Yara International (YAR) Q2 2024 earnings summary

Executive summary

• EBITDA excluding special items reached $513 million in Q2 2024, more than doubling year-over-year due to improved margins, higher deliveries, and lower energy costs, with strong cash conversion and a $500 million operating capital release.

• Net income for Q2 was $3 million, a turnaround from a $298 million loss in Q2 2023; first-half net income reached $19 million versus a $194 million loss last year.

• Cost and CapEx reduction programs targeting $150 million each by end of 2025 have been initiated, with further portfolio optimization and divestment of non-core assets planned.

• The company is sharpening focus on core business (ammonia, straight N, and N-based premium products) and scaling down non-core activities.

• Flooding in Brazil impacted operations, with support provided to affected employees and financial impacts recognized.

Financial highlights

• Q2 EBITDA excluding special items was $513 million, up from $252 million in Q2 2023; ROIC increased to 6.1% from -5.6% a year ago.

• Q2 revenue was $3,529 million, down from $3,963 million in Q2 2023; first-half revenue was $6,861 million, down from $8,146 million year-over-year.

• Net debt decreased by $366 million to just below $3.6 billion, driven by improved earnings and operating capital release.

• Cash from operations in Q2 was $822 million, up from $677 million last year; free cash flow before financing activities reached $1,142 million on a L12M basis.

• Earnings per share increased but were negatively impacted by a $126 million currency loss and a 92% effective tax rate, mainly due to unrecognized tax losses in Brazil.

Outlook and guidance

• Cost and CapEx reduction programs aim for a two percentage point ROIC improvement and enhanced free cash flow by end of 2025.

• CapEx guidance for 2024 reduced by $100 million and for 2025 by $150 million, prioritizing high-return projects with IRR above 10%.

• Market outlook is positive, with tightening urea supply and supportive demand fundamentals expected to improve margins and financial performance.

• Gas costs for Q3 and Q4 2024 estimated to be $15 million higher and $70 million lower, respectively, than a year earlier.

• Capital allocation policy targets mid-investment grade credit rating and value-accretive growth.