Thor Giæver – Head, IR
Jørgen Ole Haslestad – President and CEO
Torgeir Kvidal – CFO
Thomas Lorck – Arctic Securities
Bengt Jonassen – Carnegie
Anne Gjøen – Handelsbanken Capital Markets
Hans-Erik Jacobsen – Swedbank First Securities
Per Haagensen – RS Platou Markets
Yara International ASA (GM:YRAIF) Q3 2013 Earnings Call October 18, 2013 3:30 AM ET
Good morning, and welcome to the presentation of Yara’s third quarter 2013 results. Today’s presentation will be by our CEO Jørgen Haslestad; and our CFO Torgeir Kvidal. After the presentation, there will be a Q&A session. So with that, it’s my pleasure to introduce Yara’s CEO, Jørgen Haslestad.
Jørgen Ole Haslestad
Thank you, Thor. And from my side as well, welcome to the third quarter results of 2013. I normally have something that I can use here. I can use them, okay.
I am pleased in spite of the weaker commodity fertilizer market to present a strong third quarter result. I look into the media, the internet today and I was a bit surprised, I got a feeling that the newspapers had an understanding or meant that we have delivered a slower results or bad results. I know that we know differently which I will then to analyze it.
We say strong results when we have a CROGI about 10% and you know what that means. You can put that in context, and we had in this quarter 12.5% -- which means it is a strong result. We had a 17% increase of our deliveries. This is mainly due to Bunge -- Bunge acquisition, we will come back to that. And we saw a very robust value added premiums.
If you look at the price reductions that we have seen, the urea compared to third quarter last year, the price have dropped with 24%. Nitrate prices have dropped with 7% and NPK prices have dropped with 4% -- which means that the value-added products, which we have a considerable portion of our portfolio have not dropped in the same way. They are obviously driven down by urea but they are keeping up extremely well. And then, we also then have seen stable deliveries of the NPK outside Europe. Also, the industrial segment performed well in the quarter. This gives then a results of NOK 5.65 per share in the quarter.
If we look at then fertilizer market development. We have seen in spite of the lower grain prices, there are still solid economics for the farmers around the world. The quarter has been supply-driven, mainly due to the China export and we saw a drop in the deliveries in Europe of about 9%.
India has had a considerable effect on the potash and phosphate markets and in spite of this we are very pleased to see that the NPK activities is running very well. And we have seen a strong demand for the value-added fertilizer products out of our reported volume.
Then I said there are still good economics for the farmers. We see here the price curve for cereals and also then the food price index given by FAO. You see that the cereals have dropped then lately. But you know very lately they have for at least wheat come up again a bit. But still they are at the high level. And if you look upon the tendency from 2004 up till today, there is a clear tendency that the food prices are declining – inclining, it’s going up – not declining, the other way around, going up on a steady basis and there are no reasons to believe that the food prices will drop in the years to come, that we can see ups and downs based on the expected and results from the different harvests that we will have but in general, it is an upside trend, which is – you could say, gives then the farmers good reasons for running their farms as sufficient as possible, which would mean using the best fertilizer in the – to the right amount.
Looking then at China. You see here the last five years global urea trade and it’s no question that there is a strong demand for urea in the world. And there is also here a clear trend going from 08/09 till this year that there is a need for urea in the world, increasing need for urea. The drop that we had last year in season 11/12 is mainly due to the fact that the Chinese actually put on some restrictions with regards to how much volumes they were willing to let out of China.
That we have some shifts also then between ‘09, ’10, ‘11 and then ’12 is also due to the fact that not that there is a need in a particular season, because this is stable but there are things which are bought in and also started then in some of the years.
If you look at the price development, you see here the urea price and then the Chinese export that we saw in July and August, a considerable export out of China and then dropping urea price. You also have to remember that it takes about one to two months from the Chinese manufacturers have produced the fertilizer until this is exported out of China. And we do believe that we are now seeing some sort of a level where it is starting also to be for quite a few Chinese producers, not a commercial viable then to produce at this. And it will be interesting to see in August and September and there are some indications that there are also then less of activities out of China, which means that the price level also now starts to bite the Chinese producers.
Looking at the start of the season as such into the third quarter. Interesting also to see here that we and our figures are affected by the fact that there was a standstill in part of the official activities in the U.S. We actually haven't got any informations about August and September. So this is only in July – sorry, only in the U.S. July figure, which means that comparing July last year to this, then there is a 17% reduction. We shouldn't put too much attention on to that.
Looking then at the European side. We have a 9% reduction year-over-year. And then this is – in third quarter we had a very good July. August was slower and then we saw some sort of flattened out in the third quarter this year. You know that I am a farmer, and I will say as a farmer, you would know why, because the price for your products, you know, is good and then the price for fertilizer is at acceptable level for them. And they will then now say, okay, they have got all the grains out of the stores, they can then load up for the fertilizer, it is an acceptable level and you would buy.
And it remains to be seen the volume which comes out. What clearly is a given is that the volumes that they need in Europe will be the same this year, slightly higher probably, as we have seen over the years, because it makes sense for the farmers to fertilize it.
The very good story – this is not only the price reductions and [the lack of word] for the NPK, but it’s also then related to the deliveries here. You can see the NPK deliveries outside Europe has increased by 18% year-over-year over the last four years. And you can see also here that it is Asia and Brazil which has taken most of the volumes. We see here in Latin America some small adjustments that this year it’s mainly some uncertainties by the farmers in Argentine and also then some drought and then there are also some uncertainties and weather problems in Colombia.
Africa is actually one customer, which had run into commercial difficulties and he has not taken the volumes this quarter as he did last year. So there isn’t any tendency to that. But as you know we have a limited capacity of NPK and the ones which Latin America and Africa doesn't take, we sell it other places where we can also get very good commercial conditions for it.
Looking at the fertilizer production side. I'm also then very pleased to see that we do have here an increase quarter-over-quarter and year-over-year. The increase is here from Qafco and Lifeco but it is also then and I'm very pleased to see we have reported to you in the last couple of years that we are investing more into our plants, also then into our engineering staff in our plants, to make sure that we can debottleneck. And we can also then maintain our plants so we can have as high reliability as possible. This is something that we now see our results of and I am very pleased to be able to also report on that. That goes from finished fertilizer as well as ammonia.
Brazil and Bunge, extremely pleased that we now have closed it and we are into the – real integration have been working on that for the last half year. But we now also are able then to start working with our colleagues. If you look upon the sales volume in 2012, Bunge had 4.6 million tons and we had 3.3 million tons. And then you see also the revenues from the different companies.
We have now in Brazil about north of 2,500 people. We have three plants and we have 33 blending units. The sales force as such is about 1000 people, which are actually out there and selling our fertilizer. We have our own sales force but we also then have sales representatives which are actually people which are working and selling our products for us in Brazil. So it’s about 2,500 people as such and then it’s about 1000 people – sales people which are supporting our business and volumes in Brazil, which is extremely good.
Also, then an interesting development here, you can see the volumes sold from Yara on a yearly basis. Latin America, volume wise, is now becoming almost balanced with Europe. And as we know that Brazil is the south of the equator and the rest of our activity is North America and Europe, some Asia is south but the other are north. This will also then give us a balance, because we know when it is winter in the north, it’s summer in the south. And that also give a balance of deliveries, which will obviously balance also then our yearly volume shift in the years to come. So this is also then something we are held [ph] from.
Looking at the footprint in Brazil. You can see here the red dots are the Bunge plants, we are now calling them plants, also then are in bagging plant where we have warehouses and do bagging activities -- blending units as we call them. You can see the yellow – the greenish circles, that’s the market for our product. And you can see we are very well located when it comes to the big markets.
I was in Brazil three weeks ago to have a meet-and-greet to our people. We had 500 people gathered in the vicinity of São Paulo. And then we drove from São Paulo to Curitiba [ph] where we have our largest blender and warehouse, huge thing and it was fascinating that we were driving, because that’s downhill. And we passed thousands and thousands of trucks. And unfortunately most of the volumes, which are transported in Brazil, are actually on trucks. They have very little rail and some ship transportation.
And then the volumes that we now need to move that some raw material into our blenders but also then the finished products out, that means that we have to hire about between 550,000 and 600,000 trucks and this is – this 40-tons trucks on a yearly basis in Brazil. And to get the volumes in, about 6 million tons of raw material, we need between two and three 40,000 tons ships every week to bring volumes into Brazil. And then you start to imagine this is a huge logistic challenge. And this is where we have an advantage as a company, because we have the supply and trade, we are used to do this. And we are used then to really to deal with both locally and on a worldwide basis the large volumes.
And then if we compare, put it a bit into context, which is also interesting. This is the – in 2012, if we combine now ourselves and Bunge, the purchase of potash on a worldwide basis. Last year we were slightly above India, we are below China but slightly above India. This year we are on par, which is also interesting. You know that India and China, they do it on a bid basis, we are buying on a continuous basis. To the north and the south, you remember that will also then be very well balanced.
On the phosphate side, we are number two purchaser in the world. And then very interesting also perspective in this Bunge acquisition. So I met then a lot of very excited people and they said as Bunge, which has been bigger than us, which also I must say was very interesting for me to hear. They said that we – when we now understand how Yara is working, your strength, we are really difficult as to understand that we in the past could compete with you, which is interesting. So I look forward then to see the results coming out of the Bunge acquisition. So Torgeir, the floor is yours.
Thank you, Jørgen. And good morning to all of you from me too. Jørgen has presented to you the highlights of Yara’s third quarter. It’s now my pleasure to go into some more detail on the strong financial performance of Yara. And Jørgen picked my first point then underlining that we define strong and have done that very consistently over time as a CROGI above 10% and in this quarter we have CROGI about 12% as Jørgen said.
If you then go into some more detail and start with the development of EBITDA. You can see that we had an EBITDA in the quarter of NOK 3.3 billion, which is down from NOK 4.12 billion a year ago. If you then go into and try to explain this drop in EBITDA, you can see that is all explained by lower fertilizer prices. Fertilizer prices gave a drop in EBITDA of NOK 924 million. All this is explained by lower commodity prices as such the lower nitrogen value in the world for the time being. And that is for the fact that urea prices dropped with 24% from last year and ammonia prices dropped with 30%.
So if that kind of price drops have been reflected in our total portfolio or price drop would have been more than NOK 1.5 billion. But as Jørgen underlined, most of our products, most of our nitrogen is sold more as equator [ph] product where the price decline was much smaller, 7% down for nitrate and 4% down for NPK, as Jørgen also mentioned.
If you look at the other elements, we had a positive volume variances. We sold more this quarter than last year and that was due to the Bunge acquisition. We sold 17% more due to Bunge. If you take away the Bunge acquisition and compare apples for apples, they were in line with last year. But that is a mixed bag of fruits where overseas, meaning outside Europe, continued to grow, we increased our sales outside Europe, excluding Bunge with 4%. While in Europe our deliveries declined with 6%, which is also on performance where we as such is not so and happy, as you saw that the total market in Europe as such were down 6% -- 9% as Jørgen showed in his market overview.
Other elements, you can see that our gas price in Europe was exactly in line with last year, and also in line with the guidance that we have given you. While the spot gas price in Europe actually was up $1, so we did improve our position by converting from oil to gas in our plant in Brunsbuttel and by improving our contract for gas sourcing in Italy.
Now you see we have other element, which is reducing the EBITDA with NOK 269 million and that is mainly cost increases. The biggest single element is the inclusion of Bunge, so the fixed cost increased due to the new activity there. But it’s also a fixed cost increase that we have stepped up over the last couple of year to increase reliability in our production and as Jørgen point out, we had a steady increase in production over the last years and it’s also for growth initiatives in general.
Then you see that we had a small positive currency effect by the fact that dollar was 1% stronger on average versus Norwegian krone in this quarter than last year. And Yara’s positively exposed to a strong dollar.
The last element then is the so called special items. We had positive special items in this quarter of NOK 93 million. The major part of that is positive derivative effect on some more gas contracts where we have ammonia links and as ammonia price have dropped, we get a positive expected forward gas cost effect of that. And then we have a smaller negative special item by integration costs from the ongoing integration in Brazil.
If you then look at the segments, you can see that downstream and industrial improved the results from last year to this year and downstream, industrial shows a strong earnings with the definition of above 10% CROGI. Downstream had a CROGI of 14.8%, and industrial had a CROGI of 12.7% in the quarter annualized. And downstream improved its result significantly. They are benefitting from improved operating margins on the premium products, they are benefitting from lower ammonia input costs into exporting [ph] products, and they’re also benefitting from the increased activity in Brazil, following the Bunge acquisition.
Industrial did well, as also Jørgen pointed out. Their EBITDA increased 22% and that is due to sales increases. Their sales volumes were up 6%. Most of that growth came in environmental products for NOx abatement and water treatment. And then they also improved margins because when commodity, ammonia and urea price drops, they are able to realize better margins to their industrial consumers on these products. In a way, industrial is a small hedge to those movements.
Then the decline in our EBITDA from last year came in extreme and of course due to the significant lower ammonia and urea prices. But that was to some extent compensated by higher production. We have actually record [ph] high production in this quarter where finished fertilizer were up 5% from last year and ammonia were up 3% from last year.
If you then shortly look at our net income from equity accounted investees, you will see that, that income dropped with NOK 306 million, also because these are – you can say, exposed to the commodity prices of ammonia and urea. And most of the drop came in Quattai [ph] due to lower urea prices but also higher gas costs as we have told you before, there has been a new contract for the old Qafco 1 to 4 plants, which have increased gas costs from last year. We also had lower sales volumes in Quattai [ph] this quarter by a phasing of product where they have beefed up inventory this quarter while they slightly reduced inventories a year ago.
Then the earnings in Tringen dropped due to lower production volumes, partly due to gas curtailments but also due to maintenance stops and also the earnings takes line due to lower ammonia prices. GrowHow have a lower earnings due to lower sales volume in Europe as touched upon lower prices but also higher gas spot price. And then we had an improvement in Lifeco, which was out of operation last year but this is running again this year. Unfortunately still at a low ratio, this quarter we had an operational rate of about 50% and we expect that that may continue short term going forward, as there are still interruptions in supply of utilities.
If you then look in somewhat more detail on our total deliveries. Total deliveries, including Bunge, was up 17% and the main product that Bunge fertilizer activity deliver is NPK blends. And you can see that NPK blends almost doubled this quarter from last year. And 95% of that increase is due to Bunge fertilizer.
Then we also had an increase in urea sales, 13% up and that is due to higher sales from Qafco, from Lifeco, the Libyan joint venture and from Belle Plaine. And remember that just a moment ago, I said that Qafco have lower earnings due to lower sales, so the company Qafco sold less last year. But we took more products from them through or marketing agreement as such. So we sold more.
And then you can see there is a small drop in nitrates, down 2% from last year that is explained by the slower European market where deliveries dropped 4%, while we sold more nitrates outside Europe. And we had a drop in NPK compounds of 6% were also all the drop was in Europe, while we also sold more outside Europe. And the biggest increase, as Jørgen highlighted, was in Asia where sales were up 13%.
So we have – excluding Bunge, had sales in line with last year but we have produced more and as such we have built inventory. If you look at the inventory build-up from third quarter last quarter to this year, inventories increased 27%. Most of that is, of course, due to Bunge and due to other activity. If you take away that and Bunge in this slide marked as the grey part on top of a stack bar, if you take away that and make it comparable, inventories were up 2% from last year. That was due to increased urea inventories where – partly due to phasing but also the position taken has increased those inventories with 18% while actually nitrate and NPK inventories are down from last year.
If you compare it with the development from the second quarter to the third quarter this year, our inventories are up 22%, excluding Bunge. That is also mainly explained by higher urea inventories, while the rest is quite natural due to seasonal effect, where we normally start to build in inventories at the start of the reason and also the fact that we had low inventories at the end of a very strong second quarter. So as such, our inventories are pretty much in line with last year but actually lower on nitrate and NPKs, which I think proved well for the season going forward, when you know that so far this season, the market, for instance, in Western Europe has taken 9% product less than last year.
I also mentioned then, and it’s a slide further back in the pack which shows the producer inventories, not only us but the European producer inventories for nitrates in Europe where we will see that after August where we have the statistics, also those inventories are lower than last year.
If we then move on to some premiums, I am here really comment upon the nitrate premium, which is a very important value driver for Yara on top of the urea price. And I have been quite comments, all know that the nitrate premium currently measured as a percentage about urea is quite high historically. But that is due to lower urea prices as such, then the percentage becomes bigger.
If you look at nitrate premiums, the extra premium that the farmer paid to use urea, used nitrate instead of urea in absolute term, that is at a quite historical normal level as you see here on the left side and that is the absolute premium that former compared with grain or with food prices, because the advantage [indiscernible] using nitrates is that urea is a higher yield and better quality of his crop. So he is evaluating this premium compared to food prices.
And as Jørgen pointed out, food prices are historically keeping up very well and if you look a little bit more on what kind of food prices is keeping up best is also supporting nitrates. Because if you look at grain, grain crop that have dropped most is corn or maize as we say in Europe and also partly rice, while wheat has kept up much better and wheat are more important in Europe and as such more influential on the nitrate market than corn or rice, and also fruit and vegetables and dairy products have kept up better which are also important for nitrates and for the European market as such.
The same can be said for important and other important premium for Yara which is that premium that we get from our NPKs on top of the pure commodity value that you could get from the plant as such. And this slide also shows that, that premium have kept up quite stable. On the right hand side, we have compared the commodity values with the NPK price in France. In addition, we have improved our overall premiums on NPKs through the last year while steadily moving more of that NPK into higher paying cash crop niches outside of Europe.
So then my final slide which of course turns around cash – cash is the reason for the company as such and this is summarizing what kind of cash we have generated and how we have used it in the quarter measured as a development in net interest bearing debt.
So we started the quarter with a net interest bearing debt of NOK 741 million. We have the cash earnings from operation plus dividend from associated companies mainly in this quarter Qafco of close to NOK 3 billion. In addition, we released cash from our net operating capital mainly from receivables as prices dropped and then we have used those cash to invest about NOK 5.7 billion in our activity. The biggest investment is of course the Bunge acquisition where we had a net cash outlay of NOK 4.3 billion but we also do a partner funding over ongoing TAN plant construction in Australia of NOK 331 million and we also had a NOK 1.1 billion investment in other activities which goes on mainly on maintenance and exploiting our production facilities plus some minor growth initiatives. And we see the payback from that maintenance investment by higher production this quarter as I said record production.
And finally, we have turned back about NOK 950 million to our owners by share buybacks and redemption of shares from the Norwegian state related to the buybacks started in the previous buyback period before the last annual meeting.
So we are ending this quarter with a net debt of NOK 3.5 billion which is still a very strong balance sheet. We have [indiscernible] ratio of 0.06. So we are well positioned finally to grab further attractive growth opportunities when they come up.
And with that backdrop, I give the word back to Jørgen for his perspectives on Yara.
Jørgen Ole Haslestad
Thank you, Torgeir. And we do believe that there will be a continued strong farm economics and this will support strong fertilizer demand. The farmers would like to run their plants as efficiently as possible. I talked about that we believe that we are probably now at the – some sort of floor in China. We will however be dependent on the coal price in China and obviously also then the export tax regime. We do not know and how to assess we do believe around Christmas time we will know more about the development in China.
If you look upon the capacity outside China it is very limited greenfield activities in the next 2-3 years before the activities in the U.S. start to kick in, that will be 2018. We also are actually limited by a few of the dealers which are -- would like to sit with high volumes. We do believe that in the pipelines little. We have seen in the start of the fourth quarter that we have seen improved nitrate deliveries, following then also a slightly lower North African urea price and also then the new YARA nitrate prices.
And you have all read in the newspaper about the volatility and the activities related to potash in particular. We have seen limited impact on our compounded NPK deliveries and we are also not expecting that that will have a major effect on to our deliveries in the months to come.
We are very pleased – you got a press release today that we are discussing now with the BASF to build a world scale ammonia plant in the U.S. Gulf Coast. The mix between BASF and us is actually extremely evolved, we fit very well to each other. They use ammonia and we have and we can, know how to produce ammonia and we have together located then a couple of good locations for it and then taking advantage of the low gas price but also then the locations in the Gulf of the U.S.
So we will be informing you more about this in the month to come, but are pleased that we have now reached an agreement that this is something that we jointly will drive forward. So with these comments and outlooks, Thor?
Again for the Q&A section where Jørgen Ole Haslestad and Torgeir Kvidal will be joined by YARA’s head of market intelligence Dag Tore Mo. So if you have a question please raise your hand. If I don’t get around to it please say your name and company when you ask the question.
Thomas Lorck – Arctic Securities
Can you elaborate a bit what kind of signs you have seen? The second, could you please quantify the contribution from higher gas costs regarding the year-on-year drop from Qafco earnings this quarter
I was not able then to hear clearly, probably you did, -- the microphone is not functioning into this system at least.
Thomas Lorck – Arctic Securities
Jørgen Ole Haslestad
[Indiscernible] over the last month that we had the support of the Chinese production had been basically relatively flat and not far above what they were similar months last year and in addition what we have seen is that the prices have stabilized – let’s say more or less during the second half of the quarter, both for coal and urea and also less product moving to ports at the moment and that actually for B [ph] prices from China as $16.00 over the last couple of weeks. So as it is running right now it seems like the situation at the moment we have seen the floor price in China. That is kind of how we read it. Of course you never know what is going to happen going forward but that seems to be kind of the situation at the moment.
If I can could comment on the gas. You know Thomas that we don’t give gas costs on single lead plants. We are all prohibited to do that also with the confidentiality clause in our contracts. I could say that I can do this but I won’t do it. But I can give you some insight in to it. [indiscernible] showed a net drop in our earnings from our quarter of 280 million. The biggest part of that – about half of it was their price decline. The second biggest as far as the drop with more or less effect was product, as I mentioned, and the two -- didn’t differ a lot in magnitude. There I think I have been so precise that you can almost calculate it without saying anything as such on the gas price.
On the expansion plans with BASF; three months ago you canceled Bell Plaines expansion or at least postponed it. What is different, it’s both nitrogen, it’s different places, and have you been able to secure, or will you be able to secure gas contracts tied in with ammonia or could you elaborate on why –
Jørgen Ole Haslestad
We cannot elaborate more on that then the difference is that the cost of constructing in the Gulf of Mexico is considerably lower than in Canada and in particular in mid-south Canada where they are very much still driven from the shale gas activity of north. So it is the same basis gas cost wise as we do have in Canada but it is more cost evident and also then due to the fact that BASF is already established in that region.
And you could also in a way say that it’s to do ammonia – as ammonia is more energy intensive when you are aiming for the gas advantage as such, as ammonia is more costly to transport and you’re benefitting from the local consumption on particular whether you will have a captive use from BASF.
So BASF is going to take the ammonia produced?
Jørgen Ole Haslestad
They will take a part of it.
Bengt Jonassen – Carnegie
Could you say something about your nitrate price strategy, in Q3 going forward and also in light of the as we understand it very low inventories as to distributor levels in Europe? The second point is NPK growth in Asia, is that related to cash crops or is this other kind of crops that this is the main driver behind the growth there?
You have probably seen our announcement on the nitrate pricing that we have slightly reduced our nitrate prices now in October in Benelux and we have said as such that deliveries are improving. We had a situation in the third quarter, as indicated also, that we had very good deliveries early in the third quarter. Some of that delivery -- we think went for immediate application than as we had the late spring and then I think that also farmers or maybe even more distributors in Europe in the third quarter were influenced by lot of analysts and the newspapers starting to say that fertilizer prices should drop and they were maybe driven by the focus on what happened in the potash market as such, so from especially distributors to take too much position during the third quarter.
The phasing of deliveries are always uncertain, so we will have to have a model where we are able to cope with that phasing. So fourth quarter – for instance – there is always a -- in the way that there is nobody who need to apply in Europe fertilizer or nitrates and no application as such that is substantial of nitrates that we don’t need to deliver. As we said we are quite confident in the situation because we have low inventories and also the industry as such do not have high inventories and the fact that up to third quarter deliveries were down 9%. It is hard to see – even though we don’t give predictions – it is hard to see for us how farmers will think that that is a drop in application when you look at current food prices. At least one farmer said that he doesn’t see that but he may be biased.
Jørgen Ole Haslestad
The NPK is mainly a cash crop in Asia.
Anne Gjøen – Handelsbanken Capital Markets
I am Anne Gjøen, Handelsbanken Capital Markets. Could you comment on the earnings impact from Bunge? And the second question; by Q2 release, you commented that you had a relatively good order book and how is that now compared to by Q2 release?
Should I maybe started accounting effect of Bunge, for those who like accounting notes, you can picture that we have a quite extensive note on business combinations in the report as note on before. And in that note, we give the effect of Bunge, that adds NOK 5 billion and you have to read more than two pages of that note before you come to that number, but as such the EBITDA effect of Bunge was NOK 45 million, and remember that, that is from -- it is not the full quarter. It is from August 8 until the end of the quarter as such. And it is also influenced that before the transfer Bunge had a so called black-out period where they stopped order taking for the last 10 days. Today they are able to lift this over to the new company as such and we took it over. So there is some temporary reduction in sales which is affecting that period.
Hans-Erik Jacobsen – Swedbank First Securities
One of the biggest issues for 2014 is likely to be the Chinese exports and not the least export taxes. They are quite considerable -- will be lower and it seems to have such a huge over-capacity that maybe or make a sense for them to do so. Do you have any view on this issue?
Maybe you should answer on this, order to question first it’s not giving any signals that we won’t talk about that. We have said earlier that we have been comfortable with the order book. As I already said, earlier in the quarter or in the middle of the quarter we saw some slowdown as such but it has improved and we are comfortable with the order book as such.
We don’t know more than you and we also see the speculations that are kind of concentrated around two issues; either more flat export tax for the whole year at the relatively low level or an extension of the low tax export window. We don’t know yet. We don’t expect to get an announcement from China before December as is usual but there seems to be quite a bit of consensus among the analysts and followers that are either of those two are likely – which is also why we have written in our outlook here that we do see coal prices and export taxes from China as two really key drivers for prices in 2014 given the – there is a very strong dependency the world has put themselves into when it comes to sourcing of nitrogen from China.
Per Haagensen – RS Platou Markets
Two interlinked questions on South America. Firstly, the South American potash market has been the only active one in the third quarter and prices have fallen. What impact has this had for your NPK margins in Brazil and South America in particular? And secondly, on that note, you’re becoming a massive importer of raw materials to South America and in terms of thinking around upstream expansion, what area – what nutrient, would be most interesting to go into South America? The obvious answer is phosphates but are there any opportunities for the others? Thanks.
Jørgen Ole Haslestad
We have said several times that the Bunge acquisition is the first step for us into Latin America in a bigger way. We want to participate in upstream activities and as you also know, upstream activities in Latin America, in particular in Brazil will also then include the local phosphate activity. That does not mean that we will go into a big way, being a miner in Latin America or in Brazil but one could think about a combination with the miner where we do the upgrades, of which we do have knowledge and competence of doing. So I think we could see not going in alone but we could go in with somebody. That we want to do that? Absolutely and we are seeking opportunities to do that. But we would like to establish ourselves as some sort of a Brazilian company which we know will be and then gradually also go into upstream activity in Brazil.
Maybe I should comment that it is correct that both phosphate and potash prices, potash prices in particular, have dropped lately triggered by several factors but very slow demand from India is the main cause. But we are seeing here from the results that we are having very good NPK premiums also, not only on nitrates. So we have of course full focus on making sure that we have at least not worse position on buying raw materials than our competition whether it’s in this market or other market.
As you saw we are still a major buyer.
If there are no more questions at this stage, there is another opportunity with our phone conference at 2 PM Oslo Time. Otherwise thank you for attending Yara’s quarter presentation.
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