Uralkali Announces Q1 2014 Key Figures

19.06.2014
Uralkali Announces Q1 2014 Key Figures

Uralkali (LSE: URKA, “the Company”), one of the world’s largest potash producers, announces its unaudited IFRS key figures for the three months ended 31 March 2014.

JANUARY-MARCH 2014 TOP LINE AND OPERATIONAL HIGHLIGHTS:

  • Revenue up 17% y-o-y to USD 862 million
  • Production up 38% y-o-y to 2.9 million tonnes of potassium chloride (KCl)
  • Sales volumes up 63% y-o-y to 3.1 million tonnes of KCl
  • Average export price down 31% y-o-y to USD 215 per tonne of KCl

CORPORATE HIGHLIGHTS IN Q1 2014:

  • Acquisition of a 25% stake in Equiplan Participacoes S.A. to enhance the Company’s logistics infrastructure in Brazil
  • Election of the new Board of Directors, following changes in the shareholder structure

Significant Events after the Reporting Period:

  • In June, approval of the dividend payment for 2013 by the annual general meeting of shareholders in the amount of RUB 1.63 per share (approximately USD 0.24 per 1 global depositary receipt ("GDR“)1), with total dividends for 2013 amounting to RUB 11.3 billion (approximately USD 326 million)
  • In June, decision of the Board of Directors to convene an extraordinary general meeting of shareholders (“EGM”) in the form of absentee voting on 31 July 2014 to vote on the merger of its subsidiary CJSC Uralkali-Technology, as well as the cancellation of 100% of CJSC Uralkali-Technology shares and Uralkali shares owned by CJSC Uralkali-Technology (12.5% of Uralkali’s share capital).

Dmitry Osipov, Uralkali CEO, commented:

In the first quarter, we saw that all three factors defining our revenue maximisation strategy — market share, price and volumes — were working well. Robust demand enabled us to sell a large volume that we produced working at almost full utilisation capacity. At the same time, global potash prices started to grow compared to the previous quarter. As a result, we were able to significantly increase our revenue compared to the same period last year while maintaining our historical market share.


Key Q1 figures are as follows:

Q1 2014

Q1 2013

FY 2013

Revenue (USD million)

862

738

3,323

Net Revenue (USD million)2

649

614

2,665

Average potash price, FCA, USD

— Domestic

— Export


153

215


315

313


219

268

Production (KCl, million tonnes)

2.9

2.1

10.0

Sales volume (KCl, million tonnes)

TOTAL

— Domestic

— Export


3.1

0.5

2.6


1.9

0.4

1.5


9.9

1.9

8.0


Business and Financial Review

The contracts with China concluded in January 2014 boosted the global potash market. Robust demand enabled Uralkali to keep its utilisation rate close to 90%, with potash output totalling 2.9 million tonnes and sales 3.1 million tonnes. As a result, the Company’s revenue increased by 17% y-o-y to USD 862 million.

The expansion programme remained on track with the major focus on the Ust-Yayvinsky mine construction and debottlenecking. The latter is planned to increase the Company’s production capacity by one million tonnes of KCl by 2016.

Uralkali also further developed its logistics infrastructure expanding its presence in one of the fastest-growing potash markets — Latin America. In February 2014, Uralkali acquired a 25% stake in Equiplan Participacoes S.A., the main shareholder in Terminais Portuários da Ponta do Felix S.A. port terminal in the city of Antonina, Brazil. This acquisition enables the Company to efficiently supply Brazil’s fast-growing regions.

Following the shareholder changes at the end of 2013, the extraordinary general meeting of shareholders elected on 24 March 2014 a new Board of Directors consisting of both representatives of major shareholders and independent directors, with independent directors chairing the Board and all its Committees. On 9 June 2014, the Board composition was reconfirmed by the annual general meeting of shareholders.

On 9 June 2014, Uralkali’s annual general meeting of shareholders approved a dividend payment for 2013 of RUB 1.63 per share and approximately USD 0.24 per GDR. The total dividend payment for 2013 including interim dividends will amount to RUB 11.3 billion (ca. USD 326 million)3, which is in line with the Company’s policy of paying dividends in the amount of not less than 50% of IFRS net profit.

In June 2014, the Board of Directors resolved to convene an extraordinary general meeting of shareholders in the form of absentee voting on 31 July 2014 to vote on the merger of its subsidiary CJSC Uralkali-Technology, as well as the cancellation of 100% of CJSC Uralkali-Technology shares and Uralkali shares owned by CJSC Uralkali-Technology (12.5% of Uralkali’s share capital). After the merger is completed, Uralkali’s share capital will decrease by the amount of shares currently owned by CJSC Uralkali-Technology.

Market review and outlook

In Q1 2014, the resumption of contract shipments to China drove a rebound in potash demand. Customers who chose to delay or defer H2 2013 potash purchases in anticipation of lower spring prices returned to the market in Q1 2014 and this led to a significant increase in potash sales. Strong potash demand growth and improved overall agriculture commodity prices translated into higher potash prices in major markets. In addition, a combination of high demand, unfavourable weather conditions in North America and operational disruptions of several major manufacturers led to lower potash availability in Q1 2014.

In Brazil, potash shipments continued to grow at record pace in the first quarter, with demand supported by increased soybean acreage while granular potash remained in short supply. Customer commitments for H2 2014 deliveries demonstrate their confidence in stable demand from the Brazilian market for 2014. In Central America, potash demand has been supported by strong coffee prices.

North America also had a very strong quarter. Domestic potash sales for the first three months of 2014 increased to 2.8 million tonnes, up from 1.9 million tonnes in the same period last year. In the second half of March, delayed rail deliveries from Canada due to unfavourable weather conditions and logistical problems prompted some US buyers to turn to the barge-delivery market in order to secure tonnage for the approaching spring season. Potash demand is expected to be strong in this region in 2014 as farmers replenish declining nutrient levels in their soils after record crop production in 2013.

Spring season demand was strong in many European markets, supported by favourable weather conditions. Distributors in the region actively purchased to replenish their inventories which had been largely depleted due to their low purchasing activity in the second half of 2013. Robust demand for granular potash caused the price gap between granular products and standard products to widen. Overall, European demand is expected to remain solid in 2014, with Central and Eastern European markets demonstrating strong potash demand growth.

In Southeast Asia, the market was in a steady way, with competition among suppliers being particularly tough in Malaysia, Indonesia and Vietnam. Palm oil growers have continued to invest heavily in fertilisers to maximise returns. The region is expected to have a y-o-y increase in demand from 8.1 million tonnes to approximately 8.4-8.7 million tonnes in 2014.

At the end of Q1 2014, India cut potash subsidies by 2,000 rupees per tonne to 9,400 rupees per tonne for 2014/2015. In early April, Uralkali was the first potash producer to announce an agreement with IPL, securing sales volumes of 800,000 tonnes through to March 2015. The demand environment in India this year is expected to be supportive compared to the recent years, mainly due to the strengthening rupee. The Indian market is expected to reach 3.7-4.0 million tonnes this year.

The Russian market in January-March 2014 grew by 26% y-o-y, with increased purchases from both agricultural and compound fertiliser (NPK) producers.

Oleg Petrov, Uralkali Director of Sales and Marketing, commented:

After a sluggish second half of 2013, starting from January, customers returned to active buying as they sought to replenish their depleted stocks and prepare for the spring sowing season, benefiting from the favourable crop and fertiliser pricing environment. We expect the momentum to continue and global potash deliveries this year may set a new record of 58 million tonnes, growing 7% y-o-y.


For more details about potash market developments, please see an interview with Oleg Petrov, Director of Sales and Marketing, at http://www.uralkali.com/investors/results/.


Uralkali (www.uralkali.com) is one of the world’s largest potash producers and exporters. The Company’s assets consist of 5 mines and 7 ore-treatment mills situated in the towns of Berezniki and Solikamsk (Perm Region, Russia). Uralkali employs ca.11,300 people (in the main production unit). Uralkali’s shares and GDRs are traded on the Moscow Exchange and London Stock Exchange, respectively.



1 According to the exchange rate of the RF Central Bank as of 9 June 2014, 1 USD=34.6573 RUB

2 Net revenue represents adjusted revenue (sales net of freight, railway tariffs and transshipment costs)

3 According to the exchange rate of the RF Central Bank as of 9 June 2014, 1 USD=34.6573 RUB

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Smoking in mines is prohibited.
Work at heights without wearing a safety harness is prohibited.
Work in electrical installations under voltage is prohibited.
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