Norway's Yara International ASA (YAR.OS) Friday said its second quarter net profit more than tripled due to improved margins and close to optimal capacity utilization.

Yara, one of the world's largest fertilizer producers, reported a rise in second quarter net profit to NOK3.72 billion from NOK1.12 billion a year earlier, slightly missing analysts' expectations of NOK3.75 billion.

"Yara reports strong second-quarter results as fertilizer margins improved and production ran at close to optimal capacity utilization," said Yara's Chief Executive Officer Jorgen Ole Haslestad. "The second quarter result benefits further from the NOK2.6 billion after-tax gain on the sale of Yara's shares in the Brazilian phosphate producer Fosfertil," he added.

The company said the new fertilizer season has had a promising start. Global nitrogen prices have increased as demand has picked up, and European nitrate prices have started substantially higher than at the beginning of the previous season, supported by low inventories.

Revenue in the second quarter was NOK15.68 billion, down from NOK16.13 billion a year ago, missing the consensus estimate of NOK16.48 billion. The company showed an operating profit of NOK1.89 billion, compared with a NOK85 million loss in the second quarter of 2009.

Nordea analyst Morten Normann said the results were strong, with earnings per share and earnings before interest, tax, depreciation and amortization, or Ebitda, beating estimates.

"Looking at clean Ebitda, its stronger in most facets compared to what we projected," he added.

Ebitda excluding special items came in at NOK2.72 billion, up from NOK1.23 billion in the second quarter of 2009, while clean EPS climbed to NOK5.22 from NOK1.19.

Yara said the new fertilizer season in Europe has started with substantially higher nitrate prices than last year, with low stocks at the producer, distributor and farmer levels. Global urea prices have increased significantly since late second quarter as demand picked up, but price increase may be capped by the availability of Chinese exports, it added.

The company projects strong global demand from agricultural products.

"The U.S. Department of Agriculture estimate for global grain consumption growth is 1.9% for 2010-11, ahead of historical growth trends," the company said. "The strong consumption reflects population growth and continued diet improvements in emerging economies, and in addition increased biofuel production amid historically high energy prices relative to soft commodity prices."

Yara also noted that biofuels could further boost grain demand if the U.S. authorities later this year approve a proposed increase in gasoline blending levels.

Yara said hub prices have been volatile during the second quarter due to weather and supply interruptions. It foresees increasing energy costs in the third quarter.

"Based on current forward markets for oil products and natural gas (on July 7), Yara's third quarter energy costs are expected to be approximately NOK500 million higher than last year, and fourth quarter energy costs are expected to be NOK550 million higher than last year. The estimates may change considerably depending on future energy prices," Yara added.

Nordea's Normann said the projected energy cost increases were higher than his estimate.

At 0707 GMT, Yara's shares were trading up 4.5%, or NOK9.5, at NOK221, outperforming the general Norwegian market.

-By Erik Durhan, Dow Jones Newswires; +46-8-5451-3091; erik.durhan@dowjones.com