Yara (STO:YARO) benefits from the current high crop prices, as higher prices translate into good volume growth for their nitrogen fertilizers, despite an overall tightness, muted growth and difficulty in pricing power for the broader chemicals sector, says Jeremy Redenius, Research Analyst at Sanford C. Bernstein & Co., LLC.
“Yara is one of the most interesting stories in my coverage right now. They are a nitrogen fertilizer company. High crop prices translate into good volume growth for their fertilizers. Meanwhile, we find there is some supply/demand tightness in their value chain. There is just not quite enough supply to go around, and therefore, the company has been able to maintain higher margins,” Redenius said.
Redenius says petrochemicals have seen a decline in margins, and specialty chemicals with pricing power have been able to maintain some of the margin growth. Redenius also says agricultural chemical companies like Yara enjoy more pricing power due to the current high crop prices.
“We continue to see a slight month-over-month declines in chemicals volumes. Volumes have been slightly stronger in agricultural chemicals due to higher crop prices. Anything chemicals related to economic development in southern Europe and construction in southern Europe continue to do quite poorly,” Redenius said.
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