QUARTERLY REPORT Open Joint-Stock Company Uralkali for the ...

according to the rating of the "Expert" magazine the Perm Region has been among the leaders during the
whole period of rating 1998 – 2011. Its rating is estimated as "Middle potential – moderate risks" (2B). In
2010-2011 the same agency ranks the Perm Region to the 11 th place according to the level of investment
potential between the Russian regions (source: http://www.raexpert.ru/ratings/regions/2011/).
Geographical location of the Perm Region determines a full structure of transport system.
There is a confluence of transcontinental railway, airway lines and roads in the Perm Region. There are four
eastern ports of the unified deep water system of the European part of Russia providing an entry to Northern
and Southern Europe.
The main natural resources in the Perm Region are oil and gas, potassium, magnesium and
sodium salts, precious (diamonds) and semi-precious (selenite) stones, gold and platinum, chrome ore,
metallurgical and cement raw materials, carbonate raw materials. 205 oil and gas fields are opened in the
Perm Region, there is the largest in Russia Verkhnekamskoe field of potassium-magnesium and mineral salts.
In the north there are eight fields of diamonds.
Industrial economy of the Perm Region includes more than 500 large and medium
enterprises of different spheres.
The Perm Region is among the leaders when it comes to the volume of production export,
including the foreign market. As for the volume of exports the Perm Region is rated among the top five
regions – the largest exporters of Russia.
Nevertheless, the infrastructure of Russia, including the Perm Region, was mainly created
during the Soviet era and has not received a sufficient financing and maintenance within the preceding
decades. In this connection at the present time there is a crisis related to considerable deterioration of basic
funds of the enterprises ensuring the normal functioning of all processes of the state and society activities. It
is necessary to renew the funds of transport system, power industry, communications and capital
construction.
Deterioration of infrastructure in Russia damages the economic development, breaks a
transportation of goods, raises the expenses of the production activity in Russia and can lead to disruptions of
financial and economic activities and thereby can have a considerable adverse effect on the Issuer’s activity
and its stock value.
The Russian Federation is a multinational state and includes regions with different level of social and
economic development and therefore one cannot totally preclude a possibility of military conflicts in Russia
including the use of military force. The Issuer cannot totally eliminate the risks related to a possible
imposition of a state of emergency in the regions where the Issuer has its assets and in Russia in the whole.
The risks related to possible military conflicts, imposition of a state of emergency and strikes, in Issuer’s
opinion, are not very considerable because the Perm Region is geographically remote from the regions of
current conflicts and military actions. A serious damage to the activities of the Russian enterprises including
the Issuer’s activity can be done by acts of terrorism, internal or international; the influence of such acts can
have an adverse effect on foreign investments and the price of the Issuer’s shares.
2.4.3. Financial risks
1. Inflation risks
The Company is exposed to inflationary cost increases, due to the dependence of the substantial costs on
inflation in the country.
A negative impact of the inflation on the Issuer’s financial and economic activity can be caused by the
following risks:
- Risk related to loss of actual costs of loan receivable due to a long respite or delay in payment;
- Risk of prime cost increase for goods, produces, works, services due to a price escalation for energy
resources, transport expenses, salary and so on;
- Risk of actual cost decrease of means raised for financing investment programs.
To reduce the impact of inflation risk, the Company pays key attention to reduction of production costs, as
well as assessment of the risk in development of investment projects and making investment decisions.
2. Risks related to change in the interest rates
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