eurochem-annual-report-2011

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Business review Addressing the issues that matter 1. Population growth The world welcomed its seventh billion citizen this year, and every day another 200,000 seats are needed at the table. We estimate that global farmland productivity needs to increase by at least 15% by 2020 to keep global food consumption per capita on a par with today’s level. To meet this core challenge facing the global food system, agricultural producers must continue to increase farmland output and efficiency to keep up with demand and contain food price growth. Population growth remains a key driver of increased fertilizer consumption. World population growth 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1950 1975 2000 2025 More developed countries Less developed countries Sources: World Bank, UN, FAOSTAT, BP, EuroChem estimates. 14 EuroChem Annual Report and Accounts 2011 2050 2. Available land This increasing food burden is compounded by another challenge: the decreasing amount of land available for cultivation. Between 1960 and 2011, while the global population increased 130%, cultivated land increased a mere 10% – meaning that if one acre of agricultural land fed 2.4 people in 1960, that same acre must now manage to feed 4.8 people. Throughout the world, but predominantly in developing countries, the rapid pace of industrialisation has led to increasing urban footprints and decreasing land available for agriculture. Highlighting this trend, as of 2011 and for the first time in its history, more people in China now live in cities as opposed to rural agricultural areas. Arable land per capita vs population 10 8 6 4 2 0 1960 1970 1980 1990 2000 2010 2020E 2030E 2040E 2050E 0.1 Population (bn) Arable land (ha/person) 0.5 0.4 0.3 0.2 3. Changing diets Growing prosperity especially in emerging markets, leads to significant dietary changes. This trend has been especially strong in emerging economies, where greater individual wealth has not only brought increased food consumption per capita, but also greater protein intake. This change in dietary standards adds to the burden of a growing population, as protein-rich foods, such as meat and poultry, are resource-intensive sources of calories. Already today, nearly half the world’s cereal production is used to produce animal feed. Over the next 20 years, more than 25% of the projected increase in demand for crops will come from the growing need to produce animal feed rather than as a result of population growth. Kilocalories per capita/day 3,000 2,500 2,000 1,500 1,000 500 0 1964-66 1997-99 2030 Other Pulses Roots and tubers Meat Sugar Vegetable oil Other cereals Wheat Rice
4. Global economy Emerging economies are a key driving force behind fertilizer demand. From 2001 to 2010, the combined gross national income per capita (PPP dollars) of the BRIC countries (Brazil, Russia, India, and China) rose by an estimated 125%, while the US and world averages increased 30% and 56% respectively over the same period. In addition, the world’s population has gone from 2.5 billion people in 1950 to 7.0 billion in 2011, which much of the increase coming from Asia, Africa and South America. It is this unprecedented growth phase that drives both increased consumption and improvements in dietary standards. GNI per capita growth dynamic % 350 300 250 200 150 100 50 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 US EU Brazil India Russia China Per capita meat consumption PPP dollars 140 120 100 80 60 40 20 0 China Brazil Russian Federation India Thailand Japan 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Per capita income, USD PPP US 5. Soil fertility More nutrients need to be applied to bring yields per acre to levels capable of meeting the increasing food demand. Crops deplete the nutrient content of the soil in which they grow. With each successive harvest, these nutrients must be replaced simply to maintain stable production levels. Nitrogen fertilizers must be continuously applied since nutrient not used by crops is heavily subject to leaching. For phosphates and potash, any reduced or delayed application during one harvest cycle will lead to the requirement for a heavier application pattern over the following cycle. Arable land also needs fertile soil to grow the crops that are in demand. While each crop requires different nutrients for optimal growth, N, P, and K fertilizers work best when combined together. World fertilizer consumption in 2000-2011 KMT nutrients 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 2000 2011 Nitrogen Phosphates Potash i EuroChem is addressing these issues. See how we are enabling our future See pages 23-35 6. Alternative fuels Biofuels account for a small but rapidly growing share of consumption of the world’s food resources. The quest to find an alternative to oil at the same time as decreasing CO emissions has led to an 2 increase in biofuel production. Between 1980 and 2011, the share of US corn production destined for ethanol production has risen from under 1% to over 24% in 2011. Globally, biofuel production has grown from seven million tonnes of barrel equivalent (Mtoe) in 1990 to 60 Mtoe in 2011. According to some estimates, this number could grow to 188 Mtoe by 2030. Global biofuel production Mtoe 200 160 120 80 40 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 North America South America Africa Asia Pacfic Europe & Eurasia Annual Report and Accounts 2011 EuroChem 15 Business review
Page 1 and 2: Enabling our future Annual Report a
Page 3 and 4: ...by supplying world markets Our s
Page 5 and 6: 2011 Operational highlights > Succe
Page 7 and 8: Potash 912 MMT of proven and probab
Page 9 and 10: 16 Estonia Lithuania 7 14 15 Belaru
Page 11 and 12: Raw materials Up to 80% self-suffic
Page 13 and 14: Ten years of performance Ten years
Page 15: A record RUB 131bn in revenues 66%
Page 19 and 20: Ranking by nutrient capacity MMT p.
Page 21 and 22: Despite the significant breakthroug
Page 23 and 24: Business review Our strategy Our st
Page 25 and 26: Enabling our future... ...by supply
Page 27 and 28: 7billion World population in 2011 9
Page 29 and 30: Severneft-Urengoy Novy Urengoy, Yam
Page 31 and 32: Environmental footprint -16% decrea
Page 33 and 34: Our commitment We have committed US
Page 35 and 36: Vertical integration > 2.8 MMT p.a.
Page 37 and 38: Employee participation Our employee
Page 39 and 40: The following table highlights our
Page 41 and 42: Nitrogen segment RUBbn, or as indic
Page 43 and 44: Over the next five years (2012-2016
Page 45 and 46: Phosphate segment RUBbn or as indic
Page 47 and 48: EuroChem’s main planned investmen
Page 49 and 50: i Along with nitrogen and phosphate
Page 51 and 52: Distribution RUBbn, or as indicated
Page 53 and 54: i At Tuapse, one of our priorities
Page 55 and 56: Cost of sales and gross margin As i
Page 57 and 58: 2011 2010 2009 RUBm % of total % ch
Page 59 and 60: Balance sheet Working capital Worki
Page 61 and 62: Environment We’ve come a long way
Page 63 and 64: Occupational health and safety We s
Page 65 and 66: Strategic risks We classify as stra
Page 67 and 68:
Area Ref. code Nature Description S
Page 69 and 70:
Richard Sheath Audit Committee Chai
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Nikolay Pilipenko Audit Committee Q
Page 73 and 74:
Where did we focus in 2011? The Boa
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The Strategy Committee The Strategy
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1 Andrey Melnichenko (39) Chairman
Page 79 and 80:
Financial information Consolidated
Page 81 and 82:
Financial information Consolidated
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Financial information Notes to the
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2 Basis of presentation and signifi
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2 Basis of presentation and signifi
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3 Critical accounting estimates, an
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4 Adoption of new or revised standa
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6 Segment information continued The
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8 Intangible assets Note Acquired s
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10 Mineral rights continued As of 3
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13 Cash and cash equivalents and fi
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15 Bank borrowings continued Intere
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17 Derivative financial assets and
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22 Distribution costs Distribution
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26 Income tax continued The movemen
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29 Business combinations Acquisitio
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31 Contingencies, commitments and o
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32 Financial and capital risk manag
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Page 117 and 118:
Page 119 and 120:
Financial information Main producti
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Q4 2010 Q3 2010 Q2 2010 Q1 2010 201
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Forward-looking statements This ann
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