eurochem-annual-report-2011

Business review
Management report
Income statement continued
56 EuroChem Annual Report and Accounts 2011
Operating profit and operating margin
Our operating, or EBIT, margin for 2011 grew 6 percentage points to 33% as the increase in revenues,
which was primarily a function of a more favourable pricing environment, outpaced growth in cost of sales
and other expenses. EBITDA margin also improved, gaining 7 percentage points and increasing to 38%;
one percentage point lower than the record EBITDA margin of 39% achieved in 2008.
2011 2010 2009
RUBm/% % change RUBm/% % change RUBm/%
Operating profit 43,860 69% 26,026 33% 10,712
Revenues 131,298 34% 97,788 143% 73,577
Operating profit margin 33% 6pp 27% 12pp 15%
EBITDA margin 38% 7pp 31% 9pp 22%
The following diagram highlights the positive and negative influences of various components of our
operating profit in 2011 relative to 2010.
Operating profit (EBIT) 2010-2011
RUBm
26,026
2010 Operating profit (EBIT)
367
Sales volumes and mix
Increase Decrease
32,557
Sales prices
587
Other sales
(12,250)
Materials
(1,414)
Personnel
(1,069)
Energy
Finance income and costs
Below the operating profit line, we received RUB 614m in gross dividend income from shares in the
German potash producer K+S Aktiengesellschaft (K+S), as compared to RUB 148m in 2010. EuroChem
recorded an unrealised financial foreign exchange loss of RUB 3.8bn in 2011, compared to a loss of
RUB 390m in 2010 mainly due to the accounting effect of the rouble exchange rate depreciation on the
Group’s predominantly USD-denominated debt.
Interest expense grew 51% to RUB 3.1bn in 2011 compared with RUB 2.1bn a year earlier as the Company
secured a series of new long-term facilities in the second half of the year. Other financial income of
RUB 1.0bn was mainly recognised on USD/RUB non-deliverable forward contracts and changes in the
fair value of sold call options on shares of K+S RUB 574m and RUB 550m, respectively.
Taxation
The Company’s consolidated effective tax rate for 2011 was 20.1% (2010: 19.8%; 2009: 19.2%), virtually
equivalent to the statutory 20% profit tax rate in the Russian Federation where most of the Company’s
assets are located.
(617)
Utilities and fuel
(308)
Transportation
(1,017)
D&A
2,265
Ch. WP&FG
(1,266)
Other
43,860
2011 Operating profit (EBIT)