Logistics and international sales

LOGISTICS

With over 20 million tonnes of product produced and sold in 2013, our in-house logistics and shipping infrastructure is vital to our competitiveness.

While our logistics function is not a reportable business segment, it is a vital component of our vertically integrated business model. Whether for intra-company raw material deliveries or final product shipments, our logistics infrastructure helps us lock in transportation margins and reduce overall transportation costs.

Our logistics assets include three wholly-owned fertilizer transhipment terminals, two of which, Tuapse (Black Sea) and Murmansk (Barents Sea) are in Russia, while Sillamae in Estonia provides us with access to the Gulf of Finland. Also, since 2012, we benefit from direct jetty access in the port of Antwerp (Belgium) with our EuroChem Antwerpen production facility. To minimise bottlenecks, we own and operate cargo ships and rail capacity which includes close to 7,000 rolling stock and 45 locomotives as well as EuroChem Depot – our dedicated rail maintenance and repair centre. The financial benefits that we extract from these assets manifest themselves in the reduced costs of the reportable segments.

To support exports from our future potash production, we plan to construct a fertilizer transhipment terminal on the Baltic port of Ust-Luga. The terminal will have berths and warehouses to support a transhipment capacity of five million tonnes per year.

INTERNATIONAL SALES

To better support our more than 1,000 customers across some 100 countries, we have developed sales and distribution capabilities which allow us to provide them with the products and added value services which they have come to rely on. The bulk of our international fertilizer sales to wholesalers, distributors and cooperatives are carried out through our trading companies in Switzerland, Brazil and the US.

Our acquisition of EuroChem Agro in 2012 added considerable depth to our global reach. With regional offices in Germany, Spain, Italy, Greece, Mexico, France, Turkey, Singapore and China, EuroChem Agro provides the entire range of nitrogen fertilizers – from classic standard fertilizers to the composite Nitrophoska® and innovative high-end N-stabilised products such as ENTEC® and UTEC® which have achieved broad market acceptance in just a few short years. Our Agro offices market the fertilizers produced by EuroChem Antwerpen and also offer products from other reputable suppliers. In collaboration with various research institutes, EuroChem Agro is developing pioneering solutions for the optimisation of fertilizer efficiency.

As with our logistics function, our international sales infrastructure is not one of the Group’s reportable business segments.

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In 2013 EuroChem finalised the acquisition of 54,613 ordinary shares of OJSC ‘Murmansk Commercial Seaport’ for a total consideration of RUB 3.15bn. These ordinary shares represent 48.26% of the total number of the ordinary shares and 36.20% of the total issued share capital of the Company. As at 31 December 2013, the Group held 36.20% of the OJSC ‘Murmansk Commercial Seaport’ voting rights.