Yara International ASA

Overview Key strengths Key risks World's largest distributor of fertilizer by volume, with good geographic diversity. Profits anchored in the highly cyclical nitrogen fertilizer industry. Joint ventures in low-cost gas areas and large, efficient production facilities. Exposure to volatile--and currently high--European gas prices. Higher-margin specialty fertilizers that are increasingly contributing to profits. Cash flow swings, reflecting cyclicality of the fertilizer industry. Financial policy commitment to maintaining a 'BBB' rating. Capital intensity and long lead time to add or expand capacity. We forecast Yara's funds from operations (FFO) to debt at 46%-48% in 2021, supported by strong fertilizer prices and increased share of premium products in deliveries, which more than offset higher energy costs. The company's strong operating performance allowed it

...S&P Global Ratings forecasts that Yara's credit metrics will remain at the higher end of the threshold that we view as commensurate with the rating, despite increased distributions to shareholders. We forecast Yara's funds from operations (FFO) to debt at 46%-48% in 2021, supported by strong fertilizer prices and increased share of premium products in deliveries, which more than offset higher energy costs. The company's strong operating performance allowed it to increase distributions to shareholders while maintaining headroom under its current rating. We expect that Yara will generate negative free operating cash flow (FOCF) in 2021, as a result of...

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