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Earnings call: Yara announces strategic growth and project updates

Published Feb 12, 2024 10:16AM ET
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In their Fourth Quarter Results 2023 Conference Call, Yara International ASA (ticker: OL:YAR) provided an overview of their strategic plans and current projects, including the development of clean ammonia initiatives in the U.S. and a blue ammonia project in Texas. The CFO, Thor Giæver, discussed various aspects of the company's performance and outlook, including supply and demand dynamics, capital allocation strategies, and the impact of political changes in the U.S. on their operations. Despite higher curtailments in the previous quarter, Yara sees a positive long-term outlook with limited new capacity entering the market. They also highlighted their competitive advantages in the European nitrogen market, citing their flexible plant network and ammonia trade network. While specific projections for urea prices were not provided, the company noted that demand-driven pricing is currently in effect and that Europe benefits from a gas price advantage.

Key Takeaways

  • Yara is focusing on clean ammonia projects, with a blue ammonia project in Texas expected to reach FID in the second half of 2025.
  • The company mentioned increased deliveries in Africa and Asia, expecting a green premium for fertilizers made with green ammonia.
  • Yara's capital allocation strategy includes considering divestments and potential IPO or funding options linked to ICA.
  • They advised caution in adjusting out the previous year's write-downs and discussed the importance of their flexible plant and ammonia trade networks in Europe.
  • The company is in the commissioning phase of a green ammonia pilot project, expecting to ramp up production throughout the year.

Company Outlook

  • Yara has ambitious growth plans, particularly in the U.S., and expects political changes to have minimal impact on these projects.
  • Europe may experience higher nitrogen production in 2024 due to positive margins from lower gas prices.
  • The company is exploring commercial opportunities and optimizing sales of low-carbon products.

Bearish Highlights

  • Yara experienced higher curtailments in the fourth quarter of the previous year.
  • The company discussed negative position effects and falling prices during the same period.

Bullish Highlights

  • Positive developments in financial results and a positive long-term outlook due to limited new capacity in the market.
  • Europe's gas price advantage is seen as a competitive edge for Yara.

Misses

  • Yara did not provide specific guidance on normalized EBITDA levels or the range between low and peak cycles.
  • No specific projections for urea prices were given, although a floor price from China is estimated to be between $250 to $275.

Q&A Highlights

  • The green ammonia pilot project will produce around 20,000 tons of ammonia, translating to 40,000-70,000 tons of finished fertilizer.
  • Market activity in the pharma industry has seen delays due to higher interest rates and farmers' purchasing behaviors, but the main buying seasons are approaching.

Yara's focus on clean ammonia and strategic growth initiatives, alongside their cautious approach to financial adjustments, demonstrates their commitment to long-term sustainability and market leadership. The company's ongoing projects and market positioning suggest a forward-looking approach to meeting global agricultural demands while navigating the complexities of international markets and commodity pricing.

InvestingPro Insights

In light of Yara International ASA's strategic focus on clean ammonia and their growth initiatives, particularly in the U.S., it's pertinent to consider the financial metrics and market performance of the company. According to InvestingPro data, Yara International ASA (ticker: YARIY (OTC:YARIY)) has a market capitalization of approximately $8.84 billion USD, reflecting its substantial presence in the global agricultural sector.

InvestingPro Tips indicate that Yara International boasts a high shareholder yield and is expected to see net income growth this year. This aligns with the company's positive outlook and ambitious growth plans. Additionally, Yara International has been consistent in paying dividends, having maintained dividend payments for 19 consecutive years, which is a testament to its financial resilience and commitment to shareholder returns.

From a valuation perspective, Yara International is trading at a high earnings multiple, with a P/E Ratio (Adjusted) for the last twelve months as of Q4 2023 at 65.41. This could suggest that investors have high expectations for the company's future earnings growth. Moreover, the company's valuation implies a strong free cash flow yield, which could be attractive to investors looking for companies with the potential to generate significant cash.

For readers interested in a deeper analysis, there are additional InvestingPro Tips available for Yara International ASA, which can be accessed at https://www.investing.com/pro/YARIY. These tips provide further insights into the company's profitability, stock price volatility, and analysts' predictions. To explore these valuable insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.

In conclusion, Yara International's commitment to clean ammonia and its strategic initiatives are underpinned by a robust financial foundation and a favorable shareholder return profile, as indicated by the InvestingPro Tips and data.

Full transcript - Yara International ASA (YARIY) Q4 2023:

Operator: Ladies and gentlemen, thank you for standing by. I would like to welcome everyone to the Yara’s Fourth Quarter Results 2023 Conference Call. [Operator Instructions] Thank you. I will now hand the call over to Maria Gabrielsen, Head of Investor Relations. You may begin your conference.

Maria Gabrielsen: Thank you and welcome to everyone to this teleconference for Yara’s fourth quarter results. I am here together with some representatives from Yara’s management today. We have CFO, Thor Giæver; our Head of Market Intelligence, Dag Tore Mo; and EVP, Corporate Development and CEO of Clean Ammonia, Magnus Ankarstrand, as well as other representatives from Yara. We hope you have all seen the presentation we’ve had today and we will, therefore go straight into questions. So operator, will you please open the first line?

Operator: Thank you very much. Our first question comes from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead.

Christian Faitz: Yes, thank you. Good afternoon and good morning everybody. Couple of questions, please. There has been quite a few asset transactions lately. The first part of the question is, would any of those assets have been of interest to you? And then the second part of the question is, if any interest in assets still come up for sale, I am thinking, for example, of blue ammonia projects in Texas, would you be interested? So buy a project in process rather than build your own? And on your own ammonia projects, blue ammonia projects. You mentioned in your presentation in FID, which might come in the second half of ‘25. What if there is a political change in the U.S. in [indiscernible] a bit, obviously, but that could make any blue ammonia projects that are still in the planning stages, null and void? Thank you very much.

Thor Giæver: Yes. Thanks, Chris. Hi, this is Thor. I mean, first of all, on asset transactions, we are typically well aware and informed of the opportunities that are there. So if we are not involved, you can usually assume that we’ve considered but decided not to. And then, of course, linking to your second question, we do have an ambitious growth plans and a lot centered around clean ammonia. Very much focused on the projects that we’ve described that we are in the process of maturing in the U.S. I think on the question of political change, Magnus can maybe comment more, but what we’ve seen so far is that there is probably quite some diversities. So we say whether you are – if you are looking at the broad range of incentives, there is probably more risk around the sort of pure green type, for example, electric vehicles and so on than the more industrial-focused activities that our projects are targeting.

Magnus Ankarstrand: Yes, maybe to add, I think our projects in the U.S. are focused around CCS. So the 45Q section of the Internal Revenue Code that has been in place for quite a while before IRA as well, even though that gave it a boost. But I think also importantly, we don’t consider large scale investments based on subsidies or government incentives alone. It’s a combination of competitive edge around those projects such as feedstock costs, scale etcetera. So it’s more things than just a subsidy.

Christian Faitz: Okay, great. Thank you both and congrats on the results.

Operator: Thank you. Our next question comes from the line of Aron Ceccarelli from Berenberg. Please go ahead.

Aron Ceccarelli: Good morning. Thanks for taking my question. I have one on supply. My understanding is that most of the supply additions are largely behind us. Maybe can you give us an idea of how the operating rates are in Europe at this stage for the industry? And considering that cost of gas could become cheaper this year, how do you think potential increase in operating rates and impact on pricing? Thank you.

Dag Tore Mo: Yes, it’s Dag Tore here. I think that there is still some curtailments in Europe, but it’s kind of – it’s a bit hard to judge exactly how much, I mean, the companies tend to be more eager announcing the curtailments than announcing the restarts. And I think that you can assume, as you say, now with gas prices at or below $9 just a little bit, there is positive margins. So there has been some announced restarts. We have announced restarts ourselves, Romania, other places. So I cannot give you a precise number, but I think your point is valid that given – if this gas situation continues, there is likely to be higher production level of nitrogen in Europe in 2024 than what we have seen in 2022 and 2023, so that everything else equal, that is a negative factor for the pricing environment.

Aron Ceccarelli: Thank you. And maybe can I ask you one on your deliveries in Africa and Asia. I think that was a good starting for ahead of the planning season there. Maybe can you elaborate a little bit more on what you are seeing there and how you see exports coming from China at this stage? Thank you.

Thor Giæver: Yes, I can start on the Yara part and Dag Tore perhaps on the China exports. But yes, you are correct, we had a 13% increase in our Africa and Asia unit year-over-year and virtually all of that was thanks to improved demand in Asia coming up to the main application season there and also compared to – as in a lot of areas, quite a slow fourth quarter in 2022. In terms of Chinese exports, I mean that’s very limited if any at all right now. But Dag Tore, you can say something.

Dag Tore Mo: Yes. I think, of course, this is another – you mentioned two important supply issues here in your two questions. Those are maybe the top two on the supply side for 2024. And I think that the industry was kind of hoping for some clear signals from China before the Lunar Holiday that they have now started. I guess it’s the tens that is today, but they have been traveling around for a while already scaling down. So, I doubt that we will get that name clarity before they are kind of back in full swing after their holiday and the consensus seems to be that it’s logical to expect kind of a resurfacing Chinese export sometimes during Q2 and that the level of exports than for the rest of the year is one of the uncertainties on the supply side.

Thor Giæver: I can maybe just add sort of on looking at history at sort of the Chinese exports tend to be quite strongly correlated with stronger margins globally so that if you are, should we say concerned about increasing Chinese exports, historically, they tended to be for positive reasons.

Aron Ceccarelli: That’s very clear. Thank you.

Operator: Thank you. Our next question comes from the line of Priya Patel of UBS. Please go ahead.

Priya Patel: Hi, just one question for me. You mentioned in the presentation that you are rolling out the fertilizers using the green ammonia produced in your Porsgrunn plant. How do you think about pricing these green fertilizers? Like, do you expect to receive a premium versus the fertilizers that you make using green ammonia?

Thor Giæver: Yes, thank you. It’s correct. We are commissioning our pilot project in Porsgrunn right now. I think we have some of the volumes contracted as well. And we are certainly seeing and expecting a green premium on those products, considering the significant reduction or – I mean, the lack of any carbon footprint in those products, but we can’t comment specifically on levels, but there is a green premium.

Priya Patel: Okay, thank you.

Operator: Thank you. Our next question comes from the line of Rikin Patel of BNP Paribas (OTC:BNPQY). Please go ahead.

Rikin Patel: Hi, good afternoon. Thanks for taking my questions. I had one on volumes. So you had an interesting growth in the presentation showing the catch-up rates for application in Europe. Could you maybe just provide a bit of context on how you see volumes taking up in Q1? I suppose that historically, at times, you’ve been able to hit the 7 million ton mark overall. So I am just curious what sort of recovery potential you see for Q1, especially given the comp last year should be relatively easy?

Thor Giæver: Yes. So this is – it’s always sort of a tough one to sort of try and predict the exact increase, but as you probably saw in the presentation, we have shown at least – as you point out last year was not a spectacular year either and of course, a lot of volatility with very high prices in the first part of the season. We have compared it to going a couple of years further back, which was a more normal level. And if we were to achieve that level for this full season, that will be about 6% increase. You have seen the market generally tightened early this year and we can certainly confirm that we have seen that in our orders and deliveries as well. But there is also sort of – there is a sensitivity to weather factors, spring planting conditions. And also as we get into the second quarter how buyers are positioning themselves in terms of pre-buying for the next season? So many moving parts here, but the positives are, as we highlight that overall, the deliveries are running behind both in Europe and the U.S., the incentives are better than a year ago. And of course, we have seen the market respond consistent with those factors.

Rikin Patel: Thanks. Makes sense. And just had a second one on cap allocation, so you mentioned earlier your ambitious growth plans revolving around the blue ammonia projects in the U.S., I suppose when you think about cap allocation strategy over the next sort of 2 to 3 years, how do you sort of calibrate those growth plans and the CapEx, if and when it does come up against the need to, I guess, recover the base dividend following the cost today? Thanks.

Thor Giæver: Yes. So I mean, as we have noted in the presentation, we are working towards FID most likely in the second half of 2025 on this project. And in parallel with that, we are, of course, planning for the funding of those. I can refer a bit back to the Capital Markets Day, where we emphasize that we are looking at a range of levers here, including our own portfolio of – in terms of improving the efficiency and potentially making changes there. Divestments are certainly an option within that. And also, as you know, we have a potential IPO or other funding linked to ICA as well as the now improving earnings trend. So I think all those will be considered in parallel with maturing the project. So we will be, of course, more specific on this as we approach and reach FID.

Rikin Patel: Okay, thank you very much.

Operator: Thank you. Our next question comes from the line of Charles Bentley of Jefferies. Please go ahead.

Charles Bentley: Hi, guys. Thanks for taking the questions. So just my first one was just around physician adjustments. Can you just confirm what the quantum was in Q4 that was relevant versus what the kind of sensitivities would have shown? And also just anything we should be bearing in mind in total as we think about ‘23 versus ‘24 base? That’s my first question.

Thor Giæver: So sorry, the audio was a bit poor here, but I think you were asking about the sensitivity adjustment factor, right?

Charles Bentley: Yes.

Thor Giæver: Based on that we weren’t – yes, so we can – Maria add if needed here, and you can, of course, dive more into this with IR also after this call. But we had a higher curtailment in the fourth quarter last year, around 29% for ammonia and 14% for finished fertilizers. So there is some detail on that, of course, within urea nitrate amplicon. I won’t go into here, but – and maybe the final comment is that with the deliveries rather than the production as such that set the sensitivity. So in a way, for any given quarter, if you look at, okay, what are the deliveries in the reference period compared to what a, should we say, normalized production level sensitivity looks like? So a few moving parts there, and I’m sure you’ll – we can help you get more into the detail of this individually.

Charles Bentley: Okay. So, I was specifically asking around the position adjustments, so essentially the prior year write-downs that we need to consider from 2023.

Thor Giæver: Yes. Okay. By segment?

Charles Bentley: No, just group level.

Thor Giæver: Yes. So I mean, the start point, of course, the write-downs, particularly in the first half of ‘23 being a significant part of the earnings picture. So we’re getting questions sort of how should you think about that as you model into 2024. Again, I think it’s something you should see together with the sensitivity adjustments. And I think probably the short version is to be careful to sort of, should we say, 100% adjust these movements out because as you may recognize from our communication earlier this year, write-downs are an accounting element that you do kind of at the end of the month. But every day, particularly during the first half of the year, you would have been selling products that were – should we say either low or sometimes negative margins. And that’s why we’ve talked about position effects that were larger than the actual write-downs. But it’s also – of course, last year was exceptional. When you’re going into this year, you also need to pay attention to what the sort of price and market dynamic is. But I think the overall message is sort of be careful with simply just removing the write-downs from your base.

Charles Bentley: Very clear. And so my second question was just around – sorry to keep banging on about FID on Texas blue – on your blue ammonia project, sorry. But my understanding was you meant to be making that later this year. I mean, just in terms of kind of a delay to that FID. Can you just talk around the kind of considerations to that?

Thor Giæver: No. We have always had FID in 2025. We have some principal approvals that are likely to take place during this year, but FID is 2025.

Charles Bentley: Okay. And then is there any kind of update with respect to the MOU with your Japanese partner?

Magnus Ankarstrand: Yes, I think we are working with a range of partners, including the ones that we have announced, and we do that development, obviously, in tandem with the project development. I mean these are, as you know, large projects that take time to develop, but so we continue to work both on the supply side as well as the offtake side with those partners.

Charles Bentley: Okay, thanks very much.

Operator: Thank you. Our next question comes from the line of Chetan Udeshi from JPMorgan. Please go ahead.

Chetan Udeshi: Hi, thanks. I had a few questions. Let me start with the first one. [Technical Difficulty]

Operator: Apologies. Chetan, we have a difficulty hearing you. Could you move closer to the microphone, please?

Chetan Udeshi: Is this better?

Operator: Much better. Thank you.

Chetan Udeshi: Okay, fine. Hi, I had a few questions. Let me start with the first one. So I was just listening to you that you’ve actually seen the market pick up in Jan and we can see that in the urea prices. But we’ve actually seen no movement on the nitrate prices in Europe. So can you throw some light on what’s going on with nitrate? And why is that not following the urea price trend so far? The second question was, I was looking at your Slide 23, where you’re talking about how your nitrate business will actually benefit from decarbonization of ammonia. I mean, I understand what you’re trying to say, but I’m just curious why would your competitors not do the same? Because importing ammonia and upgrading it into nitrate locally in Europe, I think many of the existing nitrate players have done that already in the last 2 years of very high European prices. So why would those competitors not do the same? And the last question is, I mean, the sale of OCI’s IFCO business in Iowa, I would have thought Yara should have been the most interested party in that business, just given that your footprint in the U.S. is much smaller. So any thoughts around why was that not the case? Or was it just a question of who offered what rather than Yara not necessarily being interested in that business? Thank you.

Thor Giæver: Okay. Thanks for a nice bouquet of questions, Chetan. I can start on – I mean, in terms of the nitrates part, I think we, of course, had a weaker development on urea prices in the fourth quarter and then a rebound this quarter. So that’s part of the picture that’s in a way that meant we at the time in the fourth quarter had a very strong nitrate premium. And then it’s, of course, reduced now, not because we’ve reduced any prices, but urea price have risen. But there is no doubt that the momentum we’ve seen now puts us – gives us the opportunity to increase our own prices. But of course, we will announce that as and when we do it. On the nitrates, I think, thanks for the opportunity, I think, to talk to some of the key reasons. I mean this – first of all, what we are doing here or planning to do to bring in low-carbon ammonia to strengthen this part of the business. It is not something anyone has done before. And also it’s something we are better positioned to do. And of course, CAM isn’t effective yet. So that’s also another. It’s not a sort of – it’s not a boost you would get now, but it certainly will be in the few years. So why can we do this? Well, first of all, start with our footprint in Europe. We have a larger more flexible and better-located network of plants than anyone else. All our plants are close to port and most of them are flexible on ammonia sourcing. That’s not the case for most of the rest of the industry. We also have the world’s leading ammonia trade and shipping network, and we also have these project opportunities in the U.S. So all of these – and the shifting our energy mix and so on, that’s also a benefit. So I think there is a long list of synergies for Yara here that essentially no other player can take off all the same boxes.

Magnus Ankarstrand: Can I just add maybe too, that was the logic in the slide in the presentation is that we don’t think the European nitrogen market can be satisfied with nitrate products. There is simply not enough nitrate capacity globally, and it’s not growing. There is hardly any investments going on in nitrate. So we believe that it is the urea price that is setting the nitrogen prices in Europe, and that will remain the case for the coming decades. Europe cannot do without urea. So if there are others that are – I’m sure also others would try to look at opportunities similar to this. But as Thor mentioned, there are many inland plants and others are in a more difficult position in actually making the logistics work. But yes, to make that point as well.

Thor Giæver: On the OCI IFCO question, I mean, Magnus can probably answer. But I would say sort of generally speaking, it’s often a challenge with these kinds of acquisition opportunities is that they are fully priced. And then, of course, there is also the fact that we have our own projects that we expect to be highly profitable that we are working on. Over to Magnus.

Magnus Ankarstrand: No. And obviously, we don’t comment on processes we are not a part of. But I think we have our portfolio strategy. We have our capital discipline and plan and we execute according to that.

Chetan Udeshi: Thank you.

Operator: Thank you. Our next question comes from the line of Tristan Lamotte from Deutsche Bank. Please go ahead with your question.

Tristan Lamotte: Hi, thanks for taking my questions. First one, I was wondering if I could try again on this number in the bridge for price margin. Based on the sensitivity, it comes out with €1.4 billion impact. The amount that was shown in the bridge was €970 million. So I was wondering if you could bridge that difference there. I know that part of it is due to volume, maybe €200 million or so. But what’s the delta?

Thor Giæver: Yes. Hi. Without sort of going into the numbers by detail, but yes, the largest effect reason for the sensitivity is giving you a bigger negative price effect is that, as we have mentioned in the presentation that the reference period, fourth quarter 2022 was a period where we did not produce or sell at the level of, should we say, full production, but the sensitivities assume. The other significant element is that we did already in the fourth quarter last year have a falling price environment. So, we did already have some write-downs there and again, positioned us – negative position effects that were larger than the write-downs because the write-downs just reflect your status at the end of the month. So, they are the two main factors there. And then as you know, I mean we have a large global business with many elements. So, there are probably others that play in here, but they are the two main ones.

Tristan Lamotte: Great. Thank you. And the second question, the urea spot price for Middle East urea granular is $360 per metric ton at the moment. Europe is now the marginal cost urea producer with a higher gas price. What do you see as a normal range for urea prices now is $300 a floor, do you think? And drawing on from that, you did one….

Thor Giæver: You fell out at the end there, you said going on for that and then we didn’t hear anything more.

Operator: It appears he has dropped from the conference call.

Thor Giæver: Okay. So, we – do you want to comment on the – I mean I can start in terms of urea price. Of course, we will not give a projection for urea prices. What we have seen lately are, I suppose, elements of demand-driven pricing, right, because urea prices are now higher than the production cost in any region. So, there was a question about what’s the floor price here, which would – go to at this stage would be China…

Magnus Ankarstrand: Yes. It’s in a combination with Europe, maybe I guess if you just look at the economics, I think that probably the floor price from China is maybe somewhere between $250 to $275, maybe something like that, that’s been falling coal prices also, not only gas. In Europe, we have to say that the gas price is 10 round numbers, consumption factor of 20 or something or $200 gas carbon power, something that probably cost maybe by variable costs also below $300 in Europe. I suppose right now. So, as we have mentioned, that $365 latest one in our Gulf is actually $385 now. So, we clearly have a demand-driven situation where the – well, as I have said earlier to the question, I think there is still some curtailed capacity in Europe, but we have to expect that to be a timing issue because there are positive margins. So, right now, there shouldn’t really be market-related curtailments anywhere.

Thor Giæver: And just to quickly mention for anyone sort of looking at these swing price factors. Always keep in mind that you are looking at an export and import region and China clearly is an export region, while Europe is an importer region and that means that there is a freight advantage for the plants located in an import region.

Operator: Thank you. Tristan Lamotte, Deutsche Bank.

Tristan Lamotte: Hi there. I think I got cut off for the end of that. The end of the question was just that you did $1.7 billion in EBITDA in 2023. Do you see this as a more normalized level of EBITDA going forward? And what do you see as a normalized level of EBITDA? And what kind of range would you expect between the low and the peak cycle?

Thor Giæver: No, we don’t guide on financial results, but you have seen and we did highlight in the presentation that we have had a sequential improvement from second quarter to third quarter and now fourth quarter. So, it’s clearly a positive development, both for the fourth quarter and what we have seen in the market so far. And then longer term, of course we do have a positive view in terms of that being very little of new capacity coming into the market from now onwards really and for several years. So, we are positive longer term, but the sort of short to medium-term, we are well aware, along with all of those of you who follow this market that is harder to call the shorter term down. But as we say in the report, there are plenty of factors pointing to a positive situation, volume catch up and improved margins in the first half of this year.

Tristan Lamotte: Thanks so much.

Operator: Thank you. Our next question comes from the line of Aron Ceccarelli from Berenberg. Please go ahead.

Aron Ceccarelli: Hi. Thanks for taking the follow-up. And I was – I understand it’s not a core part of your business, but I was looking at the MOP and SOP deliveries in Americas, and were up around 28%. Maybe can you provide some color around that, please?

Thor Giæver: I think that’s probably one we will need to. I suggest you take with IR afterwards, because we don’t have quite that sort of region product, should we say, expertise available on this particular call.

Aron Ceccarelli: No problem. Thank you.

Operator: Thank you. Our next question comes from the line of Charles Bentley of Jefferies. Please go ahead.

Charles Bentley: Great. Thanks very much. Just wanted to ask a couple just as a follow-up, just on that on Sluiskil and the CCS project, so I mean can you just give any indication? I know you have kind of disclosed it will capture 800,000 tons of CO2. That seems to me like it could be something like 25% of overall CO2 from the projects from the plan. Is that right? Is it unlike one or a couple of lines of the project of the part, or is it just at a lower capture rate? And then just in terms of where you think that would cover you in terms of end products. So, would it be more on the nitrate side? Just I mean, yes, I would assume you may go into nitrate, just to kind of confirm on that.

Thor Giæver: Yes. Okay. And I mean look, you are right that this is – it doesn’t cover the full ammonia production in Sluiskil. It’s one of the units, and it’s also a roughly 60% capture rate. So, I think those two factors probably account for if you are sort of looking at this in relation to the total output there. Where this ends up, I think you are right, certainly nitrates is part of it, but that will be, I think part of our – as we approach, so we say, job one on the production here, we will of course look for where are the most promising and profitable opportunities to sell that low-carbon products.

Charles Bentley: Okay. And then I mean just in terms of what did you just flooring of commercial exploration on that basis? Has that already begun? Is there anything already?

Thor Giæver: Yes, absolutely. I mean this is, of course with this project with the U.S. projects, I mean maturing the market side, getting agreements in place is a core activity for our commercial organization. So, that’s very much on the way. And then we need to optimize a bit sort of in terms of the – given that we don’t have a whole lot of green or blue tons right now, there are limits to how far we can go in landing firm arrangements until we are closer to production.

Magnus Ankarstrand: And maybe just to add as well that the – I mean the CO2 we capture from that path is the process gas. So, there is an important distinction there compared to other CCS projects, for instance, within cement or waste in your plants where you capture the flue gas. And so I mean, the CO2 that we capture here is already captured through the process in a way, which is of course important for the business case as such.

Charles Bentley: Thank you very much.

Operator: [Operator Instructions] Our next question comes from the line of [indiscernible]. Please go ahead.

Unidentified Analyst: Hello, [indiscernible] here. I just wanted to ask regarding your green ammonia pilot project, if there is any indication of when that would start and what sort of volumes.

Thor Giæver: Yes. No, the volumes, I think we announced before, it’s around 20,000 tons of ammonia, which will equate to anywhere between 40,000 tons and 70,000 tons of finished fertilizer depending on which grade and that project is in the commissioning phase now. We have the commissioning produced the first tons, but sort of normal commissioning and testing of the facility now.

Unidentified Analyst: Is there any sort of specificity about when – like what sort of time this year that might be?

Thor Giæver: The phasing this year, it’s commissioning now. So, I mean we have not sort of specified this by month, but the tons are coming now and will be ramping up during this year.

Magnus Ankarstrand: Yes. I mean and it’s like any other plant start-up you gradually increase capacity throughout the year. But exactly how much it also depends a lot on how the commissioning goes.

Unidentified Analyst: Thank you very much.

Operator: Thank you. We have a further follow-up question from Tristan LaMotte from Deutsche Bank. Please go ahead.

Tristan Lamotte: Hi. Thanks for taking our question. I was wondering if you could just talk about the pharma economics that you are seeing by region and we have had a lot of pressure on pharma P&Ls in parts of Europe that you have talked about improving economics. I would be interested to hear about the different trends by region and by product, if possible. Thanks.

Thor Giæver: I can maybe start here. Of course, when we presented the third quarter, we were kind of asking a bit sort of why weren’t the volumes, why wouldn’t the market be more active now, because we saw already then that the incentives, when you compare typically or, in our case, nitrogen prices to crop prices like wheat and corn and so on. But then we mentioned that, okay, higher interest rates could be contributing to not buying the product so early. And also, in some cases, some farmers may have bought products at higher prices in the previous season and then seeing them drop. And for that reason, also we are waiting. But now we are essentially buying-wise, we are in the main seasons matter. There aren’t many customers in the Northern Hemisphere that either would have needed to bought by now or should be doing it very soon. So, in a way, those timing elements are less important.

Magnus Ankarstrand: It’s of course a little bit tricky because there has been such short certain wrong short-term volatility also. So, they changes by month a little bit. So, what we tried to flag is that we had very, very high prices in ‘22 and in part of ‘23 that we think that all seasons were a little bit distorted by these facts. So, that is now we are closer to average, I would say, both on the food price side and the fertilizer price side.

Operator: There appears to be no further questions at this time. I will now turn the call back over to Maria Gabrielsen, Head of Investor Relations.

Maria Gabrielsen: Just want to say thank you for everyone for dialing in and for your good questions. Thank you and goodbye.

Operator: Thank you. This does conclude today’s conference call. We thank you for participating, and you may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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