eurochem-annual-report-2011

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Business review Management report Nitrogen continued Revenue by region 4 5 6 7 1 2011 2 3 Change to 2010 % (percentage points) 1 Russia and CIS 33% (3) 2 Latin America 22% 7 3 Asia 15% 5 4 Europe 14% (8) 5 North America 11% (1) 6 Africa 3% (1) 7 Australasia 2% 1 Revenue by product 5 4 6 7 8 9 1 2011 2 3 Change to 2010 % (percentage points) 1 Urea 38% 7 2 Ammonium nitrate 22% (1) 3 UAN 10% 1 4 Complex 7% (2) 5 Other 7% (2) 6 Ammonia 5% (4) 7 Methanol 5% (1) 8 CAN 3% 3 9 Acetic acid 3% (1) * Segmental revenues (both volume and value) are shown gross, i.e. inclusive of intra-segment sales. 38 EuroChem Annual Report and Accounts 2011 i Nitrogen segment performance* For the 12 months ended 31 December 2011, sales volumes for our Nitrogen segment amounted to 5,647 KT, which was broadly in line with the 5,671 KT recorded in 2010. The slight slip in 2011 sales volumes appeared as a result of the abrupt market pullback observed in the fourth quarter of the year. Urea and CAN registered the strongest year-on-year growths by increasing 12% and 37%, respectively, while ammonia and complex fertilizer products retreated 54% and 12% respectively. Sales volumes of granulated urea, which enjoyed an average premium of USD 18/tonne over prilled product throughout 2011, rose 32% to 919 KT. The positive shifts in the structure of sales coupled with a robust pricing environment largely compensated for the stable sales volumes as revenues for the Nitrogen segment rose by 34% to RUB 63.1bn. Nitrogen segment EBITDA rose 88% to RUB 25.5bn as compared to 2010. Mirroring the January 2011 increase in natural gas prices in Russia, expenses for natural gas used as raw material at our nitrogen plants increased 13% to RUB 13.6bn in 2011 from RUB 12.0bn in 2010. For a closer look at how natural gas prices impact our business please refer to pages 54 and 65. Gas consumption per tonne of ammonia (mmBtu/tonne) 2003 2004 2005 2006 2007 2008 2009 2010 2011 Novomoskovskiy Azot* 42.15 42.36 39.80 40.00 41.10 40.01 39.42 39.2 39.09 Nevinnomysskiy Azot* 37.38 36.55 36.91 37.16 36.73 37.12 36.58 36.0 36.42 Most efficient plant out of 50 plants globally 32.5 Average of 50 plants globally 38.0 * Based on actual annual average caloric content of gas supplied to plants. Sources: EuroChem, Integer Research. In light of rising natural gas prices, we have been gradually investing in higher-margin products so as either to reduce the natural gas content per tonne of finished product or raise the margin per unit of gas consumed. As mentioned above, with a first line launched in 2009 and a second line in 2010, granulated urea has provided further depth to our product offering and contributed to higher profitability. Our next major investment to come online in nitrogen will be the launch of melamine production at Nevinnomysskiy Azot. With an ultimate aim of import substitution, we plan to have 50 KMT of melamine capacity per year. The initial start-up of the production line is expected in Q2 2012. In 2011, we took advantage of record-low freight rates to secure our position in offshore markets. Revenues from Asia and Latin America surged 98% and 91% respectively and accounted for a combined 37% of Nitrogen revenues (2010: 25%), while Russia and the CIS represented 33% of sales (2010: 36%). Fertilizer prices, average for the year USD/tonne 2005 2006 2007 2008 2009 2010 2011 Urea prilled (FOB Yuzhny) 219 222 307 489 250 288 425 Sources: Fertecon, Fertilizers Week, FMB, The Market. Global urea cost curve (2011, DDP basis) USD/tonne 500 450 400 350 300 250 200 150 100 50 0 A reconciliation of segmental revenue to external revenues is provided after the segment review See page 50 Novomoskovskiy Azot Nevinnomysskiy Azot Market volume 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 World Trade Market, MMT
Nitrogen segment RUBbn, or as indicated 2011 2010 Change 2010-2011 2009 Change 2009-2010 Revenue including sales to other segments 63.11 47.22 34% 39.58 19% Cost of sales (28.42) (25.04) 13% (20.30) 23% Gross profit 34.69 22.17 56% 19.28 15% Other expenses (11.09) (10.25) 8% (11.36) (10%) EBIT 23.60 11.92 98% 7.92 51% EBITDA 25.55 13.56 88% 9.31 46% Gross profit margin 55% 47% 8pp 49% (2pp) EBIT margin 37% 25% 12pp 20% 5pp EBITDA margin 40% 29% 12pp 24% 5pp Capex 4.68 5.25 (11%) 6.79 (23%) Net working capital 7.75 2.43 219% 3.72 (35%) Fixed assets 45.57 27.94 63% 24.21 15% Total capital employed 53.33 30.37 76% 27.93 9% ROCE* 44% 39% 5pp 28% 11pp Staff 7,564 7,701 (2%) 8,285 (7%) Production (MMT) Ammonia 2.66 2.76 (4%) 2.79 (1%) Urea 2.20 1.98 11% 1.80 10% Ammonium nitrate 2.42 2.35 3% 2.30 2% CAN 0.20 0.15 32% 0.03 440% UAN 0.69 0.69 (1%) 0.68 1% Methanol 0.42 0.43 (3%) 0.32 34% Acetic acid 0.15 0.16 (3%) 0.17 (6%) Sales, including sales to other segments (MMT) Ammonia 0.24 0.52 (54%) 0.64 (19%) Urea 1.92 1.71 12% 1.51 13% Ammonium nitrate 1.73 1.71 1% 1.83 (7%) CAN 0.19 0.14 36% 0.02 770% UAN 0.72 0.68 6% 0.67 1% Methanol 0.33 0.33 (1%) 0.23 43% Acetic acid 0.11 0.13 (12%) 0.14 (7%) Tonnes of ammonia produced per employee 351 358 (2%) 337 6% * Calculated as EBITDA less income tax paid divided by total capital employed. Revenue and EBITDA RUBbn 70 60 50 40 30 20 10 0 2009 2010 2011 Revenue EBITDA Capacity utilization EBITDA margin % % 45 40 35 30 25 20 15 10 5 0 2011 2010 2009 2008 Novomoskovskiy Azot 96% 96% 101% 99% Nevinnomysskiy Azot 91% 102% 97% 93% Total 94% 99% 100% 96% RUB 63.1bn Nitrogen segment revenues Annual Report and Accounts 2011 EuroChem 39 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 and 16: A record RUB 131bn in revenues 66%
Page 17 and 18: 4. Global economy Emerging economie
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: The following table highlights our
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
Page 71 and 72: Nikolay Pilipenko Audit Committee Q
Page 73 and 74: Where did we focus in 2011? The Boa
Page 75 and 76: The Strategy Committee The Strategy
Page 77 and 78: 1 Andrey Melnichenko (39) Chairman
Page 79 and 80: Financial information Consolidated
Page 81 and 82: Financial information Consolidated
Page 83 and 84: Financial information Notes to the
Page 85 and 86: 2 Basis of presentation and signifi
Page 87 and 88: 2 Basis of presentation and signifi
Page 89 and 90: 3 Critical accounting estimates, an
Page 91 and 92:
4 Adoption of new or revised standa
Page 93 and 94:
6 Segment information continued The
Page 95 and 96:
8 Intangible assets Note Acquired s
Page 97 and 98:
10 Mineral rights continued As of 3
Page 99 and 100:
13 Cash and cash equivalents and fi
Page 101 and 102:
15 Bank borrowings continued Intere
Page 103 and 104:
17 Derivative financial assets and
Page 105 and 106:
22 Distribution costs Distribution
Page 107 and 108:
26 Income tax continued The movemen
Page 109 and 110:
29 Business combinations Acquisitio
Page 111 and 112:
31 Contingencies, commitments and o
Page 113 and 114:
32 Financial and capital risk manag
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Financial information Main producti
Page 121 and 122:
Q4 2010 Q3 2010 Q2 2010 Q1 2010 201
Page 123 and 124:
Forward-looking statements This ann
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