DJ INTERVIEW: Uralkali CEO: Can Deliver Strong Results On Higher Pricing

28.05.2012
Alex MacDonald / Dow Jones (UK)

LONDON (Dow Jones) — Uralkali (URALL, URKA.RS), the world’s largest potash fertilizer producer, has the potential to deliver strong results this year as higher average selling prices offset lower output, the company’s chief executive told Dow Jones Newswires in an interview.

«Average realized price for this year will be considerably higher than 2011," Vladislav Baumgertner said. «That is why we think [Uralkali’s] financial results can be stronger than in 2011 despite the fact that volumes will be lower.»

Baumgertner expects Uralkali’s sales volume to drop to between 10 million and 10.3 million metric tons this year from 10.8 million tons in 2011, reflecting a similar drop in global potash deliveries due to high inventory levels at the beginning of the year. Global potash deliveries are forecast to drop to 53 million to 54 million tons in 2012 after reaching 57 million tons in the previous year.

Uralkali reacted to the high inventory levels at start of the year by operating at half its full production capacity in January and February. The move helped pare back global potash inventories and bring the global potash market back to supply-demand balance.

Uralkali has since increased production to full capacity in light of robust agricultural demand for fertilizers and expects to operate at full capacity through the third quarters, the company’s director of sales and marketing, Oleg Petrov, told investors at a luncheon.

«At the moment all the markets are doing very well," Baumgertner said. «Consumption and the market has recovered. The only exception is the market of India.»

Brazilian potash prices recovered to $550 a metric ton, while sales to Southeast Asia have been good and sales to Europe have been on par with the previous year, Petrov said.

In China, the company remains «positive about its prospects," with second half of the year contract negotiations due to begin in a month’s time.

India, however, remains a problem since demand there has been «considerably impacted by significant rupee devaluation and [a] change in state subsidies," Baumgertner said. Indian farmers are consuming less potash after the Indian government lowered its potash subsidies and the rupee weakened against the dollar, making potash more expensive for Indian farmers to buy.

Uralkali expects to conclude its Chinese and Indian contracts negotiations by August or September, Petrov said.

The Russian potash producer delivered a 64% rise in net profit to $1.52 billion in 2011, taking into account the merger of Uralkali with Silvinit to create the world’s top potash producer last year. The figures were calculated on a pro-forma basis.

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