Phosphate

Total sales volumes for the phosphate segment, excluding raw material mining operations, slipped 2% or 50 KMT to 2,405 KMT in 2013, as compared to last year. MAP/DAP sales remained practically flat with a modest 13 KMT year-on-year increase while NP sales finished the year 53 KMT below their 2012 levels. Iron ore demand remained resilient throughout the year. Sales of our apatite-mining co-product finished the year up 11% to 5,858 KMT as compared to 2012.

The strong iron ore backdrop lent support to our phosphate segment revenues for the January to December 2013 period and limited the effects of the year’s lacklustre MAP/DAP showing. Full year revenues for our phosphate segment amounted to RUB 58.3bn, representing a 4% decline on 2012 segment revenues of RUB 60.8bn. Phosphate segment EBITDA had a more pronounced decline, pulled down by the lower average realised prices for phosphate fertilizer products, particularly MAP/DAP, and finished the year at RUB 13.9bn, 15% below the RUB 16.2bn recorded a year earlier.

Our mining operations mitigated the weakness in phosphate-based fertilizers as healthy demand from China carried average iron ore prices 3% higher year-on-year. Iron ore and baddeleyite, which are the co-products of apatite mining operations at our Kovdorskiy GOK mine, together generated 38% and 74% of phosphate segment revenues and EBITDA, respectively, as compared to 31% and 51% in 2012.

The sales geography of our phosphate segment reflected the contribution of mining co-products to the segment’s performance. The share of revenue from Asia increased three percentage points as compared to 2012 and accounted for 30% of total segment sales. Higher feed phosphate sales drove gains in Europe. As in 2012, it was our second largest phosphate market and represented 29% of 2013 sales, a three percentage point increase on last year. Sales to Russia declined six percentage points on lower MAP/DAP prices and accounted for 18% of sales in 2013.

In late October 2013 we announced the launch of drilling and blasting operations at our phosphate rock mining project in Kazakhstan. Most of the major equipment items required to build the initial phase have been purchased, including but not limited to excavators, dozers, haul trucks, crushers, as well as screening, conveying and loading facilities. First production is expected to come on stream in the fourth quarter of 2014. With its targeted initial production capacity of around 640 KMT of phosphate ore per year, our Kazakh mining project has been an important part of the Company’s upstream raw material strategy.

Phosphate sales1(RUBbn)

Phosphate-sales1-(RUBbn)

1 Including sales to other segments

Phosphate EBITDA (RUBbn)

Phosphate-EBITDA-(RUBbn)

RUB bn, or as indicated 2013 2012 Change
2012-2013
2011 Change
2011-2012
Revenue (including sales to other segments) 58.28 60.77 (4%) 63.92 (5%)
Cost of sales (36.66) (36.45) 1% (31.97) 14%
Gross profit 21.62 24.32 (11%) 31.95 (24%)
Other expenses (11.14) (10.72) 4% (10.17) 5%
EBIT 10.48 13.60 (23%) 21.78 (38%)
EBITDA 13.87 16.24 (15%) 23.99 (32%)
           
Gross profit margin 37% 40% (3%) 50% (10%)
EBIT margin 18% 22% (4%) 34% (12%)
EBITDA margin 24% 27% (3%) 38% (11%)
           
CAPEX 8.61 5.79 49% 6.40 (10%)
           
Net working capital 10.40 16.40 (37%) 19.62 (16%)
Fixed assets 32.32 26.60 22% 22.51 18%
Total capital employed 42.72 43.00 (1%) 42.13 2%
ROCE 25% 32% (7%) 52% (20%)
Staff 6,901 6,968 (1%) 6,776 3%
 
Production (MMT)
Apatite 2.37 2.35 1% 2.58 (9%)
Iron ore 5.71 5.60 2% 5.25 7%
MAP 0.92 0.91 1% 0.96 (5%)
DAP 0.85 0.92 (8%) 0.96 (4%)
NP, NPK 0.12 0.16 (27%) 0.12 35%
 
Sales, incl. sales to other segments (MMT)
Apatite 0.14 0.17 (15%) 0.17 1%
Iron ore 5.85 5.29 11% 5.47 (3%)
MAP 0.95 0.88 8% 0.94 (6%)
DAP 0.89 0.95 (6%) 0.93 2%
NP, NPK 0.12 0.17 (31%) 0.12 48%
Tonnes of output per employee 1,445 1,427 1% 1,456 (2%)