Uralkali CEO Mulls Alternative Ways To Execute $2.5B Shr Buyback

Alex MacDonald / Dow Jones (UK)

Uralkali (URKA.RS), the world’s largest producer of potash fertilizer, is considering alternative ways to execute its $2.5 billion share-buyback program before October, including a special dividend or a share buyback tender offer, the company’s chief executive said in an interview.

The Russian company’s share-buyback program is aimed at returning excess cash to shareholders, after taking into account the company’s capital expenditure plan and cashflow generation. But so far it has spent less than a fifth of the intended sum, prompting questions about whether it would meet the deadline.

Under the program, launched last October, Uralkali said it would buy back its shares and global depositary receipts in the open market by Oct. 6, 2012, and then cancel them rather than hold them in its treasury.

As of the end of last week, the company had only spent about $484 million on share buybacks, prompting analysts to wonder how the company intends to fulfill the remainder of the share-buyback program before the deadline.

Uralkali’s Chief Executive Vladislav Baumgertner said in an interview with Dow Jones Newswires that the company doesn’t have to execute the entire share-buyback program by Oct 6. «It will be difficult» to do this, he said, given the company’s silent periods ahead of earnings [when it’s not allowed to buy its own shares] and the London Stock Exchange’s requirement that a company can only buy up to 25% of the daily traded share volume.

Baumgertner said the company is examining several alternatives to return cash to shareholders, including a special dividend or a share-buyback tender. «We’re not in a hurry to take this decision," he said. «The final decision can be taken in August or September," he said.

The program aims to restore net debt to earnings before interest, taxes, depreciation and amortization, or Ebitda, ratio to its targeted level of 1 to 2 times net debt to Ebitda.

«At the moment we are under-leveraged so our net debt position is below one [times] Ebitda," he said. He added that the company is producing strong cashflows and is able to cover its capital expenditure requirements even after taking the share buyback into account.

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