Bloomberg News

Yara Advances as Berenberg Advises Buying on Payouts: Oslo Mover

April 09, 2013

Yara International ASA (YAR) rose the most in two weeks in Oslo after Berenberg Bank advised buying shares in the largest publicly traded nitrogen-fertilizer maker on improved payouts and the chance of value-adding acquisitions.

Shares in Yara, based in the Norwegian capital, climbed as much as 1.4 percent, the most since March 22, and traded 0.1 percent higher at 260.9 kroner as of 11:52 a.m. That curbs the stock’s loss to 3.9 percent during the last 12 months and gives Yara a market value of 74.4 billion kroner ($13 billion).

The company’s share price doesn’t reflect Yara’s “sound cash profile and ignores” the opportunity provided by mergers and acquisitions, Berenberg analyst John Philipp Klein said in a note today. The company’s “renewed focus on returning cash to shareholders” won’t be diluted by acquisitions, he wrote.

Yara, in which the Norwegian government owns a 36 percent stake, is earning more from its so-called upstream operations, where it converts natural gas into ammonia, as rising Chinese exports of urea put pressure on nitrogen fertilizer prices.

Earnings volatility has decreased as the natural gas price “effectively creates a pricing floor for ammonia,” said Klein. That’s being supported by a “structural shift in the industry” which is redirecting margins from finished products to intermediaries, he said.

Yara plans to maintain its payout level at about 40 percent to 45 percent of profit, it said at its capital markets day on Dec. 4. It will also move away from a stable cash dividend to track market cycles, with a minimum of 30 percent of payouts coming in the form of dividends and the rest in share buybacks, it said at the time.

The company’s 2012 dividend of 13 kroner “represented an increase of 86 percent over 2011,” Klein said. “We believe any M&A activity will not be at the expense of this policy.”

Yara shareholders will probably see payouts of 13 kroner a share for each of 2013, 2014 and 2015, according to Bloomberg dividend forecasts.

Berenberg initiated coverage of Yara with a buy rating and a 335 kroner price target.

To contact the reporter on this story: Alastair Reed in Oslo at areed12@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net


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