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PhosAgro highlights India boost to phosphate market

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PhosAgro flagged support for phosphate prices from improved Indian demand as the fertilizer group revealed the weak rouble had landed it with a large loss for 2014, but boosted its performance so far this year.

The Russian nutrients group said that the "softer-than-expected demand from India" which dogged phosphate markets in 2014 had created a positive factor for prices this year, in leaving the country with thin inventories.

"Low imports by India in 2014 have depleted local fertilizer stocks," PhosAgro said.

The need for fresh supplies, coupled with a move by the Indian government in its February budget to lift subsidies for phosphate and potash fertilizers in 2015-16 "should lead to much better local consumption and imports of phosphate-based fertilisers in 2015".

The budget raised the allocation for phosphate and potash nutrients by 8.7%, more than the 1.7% increase for imported urea, seeing some swing away from the nitrogen sector which has historically taken the lion's share of subsidies – albeit to a level which fell short of some expectations.

'Healthy demand'

Nonetheless, "increased demand from India, combined with healthy demand from the rest of the world, should support DAP [diammonium phosphate] pricing throughout the year," the group said.

DAP prices have already recovered to an average of $483 a tonne, in the US port of Tampa, for the January-to-March period, from $459 a tonne in the last three months of 2014.

PhosAgro flagged "healthy demand from developed agricultural markets", although it acknowledged that weakness in ag prices "continues to be a limiting factor for significant fertilizer price increases".

'Very optimistic'

The group itself said it was receiving an extra boost from weakness in the rouble, which boosts the competitiveness of Russian exports, besides from drives to reduce costs through measures including shake-ups to logistical and mining practices.

"The situation has significantly improved already in the first three months of 2015," said Andrey Guryev, the PhosAgro chairman.

"The weak rouble, combined with our cost-cutting initiatives, has substantially improved PhosAgro's global cost position.

"I am very optimistic about the results we will report for the first quarter of 2015."

Into the red

The comments followed the release of results for 2014 showing the group had slid to a net loss of 13.40bn roubles ($349m), from earnings of 8.58bn roubles ($303m) the year before.

While sales rose 18% to 123.1bn roubles ($3.21bn), PhosAgro faced the setback of an unrealised foreign exchange loss of 31.51bn roubles ($820m), reflecting the collapse of the rouble against the dollar.

The group's gross debt, mostly denominated in dollars, rose 37% in dollar terms to $2.20bn over 2014, with net debt up 24% at $1.67bn.

Excluding the foreign exchange loss, earnings would have soared 88%, PhosAgro said.

The group's London-listed depositary receipts, a proxy for shares, stood 1.6% higher at $12.35 in afternoon deals.


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