Nitrogen

Our 2013 nitrogen segment sales volumes continued to benefit from the added depth to our fertilizer production chain. Full year volumes increased 11% and rose to 8,217 KMT, which corresponded to an additional 838 KMT of product as compared to 2012. While the year proved challenging for urea and AN trading, the breadth and flexibility of our production and distribution assets alleviated some of the pressure. The consolidation of EuroChem Antwerpen and EuroChem Agro yielded significant gains for our more advanced crop nutrition products. Sales in NPK, UAN, and granulated AN increased a combined 978 KMT over the previous year, more than compensating for the slightly lower urea and AN sales volumes, which slipped 7% and 11% year-on-year respectively. CAN sales volumes were also strong, increasing 24% to 943 KMT as compared to 759 KMT in 2012.

Our nitrogen revenues for the 12 months ended 31 December 2013 climbed to a record high of RUB 100.1bn, which represented an 8% increase on what was a strong 2012 performance. Average prices for nitrogen products nevertheless reflected the challenging market backdrop and pulled the nitrogen segment EBITDA down 14% to RUB 26.2bn as compared to RUB 30.6bn in 2012.

Sales to Europe, which represented 26% of total nitrogen sales in 2012, increased 29% and accounted for 31% of the Group’s nitrogen sales in 2013. The increase in sales to Europe was primarily brought on by the expansion of our distribution network and asset base in Western Europe coupled with challenging conditions on the other side of the Atlantic. Our sales to Russia increased 14% and accounted for 23% of segment sales (2012: 22%). Urea’s relative weakness versus other nitrogen products was especially felt in the Americas. Sales to Latin America and North America decreased 31% and 18% respectively. Together these two regions accounted for 23% of sales in 2013 (2012: 32%). At our upstream nitrogen operations, our Severneft-Urengoy (SNU) natural gas subsidiary provided RUB 5.1bn and RUB 1.5bn to the Group’s revenues and EBITDA respectively. Natural gas sales volumes increased 27% year-on-year to reach 830 million m3 while gas condensate sales volumes expanded 26% to 141 KMT as compared to 2012. The natural gas volumes were sold to Novomoskovskiy Azot at regulated prices less a 5% discount.

For the year, our Novomoskovskiy Azot and Nevinnomysskiy Azot ammonia facilities paid average natural gas prices of RUB 3,966 and RUB 4,120 per 1,000m3 respectively (c. US$ 3.87 and US$ 4.03/mmBtu), as compared to average prices of RUB 3,432 and RUB 3,594 per 1,000m3 respectively (c. US$ 3.43 and 3.60/mmBtu) for the 12 months ended 31 December 2012. Two natural gas price increases were implemented in 2013 in Russia. An increase of 15% took effect from 1 July followed by a 2-3% raise from 1 October. No price increases have been announced for 2014.

Nitrogen sales1 (RUBbn)

Nitrogen-sales1-(RUBbn)1 Including sales to other segments

Nitrogen EBITDA (RUBbn)

Nitrogen-EBITDA-(RUBbn)

RUB bn, or as indicated 2013 2012 Change
2012-2013
2011 Change
2011-2012
Revenue (including sales to other segments) 100.06 92.47 8% 63.11 47%
Cost of sales (60.44) (51.37) 18% (28.42) 81%
Gross profit 39.62 41.10 (4%) 34.69 18%
Other expenses (19.64) (15.26) 29% (11.09) 38%
EBIT 19.98 25.84 (23%) 23.60 9%
EBITDA 26.17 30.58 (14%) 25.55 20%
           
Gross profit margin 40% 44% (4%) 55% (11%)
EBIT margin 20% 28% (8%) 37% (9%)
EBITDA margin 26% 33% (7%) 40% (7%)
           
CAPEX 10.38 6.32 64% 4.68 35%
           
Net working capital 14.26 17.09 (17%) 7.75 120%
Fixed assets 69.96 63.71 10% 45.57 40%
Total capital employed 84.22 80.80 4% 53.33 52%
           
ROCE 24% 32% (8%) 44% (12%)
           
Staff 8,100 8,262 (2%) 7,564 9%
 
Production (MMT)
Ammonia 2.77 2.73 1% 2.66 3%
Urea 2.41 2.39 1% 2.20 9%
Ammonium Nitrate 2.63 2.66 (1%) 2.42 10%
CAN 0.95 0.76 26% 0.20 284%
UAN 1.06 0.76 40% 0.69 11%
Methanol 0.43 0.41 3% 0.42 0%
Acetic acid 0.15 0.15 1% 0.15 (3%)
Natural gas (m3) 0.90 0.70 29%
Gas condensate 0.17 0.13 25%
 
Sales, incl. sales to other segments (MMT)
Ammonia 0.16 0.21 (22%) 0.24 (14%)
Urea 1.95 2.11 (7%) 1.92 10%
Ammonium Nitrate 1.72 1.94 (11%) 1.73 12%
CAN 0.94 0.76 24% 0.19 300%
UAN 1.09 0.77 42% 0.72 6%
Methanol 0.35 0.33 4% 0.33 1%
Acetic acid 0.13 0.11 12% 0.11 0%
Natural gas (m3) 0.83 0.56 48%
Gas condensate 0.14 0.11 24%
           
Tonnes of ammonia produced per employee 342 330 4% 351 (6%)