Despite all difficulties, thanks to the well-coordinated work of our team, Uralkali showed consistent financial growth.
Аs you know, Uralkali is one of the leaders of the world potash industry, accounting for about 20% of global potash fertiliser production. However, the year 2015 was not easy for the Company. A drop in global food prices and a difficult macroeconomic situation in most regions led to a decrease in demand for our products. Nevertheless, despite all difficulties, thanks to the well-coordinated work of our team, Uralkali showed consistent financial growth.
In 2015, the Board of Directors approved the Company's Development Strategy for 2015-2020, and continued to improve corporate governance practices and the risk management system. The Company achieved great success in increasing cost competitiveness, successfully attracted external financing and pursued an active social policy. As one of the largest enterprises of the Perm region, Uralkali takes an active part in the development of the towns of Berezniki and Solikamsk, contributes to improving the living standards of their inhabitants, successfully implementing numerous social and infrastructure projects.
High product quality, and labour, industrial and environmental safety remain top priorities for Uralkali. In 2015, the Company continued to implement a comprehensive programme for the prevention of occupational accidents. Now, all Uralkali's mines are staffed with mining and technical inspectors, responsible for the audit and control of safety rules. The Company is committed to the care of the environment through compliance with environmental legislation, sustainable use of natural resources and continuous improvement of environmental activities.
Important changes have been introduced to our dividend policy. From now on, the Board of Directors of Uralkali will determine the amount of dividends based on the financial position of the Company and general economic situation in the country. The Company also decided to provide the holders of Uralkali’s securities with a possibility to return their funds through the buyback of its ordinary shares and global depositary receipts (GDRs). Two buyback programmes were completed in June and October 2015. As a result, the Company bought back 33.54 percent of its share capital, amounting to more than US$3 billion. The third buyback programme on the open market in respect of 6.5% of the share capital of Uralkali, was launched at the end of 2015.
The share buyback resulted in the reduction of the number of Uralkali’s GDRs traded on the London Stock Exchange. In November, with that in mind, the Board of Directors decided to delist the Company's GDRs from this international stock exchange. Ordinary shares of Uralkali are still listed on the Moscow Exchange, although in the medium term we do not rule out that the Russian stock exchange can decrease the listing level of our securities.
That said, the Company stays committed to the highest standards of transparency and corporate governance, and is aimed at mutually beneficial cooperation with shareholders, investors and all stakeholders.
I want to thank all employees of Uralkali for their significant contribution to the development of the Company and ensuring its leading position in such a competitive sector of the economy as the potash industry. I would also like to express my appreciation to shareholders, investors and partners for their trust and support.
The expansion of existing production capacity, coupled with the introduction of new technologies, will help us to meet effective demand in key markets.
Throughout 2015, Uralkali operated in challenging macroeconomic conditions. A decrease in demand for potash fertilisers in key markets, as well as the decline in production due to the accident at the Solikamsk-2 mine in 2014 had a negative impact on the Company’s operating activities in 2015.
Despite this, Uralkali has maintained its leading position and produced 11.4 million tonnes of potash. Thanks to the depreciation of the rouble and optimisation of production, Uralkali reaffirmed its status as the most cost-efficient manufacturer in the industry, which resulted in EBITDA of US$1,913 and EBITDA margin of 72%.
Despite a decline of demand for potash in 2015, we strongly believe in industry’s solid fundamentals and expect a gradual demand recovery amid global inventory levels getting in line with historical averages and reduction of economic uncertainty in developing markets. Long term potash demand will continue to be driven by increasing world population and a reduction of new arable land availability. The Company continues its active presence in markets where purchases are handled through long term supply contracts as well as in the markets operating on a spot basis. While trying to meet the needs of our long-term international customers, Uralkali is fully committed to satisfy the demand for its products in the Russian fertiliser market, which is of strategic importance for the company. Uralkali closely monitors the market situation and is always ready to respond quickly to any changes.
In March 2015, Uralkali's Board approved a new investment strategy aimed at expanding the Company’s capacity in 2015-2020 with a significant amount of investment – about US$4.5 billion. The strategy includes the implementation of projects to increase load at Berezniki-4, complete the fourth shaft at Solikamsk-3, expand granulated potash capacity and build new shafts at Solikamsk-2.
All these activities, as well as the construction of the Ust-Yayva mine, will help the Company boost its production capacity from 11.4 million to 14.4 million per year by 2020, and in future to 17.2 million per year, significantly strengthening our position on the global potash market.
The reduction in liquidity of Uralkali's securities caused by the share buyback programmes, as well as the unfavourable situation on the potash market led to the lowering of the Company's investment ratings. Nonetheless, Uralkali retained access to long-term financing on favourable terms.
In April 2015, the Company signed an agreement with eight international banks for a syndicated loan worth US$655 million, with an option to increase to US$800 million.
In the summer of 2015, the Moscow Exchange registered Uralkali's exchange traded bond programme worth up to 100 billion roubles. Under this programme, Uralkali can place any number of bonds in any currency with a maximum maturity up to 10 years.
Uralkali is also actively using credit lines provided by the largest Russian financial institutions. In September 2015 Uralkali and PJSC Sberbank signed an agreement on a nonrevolving credit line for US$1.5 billion with a maturity of 5 years and 1.5 years availability period (untill March 2017). In addition, on 24 March 2016 the Company signed an agreement to open two nonrevolving credit lines with PJSC Sberbank in the amount of US$3.9 billion for 7 and 10 years. These nonrevolving credit lines will be available from the end of 2017 till the beginning of 2020 and will be used for refinancing earlier loans from PJSC Sberbank and for other Company goals.
Companies of the Group also attracted debt financing last year. Uralkali-Technology, which holds the Company’s quasi-treasury shares, raised financing in the amount of US$800 million by transferring to VTB Capital Uralkali shares (12.61% of Uralkali’s share capital) under a repurchase agreement and Uralkali GDRs (7.38% of the Company’s share capital) under a pledge agreement.
Despite the difficult situation in the potash industry, our mission to produce potash fertilisers to ensure global food security is unchanged, as are our values: the life and health of employees, professionalism and efficiency.
The expansion of existing production capacity, coupled with the introduction of new technologies, will help us to meet effective demand in key markets, while maintaining a leading position in the industry and among socially responsible companies, the largest taxpayers and most attractive employers in the area of our operations.
I would like to thank all those who believe in our Company. I am convinced that by working in a responsible manner, setting ambitious goals and consistently achieving them we will maintain our leading position in the industry for our mutual benefit.