UPDATE 2-Yara eyes more cash returns to shareholders despite profit miss

(Adds detail, background)

OSLO, April 23 (Reuters) - Norwegian fertiliser company Yara posted a smaller-than-expected 16% rise in quarterly core profit on Friday, and said it would consider further cash returns to shareholders in the coming quarters.

The company is seeing rising prices for its fertilisers at a time of high global grain demand, but also an increase in energy costs at its plants.

First-quarter earnings before interest, tax, depreciation and amortisation (EBITDA), excluding non-recurring items, rose to $585 million from $504 million a year earlier, lagging the $612 million median expectation of 11 analysts polled by Refinitiv.

Yara generated a free cash flow of $2.7 billion in the last four quarters and saw a return on invested capital (ROIC) of 8.6% in the January-March period, the 11th straight quarter of improved ROIC.

“We will consider further cash returns in the coming quarters, in line with Yara’s capital allocation policy,” Chief Executive Officer Svein Tore Holsether said in a statement.

Wheat, rapeseed and other crop futures contracts, important indicators of income in the farming industry and thus the need for fertilisers, have surged amid strong demand globally and supply concerns linked to cold weather in the United States.

But Oslo-listed Yara also expects to pay $180 million more for natural gas, a key component in the production of nitrogen fertilisers, in the second quarter of 2021 compared to a year earlier, and $220 million more in the third.

The company last year announced plans to cut all CO2 emissions from a major ammonia plant in Norway, aiming to make the ammonia from “green” or clean hydrogen - using renewable electricity rather than natural gas - for agriculture, shipping and other use.

Yara’s share price, which had risen 24% year-to-date, fell 3.4% in early trade on Friday. (Reporting by Terje Solsvik, editing by Victoria Klesty and Subhranshu Sahu)