Distribution

Distribution saw revenue growth in 2009, although it still represents a relatively modest portion of our overall sales. Sales increased 2.2% year on year from RUR 5.3bn in 2008 to RUR 5.4bn in 2009 (2007: RUR 1.4bn). EBITDA in 2009 was RUR 22.4m, down 59% from RUR 54.8m a year earlier (2007: RUR 72.3m). The 2008-2009 decline in EBITDA was driven primarily by the price effect, while the 2007-2008 decline was due to a significant decline in the value of the Russian rouble and Ukrainian Hryvna during the period. Segment fertilizer volumes continue to rise, increasing 65% to 587 KMT for 2009 vs. 356 KMT in 2008 (2007: 121 KMT) in sales through the outlets owned by EuroChem. Fertilizer sales in Russia and the CIS through both owned and independent distributors increased by 25% to 1.64 MMT (Russia only: 1.2 MMT) of product in 2009 from 1.31 MMT (Russia only: 1.0 MMT) of product in 2008.

EuroChem’s distribution network consists of 39 outlets in 24 cities in key agricultural districts of Russia and Ukraine, out of which eight are owned by EuroChem and the rest are exclusive distributors of our products. The strategy of these centres is to sell yield, not fertilizers: they buy products from our plants and other producers, and sell at a margin to customers, while simultaneously providing advisory services to help farmers produce more by using a full range of seeds, fertilizers and crop protection products.

Distribution
      Change   Change
RUR bn, or as indicated 2009 2008 2008-2009 2007 2007-2008
Revenue (including sales to other segments) 5.39 5.28 2% 1.36 288%
Cost of sales (4.97) (4.72) 5% (1.25) 278%
Gross profit 0.43 0.56 (24%) 0.11 409%
Other expenses (0.43) (0.53) (18%) (0.05) 960%
EBIT (0.01) 0.03 (123%) 0.06 (50%)
EBITDA 0.02 0.06 (59%) 0.07 (14%)
           
Gross profit margin 8% 11% (3pp) 8% 3pp
EBIT margin 0% 1% (1pp) 4% (3pp)
EBITDA margin 0% 1% (1pp) 5% (4pp)
           
CAPEX 0.02 0.05 (53%) – –
           
Net working capital 0.29 0.55 (47%) (0.33) (267%)
Fixed assets 0.20 0.22 (10%) 0.09 144%
Total capital employed 0.49 0.77 (36%) (0.24) (421%)
           
ROCE (0.01) 4% (5pp) (25%) 29pp
           
Staff 187 162 15% 72 125%
           
Sales (MMT) (top 5)
Urea 0.018 0.011 65% 0.001 1000%
Ammonium Nitrate 0.306 0.112 175% 0.087 29%
UAN 0.017 0.006 179% – –
MAP 0.092 0.047 97% 0.019 147%
NP and NPK 0.140 0.180 (22%) 0.014 1186%

Sales volumes via own distribution network, MMT

Sales volumes via own distribution network, MMT

Revenue, RUR bn

Revenue, RUR bn

EBITDA, RUR bn

EBITDA, RUR bn