Q2 EBITDA beats consensus Yara reported Q2 EBITDA of USD1.475bn, c9% ahead of consensus expectations. The beat looks to have been driven by outperformance on energy costs. Management mentioned on the call that its realized gas costs had become slightly decoupled from benchmarks due to a shifting mix in sourcing. Pricing contributed to a sizeable tailwind, as expected. Deliveries declined 21% with farmers said to have deferred purchase due to high prices, especially in Europe. FCF was slightly below expectations although leverage continued to fall. Production cuts announced Yara announced that c1.3m tonnes of ammonia and 1.7m tonnes of finished products are currently curtailed due to elevated European gas prices. The decision wasn''t terribly surprising with other nitrogen producers having already cut European production. However, with spot margins negative on urea/ ammonia and just breaking even on most nitrate products, we think risks around further production cuts are high. Dividend commentary may lead to false hope With leverage continuing to trend below Yara''s target range (c0.8x LTM vs 1.5-2x), management indicated it will consider further capital returns during Q3. We think speculation around a special dividend/ buyback may be premature, however. While Yara has balance sheet headroom, macro and energy price volatility may take precedence in management''s decision-making process. Retain Underperform rating We cut our EBITDA estimates by an average of 3% for FY22/23 and we remain c17% below consensus expectations for the same period. Our price target falls to NOK400 from NOK405. We retain our Underperform rating on the shares owing to our view that European nitrogen margins will remain under pressure.