EuroChem Group AG, Zug, Switzerland, reported a 127 percent increase in EBITDA to $3.86 billion on sales of $10.20 billion for the year ended Dec. 31, 2021, up from the year-ago $1.7 billion and $6.15 billion, respectively, according to the group’s IFRS statements.
Sales increased 66 percent year-over-year, while sales volumes were up 6 percent, to 27.25 million mt versus the previous year’s 25.63 million mt.
The fertilizer group cited a favorable pricing environment, the increase in sales volumes, and higher operating efficiencies.
“These encouraging results will allow EuroChem to build upon its position as a leading global fertilizer player,” said EuroChem Group CEO Vladimir Rashevskiy. “The supportive environment enables us to set even higher goals for ourselves and invest in ambitious new projects to stay on our growth trajectory.”
The CEO highlighted that the group had experienced several milestone events in 2021, including the ramp-up in potash output to 2.6 million mt from the Usolskiy and VolgaKaliy plants, and the signing of two share purchase agreements in Brazil: in August, to acquire the Serra do Salitre phosphate mine and plant in August (GM Aug.6, 2021), and in December, to purchase a controlling 51.48 percent stake in the Fertilizantes Heringer SA distribution business for $96.5 million (GM Dec. 31, 2021).
The group has completed the acquisition of the Serra do Salitre phosphate project in Minas Gerais state from Yara International ASA and said it took over the project on Feb. 22 (see related story).
“With the right mix of organic expansion and carefully managed M&A, we can lock in sustainable long-term business growth, and, importantly, continue to invest in our own production base,” Rashevskiy said.
EuroChem earlier this month made a binding offer for the acquisition of the nitrogen business of Austrian polyolefins and fertilizers major Borealis AG, and has begun exclusive negotiations to acquire the business, which includes fertilizer, melamine, and technical nitrogen products (GM Feb. 4, p. 1). The offer values the business on an enterprise value basis at €455 million (approximately $515 million at current exchange rates).
In terms of its finances, the group said it significantly improved its capital structure in 2021 by reducing its total debt, optimizing short-term debt share and its overall debt portfolio. Its net covenant debt fell to $3.562 billion as of Dec. 31, 2021, from the year-ago $4.278 billion. Its net covenant debt/covenant LTM EBITDA was reduced to 0.92x at end-2021 from 2.68x as of end-2020.
EuroChem received ratings upgrades from Moody’s, S&P, and Fitch through the course of the year.
In terms of sales and markets, the group noted tight markets as a feature of 2021, and a year dominated by high gas prices and political developments.
Curtailments and countervailing duties impacted trade flows, which made for “a fiercely competitive environment,” it said, “but also supported strong results by rewarding the more flexible and diversified operators.”
Against this backdrop, as noted above, EuroChem posted a 6 percent rise in total sales volumes over the previous year, with third-party products up 21 percent and accounting for 24 percent of sales volume. Fertilizer sales volumes increased by 7 percent to 19.10 million mt, up from the prior year 17.91 million mt. Sales of third-party products increased to 6.49 million mt, versus the year-ago 5.35 million mt.
The sales volumes increase was reflected across all segments, with nitrogen up 4 percent, phosphate fertilizers 17 percent, and potash 15 percent on the back of the company’s ramp-up of the Usolskiy and VolgaKaliy potash projects. The potash sales included the first commercial sales from EuroChem’s VolgaKaliy Potash Plant, which – according to the group – produced 228,000 mt of potash last year (see related story).
The group reported that nitrogen sales volumes continued to be driven by urea, which rose 18 percent to sales of 3.4 million mt amid tight markets in Europe due to high energy costs and limited availability from China. Ammonia sales rose 33 percent to 700,000 mt in a market also impacted by elevated feedstock costs that kept prices high and supply short, with some European capacity idled.
EuroChem became self-sufficient in ammonia after the June 2019 launch of its 1 million mt/y capacity EuroChem Northwest 1 facility (GM June 7, 2019), which in 2021 produced 991,000 mt.
UAN sales volumes dropped by 10 percent to 1.4 million mt year over year, but the group said U.S. sales remained roughly flat despite the imposition of preliminary antidumping duties on imports from Russia and Trinidad and Tobago.
In phosphates, sales of MAP/DAP climbed 10 percent to 2.6 million mt, with third-party product sales accounting for roughly 40 percent. EuroChem said the third-party sales, together with the group’s own production of phosphates fertilizers in Lifosa in Lithuania, one of the group’s E.U. assets, helped to increase sales volumes in the U.S. by 38 percent year over year.
EuroChem said its “gradual introduction of potash into global markets” passed the 2.5 million mt mark in 2021, an increase of 15 percent year-over-year. It noted that potash prices have been kept high due to supply restrictions stemming from political sanctions on Belarus and temporary supply disruptions from other key producers. The group sees global potash market fundamentals remaining bullish.
The group’s geographical sales base continues to be strongly diversified across key markets, dividing principally among Europe (21 percent), North America (15 percent), Latin America (23 percent), Russia (20 percent), and Asia Pacific (19 percent). It reported year-over-year reductions in volumes to Asia-Pacific (-19 percent) were attributable to iron ore volume redirection to the local Russian market (-24 percent year over year).
In terms of market outlook, EuroChem said despite geopolitical tensions, the importance of the agricultural and fertilizer sectors for global food security supports a favorable market outlook for 2022. It noted the International Monetary Fund (IMF) projects that the global economy will grow by 4.9 percent in 2022, while macro conditions will remain inflationary for commodity markets.
“Continued strong grain prices are supporting farmer economics and driving fertilizer demand across all nutrient groups in 2022. Trade export protectionism and sanctions restrict global trade flows and supply volumes, while unprecedented high gas and energy costs are driving up the marginal costs of production,” the group noted.
“Although some of these market drivers are expected to ease throughout 2022, they remain supportive of higher fertilizer prices on average in 2022 versus 2021,” said EuroChem.
“In spite of new nitrogen capacities to be launched during 2022, persistently higher marginal supply production costs look to maintain prices at a higher level on average in 2022 compared to 2021. In phosphates, restrictions on exports from China in the first-half should keep the market tight, global inventories low and support higher prices in 2022 overall. The potash market, meanwhile, will shift into a more balanced position in 2022 due to supply increases from Canada. However, the impact of Belarus sanctions on potash supply and demand will support firmer prices,” the group said.
EuroChem published its financial results on Feb.16, and before the Russian invasion of Ukraine on Feb. 24.
Selected sales volumes (‘000 mt)
| Product | FY2021 | FY2020 | % change | FY2021 share of total |
| Nitrogen products | 9,343 | 8,949 | +4 | 34 |
| Nitrogen fertilizers | 9,289 | 8,912 | +4 | 34 |
| Phosphate products & complex fertilizers | 7,249 | 6,774 | +7 | 27 |
| Phosphate fertilizers | 3,127 | 2,680 | +17 | 11 |
| Complex fertilizers | 3,715 | 3,705 | 0 | 14 |
| Potash | 2,512 | 2,191 | +15 | 9 |
| Total fertilizer sales | 19,104 | 17,914 | +7 | 70 |
| Mining products1 | 6,041 | 5,737 | +5 | 22 |
| Industrial products | 2,103 | 1,975 | +6 | 8 |
| Other sales | n/a | n/a | n/a | n/a |
| Total sales (including third party products) | 27,248 | 25,626 | +6 | |
| Third party products | 6,492 | 5,349 | +21 | 24 |