Yara International: More Than Just Fertilizer

Norwegian-based Yara International (YARIY.PK) is thought of as a fertilizer company, but it is much more than that.

It is true that Yara is positioned right in the middle of the ongoing agricultural boom. It is the world's largest supplier of plant nutrients in the form of mineral fertilizers. The core business of Yara is the production and marketing of nitrates, urea and ammonia.

A key component in the production of urea, nitrates, NPK and other specialty fertilizers is energy. The process involved to produce these fertilizers is quite energy intensive and uses large amounts of natural gas. This is where Yara has a competitive advantage over its competitors. Yara owns 25% of the Qafco, which is based in Qatar. The owner of the remaining 75% of Qafco is Qatar Petroleum. So Yara has access to extremely cheap natural gas, allowing it to produce fertilizers at a much lower cost. Yara also has a similar arrangement in the Caribbean with Trinidad & Tobago, the world's largest exporter of ammonia. Yara is also expanding its reach in the fertilizer market; it entered the phosphate market with last year's purchase of KemiraGrowHow in Finland.

Yara has smartly positioned itself in all the key overseas markets through the use of joint ventures such as Qafco in Qatar. The company has joint ventures in other large markets such as China, India and Brazil, along with smaller markets such as those in Africa. Yara is currently selling products in over 120 countries.

Yara is also involved in other markets. In the commodities-related markets, it produces inorganic phosphates, magnesium supplements and acidifers used in animal feed. Yara also produces nitrates used in explosives for mining and chemicals for the oil industry.

Last year, Yara set-up a joint venture with Praxair for its industrial gases business. These gases are used in all types of industries, such as the food and beverage business where Yara is a leading European supplier of CO2. Yara has a green side to its business as well. The company has products to reduce nitric oxide from the air and hydrogen sulfide from the water.

Yara is not well known in the U.S., but global investors have begun to realize what a fine company Yara is. Over the past 6 months, its stock has more than doubled, which is outstanding even for ag-related stocks.This performance is better than Potash (POT) or CF Industries (CF) and right up there with Mosaic (MOS). It may be a stock to consider adding to the portfolio on any pullback.

Disclosure: Author has a long position in YARIY.PK

Comments

[CTProgrammer]

Don't count on a pullback. I have had this stock since June 2007 (when Jim Jubak on MSN recommended it). It has not missed a beat since. I am up 127% to-date, and it keeps climbing. The most it has ever dropped in a day that I can remember was about 5% and that was exceptional in a market where +/- 5% on any day is the norm. It slid back a little in January 2007, and it has had a few bumps, but if you're waiting for a major pullback don't hold your breath. Even on days (like last Friday) when ALL my stocks were in the red between 1-10%, YARA was in the green. It's hard to get a handle on the financials because its a foreign stock and you can't readily get charts or data on common tools like Yahoo, MSN, TD Ameritrade, etc. but I read that their PE currently is about 19. Compare that to Potash which is in the 50's. This is a little known stock that I think even if Potash and some of the other better known fertilizer stocks crash, YARA won't due to its relatively lower PE.

[sliman]

I have also owned this stock on Jubak's recommendation. Go to the companies site www.yara.com/en/invest...

for tons of information including earnings reports. Current p/e is about 18. It is not well followed here so any other information is appreciated.

[John Egan]

I had a look at the chart and I see an upside trending channel With prices swinging $12 on a 'month to 6 week' swing from low to high and back. If it keeps up this pattern, I'd expect to pick it up for about $60 at the end of the first week in May.

Having said that, on the daily chart, +DMI in on an upswing and ADX is as well. This could indicate a breakout above it's channel..

Also, fundamentally, it is approaching planting season ( I presume that this holds true for this stock, although I have no idea where it's markets are.. )

Volume is light as it is on the pink sheets, which means that on a downturn, you might not be able to get out and could lose a fair bit, but it definitly is in a good sector. (You might also watch TNH on a pullback for similar rewards...)

I think I'll wait to see if it continues its cycle and look at it in May, or watch for a breakout and retracement above its upper trend line.

Nice suggestion though..

Thx jegan ;-)

[sliman]

Stock trades heavy in Europe. Get an up dated price from your broker and put in a limit bid. As a side note this stock is in MOO the ag ETF. So it will move up as MOO becomes more popular.

[TonyDaltorio]

I agree with the general comments.I think any pullback would be very short-lived and I expect it to go a good bit higher.

[CTProgrammer]

If you wanted a pull-back, April 17th was the day. YARA was down to $70.10 from $73.60 the day before, after rallying about 4-7% a day for a few days. Who knows why it was down? Monsanto and Potash were down too, and all this during a lot of buzz about agriculture stocks. However, YARA management said this morning that profits nearly doubled this quarter from last. Also, they just renegotiated with China's biggest fertilizer distributor for a whopping 230% increase! This morning, it's got an ask price of $78.20 (11.5% increase). It's not too late. All the estimates are that this thing will keep on going. Jim Jubak just raised his target price yesterday to $78 by June 2008, and looks like he'll have to revisit that again since it just hit it a day later. Even if ag takes a hit, this is still priced extremely low right now with a PE of about 8 given the increase in EPS from 3.67 last quarter to 9.63 this quarter.

[mslasky]

Can anyone think of a catalyst to drop the value of the fertilizer sector? I haven't been able to. Despite the parabolic rise of fertilizer stocks, I'm not selling anything. I have positions in YARIY, POT, & MOO.

[Global E]

I appreciate the market perspective. Allow me to return the favor by adding some academic info. At the moment, probably for some time to come, rice is a stressed staple foodstuff. The image of a rice paddy, flooded with stagnant water (which encourages heavy blue-green algal (nitrogen-fixing) blooms is reasonable, BUT-modern seed developments have provided a dry field form of rice (better for instance for U.S. growers). No blue-green blooms means much less free nitrogen. Thus, nitrogen is a hyper important additive. Yara is a truly major world-wide producer of nitrogen fertilizer (ureas,etc.). I has grown steadily for some time, but does not seem to be a target of U.S. stock pickers. I have read (not verified) that Yara has made a recent deal with Gazprom for energy supplies. Since the Habor process (makes biologically available nitrogen from the free, but, inaccessible N in our air), has exceptionally high energy requirements. Yariy will be a desirable stock for some time to come.

[Dr. YashbirSingh Shivay]

Dear Friends,
I had just read this article and came to know that Yara is wolrd's largest Fertilizers manufacturing and selling company with high standard quality products. I am from India and working as Senior Scientist (Agronomy), Indian Agricultural Research Insitute, New Delhi 110 012. My specialization of research work is Zinc nutrition of rice and rice-wheat cropping system and also slow release of fertilizers to increase the ferilizer use efficiency, especially in flooded rice field conditions. I would like to know from the Yara Fertilizer Manufacturing management authorities that whether they have product viz. zinc-enriched urea or zincated urea for rice or zinc deficient conditions. Since India's soils are nearly 50% zinc deficient and major problem of to increase the N use efficiency, especially in flooded rice soils. I will appreciate if you kindly respond to my quarries to this mail id: [e-mail] or [e-mail]

I also came to konw that Yara has entered in to the seeling of their fertilizer products in India. I would also like to work for Yara Fertilizer Company, if suitable postion is provided to me as per my qualifications and experince.