Uralkali reported a 33 percent increase in EBITDA, to $1.4 billion, for the first half ending June 30, 2012, up from the year-ago $1.05 billion. Net profits were up six percent and revenues 13 percent. Profits were $842 million on revenues of $2.23 billion, compared to the year-ago $794 million and $1.97 billion, respectively.
Overall potash sales volumes were off 3 percent, to 5.1 million mt from 5.3 million mt. China was Uralkali’s largest customer at 30 percent, followed by Russia at 20 percent, Brazil at 12 percent, Southeast Asia at 11 percent, Europe at 10 percent, and India at only 8 percent. The U.S. was at 5 percent. While domestic sales were up 3 percent, to 1 million from 900,000 mt, exports were off 7 percent, to 4.1 million mt from 4.4 million. However, export prices were up 17 percent, to $380/mt FCA from the year-ago $324/mt FCA. Domestic prices were also up, at $270/mt FCA from $190/mt FCA. Production was down, at 4.8 million mt from the year-ago 5.2 million mt.
Uralkali sees a slump in global potash deliveries in 2012 to 50 million mt, down from 2011’s 57 million mt. However, it believes high commodity prices and drought conditions will spur both demand and the price for potash for 2013, and that deliveries will move back up to 55-57 million mt. Major areas for increases in 2013 include the U.S., Brazil, and Southeast Asia. For the remainder of 2012, Uralkali sees ongoing challenges in India, which includes weak sales volumes due to high prices and a deficient monsoon, as well as decreased subsidies. The company says Indian volumes for 2012 will likely be down at 3.5-4 million mt, limiting the room for a possible price increase. “We don’t expect miracles out of India, but we do believe that the market will also steadily improve,” the company told analysts, citing high crop prices and low application rates. It also says there is a lack of clarity with respect to the Chinese contract, with that market being seasonally slow in addition to the accumulation of high port inventories, though it expects to have talks with the Chinese in October or November and be able to conclude contracts for 2013. Macroeconomic concerns, such as the European situation, are also a factor. The company expects stable prices for the rest of 2012, with increases for first quarter 2013 and beyond spurred on by good demand.
Uralkali also believes that smaller, aggressive competitors – Israel Chemicals Ltd. (ICL), Arab Potash Co. and K+S Group – took market share away from Belarusian Potash Co. (BPC) and Canpotex Ltd. in the first half. Uralkali cites price competition, mainly in Brazil and Southeast Asia, though U.S. players have argued ICL has had an impact on the U.S. barge market. Uralkali estimates that the three had a combined 29 percent share in the first half, up from the year-ago 27 percent, while BPC dropped a point from 42 to 41 percent, and Canpotex fell from 29 to 28 percent.
Uralkali also noted that it is in the process of increasing its own capacity, and expects to add some 1.5 million mt/y by the end of the year to the Berezniki-4 plant’s present capacity of 11.5 million mt/y. It has also commenced construction on the Ust-Yayvinsky mine, which will have an annual capacity of 2.8 million mt/y and will be used to replace the depleting capacity of the Berezniki-2 mine.