Uralkali's potassium chloride sales fell 12% in 2018, to 11.1 mln t, 11.5 mln produced
MOSCOW. May 7 (Interfax) - Uralkali's production of potassium chloride decreased 4% year-on-year, to 11.5 million tonnes, while sales fell 12% to 11.1 million tonnes, according to the company's annual report.
The company explained these decreases with reference to efforts to maximize prices by redistributing shipments to premium markets.
Uralkali's exports decreased 22% to about 8.5 million tonnes, compared with 10.9 million a year before. Volumes from India, with which the company did not conclude a long-term contract for 2018, were partly re-oriented to Latin America and to the Russian market.
"Meanwhile, Uralkali revised its production strategy, refraining from entering into a long-term contract with India in favour of higher-margin spot markets, which had a positive effect on almost all annual financial indicators. In the future, the updated strategy will reduce the amount of overproduction, as well as sales of such products at prices below the level of current market indicators," CEO Dmitry Osipov said in his statement in the report.
"In 2018, the volume of potash supplies to the Russian market increased by 9% year-on-year and amounted to 2.64 million tonnes. The main consumers of the Company's products on the domestic market have traditionally been manufacturers of compound mineral fertilisers (NPK producers)," the report reads. In 2018, deliveries to them increased 6% to 2.35 million tonnes, despite the fact that EuroChem launched its own potassium mine.
The share of sales in long-term-contract markets (China and India) decreased to 23% of total export volume, down from 27%. In absolute terms, deliveries to these countries decreased by approximately 1 million tonnes from the 2017 level, coming to about 1.9 million tonnes.
Sales in Latin America, the company's largest spot market, fell approximately 6% to about 3 million tonnes, while the region's share in total exports grew from 29% to 35%.
Last year, "global potash demand is estimated to have climbed to a record high of 66 million tonnes compared to 65 million tonnes in 2017," significantly less than the company expected; its management had forecast 5% growth (to 68 million tonnes).
"The increase in demand has been led by Brazil, which has outperformed the rest of the world in terms of demand and potash price growth. Favourable soybean economics helped to promote strong distributor potash purchases last year. [...] Brazil's 2018 potash imports increased by 9% year-on-year to 10.0 million tonnes," and the price rose to $70 per tonne, according to the report. India cut its potash purchases by 100,000 tonnes, to 4.6 million, due to decreased subsidies; China's imports fell 1% to 7.5 million tonnes.
Uralkali expects that the positive market dynamics "will continue this year and facilitate further growth of demand and potassium prices."
The company's net profit in 2018 grew 4% to $2.28 billion and EBITDA rose 9% to $1.46 billion. EBITDA margin was 64%, up from 61%. These financial indicators improved even as sales decreased thanks to an 18% increase in the average export price of the company's products. Cost of sales in 2018 was $42.50 per tonne, compared with $41.40 a year before.