eurochem-annual-report-2011

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Business review Sustainability continued Employees Our employees are directly responsible for the Company’s current success and our HR policies play a fundamental role in driving and supporting EuroChem’s growth. In order to retain the very best staff, we operate a fair employment policy to keep our teams motivated and productive. Throughout the Group’s businesses, we remain committed to investing in health and safety and fair remuneration, while rewarding outstanding performance. This is because we fully realize that in the end, in a commodity business, what really differentiates one company from another is the quality of its workforce. A strong focus on empowering lower management has allowed us to maintain a lean and effective structure even as we decrease staff at existing production units and take on new employees for our potash developments. As a result, the ratio of management to total staff has reduced to a 12%/88% split. Our targeted employee engagement initiatives have brought staff turnover at production units to an enviable 3.4%, down from over 10% in 2006. Productivity, measured by tonnes of output by employee, remained in line with 2010 at 1,358 tonnes per employee. In 2011, the growth in average monthly remuneration slightly outpaced productivity as a result of the highly skilled workforce intake for the development of our Gremyachinskoe and Verkhnekamskoe potash deposits. Local communities and state authorities We are committed to being an exemplary corporate citizen in the countries and regions of our presence and are engaged in a continuing dialogue with state authorities and local communities. We are the top regional employer in the areas of our presence and a leading contributor to regional and federal budgets. In 2011, EuroChem spent a total of RUB 455m on social and charity programmes, up from RUB 412m in 2010 and surpassing the our previous record of RUB 445m invested in 2008. 2008 2009 2010 2011 Income tax 9,295,501 2,437,953 4,699,114 7,851,478 Property tax 286,543 362,536 488,890 570,059 Mining tax 212,551 117,220 122,249 170,370 Land tax 142,621 181,217 190,549 207,088 Environmental fees 36,025 76,364 111,920 94,092 2008 2009 2010 2011 Social and charitable expenses 445 203 418 455 In 2011, the Russian Union of Industrialists and Entrepreneurs recognised EuroChem’s corporate responsibility achievements with one of its “Russia’s Best Companies” awards: in our case for “Development of Non-Financial Reporting in the Chemical Industry”. The award was given to EuroChem’s corporate sustainability report for its transparency and the quality of our dialogue with stakeholders. 60 EuroChem Annual Report and Accounts 2011 i EuroChem corporate social responsibility reports are available at www.eurochem.ru/sustainability/social-reporting Staff turnover at production units % 2011 2010 2009 2008 2007 2006 3.4% 3.4% 2.6% 5.7% 7.3% Management to total staff ratio % 2011 2010 2009 2008 2007 2006 10.2% 12.3% 12.7% 13.5% 13.4% 13.3% 13.9% Average monthly remuneration per employee RUB/month 2011 2010 2009 2008 2007 2006 35,109 31,700 29,790 25,220 20,305 16,025 Production output per employee Tonnes 2011 2010 2009 2008 2007 2006 Permanent employees As at 31 December 2011 20,801 2010 19,614 2009 20,034 2008 21,526 2007 22,897 764 1,173 1,051 924 Production Service Logistics Sales, admin and other 1,358 1,360
Occupational health and safety We seek to implement and maintain leading occupational health and safety standards. Over the years we have made substantial improvements to our health, safety and environment (HSE) management system, and these have earned EuroChem the reputation of a responsible industrial enterprise where HSE issues are a top priority. In 2011, EuroChem’s lost time injury frequency rate (LTIFR), which is calculated as number of injuries resulting in absence from work per million hours worked, was 1.45. Additional International Fertilizer Association safety and occupational health information is available at www.fertilizer.org LTIFR (injuries per million hours worked)* 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 IFA 4.35 4.38 6.98 5.00 – – 3.09 2.80 2.35 2.82 – Russia 3.19 2.81 2.44 2.13 1.94 1.81 1.69 1.56 1.31 1.38 – EuroChem 1.79 1.73 1.85 1.39 1.71 1.44 1.34 1.28 1.11 1.25 1.45 * As per IFA methodology based on 1,600 working hours per person per year. Number of industrial accidents resulting in absence from work at EuroChem production sites 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Number of industrial accidents 89 86 77 57 66 51 37 35 28 29 33 Financial stability The cyclicality of the business we are in, and its effects on our cash flows, requires us to adopt a sensible debt policy. We manage debt levels prudently and our policy is to maintain a net debt/normalized EBITDA ratio of between 1.5x and 2.0x. 2008 2009 2010 2011 Net debt/EBITDA (x) 0.57 2.2 1.13 1.35 2008 2009 2010 2011 Funds from operations/gross debt (x) 0.65 0.21 0.55 0.41 2008 2009 2010 2011 Free operating cash flow/gross debt (%) 4% (67%) 9% 18% 2008 2009 2010 2011 EBITDA/interest expenses (x) 35.2 8.3 14.5 15.3 2008 2009 2010 2011 Return on capital employed (%) 46% 17% 27% 33% Number of industrial accidents 100 80 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Absent from work 1.35x Net debt/EBITDA Annual Report and Accounts 2011 EuroChem 61 Business review
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Enabling our future Annual Report a
Page 3 and 4:
...by supplying world markets Our s
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2011 Operational highlights > Succe
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Potash 912 MMT of proven and probab
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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 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: Environment We’ve come a long way
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
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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
Page 121 and 122:
Q4 2010 Q3 2010 Q2 2010 Q1 2010 201
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Forward-looking statements This ann
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