Incorporated: 1900 as Norsk Hydro; 2004 as Yara International
NAIC: 325311 Nitrogenous Fertilizer Manufacturing; 325120 Industrial Gas Manufacturing
SIC: 2873 Nitrogenous Fertilizers; 2813 Industrial Gases
Yara International ASA is the world's largest specialty producer of mineral-based fertilizers. Nitrogen fertilizers represent 90 percent of the group's production, which includes products such as ammonia, urea, nitrates, and NPK (the nutrients nitrogen, phosphorus, and potassium). Nitrogen fertilizers are also the most widely used fertilizers, accounting for 60 percent of the global fertilizer market. Ammonia, derived from natural gas, represents 53 percent of the group's total production, while NPKs add 17 percent.
The company is the global leader in both categories, and is also the world's largest nitrates producer, a position further solidified by its acquisition of Kemira GrowHow in 2007. That acquisition also helped raise Yara's global market share to 7 percent of the total fertilizer market. Yara, a spinoff of oil and gas giant Norsk Hydro, has also been leading the consolidation of the fertilizer industry, completing nearly 15 acquisitions since the beginning of the 2000s. Through these acquisitions, as well as through organic growth, Yara's total production has topped 20 million tons into 2008.
The company plans to double that capacity, with a goal of boosting its total market share past 10 percent. Yara operates through a global network of production and marketing subsidiaries in more than 40 countries. The Norwegian company has been listed on the Oslo Stock Exchange since 2004 and is led by CEO and President Thorlief Enger. In 2006, Yara's sales topped NOK 48 billion ($8.7 billion).
Nitrogen Fertilizer Pioneer in 1904
The population explosion that resulted from the Industrial Revolution of the 19th century placed extreme pressures on Europe's food supplies. By the dawn of the 20th century, farmers found themselves hard pressed to keep up with demand. Traditional fertilizers, primarily animal manure, were not available in sufficient quantities. At the same time, the adoption of new types of crops and increasingly intensified growing techniques contributed to a steady depletion of nutrients in the soil.
Among the most important of these nutrients was nitrogen. The coal industry provided one source of nitrogen-based fertilizers, in the form of ammonium sulfate. However, production of this byproduct could not reach a sufficient level to meet the growing demand at the turn of the 20th century.
A more abundant source of nitrogen had been identified: the air. However at the beginning of the 1900s, no method for extracting that nitrogen had been perfected. Early attempts to release the nitrogen, in the form of nitrous gases, using electricity had been unsuccessful.
This problem was taken up by two Norwegians: Sam Eyde and Kristian Birkeland. The former was a prominent engineer while the latter was a professor of physics at the University of Christiania (the earlier name for the city of Oslo) as well as a prolific inventor. Birkeland had developed the idea of an electric cannon, which could make use of Norway's abundant waterfalls to provide the electric power necessary to produce the nitrogen-releasing reaction. Eyde secured the rights to build and use a hydroelectric plant at the Notodden falls, in the south of Norway. The partners then turned to Sweden's Wallenberg family for start-up funding. With the support from Marcus Wallenberg, the company, founded as Norsk Hydro-Elektrisk Kvaelstofaktieselskap (Norwegian Hydro-Electric Nitrogen Corporation, or Norsk Hydro) in 1905, secured further financing from France's Paribas Bank.
Within a year, the company's products, principally calcium nitrate, had achieved international recognition. "Norwegian nitrate" quickly set the standard for the agricultural market for its purity and efficacy in boosting crop growth. The resulting surge in crop production was to have far-reaching effects on the Western world, helping to lower food prices and raise the nutritional value of the Western diet.
Success at the Notodden plant encouraged the company to begin planning a new and still larger fertilizer complex. Preparations began in 1906 to build a new fertilizer facility at Rjukan, powered by the Skarsfoss waterfall. This time the company formed a partnership with Germany's BASF, which had been developing its own nitric acid furnace design. The Germans became majority shareholders of the Rjukan facility, imposing the use of their furnace. Yet this design proved far less efficient than the furnace developed by Norsk Hydro itself. By 1911, the German backers had agreed to sell their stake, and the Rjukan plant was instead converted to the Norwegian furnace design. Production at Rjukan was launched by 1919.
New Technologies Before World War II
Norsk Hydro's pioneering status enabled the company to maintain a competitive edge into the 1920s. Yet the company's production process required enormous amounts of energy. The company was able to improve its technology by refining its electric arc production process. Its competitors, however, especially BASF, which became one of the founders of IG Farben, had in the meantime developed a more efficient ammonia-based method for producing calcium nitrate.
By the mid-1920s, Norsk Hydro recognized the need to convert to the new technology as well. The company acquired a license for the use of IG Farben's production technology, in exchange for a 25 percent stake in the company, in 1927. By the end of that decade, Norsk Hydro had begun to modify both the Notodden and Rjukan factories. The company's production then shifted to calcium nitrate, an improved form of the original Norwegian nitrate.
These facilities, however, had been built close to the falls, making transportation of the company's fertilizers, which were sold primarily on the export market, difficult and costly. The 1920s had seen the development of Norway's electrical transmission network. This new infrastructure permitted Norsk Hydro to construct a third factory close to Norway's ports. The company chose Herøya, on the Tinnelv River near Porsgrunn, launching production of calcium nitrate in 1930. That site was later to grow into Norway's largest industrial center.
Norsk Hydro had also been building up its research and development side. This led the company to launch production of the complex fertilizer, NPK, combining nitrogen with two other essential plant nutrients, phosphorous and potassium, in 1936. By 1938, the company had refined its NPK production technology, which became known as the Hydro process, with full-scale production launched that year.
In the years leading up to World War II, Hydro continued to expand its production, adding a number of new chemicals and minerals. These included urea, ammonium nitrate, potassium, phosphate, and calcium chloride.
The Depression era, however, placed the company under new pressure, as the market for ammonia fertilizers collapsed. A new highly protectionist era emerged in the global fertilizer industry, as countries sought to protect their domestic producers. Norsk Hydro's heavy reliance on exports, which accounted for 95 percent of its sales, left the company particularly vulnerable during this period. In order to survive, the company formed an alliance with ICI in England and IG Farben, called the DEN Cooperation.
The company returned to profit growth only toward the end of the decade. However the outbreak of World War II, and the German occupation of Norway, brought an end to the group's prosperity as an independent concern. A new shareholder base took over the company, while its managing director was taken as a prisoner of war. Norsk Hydro's operations were then turned over for the support the German war effort. The Rjukan facility, for example, was used to produce heavy water needed for the Nazi atomic research program. This led to the plant's destruction by Allied-trained saboteurs, the famed Heroes of Telemark. By the end of the war, however, the company's other sites, including Herøya, had also suffered extensive bomb damage.
Modernization in the Postwar Era
With the end of the war, the Norwegian government moved to take control of Norsk Hydro, claiming a 51 percent stake in the company. Norsk Hydro mapped out an ambitious plan to expand its production capacity. The company launched a massive investment program, succeeding in nearly quadrupling its sales revenues between 1945 and 1955. While the period was marked by a general overcapacity in the global fertilizer industry, Norsk Hydro counted on its access to Norway's readily available and inexpensive hydroelectric power. In this way, the company was not only able to remain competitive, but also to grow to become one of the world's leading fertilizer producers.
A major factor in the group's rise was its acquisition of the Glomfjord hydroelectric plant near the polar circle. Developed in the post-World War I era, the Glomfjord site had originally powered an aluminum factory. In 1947, Norsk Hydro acquired the plant, which had been damaged during the war. The company launched construction of a new ammonia and fertilizer production facility, and production there was launched in 1949. The Glomfjord site not only provided ammonia production, but also capacity for converting ammonia into higher-value fertilizers including NPK and calcium nitrate.
The postwar era witnessed Norsk Hydro's growth into Norway's largest and most diversified conglomerate. Fertilizer production inspired much of this diversification, either through production byproducts or into related business areas. The most important of these stemmed from the company decision in the mid-1960s to convert its ammonium production processes to petrochemicals-based methods, using butane and naphtha. The first of the company's new generation plants began production at Porsgrunn in 1968.
As a result, Norsk Hydro entered the oil and gas industry during this time in order to ensure its supply of raw materials. Over time, Norsk Hydro also expanded into the production of light metals. By the turn of the century, the group's diversified operations had grown far larger than its original fertilizer business.
International Expansion in the Eighties
Fertilizers nonetheless remained an important component under the company, and were later regrouped as Hydro Agri. International expansion played a prominent part of the division's growth. The company had begun establishing international sales subsidiaries, including in the United States from 1946. In 1969, the company added its first international production operations, gaining a 25 percent stake of a joint venture launched in Qatar in 1969. By 1972, Hydro Agri had entered the Asian market, starting with a sales operation in Thailand.
The surge in European agricultural production brought on by intensive agricultural techniques led to an oversupply of the market by the late 1970s. Hydro Agri took steps to lead the consolidation of the European fertilizer market, in order to maintain its role as a major player. The company's first acquisition came in 1979, when it acquired NSM, based in the Netherlands. In 1981, the group turned to Sweden, buying 75 percent of Supra AB. The United Kingdom's Fisons Group was added next, becoming Hydro Agri (UK) Ltd. in 1982. That year, Hydro Agri expanded its Scandinavian reach again, purchasing Denmark's Korn- og Foderstofkompagniet.
The company's next move onto the continent came in 1985, with the acquisition of Veba, based in Germany. The following year, Hydro Agri gained a major stake in the French market, with the purchase of 80 percent of Cofaz (Compagnie Française de L'Azote). The company acquired full control of Cofaz the following year. At the end of that decade, the company added a new sales headquarters in Brussels in order to coordinate its European marketing efforts. By 1991, the company had boosted its European production base again, acquiring a facility in Rostock, Germany.
Independence in the New Century
Hydro Agri targeted more global expansion with the lowering of trade barriers in the early 1990s. With its European market position threatened by the influx of less-expensive Asian and South American fertilizers, the company moved to gain a stake in these markets as well. The group's first entry outside of Europe came in 1990, with the acquisition of Sri Lanka's state-owned Ceylon Oxygen Company. The company next added operations in Trinidad, then launched a joint venture in Florida, marking its entry into the North American market. That operation was later joined by a move into Canada, with the acquisition of that country's Nutrite in 1996.
By the end of the 1990s, however, Hydro Agri was once again suffering from the low margins and massive oversupply of the European and global fertilizers markets. By then the smallest part of Norsk Hydro, the Agri division continued losses had left it deprived of further investment funding. As a result, the company launched a major restructuring effort at the dawn of the 21st century. As part of its restructuring the Hydro Agri shut down a number of its plants and downsized others, while instituting tough new profitability requirements.
With the restructuring underway, the company once again targeted the further consolidation of the fertilizer industry on a more global level. The company entered South Africa in 2000, forming a 50-50 joint venture with Anglo American Industrial Corporation to take over Kynoch Fertilizers, the country's largest fertilizer producer. Also that year, Hydro Agri entered Brazil, buying a 58 percent stake in Adubos Trevo, based in Porto Allegre. Back in Europe, the company boosted its U.K. position through the purchase of 35 percent of Phosyn in 2001.
Hydo Agri's restructuring was largely completed by 2003. With the revenues and profits of its fertilizer business once again on the rise, Norsk Hydro announced its decision to spin off that division as a separate, publicly listed company in 2004. The new company became known as Yara International, the name being taken from an ancient Norse-language word similar to the English word "yield."
Olanned Double Production by 2010
Yara's total production capacity reached 20 million tons by mid-decade. Already the outright leader in the global fertilizer industry, Yara mapped out a new strategy of doubling its total capacity into the next decade. For this, the company once again began shopping for new acquisitions as it celebrated its 100th anniversary.
The first of these came in 2006, when the company reached an agreement to acquire full control of Phosyn in the United Kingdom. Soon after, the company announced that it had acquired control of Fertibras, a fertilizer marketing and distribution company in Brazil. Fertibras also owned 15 percent of Fosfertil, the leading nitrogen and phosphate fertilizer producer in Brazil. By the end of 2006, Yara had bought up 50 percent of Balderton Fertilisers, in Switzerland, a leading European fertilizer trading group. The company then acquired Mexican fertilizer retailer Olmeca.
Yara added new operations in North Africa in 2007 through a joint venture with the National Oil Corporation to take over its ammonia and urea plants in Libya. The company then extended its reach into India, forming a joint venture there with Krishak Bharati Corporation.
By the end of that year, Yara had gained approval to complete a still larger purchase: Europe's number two fertilizer producer, Kemira GrowHow. The addition of the new operations were expected to add more than 20 percent to Yara's 2006 revenues of NOK 48.26 billion ($8.72 billion) and boost the company's total global market share considerably.
Principal Subsidiaries
Yara A/S; Yara AB (Sweden); YARA Agri Czech Republic S.R.O.; Yara Agri Ltd. (United Kingdom); Yara Belgium S.A./NV; Yara Brasil Fertilizantes S.A.; Yara Colombia Ltda.; Yara France S.A.S.; YARA GmbH and Company KG (Germany); Yara Iberian S.A. (Spain); Yara Industrial GmbH (Germany); Yara Italia S.p.A.; Yara North America Inc. (United States); Yara Phosyn Ltd. (United Kingdom); Yara Rus Ltd.; Yara Sluiskil B.V (Netherlands); Yara Trinidad Ltd.
Principal Competitors
China National Chemical Corporation; Vietnam National Chemical Corporation; Norsk Hydro ASA; Royal DSM N.V.; Equistar Chemicals L.P.; Bangladesh Chemical Industries Corporation; Liaocheng Luxi Chemical Group General Corporation; Wesfarmers Ltd.; Jiangxi Damaoshan Group Company Ltd.; Bayer CropScience AG; Arkema S.A.
Further Reading
Bains, Elizabeth, "Yara Undertakes Indian and Libyan Ventures," ICIS Chemical Business Weekly, April 30, 2007.
Baker, John, "Yara Cultivates Its Fertilizer Business," ICIS Chemical Business Weekly, May 28, 2007.
"FGBusiness: Yara Mounts Kemira Bid," Farmers Guardian, June 1, 2007, p. 84.
Gibson, Jane, "Yara Buys into Mexico," ICIS Chemical Business, November 6, 2006, p. 17.
"Hydro Agri Faces a New Future," Fertilizer International, September-October 2003, p. 14.
"Hydro Agri Prepares for Demerger from Norsk," Chemical Market Reporter, December 8, 2003, p. 6.
"New Jewels in Hydro Agri's Network," Fertilizer International, July 2001, p. 14.
"New Name for Fertiliser Business," Farmers Guardian, March 26, 2004, p. 110.
O'Driscoll, Cath, "Successful Fertilisation," ECN-European Chemical News, July 25, 2005, p. 21.
"Yara Eyes Synergies from GrowHow," Chemical Week, December 12, 2007, p. 5.
"Yara International Takes to the Water," Fertilizer International, May-June 2004, p. 14.
"Yara Plans to Acquire GrowHow in Fertilizer Megadeal," Chemical Week, May 30, 2007, p. 5.
"Yara Restructures in Europe and Latin America," Fertilizer International, January-February 2007, p. 60.
"Yara Takes a Bow," Fertilizer International, March-April 2004, p. 52.
"Yara to Build Urea Unit at Dutch Complex," Chemical Week, October 31, 2007, p. 16.
Young, Ian, "Yara Will Sell Assets to Secure Clearance for GrowHow Deal," Chemical Week, October 3, 2007, p. 17.
— M. L. Cohen
