Yara International ASA. - ADR

Profitability surge in Q2 (strong “good”): EBITDA (ex special items) was $906m, up 39% YoY, mainly from higher nitrogen upstream margins (prices rose more than gas costs). EPS up 84% on a stable capital base; ROIC 14.3% vs 7% last year (note: includes EUA sale benefit). Free cash flow: $583m.

Demand/volume weakness and timing distortion (bad/surprising): Fertilizer deliveries were 17% below same quarter last year. The quarter also included negative volume impact of ~$240m (about half from Pilbara ammonia reliability issues + planned maintenance at Belle Plaine), and ~$120m from demand deferral. Management attributes the market shift to the Strait of Hormuz closure → supply shock → price spikes, followed by customers delaying purchases for the next season due to peak prices. However, demand picked up again in recent weeks, especially Europe (buyers pre-buying for the next season).

Risk factors for upcoming season: Middle East uncertainty + potential volatility (key investor risk): Renewed tensions in the Middle East create uncertainty around nitrogen and phosphate supply for Q3 and the coming Northern Hemisphere season. Management also highlights the need to monitor Chinese supply (quota referenced at ~3m tons) and India consumption. While season-to-date Europe deliveries are “stable,” imports into Europe were down ~25% during the ended season, implying activity is still catching up after deferral.