Bullish indicating open at $55-$60, IPO prices at $37
Yara International reported a robust financial performance in its Q2 2025 earnings call, showcasing a 27% year-over-year increase in EBITDA, reaching $652 million. Adjusted earnings per share (EPS) surged to $1.92, tripling from the previous year. The stock currently trades at $16.39, down nearly 28% year-to-date, and according to InvestingPro analysis, appears slightly undervalued. Yara’s strategic focus on cost reduction and operational flexibility played a crucial role in this performance.
Key Takeaways
- Yara’s Q2 EBITDA increased by 27% year-over-year.
- Adjusted EPS rose to $1.92, tripling from last year.
- The company reduced fixed costs by $188 million.
- Production of finished fertilizers increased by 1.5 million tonnes since 2019.
- CapEx guidance lowered to $1.1 billion for 2025.
Company Performance
Yara International demonstrated significant growth in Q2 2025, driven by strategic cost reductions and an increase in fertilizer production. The company has effectively managed to enhance its operational efficiency, resulting in a substantial rise in EBITDA and EPS. Yara’s focus on premium products and operational flexibility, particularly in ammonia sourcing, has positioned it well in the competitive European market.
Financial Highlights
- Q2 EBITDA: $652 million (27% increase YoY)
- Adjusted EPS: $1.92 (up from $0.64 last year)
- Free Cash Flow: Increased by $126 million
- Fixed costs: Reduced by $188 million
Outlook & Guidance
Yara has set ambitious targets, aiming for a through-cycle return on invested capital (ROIC) above 10%. The company plans to lower its fixed costs closer to $2.35 billion by 2025 and is considering strategic investments in U.S. ammonia projects by 2026. With an overall Financial Health Score of "FAIR" from InvestingPro, these initiatives underscore Yara’s commitment to margin expansion and operational efficiency. The company’s comprehensive Pro Research Report, available to InvestingPro subscribers, provides detailed analysis of these strategic initiatives and their potential impact.
Executive Commentary
CEO Svein Thore Hulsetter emphasized the importance of safety and asset productivity: "Safety requires continuous focus. We need to avoid accidents that could and should have been avoided." He also highlighted the capital efficiency of increasing asset productivity. CFO Magnus Krog Ankerstrand reiterated the company’s focus on improving shareholder returns: "We will continue to identify additional opportunities to structurally improve shareholder returns."
Risks and Challenges
- Global grain price softness could impact fertilizer demand.
- Potential volatility in ammonia and urea markets.
- Restructuring costs of $80 million could affect short-term profitability.
- Workforce reduction by 1,400 full-time equivalents may pose operational challenges.
- Competitive pressures in the European nitrogen market.
The company is well-positioned to navigate these challenges with its flexible production infrastructure and strategic focus on cost management and market share expansion.
Full transcript - Yara International ASA S (YAR) Q2 2025:
Maria, Moderator/Host, Yara: Welcome to Yara’s Second Quarter Results Presentation. Today’s presentation will be held by our CEO, Svein Thore Hulsetter and our CFO, Magnus Krog, Ankerstrand. There will be a conference call at 1PM also time where you can dial in and ask questions. With that, it’s my pleasure to hand over to our CEO, Svein Thore Hulsetter.
Svein Thore Hulsetter, CEO, Yara: Thank you, Maria, and good morning, good afternoon and good evening, depending on where you’re dialing in from. And thank you for joining our second quarter earnings presentation. As always, we start by looking at our safety performance. Jara must be a safe place to work for our colleagues and contractors. Unfortunately, the start of the year has not shown the continued strong improvement that we aim for.
We saw an increase in recordable accidents across our sites in the first quarter and also at the start of the second quarter, as I mentioned in the first quarter presentation. In May, there was a fatal accident at Tapojarvi, the contractor working at our mine in Seljarvi. Technically, this is not part of our statistics shown in the graph here, but that has no bearing on how we handle this very tragic accident. Emergency services were immediately alerted when the accident happened, but the person could not be saved. This is a deeply tragic accident and we express our deepest condolences to the family, friends and to all colleagues.
I take the safety development in 2025 very personally, and I’m not satisfied with my performance on safety. It’s critical that we must never compromise on safety. We have addressed this immediately within the organization and we’ve taken action on this to strengthen our focus and execution on safety by choice, making sure that the basics and the routines are in place. Safety requires continuous focus. We need to avoid accidents that could and should have been avoided.
We remain committed to achieve our ambition of zero accidents, and we have all the tools in place and the way of working through safe by choice. Moving then to the key elements of the second quarter results. Jarrah reports a solid second quarter with strong operational performance with EBITDA, excluding special items, of $652,000,000 This reflects an EBITDA increase of 27% compared to the same quarter last year. We saw increased margins this quarter, driven by a combination of strong commercial performance through sustaining both strong volumes and premiums in the quarter and also supportive market fundamentals. This is a solid achievement considering that Europe had an early spring this year.
Underlying production performance is at record levels this quarter, continuing to build on the production records that we set last year. We continue to execute and deliver on our cost and CapEx reduction program, both of which are ahead of schedule. Adjusted earnings for the 2025 are at $1.92 per share compared to $0.64 a year ago, meaning that this has more than tripled from the last year. This clearly demonstrates our commitment to increase profitability through strong and consistent focus on improving our core operations. Turning now to the EBITDA variance for the quarter.
While volumes are slightly up for the quarter, the impact in the EBITDA bridge is zero, reflecting a change in product mix. Underlying market fundamentals have been supportive with the expanded gas to nitrogen margins for Juara in addition to a strong commercial performance that enables sustained high premiums on both nitrates and NPKs. Price margin is impacted by somewhat lower realized nitrate prices, reflecting the early spring that we saw in Europe this season, which are offset by strong PE upgrading margins. Fixed costs are $46,000,000 lower than a year earlier, reflecting continued progress on the cost program. The progress we’re seeing indicates that we will over deliver on our fourth quarter run rate target, and this is a strong performance from the organization, which continues to demonstrate its ability to deliver also when it’s facing geopolitical volatility and also stricter capital discipline.
And I want to thank my colleagues across Jara for being resilient and for continuing to deliver strong operational results. The quarterly return on invested capital is at 9.9%, and this marks a solid increase from one year ago, but also demonstrates the need to sustain our focus on improving returns and achieve through the cycle return at 10%. Since the launch of our Yara improvement program, we have steadily increased production from our existing asset base, and this is really the most value accretive growth that we have. Of the 1,500,000 tonnes increase in finished fertilizers since 2019, approximately 50% is attributed to premium products in Europe. And if we’re not using the average margin for 2025, this translates into an implied annual EBITDA increase of more than $140,000,000 since 2019.
And I do note that these volumes reflect underlying production, not necessarily matching actual production as we adjust for turnaround volumes and any potential market driven curtailments. The continued strong trend demonstrates that the improvements are consistent and that they are sustainable. We’re also continuing our good progress on reducing greenhouse gas emission intensity and to reach our target for 2025. Reducing our greenhouse gas intensity also improves margins, as higher efficiency leads to both lower gas cost and also lower EPS cost. And combined, this represents an annual EBITDA improvement of over $100,000,000 compared to 2019.
So increasing our asset productivity is the most capital efficient growth for IATA and drives sustainable margin expansions. With that, I’ll now hand over to Magnus.
Magnus Krog Ankerstrand, CFO, Yara: Thank you, Svendt Hora. As explained earlier, EBITDA is up $140,000,000 excluding special items compared to last year, reflecting improved margins and lower fixed cost. Following that strong underlying performance, earnings per share excluding currency and special items more than doubled to $0.91 for the quarter. This brings the total EPS for first half to $1.92 and our efforts on the cost program have contributed to around 25% of that improvement so far. Return on invested capital increased by 2.4 percentage points to 7% on a twelve month rolling basis.
For the quarter in isolation, return on invested capital was 9.9%, close to our through the cycle target of 10%. This is, of course, driven by the same factors as EPS, but we will also continue our improvement program to ensure high asset utilization and optimize our portfolio to increase our return on invested capital. Looking at the cash flow, cash from operations increased US56 million dollars compared to a year earlier. The seasonal release of operating capital contributed less than last year. This reflects an increase in inventory values of US75 million dollars due to higher nitrogen prices.
And higher than nitrogen prices, of course, is a positive development for share exposed between gas and nitrogen. On the investment side, our cash outflow decreased by US17 million dollars compared to last year, reflecting our strict capital discipline and maintenance CapEx reduction through our portfolio program. Adding these together, we see a net increase in free cash flow of US126 million dollars which is a significant improvement considering increasing inventory values this quarter. Turning then to the segment results. We saw improved returns for the quarter across all segments except for Global Plants.
However, the rolling twelve months ROIC for Global Plants is impacted by fourth quarter settlement of the Dutch Pension Fund, which was a noncash event. Adjusted for this, YGP ROIC would be over 7% and an improvement from previous quarters. Europe saw an increase in EBITDA with continued good premium product deliveries, strong margins and lower fixed cost. Returns in Europe for the last twelve months is impacted by restructuring costs of US43 million dollars Looking at European ROIC for the first half, excluding special items, we end up at 7.8%, reflecting the effects of the underlying improvements. However, this is still not at a satisfactory level and core to increase this is to optimize the asset portfolio and seek further margin expansion opportunities.
In The Americas, a strong underlying EBITDA increase in North America and Latin America improved results. In addition, we have had a normalization in Brazil, which took a significant loss last year due to flooding. Global plants saw improved production margins on the basis of very strong production performance. Commercial performance provided strong premiums in Asia for this quarter and was a key contributor to the improved results for African Asia. Lastly, Industrial Solutions results were lifted by strong commercial performance and higher nitrogen prices.
While we have had a solid EBITDA increase, the ROIC is impacted by the impairments of Brazilian assets in fourth quarter twenty twenty four and also restructuring costs. While returns are improving, we maintain laser focused on further increasing our returns through our improvement work to generate a return through the cycle ROIC above 10%. Our improvement program is the pivotal part of exactly that. It is now a year since we launched our improvement program, and I can report that we are progressing ahead of plan to deliver beyond our target of $150,000,000 Looking at fixed costs last twelve months, we are down $188,000,000 We have had some help from the weakening U. S.
Dollar, but looking at firm cost reductions, this then equates to $144,000,000 as realized saving. In total, our workforce has been reduced by 1,400 full time equivalents or 9% compared to a year ago. Rigorous program management has delivered solid progress on the cost program, and we are nearing completion of the underlying initiatives, meaning that there are additional savings that will arise both from the full year effects of implemented measures as well as remaining measures. We therefore believe that we will hit at least US30 million dollars beyond our original fixed cost target for the end year run rate, excluding currency impacts, also considering the inflation on our cost base between now and the end of the year. Excluding any further currency changes, we believe then that our fixed cost for the year 2025 will be closer to $2,350,000,000 although there could be some variations due to phasing.
The run rate, however, going into 2026 will be lower than this before accounting for 2026 inflation. And during the quarter, restructuring costs were around $6,000,000 and those are classified as special items, bringing the total of restructuring costs to $80,000,000 for the current scope of improvements. We expect limited additional restructuring costs for this scope to be expensed. Strict capital discipline is also yielding results and we have lowered our 2025 CapEx guidance by $100,000,000 to $1,100,000,000 for the full year. This is in addition to the $150,000,000 reduction we said in second quarter twenty twenty four.
So CapEx guidance for 2025 has in total been reduced from US1.35 billion dollars to US1.1 billion since second quarter twenty twenty four. The improvement program is a top priority for the organization and crucial to improving our EBIT margin and returns going forward. With these results and the achievements on our production target that Sven Toure presented a few minutes ago, we have demonstrated our ability to drive focus improvement and we will continue to identify additional opportunities to structurally improve shareholder returns. Looking to volumes. Total deliveries for the quarter are roughly in line with the year before, as slightly higher Crop Nutrition deliveries were partly offset by lower Industrial Solutions deliveries.
The higher Crop Nutrition deliveries were mainly driven by higher deliveries of both third party products and premium products in Brazil, reflecting both a recovery of lost volumes due to flooding during the second quarter last year and stronger sales. The lower Industrial deliveries mainly reflect impact from hibernation of assets in Brazil and have limited EBITDA impact. European deliveries are down in the quarter, mainly as we had late spring with strong volumes in second quarter twenty twenty four versus an early spring and strong first quarter deliveries in 2025. But as we can see, full season volumes for Europe are up compared to last year and almost back to 2021 level 2021 levels. Meanwhile, the total nitrogen market in core European countries is up only 1%.
This reflects the strong commercial performance in Europe and Jara gaining market share. The majority of the increase comes from premium products driven by increased capacity utilization in production and strong order book management balancing volume growth with margin optimization. The dynamic of the European order book is typically a buildup during the second quarter following the new season pricing. This typically peaks at the start of the third quarter with approximately two months length in the order book. This was also the case last year and suggests a two month lag on nitrate prices for Q3 as Jara is currently selling September volume for key markets.
Premiums remained strong during the quarter, both for nitrates and NPK. The new season price for nitrates were launched mid May, with strong premiums at the time of order taking. The launch of the new season prices, that is the 2025 and 2026 season, usually represents a reset of European nitrate prices to incentivize pre buying explaining the declining trend in realized pricing during the quarter. However, since the initial launch, Jara has increased its nitrate list prices in several rounds, paying close attention to market fundamentals. NPK prices increased from already strong levels during the quarter, driven by strong commercial performance across all regions.
Jars saw a significant strengthening of the balance sheet compared to the end of last year. Strong cash earnings were the main contributor to this strengthening and the seasonal release of operating capital more than offset investments and dividend payments. The Other category mainly reflects noncash effects from leases and currency translations. And then turning our attention to the markets. We continue to see strong fundamentals ahead.
Urea prices appear to be fundamentally demand driven for the time being and the global supply and demand balances indicate a continuation both on a short and a medium term basis. Looking at balances outside China, there appears to be a need for Chinese supply to cover demand driven by lower and lagging stocks in India, but obviously also the outages in Egypt and Iran a month ago has an impact here. Looking at China, the export quota of 2,000,000 tonnes announced earlier this year has been absorbed by the market, as the market remains tight and demand driven. On top of the initially sold tonnes, it is now expected by the market that another 1,000,000 to 2,000,000 tonnes is in the process of being allocated, making Chinese exports still a key supply factor to watch out for in the second half of twenty twenty five. Looking to the farming fundamentals, we have seen unusually few issues in crop production globally, softening the supplydemand balances for the year.
In addition, Chinese grain imports are down from 60,000,000 to 30,000,000 tonnes contributing to softer global prices. On the other hand, this is a likely drive behind Chinese nitrogen consumption, which may suggest a continued conservative approach to exports going forward. And on the medium term basis, we see that new urea capacity coming on stream looks to stay well below historic consumption growth. And given the lead time to get new urea projects to completion, the supply outlook looks increasingly firm towards 02/1930, suggesting very strong Ammonia to urea operating margins in the medium term. And with that, I give the word back to Svendt Wide.
Svein Thore Hulsetter, CEO, Yara: Thank you, Magnus. Jana has the largest import infrastructure for ammonia in Europe. And out of the 3,000,000 tonnes of ammonia that we consume for nitrate and MPK production, 50% is already imported today. So all of our European nitrate and MPK production capacity is fully flexible on where the ammonia is sourced from. And this was clearly demonstrated during the energy crisis when Jara curtailed European ammonia production due to high gas cost, but we could maintain the production of finished goods by importing cheaper ammonia from outside Europe.
With the new normal now being structurally higher gas cost in Europe, capitalizing on this operational flexibility is key to unlock value and also to increase margins. Consequently, new ammonia assets are not only about lower gas cost and lower fixed cost per tonne, but also about safeguarding our nitrate and NPK asset base. And this will be a significant margin advantage in the future. This gives us flexibility in how we approach a potential equity investment into U. S.
Ammonia projects. Having access to our own ammonia is important to secure the scale and the flexibility to maximize synergies from this system. But an investment into new production capacity must be profitable in itself. As a starting point, we need to believe that a project can create a value based on the fundamentals of ammonia production, competitive CapEx per tonne and competitive gas price. And in addition, there are benefits from 45Q and ETS CBAM in Europe.
We believe that Jara has the value drivers in place to create significant shareholder value from an upstream equity position. But we will, of course, make careful consideration before taking any decision. Double digit returns remain a requirement for a potential final investment decision. And Jara is targeting an equity participation that would uphold shareholder distributions in line with our capital allocation policy, also through a potential investment period. This also means that equity issuance is not part of our potential funding levers.
Final investment decision remains planned for first half of twenty twenty six. So then to summarize, the key focus of the whole organization is to ensure a safe working place, to optimize our core operations, to increase free cash flow and generate higher returns in order to fund improved shareholder returns and value accretive growth. We’re progressing on improving our returns with improved results this quarter. The cost reduction program and portfolio optimization are delivering ahead of target and we continuously assess further improvement opportunities. Ensuring a future proof asset base is core to strengthening Yara’s position.
We’re therefore working diligently on executing announced portfolio changes. In Brazil, all three production units in scope for hibernation at Cubatao have been taken out of service, while in Europe we’re making good progress both in Teitre and in Montoir, reaching important milestones in the social plans related to the transformation. These processes are never straightforward, but we are making good progress. Both ammonia and premium product growth are key opportunities where we see potential for high returns and excellent strategic fit. Through disciplined capital allocation and strong focus on resource efficiency, Jara is enhancing returns.
Going forward, we continue to take steps to expand margins by diversifying our energy cost and leveraging scale and operational efficiencies across our global network. This will enable increased returns for shareholders. So with that, I will now hand back to Maria.
Maria, Moderator/Host, Yara: Thank you, Seinthorje. I would just like to take the opportunity to remind everyone about the conference call starting at 1PM Oslo time. You can find login details on our webpage under Investors. That concludes today’s presentation. Thank you for watching.
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