Yara stock rose amidst scandal

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Investors didn’t seem scared off when one of Norway’s biggest companies was hit with the harshest corporate fine in Norwegian history on Wednesday. Shares in the bribery-tarnished Yara International rose on the Oslo Stock Exchange, and analysts still hailed its strengths.

Yara International, one of the world's biggest fertilizer producers, is caught in a huge bribery scandal but it hasn't badly affected its share price. Current management seems intent on carrying on, with those charged in the case mostly belonging to the company's earlier top management team. PHOTO: Yara

Yara International, one of the world’s biggest fertilizer producers, is caught in a huge bribery scandal but it hasn’t badly affected its share price. Current management seems intent on carrying on, with those charged in the case mostly belonging to the company’s earlier top management team. PHOTO: Yara

Shares slipped again on Thursday, after news broke Wednesday night that Yara’s former chief executive, 70-year-old Thorleif Enger, is now under indictment for his role in the company’s bribery scandal. He denies guilt, while Norway’s economic crimes unit Økokrim claims he bribed the sons of Libya’s former oil minister and a civil servant in India in an effort to seal important business deals in the countries.

“I know what I’ve done and haven’t done,” Enger, who retired from Yara in 2008, told newspaper Dagens Næringsliv (DN) on Thursday. Enger, who was a popular and highly respected boss of the huge fertilizer and chemical producer after it was spun off from Norwegian industrial firm Norsk Hydro, has hired one of Norway’s most high-profile defense lawyers and vows to clear his name.

Meanwhile, Yara’s current management seemed to be working hard on Wednesday to once again distance themselves from the bribery scandal that left Yara with corporate fines totaling NOK 295 million. The company itself, now led by CEO Jørgen Ole Haslestad, admitted guilt and accepted the fines, much to the aggravation of Enger’s defense attorney Ellen Holager Andenæs, while Haslestad repeated throughout the day that Yara is now run under strict anti-corruption guidelines and that the type of sophisticated and extensive bribery Økokrim uncovered “won’t happen again.”

Yara's current chief executive, Jørgen Ole Haslestad, seems intent on distancing himself and his management team from the bribery charges that have been filed against his predecessor, Thorleif Enger, and some members of Enger's former team. PHOTO: Yara

Yara’s current chief executive, Jørgen Ole Haslestad, seems intent on distancing himself and his management team from the bribery charges that have been filed against his predecessor, Thorleif Enger, and some members of Enger’s former team. PHOTO: Yara

DN and TDN Finans reported Thursday how Yara’s stock, after sinking Wednesday morning when the heavy fines for bribery were announced, rose by fully 2 percent later in the day, to close at NOK 264.30 on the Oslo Stock Exchange. Even though the fines were more than 10 times the previous record in Norway (NOK 20 million doled out to Statoil over its own bribery scandal in Iran more than a decade ago), they didn’t seem to rattle investment bankers like Citi, which called the fines “serious” but not especially damaging.

Citi noted in an investment report cited by TDN Finans that the NOK 295 million in fines only amount to around 4 percent of Yara’s available cash flow in 2013 and its net profits. Results of the criminal investigation into Yara that began two years ago, according to Citi, didn’t force any major changes in Yara’s financial or operating capacity.

Citi’s analysts said they still view Yara as a well-managed company with a strong balance sheet, competitive cost levels and potential to deliver strong cash flow. While the stock was trading down again on Thursday morning at around NOK 261, Yara and its shareholders, with the Norwegian state as the biggest, didn’t suffer too badly.

Questions remain
Yara’s own current executives also seemed to be weathering the storm, with Haslestad appearing on radio and TV throughout the day, also on NRK’s influential nightly newscast Dagsrevy. He does face questions, though, over why the bribery suspicions initially reported to top management back in 2008, as Enger was leaving office and Haslestad was taking over, weren’t reported further to police until 2011. Haslestad claimed he had no reason to report them for three years, when his administration learned more about the nature of them. Police investigators said they wished Yara had come forth earlier with the suspicions, but that the fact they eventually did helped the company avoid even tougher fines.

On Thursday, Yara’s chairman Bernt Reitan also faced questioning from Yara’s biggest shareholder, the Norwegian state, represented by Norway’s new conservative government’s minister for business and trade Monica Mæland. The state still holds 36.2 percent of Yara’s shares and Mæland stressed that the Norwegian government has “no tolerance” for corruption. She told reporters on Wednesday that she “wants to go through the case and hear how the company can ensure that this never happens again.”

Criminal trials loom
While Yara clearly wants to pay the fines and put the bribery scandal behind it, Enger and two other Yara executives who’ve been charged in the case must prepare for criminal trials on their alleged involvement in the actual bribery that cost Yara around NOK 70 million. Prosecutors claim it included false billing, use of offshore tax havens and overpricing of goods to grease the palms of corrupt authorities in Libya, India and Russia, and that top executives in Oslo knew it was being carried out abroad.

“We believe this was anchored among people within Yara’s management at the time,” state prosecutor Marianne Djupesland at Økokrim told NRK. “That’s also a serious aspect of this case.”

newsinenglish.no/Nina Berglund