Yara International (YAR) Q4 2017 earnings summary

Executive summary

• Q4 EBITDA excluding special items rose 15% YoY on higher fertilizer margins; the Yara Improvement Program was ahead of schedule.

• FY EBITDA excluding special items fell 18% YoY, mainly on lower margins as higher gas costs outpaced modest price gains.

• Proposed 2017 dividend of NOK 6.50 per share, equal to 45% of net income after non-controlling interests.

• Q4 CROGI was 7.1%, below the through-cycle target of 10% or more.

Financial highlights

• Q4 revenue and other income was NOK 23,937m; EBITDA was NOK 2,526m and EBITDA excluding special items was NOK 2,845m.

• Q4 net income after non-controlling interests was NOK 846m, versus a loss of NOK 333m; EPS excluding currency and special items was NOK 3.88 versus NOK 1.58.

• FY revenue and other income was NOK 93,812m, operating income NOK 3,777m and EBITDA NOK 11,120m.

• FY net income after non-controlling interests was NOK 3,948m; reported EPS was NOK 14.45 versus NOK 23.25.

• FY 2017 tax rate was 17%, including Q4 one-off tax income; the expected rate was ~25%, with potential gradual declines.

Outlook and guidance

• Yara Improvement Program target was at least USD 500m in annual benefits versus 2015 by 2020; sustained benefits reached USD 242m at 2015 margins.

• Estimated total one-off program costs rose from USD 80m to USD 125m; the 2018 target increased by USD 50m as delivery accelerated.

• Committed growth projects were expected to add USD 600m annual EBITDA at 2015 prices, or ~$450m at current prices.

• Freeport ammonia EBITDA was estimated at ~$100m at 2015 prices versus ~$25m at current prices; current ammonia prices weakened project profitability.

• Based on 31 January forward gas markets, spot-priced gas costs in Q1 and Q2 2018 were forecast NOK 225m and NOK 300m higher YoY, respectively.