Norway's Yara trounces profit estimates despite rising gas costs, tariff concerns

By Jesus Calero

(Reuters) -Yara, one of the world's largest producers of fertilisers, reported first-quarter core earnings well above market expectations on Friday, driven by higher volumes and improved margins, sending it shares up 4.7% in early trade.

The company also highlighted ongoing cost reductions and portfolio optimisation, which it said would position it for continued growth in a tightening nitrogen market.

Yara said natural gas, a key fertiliser ingredient, was expected to cost it $140 million in the second quarter and $40 million in the third quarter, higher than in the same periods last year.

Gas prices make up a chunk of its raw material costs as a vast amount of natural gas is needed to produce fertilisers.

President Donald Trump's tariffs and competition from local manufacturers are also complicating European producers' ability to sell fertiliser to U.S. buyers.

"Disruptions to trade patterns is never a good thing, but we are able to manoeuvre ... It is not creating any ammonia issues for us in the U.S.," CEO Svein Tore Holsether told Reuters. Yara supplies only 5% of its fertiliser to the United States.

Holsether also said Yara was leveraging its ammonia plant in Texas to feed into its global operations amid growing trade tensions.

Despite its small share of total sales, he said Yara remained committed to the U.S. market, focusing on specialised fertilisers that can significantly boost farmers' yields of key crops like cotton and almonds.

The big gap in energy costs between Europe and regions like the U.S. or Russia remains a major challenge for Yara, with the war in Ukraine exposing Europe's vulnerability and further straining its competitiveness, Holsether added.

Weighed down by currency exchange losses in the final quarter of 2024, Yara entered the new year leaning on cost cuts to protect margins after posting its worst annual profit in more than a decade.

It rebounded strongly in the first quarter, posting a net income of $295 million from just $16 million a year ago.

Operating earnings before depreciation and amortisation (EBITDA), excluding one-off items, also soared 47% to $566 million, beating the $500 million expected by analysts.

(Reporting by Jesus Calero in Gdansk, editing by Milla Nissi)