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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.
Companies: YARA INTERNATIONAL (YAR:STO)Yara International ASA (YAR:OSL)
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
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 cost
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.
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 v
Yara reported consensus-beating Q2 sales (beat to consensus: +1.7%) and profitability figures (operating income: +9.5%). The strong profitability increase was mainly fostered by the higher sales prices as production volumes suffered from lower ammonia production. Once again, management guided for higher gas prices, based on the crucial assumption of if it is available, especially in Europe.
Reported figures broadly confirmed our view on the company, but it is a bet on quite normal gas flows in
Companies: Yara International ASA (0O7D:LON)Yara International ASA (YAR:OSL)
Yara’s very profitable start came on the back of significant price increases, whereas sales volumes were subdued due to farmers’ reluctance to buy expensive fertilizer. The situation might have eased had Gazprom not announced that it was stopping gas transport to some European countries. This might additionally tighten the European nitrogen market helping Yara to cope with higher gas costs.
The reported figures slightly missed consensus expectations for the top line (-1.2%), whereas operating
Yara’s FY figures were strong, but EBITDA followed the top line more distantly than expected (miss to consensus top line: -2.4%; EBITDA: -11%). EBITDA’s +26% increase was held back by skyrocketing gas prices as well as by higher impairments. On a quarterly adjusted basis, the picture looks more favourable as higher sales prices outweighed the extremely high energy costs in Q4.
In our view, 2022 will be quite a profitable year despite the to-be-expected declining gas prices, if the Russia-Ukrai
Yara did better than the street had expected (top line: +5.1%; EBITDA: +2.5%), but that was the past. Central questions in today’s call were around the impact of the currently ongoing curtailment of its European production capacities and farmers’ willingness to accept continuously increasing prices. Management remained quite vague in this regard due to its conservatism, but clearly flagged that nitrogen is crucial for farmers to produce certain yields.
Yara and CF Industries, two leading ammonia producers, have announced they are to curtail quite a high share of their European production. This comes after the soaring gas prices, which can not be passed on to the farmers. The lower European production comes with the impact of Hurricane Ida. The heavy winds had caused severe damage and sudden shutdowns in the Mexican Gulf region, so the global supply balance has been hit. It looks to us as if this is becoming another perfect storm.
Yara reported a strong set of figures primarily driven by the implemented higher sales prices beating our cautious expectations, whereas consensus was more moderately beaten (top-line: 6; profitability: +2). In our view, the price increases overcompensated for the higher energy costs and weighed on volumes. However, the times of increasing prices is not over as management guides for higher forward prices until the year-end.
The world lusts for nitrogen-containing fertilisers as availability dominates pricing negotiations with ammonia prices flying up since the beginning of Q1. Being part of the story, Yara was one of the beneficiaries despite volume’s tiny performance. The higher sales prices could be introduced also because of the sharp (!) increase in natural gas prices yoy and sequentially. Our not too ambitious expectations were beaten, especially on the profitability level, but consensus was missed on all line
Yara reported a good set of figures, beating our more moderate view in 2020 as we has factored in a stronger negative from higher energy prices. The latter has been counteracted by higher volumes and better pricing momentum in Q4. In the light of the fading effect from low energy prices, the provided outlook and already signed contracts will help profitability to be maintained in the first months of 2021, at a minimum.
Consensus was not met.
Companies: Yara International ASA
Yara will release its Q4 results on 9 February, and we expect an EBITDA (Yara definition) of USD 495m (499). We have implemented firmer European gas prices and updated FX assumptions, representing headwind for earnings. This has been partly offset by higher price assumptions. Following our estimate revisions, we see limited scope for raising our NOK TP, and we hence downgrade the stock to Hold (Buy).
Targets new USD 300-600m EBITDA by 2025
2020-21 CapEx unchanged, 2022 higher than expected
Unchanged financial targets
Plans for 500’t green ammonia plant in Norway
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FY24 Interim results: A record H1 performance delivered revenue growth of 62.5% to £105.1m (H1 FY23: £64.6m), with growth across all divisions: Batteries +1.4%, Lighting +21.8%, Sports Nutrition & Wellness +17.5%, Vaping +32.5% (ex- ElfBar) and Branded Distribution +798.9%, which includes revenue of £26.4m from the ElfBar distribution opportunity, commenced in June. Adj. EBITDA of £15.2m is +88.0% (H1 FY23: £8.1m) benefitting from higher sales, and operational efficiencies. Adj. PBT of £12.6m is
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TClarke has confirmed it is on track to deliver its three-year growth-plan target of £500m of revenues in 2023E (up from £426m in 2022). It detailed a 99% increase in the order book to £1.1bn alongside a further £1bn in opportunities. Reflecting the current challenges in the construction sector, management has made a number of strategic decisions to preserve the business’s strong market and financial position. These include changing some supply-chain partners mid-contract to protect project comp
Companies: TClarke plc
Today’s interims are in line with the recent trading update (11th October) and as such we make no changes to forecasts. Revenue of £324.8m represents a LFL decline of 14%, with EBITDA of £25.6m (H123: £25.5m). This is a strong performance, against what is a challenging market backdrop and underlines the benefits of its diversified operating model and focused strategy. We therefore continue to be surprised at the weakness of the share price, especially in the context of a broader peer group. Putt
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Epwin has released a brief trading update confirming that it is on track to meet FY23 estimates. It has also announced its intention to start a buyback, indicating the Board’s confidence in the business going into FY24, despite the volatile operating environment. Zeus leave profit estimates unchanged across the forecast period. This is a continuation of the performance over the last few years, the business has met or beaten consensus numbers since FY20, has not raised equity and managed its bala
Companies: Epwin Group PLC
The H1 outcome was as indicated in the recent (18 October) Trading Update. Group guidance for the full year is now raised: from revenue of £195m - 205m to £210m - £220m (ED estimate was £204.2m); (adj.) EBITDA from £28m - £30m to £32m - £35m (ED estimate was £29.0m). From incremental EBITDA of c.£4.5m, c.£1.5m arises from core operations and c.£3.5m from the Elf distribution agreement, which supplies retailers including Tesco, Morrisons, One Stop and WHSmith.
A series of initiatives – branding
Van Elle has released a pre close trading update for HY24 confirming it is trading in line with expectations. Revenue is down 16% yoy to £68.0m which is broadly in line with Zeus expectations for FY24 of 12.1% decline in revenue, pre the addition of Rock & Alluvium. Estimates are updated on the back of the completion of the deal increasing revenue by 6% in the current year to £138m and 11% to £155m in FY25. Zeus leave profit before tax estimates unchanged at £5.0m in FY24 due to integration cost
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Xaar has released a trading update for 2023 that includes cautious commentary around 2024. The group is expecting a strong end to the year in terms of profitability, albeit with depressed revenue levels. Sales pressures are expected to continue in 2024 and, combined with downward pressure on prices and cost inflation, are likely to lead to a materially reduced level of profitability. We alter our estimates for both years to reflect the update. Although the group is clearly navigating tough marke
Companies: Xaar plc
Progressive Equity Research
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Treatt’s FY23 results show a significantly improved y-o-y operating performance, delivering revenue and profit growth alongside record cash generation. Sales in H223 were affected by the destocking of inventory from clients, although management notes early signs of this reversing. Particularly strong growth came from Treatt’s new markets segment (Coffee, China and Treattzest), up 61% y-o-y. Record cash generation resulted in net debt more than halving to £10.4m. Management is focusing on volume
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The front of this note takes a look at the UK oil and gas sector, why domestic production is advantageous, what the main political parties think, and what could happen going forward. The latter part contains a review of the companies in our coverage – some that are UK centric, which give exposure to the note’s wider theme, and others that are focused elsewhere.
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