Okay, good morning and welcome to the presentation of Yara's third quarter results. Our presentation today is by our CEO, Svein Tore Holsether, CFO, Lars Røsæg, and EVP Sales and Marketing, Terje Knutsen. We'll have a Q&A after the presentation. I then hand over to Svein Tore Holsether.
Thank you very much, Tore. Good morning to all of you. Before we go into the presentation, I want to give my overall reflection on the quarter, which is that Yara is delivering on its targets operationally, with higher production, reliability, and also energy efficiency. Commercially, with strong premium product sales and realized prices. This is improving sales and marketing's EBITDA per ton. As a result of this, results continue to improve. Now I'll go straight to the results. As always, we start with safety. Very pleased to have established an industry-leading TRI rate in the last year. We have now reached a level where we have to accept that we cannot improve further each and every month. I am pleased to see that the severity level of the injuries we've had this year are at a lower level than last year.
We believe that we can ultimately get to our zero target on injuries, and we will continue to push towards this goal and we do this through our Safe by Choice way of working. Let's take a look at our financial results. EBITDA, excluding special items and IFRS 16, is up 49% year-over-year. This reflects lower energy costs, strong premium deliveries, and higher production in the quarter. We also saw a strong earnings improvement in the new business area. Our earnings are on an improving trend, and as you can see on your left-hand side, so are our capital returns. Further improvement is needed in order to generate satisfactory returns, and achieving it is a top priority at Yara. Volume-wise, our total third-quarter deliveries were down 5% to 9.8 million tons.
We saw a positive mix effect on EBITDA as deliveries were up for NPK and other high-margin products. The lower deliveries were mainly within commodity products, where margins are lower. We saw strong nitrate deliveries, still somewhat lower compared with a record high third quarter in 2018. Before we go further into the results, let me provide some comments on market developments this quarter, starting with production costs. Gas prices in Europe were down 55% compared to the year earlier, and U.S. gas prices were down 23%. Nitrogen prices were stable, and it's fundamentally positive that prices in most locations have moved to a level where Chinese exports are increasingly in demand globally. Yara's realized nitrate and NPK prices were also higher, both in absolute terms and in terms of premiums compared with urea and other commodity fertilizers.
The publication prices on the chart that you see here are lagged by one month to better reflect that Yara's P&L, where deliveries that are made today typically are made roughly one month earlier. Even if we have not yet reached a satisfactory return level, we are pleased to see an improving trend. This is our highest third quarter result in five years, and our Return on Invested Capital has improved for the last five quarters. I'd now like to hand over to our CFO, who will take you through our financial performance in more detail. After this, EVP Sales and Marketing, Terje Knutsen, will provide an update on our commercial activities. Over to you, Lars.
Thank you, Svein Tore. Good morning, all. Let me start by looking a bit at the key numbers. EBITDA, excluding special items, was at NOK 630 million, representing an improvement of roughly 50% when we also adjust for IFRS. The underlying EPS improved significantly in the quarter, but the reported EPS was down in the quarter. That was driven by two main effects compared to the underlying. Number one is special items. Where we have a potential misinterpretation of an energy tax in one of our larger sites, which we have made a provision for referring back to the past five years of a total of $35 million. In addition, we have a negative effect on our USD loans, which are consolidated into a NOK entity when the dollar strengthens.
The EBITDA growth was also the main driver behind the increased cash flow from operations, landing at NOK 285 million, which is significantly higher than a year ago, and also positive net of investments. As communicated, we have a significantly reduced investment activity as our focus is on ramping up current investments, and CapEx at the end of the year was at NOK 750 million. The increase in earnings and in capital return is positive. However, we are still well below our mid-cycle target of above 10% Return on Invested Capital. The rolling 12-month return is at a little bit north of 6%, while the return in the quarter is just north of 8%, supporting the path towards that mid-cycle target.
If we look at the bridge, lower energy cost was a significant driver for the EBITDA improvement compared to a year earlier, and an improved mix in line with our strategy, prioritizing value over volume, provided a positive volume mix effect and better margins, then also contributed to the net increase in EBITDA. The energy cost decrease was in line with the Q2 guiding, driven by lower energy prices in Europe compared to last year. The other includes the IFRS 16 effect of NOK 29 million, as well as certain negative portfolio effects from operations that had a contribution which was positive last year. We should remind ourselves that the Galvani transaction was closed in the third quarter on the 10th of July.
If we move on to look at the different segments, there was a profit growth, as expected in production, driven by the European upgrading margins with improved reliability, as well as a positive contribution from growth projects compared to last year. The sales and marketing segment, which is less cyclical, was up compared to last year. Terje will shortly provide more comments related to sales and marketing. We saw a broad-based improvement across all business lines in new business with volume increase for AdBlue in both Europe and North America, as well as higher margins, mainly within mining applications. Maritime contributed a significant share to the result improvement in the quarter. The evaluation of an IPO scope is ongoing in line with the previously communicated timeline.
In accordance with the extended improvement program, which we launched at the Capital Markets Day in June, underlying production performance increased 470,000 tons versus 2018, driven by increased finished product output and improved reliability relative to 2018. Of course, with current upgrading margins, improved reliability being a key factor. As we can see from the past, output will vary on a quarterly basis around the positive long-term improvement trend. Our main focus is on turnaround performance, further reliability improvements, and growth project execution. This, of course, supports our strategic targets on reduced greenhouse gas emission.
The fixed cost trend remains flat, in line with the announced target of beating inflation by around NOK 300 million by 2023, and the overall payroll cost was at around NOK 280 million in the quarter, which is actually the lowest level since the fourth quarter of 2017. Working capital increased in the quarter on a rolling basis, both seasonally and in this quarter, in particular, driven by deliberate commercial management of inventory levels relative to pricing in an environment with favorable upgrading margins. In the quarter in isolation, the increase in working capital is driven by seasonal patterns in Brazil, which is in line with the development last year, and also timing of gas subsidy payments in India. Our committed CapEx levels are unchanged in line with the communication at the Capital Markets Day.
Although capital expenditures as of the third quarter is at NOK 750 million, we maintain the commitment estimate of NOK 1.3 billion for the year, as CapEx is normally significantly higher in the fourth quarter than in the average quarter. As you can see, and as we've discussed before, our investment spend is significantly reduced in 2019 and 2020 as our growth projects reach completion and strict capital allocation rules are enforced for any new proposals. Currently, we have three major growth projects still under execution, which is Sluiskil in the Netherlands, with completion in the second half of 2019. Salitre, with completion of the first phase in the first half of 2020, and Rio Grande, with completion by the end of 2020 as previously communicated.
Cash earnings in the quarter funded both investments and the increased operating capital, leaving net debt slightly down from the second quarter and below NOK 4 billion. The net debt EBITDA ended at 1.9 at the end of the third quarter, down from 2.5 at the end of 2018, and 2.2 by the end of the second quarter. As such, Q3 is the first quarter where Yara is within its targeted range of 1.5-2. Reminding them from the Capital Markets Day, our revised capital structure target is a mid to long-term net debt EBITDA range of 1.5-2, and a net debt equity ratio below 0.6.
As you may have seen from our separate stock exchange release this morning, in line with this new policy, we are also announcing a share buyback program for the fourth quarter, targeting to buyback approximately 0.8% of outstanding shares, including the redemption from the Norwegian states. Adjusting for this buyback, net debt to EBITDA at the end of Q3 would be close up to 2x. As previously announced, the current improving market fundamentals, combined with Yara's extended improvement program and increased hurdle rate for new investments, may lead to increased dividend capacity beyond the ordinary payout ratio going forward. With that, I hand over to Terje Knutsen for the commercial market.
Thank you, Lars, and good morning to all of you. Our sales and marketing deliveries decreased 7%, mainly due to reduced sales of commodities in Brazil, and also some lower deliveries of industrial urea in Europe. Premium product deliveries were in line with last year, as growth in Brazil offset lower deliveries in Europe and Asia. Overall, we consider the premium deliveries strong, mainly due to the NPK deliveries. Although nitrate deliveries were somewhat lower, this is compared with a record high delivery last year. Despite lower deliveries, EBITDA increased with 33% from third quarter 2018, reflecting lower fixed costs and margin improvements, which more than offset the lower deliveries. As you saw earlier in the presentation, prices were up both for NPKs and nitrates. In premium terms, the performance is even stronger since comparable commodity reference prices are lower compared to a year earlier.
Let me quickly go through some of the regional developments. The season in Europe started really well, not unexpectedly, demand slowed towards the end of the quarter, following the negative price trend in global commodity nitrogen markets. That is at the time where fertilizer application still is six to nine months away. Despite that slow market in September, Yara's nitrate and NPK deliveries for the quarter were roughly in line with a year ago, while nitrogen deliveries in Europe for the industry as a whole was down 8%. Growth for our premium products continue in Brazil, while the development in several other key premium product markets in Asia and Latin America has been somewhat muted in the quarter compared to a year ago.
That is due to a combination of challenging ag fundamentals, and also unfavorable climate conditions, typically related to water availability, and that has had a short-term impact on deliveries in several markets. Despite these short-term setbacks in some markets, total premium product deliveries were for the quarter in line with last year, as already mentioned. Over the last 12 months, we have been able to increase the premium deliveries with almost 500,000 tons. As you can see, we also continue to grow our deliveries of the YaraVita product range at a high speed. For those of you that do not follow us that closely, YaraVita is our micronutrient range for either foliar application or applied as a coating on solid fertilizer, a high margin range, knowledge-intensive solution.
All in all, we are very confident that our strategic direction is right, and also that our medium to long-term targets that we communicated at our Capital Markets Day remain. As Svein Tore noted at the start of the presentation, we are delivering our targets within sales and marketing with strong premium product sales and realized prices, thereby improving EBITDA per ton.
I will hand back to Svein Tore, who will give his closing remarks.
Well, thank you very much, Thor. Running up. We continue to consider our prospects attractive. Firstly, the industry fundamentals, where a growing population and agriculture's environmental and resource challenges create business opportunities for Yara. Better crop nutrition solutions play a key role in responding to global challenges. In addition, the market cycle is improving with supply-side pressure easing, while demand fundamentals are positive due to a tightening situation for. Our cash flow is set to improve, both due to the cyclical improvement and that our CapEx is declining significantly while our improvement program delivers higher volumes and revenues. Finally, we have a strong competitive position with a focused and sustainable long-term strategy to deliver improved service. As you may have seen, we launched our long-term targets to fulfill our strategy this summer. As mentioned at the start of the presentation, we are delivering on these targets.
I hope you've seen this as well, as you now have been through the results of the third quarter. Again, I would like to highlight that the operational improvement with higher production, reliability and energy efficiency, commercial and margin performance with strong premium product sales and realized prices, improving sales and marketing, EBITDA for the top. As a result of this, our returns continue to improve. I want to leave you with some recent examples of food chain initiatives. Improving the environmental footprint of agriculture is a top priority globally, and we are connecting with more and companies along the whole value chain to achieve this. We are collaborating with Nel to produce hydrogen with renewable energy, and our cooperation with Swedish Lantmännen leads the way towards the world's first certified fossil-free food chain.
We also have several other multinational food chain products with some of the biggest players in the industry. With these closing remarks, I'll hand you over to Thor, who will coordinate the Q&A.
Okay, we are ready for the Q&A. If you have a question, please raise your hand and my colleague, Silje, will get the microphone to you, sometimes with help from the audience. Is there a first question we can kick off with? Yeah. We go to APG.
Yes, good morning. Benton Olsen from APG. The volume reduction within other and Brazil, is that related to the Galvani transaction? How much volumes of that is related to those deliveries? If we look at realized prices for NPK, given the significant price fall within phosphates, can you please have a comment on that? Also finally, how does the order book look into Q4?
If I start briefly on the other, a main effect on the negative there, as opposed to the positive on IFRS, is related then to sales and profit from those assets in the third quarter last year, which gives you a delta. In total, when you also look at the notes of our report, you will see that the other items are actually lower than they were last year. When it comes more on the market question, I leave that for Terje.
Yeah, I think firstly, it's important that we are with our NPKs primarily in market segments that are less exposed to the pure commodity pricing. That means that we have more stability in the NPK price than I think many of our competitors. That is also due to the fact that we are much deeper in the market. Typically you would have less of the swings when we operate as far out as we do. However, over time, obviously, we are exposed to the commodity prices, and we would most likely see some more alignment, but I would stress that we are in many market segments that have much less price elasticity than a typical commodity segment. That's why we see the benefit in a phase like now when P&K is more volatile, that we are able to sustain and keep margins.
I think that is a reflection of all the work we do in positioning ourselves deeper in the value chain. Then it was order book. First, I would say we are very pleased with how the European season started. I think we hit well on pricing. We got good traction. It's very natural that we have a falling off a bit now when commodity prices have been more on the downward trend. There is substantial market left in Europe. urea has not yet come in with strong volumes. That means that we foresee that we will have a normal season in Europe. Whether that will come exactly in Q4 or early Q1, that still remains to be seen. That's something we play by the week. We are confident on where we are presently.
We have maintained market share in Europe and consider that the season will evolve normally.
More question from the audience?
If not, there is another opportunity at 2:00 P.M. Oslo time today when we have the conference call. With that, thanks for joining today. Thanks for joining the presentation.