Annual Report 1999 - Kemira

KEMIRA AGRO
EUR
million
1200
1000
800
600
400
200
0
MANAGEMENT
President: Risto Keränen
Vice President:
Rauno Valkonen
Agriculture: Timo Lainto
Horticulture: Hannu Virolainen
Process Chemicals: R.A. Chorlton
Risto
Keränen
NET SALES
Net sales
Operating margin, %
95 96 97 98 99
CAPITAL EXPENDITURE
95 96 97 98 99
NET SALES BY MARKET
AREA
Other
countries
3 %
Asia
8 %
EU
85 %
Other Europe 4 %
%
12
9
6
3
0
–3
–6
EUR
million
80
60
40
20
0
LOW PRICES PUSH THE RESULT
INTO THE RED
Kemira Agro’s net sales remained
slightly below the previous year’s level
and were EUR 1,015 million (1,030
million in 1998). The company reported
an operating loss of EUR 39 million
(operating income of 19 million in
1998). The figure includes EUR 39 million
of non-recurring net costs that
were mainly incurred in closing the
Pernis plant.
CONVENTIONAL FERTILIZERS DOWN,
SPECIAL PRODUCTS UP
Agriculture. The sales and also the
profitability posted by Kemira Agro’s
largest strategic business unit declined
further.
The use of nutrients worldwide declined
by about 2%. The weak situation
of agriculture has led to a shrinkage in
the demand for fertilizers, putting pressure
on prices. For example, the prices
of maize and soya were the lowest in a
decade. In addition, there was an abundance
of grain in storage.
It was a difficult year for the
world’s fertilizer industry. Prices fell
further, by 5-15 %, particularly within
nitrogen fertilizers in Western Europe
and they ended at an all-time low
level. China remained absent from the
urea market, and this also cut into the
demand for nitrogen. At the same
time, new ammonia and urea capacity
came on stream. The price of natural
gas was very low in Russia, making
production there very competitively
priced.
In the EU the 10% compulsory setaside
acreage requirement is continuing
up to 2006. The import of fertilizers
to Europe has remained at the
same level as in previous years, about
25% of aggregate use. The use of nitrogen
in Western Europe declined by
slightly less than a per cent, the use of
phosphorus by about 2% and the consumption
of potassium by about 4%.
The consumption of nutrients in Western
Europe is continuing to fall at an
annual rate of 0.5-1%. Concurrently,
the efficiency of fertilizer use is improving.
Owing to contracting markets and
persistently large imports, Western Europe
now has substantial overcapacity
in fertilizer production. The association
of European fertilizer producers,
EFMA, defended Western Europe’s
markets, especially against East European
producers, by initiating a number
of anti-dumping projects, with partial
success. Towards the end of the year,
plant closures and plans to close down
capacity were announced. These will
bring a total reduction of about 1.5
million tonnes in the aggregate production
volume. The calculated overcapacity
in Western Europe is about 3
million tonnes.
After several years of holding fairly
steady, the price of diammonium
phosphate headed downhill in the second
half of the year. The slide has
nevertheless now evened out. The fall
is due to new capacity in India, Australia
and Morocco that is coming on
to the market. The price of potassium
remained stable throughout the year.
The EU has set a minimum price on
potassium imports, and this has
helped to keep prices at a reasonable
level. The market situation for potassium
sulphate has nevertheless been
weak, mainly owing to the lack of purchases
by China, and the prevailing
situation has sent prices downwards.
The weak profitability of the nitrogen
fertilizer business also led to major
closures of capacity in the United
States. Kemira Agro decided to close
down the sulphuric acid, phosphoric
KEMIRA AGRO
EUR million 1999 1998 1997 1996 1995
Net sales 1,015 1,030 1,079 1,056 1,030
Cost of sales –990 –954 –941 –871 –849
Depreciation –64 –57 –53 –59 –71
Operating income –39 19 85 126 110
Net financing expenses –20 –17 –21 –23 –27
Income before extraordinary items –59 2 64 103 83
Capital invested (average) 663 645 602 595 652
Return on capital invested % –5 5 14 21 18
Capital expenditure 47 62 48 40 42
Personnel (average) 2,951 3,071 3,117 3,415 3,475
48