Sustainability

In this section, we discuss performance in the ten areas which encompass EuroChem’s sustainable development concept.

1. Continuity of production

We attach the utmost importance to maintenance of our production assets in as good operating shape as is practical and possible, bearing in mind age and depreciation.

Maintenance and repair expenses and sustaining capital expenditure, including capitalized maintenance and repair costs (RUB m)

• Maintenance and repair expenses
• Sustaining capital expenditure, including capitalized maintenance and repair costs

2-3. Health and safety, and environmental safeguards

EuroChem has a reputation for being a responsible industrial enterprise in health, safety and environmental issues. Our lost time through injury rate is significantly below the average in Russia. In 2010, we have substantially increased our environmental protection expenditures, following a decline in this expense line in 2009 forced upon us by the global financial crisis.

Lost time injury rate
(injuries per million hours worked*)

* per IFA methodology (1,600 working hours per person per year).
Source: Fertecon, CRU, IFA.

Non-recycled water consumption
2004-2010
(m³ per tonne of production)

Energy consumption 2004-2010
(kWh per tonne of production)

Environmental protection expenses
2004-2010 (RUB m)

Atmospheric emissions 2004-2010
(kg per year per tonne of production)

Effluent discharge 2004-2010
(m3 per tonne of production)

4. Financial stability

Our debt policy aims to relate EuroChem’s maximum debt burden to the volatility of its cash flows. Given the cyclicality of our cash flows, debt management becomes a very important building block in the concept of sustainable business. Even in the difficult environment of 2009 we maintained EuroChem’s debt metrics at very respectable levels. In 2010 these metrics have improved significantly. In 2011 we expect that they will return to levels closer to our targets across the cycle, albeit still reflecting a strong underlying market.

Net debt/EBITDA

Funds from operations/Gross debt

Operating cash flow/Gross debt

EBITDA/Interest expense

5. Staff

Our human capital is one of our key resources, which we must ensure does not become a bottleneck for our development in the future. We manage this risk by engaging early with prominent local engineering and chemical education establishments, and by having a succession strategy for management positions. A declining staff turnover ratio and our ability to quickly staff up potash projects are proof of our ability to attract and retain quality personnel. Our track record over the last five years further highlights our progress.

Staff turnover at production units (%)

Management to total staff ratio (%)

Average monthly remuneration
per employee (RUB/month)

Production output (main output)
tonnes per employee*

* excluding Volgakali and Perm projects employees

6-7. Customers and suppliers

We sell our product to customers in 84 countries and collaborate with more than 5,000 suppliers. We are committed to establishing fair and transparent relationships with our commercial and industrial partners, which in turn are recognized by them and highlighted by the longevity of most relationships.

Number of customers (No.)

8-9. State and authorities, and local communities

EuroChem strives to be an exemplary corporate citizen in the countries and regions where it operates. In Russia we are traditionally one of the leading corporate taxpayers, at both regional and federal levels, and a top local employer. We recognize the importance of our role in the regions where we operate. In 2010, EuroChem spent RUB 418m on social and charity programs, up from RUB 210m in 2009.

Social and charitable expenses
(RUB m)

10. Shareholder returns

A private company needs to generate adequate returns to its shareholders to stay in business. Our level of past and planned capital expenditure, as well as a solid track record with return on capital employed are a demonstration of EuroChem’s sustainability from the private shareholders’ point of view.

Return on capital employed* (%)

* Capital employed excludes non-current assets relating to potash projects (construction in progress, exploration rights etc)