vs consensus at USD 581m. Although we see uncertainty related to volume deliveries and lower EU gas prices have sent nitrate prices lower, we remain positive following strong urea price momentum in Q2/23 while Yara's strong balance sheet could provide additional cash distribution in the coming quarters. We upgrade to a Buy (Hold) recommendation and NOK 440 (440) in target price.
YCA IPO postponed 1-2 yearsUnchanged financial targets and CapEx guidanceIncreases its strategic focus
Yara delivered a Q1/23 EBITDA (Yara definition) excl. special items of USD 487m, USD 371m below consensus at USD 858m. The negative deviation was explained by lower prices and deliveries, offset by a lower gas cost. Although nitrogen prices tend to trend seasonally lower during H1, we believe lower volumes in Q1/23 will be reversed, explained by improved farmer affordability and profitability. We reiterate our Hold recommendation and lower our target price to NOK 440 (460) as we have made moderate estimate changes in this update, lower energy prices offset by lower end product prices. Yara is currently valued at a 2024e P/E of 10.6x in line with the historical average.
Q1 significantly undershoots expectations Yara reported Q1 EBITDA of $487m, c47% below consensus expectations of c$913m. Crop Nutrition deliveries fell by c25% during Q1 leading to a sizeable EBITDA impact of $370m (we had -$130m). Furthermore, Yara booked $190m of inventory write downs which is included in the company''s adjusted EBITDA figures (note the company has never adjusted for inventory revaluations). Gas tailwinds were in line, through pricing realizations lagged our expectations. FCF was also soft at cUSD250m (vs consensus at USD1bn). Things aren''t likely to get much better As we outlined in our sector note, we see a soft nitrogen market during H2. China will likely re enter the export market in May while Indian import demand may be pressured through unfavourable weather and new domestic supply. Lower European gas will also keep supply ample in the region, in our view. Hence, we do not forecast a tangible recovery in nitrogen pricing. We forecast FY23 EBITDA (co defined) of $2.25bn, c25% below pre results consensus. We are also 25% below consensus EBITDA for Q2 2022. Time to rethink capital allocation Leverage isn''t an issue for Yara at present. However, the company has announced 2 sizeable clean ammonia projects in the US which will likely start to draw capital from 2024 onwards. As we described in our clean ammonia deep dive, the returns around these projects may disappoint. Taking increasing capex into consideration alongside normalising earnings, we think Yara may have cut its base dividend significantly during 2024 to prevent leverage from rising above 2.5x. Estimate changes; Retain Underperform We lower our FY23 EBITDA estimates by c16% and keep our FY24/25 numbers broadly unchanged. Our price target falls to NOK365 (previously NOK385). We sit c30% below FY23/24 consensus and remain sceptical on Yara''s ability to sustain a balanced approach on shareholder returns vs capex.
After skyrocketing profitability, Yara had to deal with a perfect set of opposite effects heavily weighing on profitability: sharply falling commodity prices, still curtailed production and inventory values based on high energy costs. Nevertheless, consensus was not met at many levels (revenues: -11.4%; adjusted EBITDA: -43.0%; operating income: -67.1%), which might not amuse investors. The Q2 could be somewhat better as the management flagged higher demand in Europe and lower natural gas costs.
Q1 adj. EBITDA of USD 487m (Arctic: USD 976m, Cons.: USD 858m)The negative deviation was explained by volume and marginsYAR expects tighter market in Q2/23Estimate changes expected
Yara will release its Q1 results on 28 April, and we expect an EBITDA of USD 987m vs consensus at USD 858m. Although lower EU gas prices has sent nitrogen prices lower (already reflected in our estimates) and will put a cap on urea prices, we still believe dividends will provide some downside support. We downgrade to a Hold (Buy) recommendation and NOK 460 (525) in target price.
Nitrate pricing to pressure earnings During the peak of the European gas crisis last year, Yara benefited from being one of the few producers able to sustain downstream production in the region. However, since the start of 2023, capacity has started to return to the market following the collapse in European gas prices. In combination with soft demand, this has led to CAN (calcium ammonium nitrate) fertiliser prices and margins plummeting in Europe. We do not see much scope for an improvement in spot margins based on our muted outlook in fertilisers over the next 12 months (see our sector note for more details). No longer cheap Despite transitory headwinds over the past year, shares have always received valuation support. However, on our new FY24 estimates, the stock is trading on c.9x EV/EBITDA. This leaves Yara as one of the most expensive names in the broader European Chemicals and certainly within the fertiliser space. Dividend risks mounting in 2024? Yara''s track record on FCF generation has been choppy over the past 2 years. As a result, 2022 debt was relatively unchanged vs 2020. This contrasts with the rest of the sector where peers have seen material declines in absolute net debt. Hence, factoring in our earnings downgrades, we forecast leverage rising to 2.5x by 2025e and see mounting risks to the company''s base dividend and any discretionary payment. Our revised estimates stand c.24% below FY23/24e EBITDA Consensus We do not see much scope for a recovery in margins and downgrade our FY23/24 EBITDA forecasts by c7.5%. Our estimates sit c.24% below consensus for the same period. Our price target falls to NOK385 (from NOK400) and we retain our Underperform rating on the stock.
Yara published a strong Q4 report in our view and the earnings beat was driven by volumes, more than offsetting lower margin effects. The Board proposed an ordinary dividend of NOK 55 per share and given the robust balance sheet, we see the potential for additional cash returns. Our estimates are holding up and we have only made minor changes in this report, although visibility to some extent is low. We stick to our Buy recommendation and NOK 525 TP.
Pricing drives Q4 EBITDA beat and dividend ahead of expectations Yara reported Q4 EBITDA of $1,067m, 12% ahead of consensus (VA) and investor expectations. Pricing appeared to drive the beat with NPK premiums expanding considerably during the quarter. Management also announced an annual dividend of NOK55 in addition to the NOK10 special announced at Q3 results. FCF light, capex phased in to 2023 FCF came in at $728m (vs consensus at $1.2bn). While conversion was strong at c70%, Yara has built a somewhat patchy track record on meeting FCF expectations over the past 2 years. Looking at 2023, Yara should benefit from working capital relief. Management also guided for $1.7bn of capex - this includes $500m of phasing from FY22 but 50% of this is uncommitted and we assume some of this ends up being spent in FY24. Hence, the picture around FCF generation for FY23 looks supportive. However, beyond this, we see EBITDA reverting to a more normalised level. This leaves us with leverage 2x during FY24, which reduces the likelihood of further extraordinary shareholder returns, in our view. Pricing continues to free fall in the near-term The key near-term debate revolves around the timing of any re-emergence in fertiliser demand. This will be crucial in determining whether there is any upside to spot nitrogen prices which have come under considerable pressure. Ultimately, we think demand will recover, but question whether this will be enough to drive a pricing recovery - this may spell a more bearish outlook for H2 pricing. Valuation and estimate changes Our FY23/24 EBITDA estimates do not change materially and we continue to sit c20% below consensus. We also sit below consensus on DPS for FY24. We maintain our Underperform rating and view Yara as expensive on FY24 earnings. Our target price of NOK400 remains unchanged.
Yara’s Q4 figures were a mixed bag with the top line missing street expectations (-1.6%), but clearly beating consensus when it comes to adjusted EBITDA (+8.0%). The main drivers were higher prices due to the skyrocketing energy prices. On the other hand, high fertiliser prices have held back demand. The company will benefit from lower gas costs, which might be at the Q4 21 levels (pre-Ukraine-war levels), which should put pressure on sales prices, but not necessarily on margins.
Q4 adj. EBITDA of USD 1,069m (Arctic: USD 976m, Cons.: USD 988m) Proposed ordinary dividend of NOK 55 per share Energy costs guiding below our expectations High uncertainty but estimates holding up
Yara’s Q4 results are due 8 February and we expect an EBITDA of USD 976m vs consensus at USD 946m. In addition to underlying earnings our focus is tilted towards dividend announcements. Our Q4/22 estimates have been revised higher, the positive estimate revision follows lower European energy prices, more than offsetting lower urea prices. We still see earnings risk but our estimates are holding up and we stick to our Buy recommendation.
Yara’s production volumes and deliveries suffered from the curtailed European production, but the extraordinary market situation still allowed for good margins albeit not extraordinary. The situation in the gas markets seems to have peaked as the company guidance is for lower, but still extremely high spot prices. Yara’s Q3 figures were a consensus-beating surprise (sales: +17.5%; adjusted EBITDA: +37.6%). Another positive catalyst is the lower-than- previously-anticipated gas costs (USD540m versus USD920m) in Q4.
Q3 EBITDA meets expectations, special dividend a positive surprise Yara reported Q3 EBTIDA of USD1bn, 20% ahead of what looked like a stale sells side consensus and roughly in line with what we assessed to be buyside expectations. Management also announced a NOK10/share special dividend. Despite leverage being well under control, the ever-looming risk of gas shortages had led us and others to doubt Yara''s willingness to engage in special shareholder returns in the near term. Hence the announcement was a positive surprise and undoubtedly added further support to the shares. FCF continues to disappoint Despite achieving robust earnings amid elevated gas prices, Yara did not generate any FCF. This adds to choppy cash generation over the past 2 years. Since the beginning of 2021, Yara has achieved an average FCF conversion ratio of c20% which ranks towards the lower end of the fertiliser sector. Working capital headwinds were again the culprit. We believe Yara''s inconsistent track record on FCF generation during an elevated period of fertiliser pricing is indicative of the business model''s shortcomings compared to its other nitrogen peers (OCI, CF and Nutrien). Changes to numbers Our FY22 EPS estimates increase by 7% on lower estimated gas costs for Q4 along with the small Q3 beat vs our numbers. We do not materially change our EPS estimates for FY23/24. The halving of European gas over the past month has helped Yara reverse production curtailments. We suspect this will also correspond to lower pricing during Q4 as supply comes back to the market and demand remains soft. Taking into account heightened volatility in gas prices, risk now looks skewed to the downside heading into winter, especially after the recovery in Yara''s shares. We retain our Underperform rating at a price target of NOK390.
Yara published a strong Q3 report in our view and the earnings beat was driven by margins, more than offsetting negative volume effects. The Board proposed an XO dividend of NOK 10 per share and given the robust balance sheet, we see the potential for additional returns. Our estimates are holding up and we have only made minor changes in this report, although visibility to some extent is low. We stick to Our Buy recommendation and NOK 525 TP.
Q3 adj. EBITDA of USD 1,001m (Arctic: USD 859m, Cons.: USD 768m) Proposed XO DPS of NOK 10 Energy cost guiding below our expectation High uncertainty but estimates holding up
Yara’s Q3 results are due 20 October and we expect an EBITDA of USD 857m vs consensus at USD 905m. In addition to underlying earnings our focus is tilted towards potential XO dividends. Our H2/22 estimates have been revised higher, despite significantly higher gas prices, on the back of a positive net effect of sourcing ammonia and higher nitrate prices. We still see earnings risk but our estimates are holding up and we stick to our Buy recommendation.
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