The profit of Uralkali in the second half of 2009 fell by 44 percent under IFRS. In accordance with Russian accounting standards, the potash producer experienced RUR 3.943 billion in net losses during the last quarter of 2009. More encouraging news followed in the first quarter of the current year. Uralkali’s sales went up, and the company posted a net profit of RUR 3.6 billion. Uralkali also compensated the government for its expenses from mitigating the consequences of an industrial accident that resulted in a sinkhole at the company’s BKPRU-1 Berezniki mine. The company’s net profit figure takes into account those reimbursements. The capital expenditures of Uralkali are likely to be reduced by as much as 11 percent to end at RUR 12.5 billion. More than half of the amount will be invested in the expansion of production capacities and the maintenance of other fixed assets.

Second half of 2009

The bottom line figure for Uralkali’s net profits in the second half of 2009 was 44 percent less than the results that were reported one year before. Thus, net profits fell to RUR 4.6 billion under International Financial Reporting Standards. Analysts expected the figure to be substantially higher, at RUR 5.03 billion.

In the six months of 2010, the revenue decreased by 40 percent, leveling off at RUR 19.927 billion. EBITDA fell by more than 60 percent, ending at RUR 8.975 billion. Earlier forecasts estimated the EBITDA figure at RUR 9.3 billion.

Altogether, the net profit of Uralkali went down 58 percent for 2009. The company’s overall profit for 2009 totaled RUR 9.1 billion. Revenues generated from sales decreased by 47 percent, dropping to RUR 33.8 billion. The EBITDA figure adjusted for inflation stood at 16.4 percent, evidencing a profound 60-percent drop.

Most of the company’s sales – equal to roughly RUR 20.2 billion – were to importers in Latin America, Southeast Asia, India, and China. On the whole, the revenue from sales was 50 percent less than what they had been in 2008. Sales on Russia’s internal market also declined by 1.7 percent and generated only RUR 4.6 billion. The EBITDA margin indicator for the year was 56 percent, whereas in 2008 the figure was 76 percent.

The company decreased the output of potassium chloride by 45 percent in 2009, with total production going down to only 2.6 million tons. Capital expenditures fell to RUR 14.1 billion.

At the end of 2009, Uralkali’s unpaid balances on its loans were RUR 14.015 billion, which is 5.3 percent less than the company’s indebtedness a year earlier. Short-range loans increased 36 percent to RUR 5.654 billion, and long-range loan balances went down by 20.5 percent ending at RUR 7.809 billion. The weighted-average of interest rates on the company’s dollar-valued bank loans decreased to 2.49 percent from 5.63 percent at the end of 2008.

The company’s members of management in 2009 received RUR 702 million as remuneration in 2009, in comparison to RUR 375 million in 2008.

Uralkali’s president Denis Morozov said that the worldwide economic crisis caused farmers to decrease fertilizer use, which, in turn, negatively impacted Uralkali’s performance. At the same time, the demand for potash began to go up in the last months of 2009, as the agricultural sector entered a period of recovery. The price certainty in the potash market has now been restored, and the officials of Uralkali are confident that positive dynamics will persist throughout 2010.

Dividends

The board of Uralkali issued a recommendation that the shareholders of the company vote to pay out RUR 1.7 roubles in dividends per share for 2009 at their annual meeting, which has been scheduled for June 18, 2010.

Uralkali decided to make an interim dividend payment for the first half of 2008 in the amount of RUR 4 per share. Uralkali has already set aside funds – RUR 8.5 billion – to make those disbursements. For 2009, Uralkali is likely to earmark only RUR 3.611 billion to dividend payments.

At the meeting, the board of directors decided to suspend the powers of general director Vladislav Baumgertner as of June 30. As of July 1, Denis Morozov will serve as the new CEO. Denis Morozov worked as CEO of Norilsk Nickel. He became Uralkali’s president as of February 1, 2010.

The board of Uralkali’s made a suggestion to shareholders to approve an honorarium for the 2009 profit to the board’s independent directors. The company could earmark RUR 16.8 million for this purpose.

The company’s charter capital is RUR 1 062 195 000, divided into 2 124 039 000 common shares. The shares are valued at RUR 0.5 each.

First quarter results

Under Russian accounting standards, the net profit of Uralkali in the first quarter of 2010 was RUR 3.6 billion, compared to RUR 218.3 million in the first quarter of 2009. The new results represented a significant improvement over the results for the fourth quarter of 2009, when Uralkali experienced RUR 3.943 billion in losses.

The rise in net profits during quarter one of 2010 was due to rapidly increasing sales.

In the first quarter of the current year, Uralkali also compensated the government for taking part in emergency mitigation efforts following the accident at BKPRU-1. These costs were RUR 5.454 billion.

The rising profit figures notwithstanding, Uralkali has made the decision to reduce its outlays for capital expenditures by 11 percent in the current year. The company was initially planning to spend RUR 12.5 billion on capital projects. More than 50 percent of these funds were earmarked for the expansion of production facilities, and the remaining cash for the maintenance of fixed assets. In 2009, the company’s capex outlays amounted to RUR 14.1 billion.

According to the CFO of Uralkali Viktor Belyakov, the capex figures did not include outlays for construction work to be undertaken in enlarging the production capacity at the Ust-Yaivinsky field.

Over the course of 2009, the company reduced its workforce in Berezniki by 900 employees, from 8 700 to 7 800. Further reductions of the number of employees to 6 000 are likely.