Fertiliser maker Yara hit by oversupply, higher gas costs

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UPDATE 1-Fertiliser maker Yara hit by oversupply, higher gas costs

* Net income of NOK 699 mln misses forecast of NOK 1.21 bln
    * Squeezed by oversupply, higher gas prices
    * Cost-cutting on track
    * Shares down 4 pct

 (Adds analyst, details)
    By Gwladys Fouche and Ole Petter SkonnordOSLO, July 18 (Reuters) - Norway'sYara International
<YAR.OL> fell short of second-quarter forecasts on Tuesday,
citing oversupply of certain fertilisers and higher gas prices,
sending its shares lower.
    The fertiliser maker reported net income of 699 million
Norwegian crowns ($86 million), down from 3 billion a year
earlier and well short of the 1.21 billion forecast by analysts
polled by Reuters. [nL8N1K311X]
    Yara shares were down 4.3 percent at 0803 GMT, lagging an
Oslo benchmark index <.OSEBX> down 0.49 percent. It was the
third-worst performing stock on Europe's STOXX 600 <.STOXX>.
    "First reaction is negative; a big miss in EBITDA," said
Patrick Lambert, an analyst at Raymond James.
    "Our industry is facing strong oversupply of urea and other
commodity nitrogen products," CEO Svein Tore Holsether said,
noting this was hitting margins.
    High gas prices in the energy-intensive business were also
hurting, with Yara's average global gas costs up 24 percent on a
year earlier.
    The company said this would spur it to expand in premium
fertilisers and industrial applications, where it said margins
are more stable.
    "After the very weak Q2 report, we are likely to lower our
estimates for 2017, but long-term should be less affected," said
Tomas Skeivys, an analyst at Norne Securities, who holds a
"Sell" rating on the stock.
    Yara said its cost-cutting remained on track and would
deliver at least $500 million in annual earnings improvement --
or 10 crowns net income per share -- of which an estimated $150
million would be realised in 2017.
    Yara now expects it will generate $650 million of annual
EBITDA improvement by 2020 when fully operational, or 7 crowns
net income per share, up from an earlier view of 6 crowns per
    ($1 = 8.1142 Norwegian crowns)

 (Reporting by Gwladys Fouche and Ole Petter Skonnord; editing
by David Goodman and Jason Neely)
 ((gwladys.fouche@tr.com; +47 23 31 65 94; Reuters Messaging:
gwladys.fouche.reuters.com@reuters.net; Twitter handle:


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