PhosAgro revealed reasons for hope for a recovery in
phosphate markets from the "challenging times" of last year, which left the
Russia-based fertilizer group swallowing a 65% slump in earnings.
PhosAgro highlighted the recovery in prices of agricultural
commodities such as corn, up more than 20% so far this year, a factor many see
as likely to encourage plantings of what is particularly nutrient-hungry crop.
Furthermore, market conditions in India, the biggest
phosphate importer, appear more supportive, with a recent squeeze on purchases
reducing the country's stocks to "very low" levels.
With the rupee rebounding 13% against the dollar since
August India will, on "conservative expectations", raise imports by 2m tonnes
to "at least 5-5.5m tonnes", the group said.
These factors "will bring global fertilizer demand growth back
in line with the normal annual rate of around 2%," from levels depressed last
year by uncertainty following the beak-up in July of the Belarusian Potash
Company cartel, which controlled more than 40% of world potash trade.
PhosAgro signalled that it was particularly well placed to
benefit given its relatively low cost levels, with rising costs of raw
materials "driving up cash costs of most significant players" in phosphates.
Last year as a whole, phosphate fertilizer prices "remained
below cast cost levels for marginal producers", and in the October-to-December
period were "below the average cash cost for the industry".
Indeed, such "challenging times" have prompted production
curtailments among many producers, including Morocco's OCP Group, which controls
the world's largest phosphate rock reserves, which cut its capacity utilisation
to some 50-60%.
Chinese capacity utilisation was 50-70%, according to
Into the red?
PhosAgro, which is largely self-sufficient in raw materials
for making phosphate products, said that its production of fertilizers,
including the combined NPK nutrient, had risen by 9% last year, with sales
rising 11% by volume.
However, with prices tumbling after the BPC break-up, the
group's revenues eased 0.7% for the full year to 104.6bn roubles ($3.28bn).
Lower margins, thanks to the price cuts, and increased costs
of natural gas and administrative expenses, depressed earnings by 65% to 8.57bn
Although the group failed to break-out results for the
October-to-December period, the data imply a loss of 518m roubles, compared
with a profit of 5.39bn roubles a year before, on revenues down 10.6% at 23.3bn
"This has been a challenging year for the fertilizer industry,"
Andrey Guryev, the PhosAgro chief executive, said.
PhosAgro depositary receipts, a proxy for shares, stood 0.5%
higher at $11.65 in morning deals in London.