Russian fertilizer producer PhosAgro begins negotiations with Uralkali on lower potash buying price; PhosAgro's CEO believes price of potash will fall following break up of Uralkali, Belaruskali trading partnership

Mathew Kearney

BEVERLY, Massachusetts , August 26, 2013 (IntelliNews - Weekly Reports) – One of the largest global producers of phosphate and complex composite fertilisers PhosAgro started negotiations with a major potash producer UralKali on a lower potash buying price, Reuters reports citing a phone conference with PhosAgro's CEO Andrei Guryev. Guryev is convinced that the price of potash will become considerably lower for his company and for other NPK producers. PhosAgro's CEO sees at least 25% reduction on potash price as soon as September.

Reuters reminds that Uralkali is the only potash producer in Russia supplying the commodity to NPK fertilisers' producers such as PhosAgro, Acron, EuroChem, and UralChem.

In the beginning of August analysts surveyed by Reuters believed that Acron is going to be among the companies to benefit from lower potash prices. Lower prices are expected as a major potash producer Uralkali recently announced the higher output-lower prices strategy that shook the market and placed its Baa3 rating on a review for downgrade by Moody's.

Uralkali announced that it is going to seize working with its trader the BPC (Belorussian Potash Company) and to direct all of its exports through Uralkali trading. At the same time the company forecasts the price of potash to drop from current USD 400 per tonne to USD 300 per tonne, while expecting higher sales especially on the account of expanding the Chinese and the Asian market.

PhosAgro had its net profit decline by 56% y/y to RUB 4.77bn (USD 143mn) in H1/13. This was worse than RUB 6.3bn expected in the Prime analyst survey and RUB 6bn in Reuters' survey. Lower profit was attributed to declining prices on fertilisers.

Company's revenues went up by 7% y/y to RUB 53.7bn, EBITDA declined by 22% y/y to RUB 13.4bn at a margin of 25% vs. 34% seen in H1/12. Total output in physical volume went up by 12.9% y/y, sales grew by 14% y/y. PhosAgro's net debt as of end of H1/13 was RUB 29.44bn vs. RUB 26.8bn as of end of 2012.

In 2012, PhosAgro's net IFRS profit increased by 9% y/y to RUB 24.5bn with revenues going up by 5% y/y to RUB 105.3bn.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.