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Uralkali to exit London Stock Exchange, hints at Moscow delisting

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Russian potash giant Uralkali has announced its long-awaited delisting from the London Stock Exchange, and a notes that a fresh share buyback could trigger its removal from the Moscow exchange as well, leaving it a privately owned company.

The miner announced that its board has approved the delisting its global depository receipts (GDRs), which are a proxy for shares.

At the same time, Uralkali announced another open market buyback scheme, which see the company repurchase up to 6.5% of share capital of London-listed GDRs and Moscow listed shares, for cancellation.

The delisting is planned to become effective on December 22.

Moscow delisting teased

Uralkali also said it would also be forced to delist from the Moscow exchange, if the number of its shares available for purchase on that platform fell below 10%.

Given the company's current free-float of around 14%, an enthusiastic take-up from shareholders could bring about the delisting.

Uralkali said the tender would be based on the "prevailing market price".

Drop in revenues

News of the delisting came as the company reported revenues in the three months to September 30 down 9% year on year, to $819m, from $896m.

The fall in revenues came thanks to lower sales volumes, which fell 6% to 2.9m tonnes.

Uralkali reported that over the 9 months to September 30, the average export price of potash was up 11% to $248 a tonnes.

Falling prices

But potash prices in key export destinations are continuing to weaken.

As of November 19, Credit Suisse reported that granular potash prices in Brazil, including freight, were now down 21% year on year, to $293 a tonne.

"In light of current market conditions, the company may yet review its production and sales plans," Uralkali chief executive Dmitry Osipov said.

Brazilian slowdown

Uralkali forecast potash demand to fall by 8% in 2015, to 58m tonnes, citing high buyer-inventories, economic uncertainty, and continued low crop prices.

"Markets in Latin America were negatively affected by weaker national currencies against the US dollar and negative sentiment regarding crop prices," Uralkali said.

"Difficulties in obtaining financing meant that Brazilian farmers preferred to purchase according to their immediate needs," Uralkali said.

Uralkali reported Brazilian imports down 10% to 6.3m tonnes in the first 9 months of the year

The company forecast potash demand across Latin America to fall to 9.8-10.0m tonnes in 2015 compared to 11.8m tonnes in 2014.

Falling demand

"In India, a weak monsoon season and the depreciation of the Indian rupee against the US dollar led to cautiousness among farmers," Uralkali said.

"We expect India to import 3.9m-4.0m tonnes of potash this year," Uralkali said.

But Uralkali said Chinese demand has been "relatively strong," with potash down 9% on last year to 6.1m tonnes.

The company warned that higher vat, lower crop prices and an economic slowdown could "limit potash demand upside for the rest of the year".

North American demand was forecast to fall by 14-16% year-on-year to 8.6m-8.7m tonnes in 2015, while European demand was seen falling by as much as 6.5% to 11.5m-11.7m tonnes, from 12.3m tonnes last year.

China talks loom

And a Uralkali company official told investors taht it was liklely to sign a deal with Chinese buyer Sinofert in the first quarter of next year.

Along with deals signed by rival Belaruskali and the North American selling cartel Canpotex, agreements between Uralkali and Chinese and Indian buyers set the price floor for potash worldwide.

The 2015 negotiations were very slow, compared to previous years, in an atmosphere of uncertainty caused by the collapse of the BCP cartel, which represented Uralkali and Belaruskali.

Separately on Monday, the new chief executive of Canpotex Ken Seitz announced that it would be building new port capacity on the Canadian west cost, in order to gain faster access to Chinese markets.

Canpotex shipments are the main conduit of North American potash exports to China, and the development will put pressure on Uralkali in the upcoming negotiations.

Spate of buybacks

Uralkali bought back 22% of its shares last month, in a $2bn tender.

Among those who sold out of the company was the Chinese sovereign wealth fund China Investment Corp, which gave up a 12.5% stake int eh company.

An earlier buyback scheme, carried out in June, saw the company purchase around 12% of its shares, for more than $1bn.

But Russian fertilizer group Uralchem has so far maintained its stake in the company, which currently stands at 20%.

The spate of buybacks has already seen Uralkali delisted from some key equity indexes, due the low proportion of its shares available on public exchanges.

Uralkali GDRs were up 0.8% in London in afternoon deals, at $13.24.

By William Clarke

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