Customers and partners
Shareholders and financial community
Government and local authorities
Despite the challenging macroeconomic environment, Uralkali, one of the most cost-efficient manufacturers in the world, maintained its leading position in the industry. The Company produced 11.4 million tonnes of potash, which enabled it to reach EBITDA of US$1,913 million and an EBITDA margin of 72%.
Net revenue is the key financial metric that measures the success of the revenue maximisation strategy. We use net revenue to eliminate the effect of trading operations and transportation costs in order to provide for better cross-industry comparison.
Net revenue represents revenue net of freight, railway tariff and transshipment costs.
Despite the fall in global demand for potash fertilisers, the Company maintained decent net revenue.
Achieved capacity demonstrates the progress of our strategic investment programme and reflects the maximum achievable production level.
The maximum production that could be achieved in the calendar year taking into account projected stoppages for planned repairs and maintenance.
Due to the Solikamsk-2 accident in November 2014, our operational capacity decreased. We continued to implement an updated expansion programme to offset this decline.
1 Achieved production in 2015
Output per capita (production personnel) measures manpower productivity and how efficiently we can produce our product.
Potash output divided by average production personnel headcount.
Reduced production due to the Solikamsk-2 accident in November 2014 and the unfavourable situation in the world market of potash fertilisers did not significantly influence this indicator.
Difference between production and sales volumes is one of the indicators representing the efficiency of our logistics, trading performance and route to market.
The amount of potash sold within the period. The amount of potash produced within the period.
Despite adverse market conditions, the Company maintained a slight difference between production and sales volume in line with the historical range.
Cash cost of goods sold (COGS) per tonne measures our competitive cost position in the industry.
COGS less depreciation and amortisation per tonne.
In 2015, our cash costs remained the lowest in the industry and further decreased due to the depreciation of the rouble
Sustenance CAPEX measures how efficiently we can sustain our assets post commissioning.
Capital expenditures aimed at maintaining the current production facilities in sound technical condition.
The continued depreciation of the rouble had a positive impact on our sustenance CAPEX
The EBITDA margin demonstrates our pricing success, cost efficiency, advantages of being a pure-potash producer, and reflects the attractive fundamentals of our business.
Adjusted EBITDA divided by Net revenue. Adjusted EBITDA is Operating Profit plus depreciation and amortisation and does not include one-off expenses. Net revenue is revenue less railway tariff, freight and transshipment.
Our EBITDA margin in 2015 increased by 8 ppt compared to last year’s, reaching its highest level since 2008. This is explained by the effective work of management to reduce costs, finding new sales channels, earlier investments in capacity expansion and the continuing depreciation of the rouble.
TSR measures Uralkali’s strategy performance and creation of shareholder value. We also monitor relative TSR performance against other global potash/fertiliser companies.
TSR calculation reflects generation of shareholder value through share price appreciation and dividends paid over the reporting period.
In 2015, TSR returned to positive values and was significantly better than that of other large fertiliser producers (with a mean TSR of -30%) due to an increase in the Company's share price, partly caused by the buyback of Uralkali's ordinary shares.
Net debt/LTM EBITDA measures how robust our capital structure is and how we manage our balance sheet.
Net debt = Debt (including bank loans and bonds) less cash and deposits.
The rise in the Net debt/EBITDA ratio was caused by the borrowing of funds necessary for the buyback of Uralkali's ordinary shares
Expansion CAPEX reflects how efficiently we bring new potash capacity on line.
Capital expenditures attributable to the expansion programme.
In 2015, we continued to implement our expansion programme. Our expansion CAPEX in 2015 was lower than the anticipated budget due to the additional time needed to select contractors. The decrease of this figure in US$ compared to 2012-2013 can also be explained by RUB devaluation.
FIFR is the core indicator of responsible health and safety management. It is central to our focus on operational excellence.
FIFR is calculated based on the number of fatalities per 200,000 hours worked.
We regret to report that three employees tragically died at Uralkali facilities in 2015. Although an independent investigation led by Rostechnadzor cleared the Company of any wrongdoing, all necessary measures were taken to prevent such accidents in the future.
LTIFR reflects work-related injury frequency. The rate helps us to measure the efficiency of our health and safety initiatives and controls across our operations.
LTIFR is calculated based on the number of lost time injuries per 200,000 hours worked.
The LTIFR rate has been consistently declining following the implementation of the Cardinal Rules in 2012.
Social investments demonstrate and reflect the Company's important role in the community in which we operate.
Total amount of social expenditures including charity, support of infrastructure and sport.
In 2015, Uralkali continued to support sport activities, donate to charity and contribute to the development of the region where we operate.
Labour turnover represents the ability to retain our people, which is key to the Company’s strategy to be positioned as an employer of choice.
Turnover is the number of permanent employee resignations as a percentage of total employees (excl. transfer to another employer).
The effectiveness of the Company’s HR policy aimed at increasing employees’ loyalty helped to further decrease the Voluntary Labour Turnover rate in 2015.
Average annual wages per employee in the main production unit measures how competitive we are in the market in relation to attraction and retention of the best people.
The annual payroll is divided by the average number of employees in the main production unit, excluding top managers and the Moscow office.
In 2015, average annual wages denominated in US$ further decreased because of a strong RUB devaluation. In RUB average annual wages increased by 12%, but the average annual depreciation of the rouble led to a decrease by 30.2% in US dollars. Uralkali constantly monitors salary rates and pays the utmost attention to retaining people through ensuring its salary levels remain attractive.
Energy utilisation as a result of a number of mitigating actions demonstrates how the Company reacts to climate change.
Energy consumed (electricity) per tonne of production for industrial needs.
Lower production volumes and energy efficiency programmes resulted in a slight increase in energy consumption per tonne in 2015.
Stable credit outlook maintained
Investment-grade ratings maintained
Investment-grade ratings received and maintained
Stable credit outlook acknowledges that Uralkali is a first-class borrower with strong industry position, balanced financial policy, prudent risk management, and adherence to leading corporate governance standards.
Type of ratings assigned to the Company by three rating agencies: Fitch, Moody’s and Standard & Poor’s.
In December 2015, Standard & Poor’s downgraded the Company's rating to BB-, Stable. Fitch lowered the Company's rating to BB-, Stable. Moody’s lowered Uralkali's rating to Ba2, Stable.
Uralkali continued to pursue a consistent policy of enhancing its corporate governance and information transparency. No claims made by regulators.
Uralkali continued to pursue a consistent policy of enhancing its corporate governance and information transparency. No claims made by regulators.
The Company pursued a consistent policy of enhancing its corporate governance and information transparency. This included improving the information uploaded to its website and the quality of public reporting. No claims made by regulators.
The corporate governance system, based on the best international standards, is the backbone of shareholders’ trust.
Any defects in the Company’s corporate governance, transparency, disclosure or ethical standards, practices or procedures cited by any rating agency or regulator with jurisdiction over the Company’s securities as a reason for an adverse decision with respect to the Company.
Corporate governance continued to be one of the top priorities for the Company in 2015. The decision-making process in the Company is strictly in line with legal and regulatory requirements and in full accordance with the best international corporate governance practices.
Given the significant opportunities and challenges that we face, a consistent approach to the development of the risk management and internal control system is crucial for timely identification and assessment of risks, decreasing their probability or minimising their negative effect.
The development of an effective risk management and internal control system is one of the Company's most important strategic objectives. These activities ensure that events that may adversely affect Uralkali’s achievement of its goals are identified promptly and to take adequate response measures by distributing responsibilities between decision-makers.
In 2015, the Company continued its risk management activities as part of COSO ERM, an integrated risk management concept, and ISO 31000 Standard.
This section describes only the major and most significant risk factors, which may have a considerable impact on the financial and operating performance of PJSC Uralkali. All estimates and forecasts contained herein should only be viewed taking these risks into account.
Other risks, of which PJSC Uralkali is unaware or which are not currently deemed significant, may become material in the future and have a considerable adverse effect on the Group’s commercial, financial and operating performance.
The Integrated Report does not aim to give an exhaustive description of all risks that may impact the Company. PJSC Uralkali will disclose any necessary information in a timely manner according to the applicable laws.
Our risk management approach is based on understanding of our current risk exposure, appetite and dynamics.
|Risk||Description||Risk level||Dynamics||Description of change||Risk minimisation measures|
|Failure to meet targets set for investment projects||
|The Company continues to implement its investment programme in line with previously adopted plans.||
|Lack of qualified employees||
|There has been a large influx of skilled personnel into the labour market during the economic downturn.||The Company constantly monitors the state of the labour market and promptly hires qualified personnel to meet its staffing needs.|
|Reduction in production capacity||
|Production capacity decreased in connection with the accident at Solikamsk-2.||The Company continues to expand its production capacity and replace retired assets.|
|Non-fulfilment of obligations by contractors or suppliers||The failure of key partners, relations with whom are strategically important, to meet their contractual obligations.||
|The Company's activities depend on monopolistic energy suppliers and the Russian railways. In the context of macroeconomic instability, suppliers and contractors can raise the price of their products and services.||The Company strives to ensure alternative suppliers are available for all its needs.|
|Expenditure increase||Production costs may increase due to the wear-and-tear of production equipment, utilisation of obsolete technologies, or inefficient spending on operating activities.||
|The Company continues its risk prevention activities in line with previously approved plans.||The Company is implementing programmes to increase productivity and reduce operating expenditures.|
|Inflation and currency fluctuations||Additional costs through more expensive materials, resources and services (e.g. transport services) created by inflation and exchange rate fluctuations.||
|Macroeconomic instability both in Russia and abroad increases risks in the short term.||
|Environmental risks and risks related to mining operations||Uralkali’s mining operations are exposed to risks associated with exploration, extraction and processing of minerals, which include flooding, fire and other types of incidents and may create unforeseen costs and reduce the Company's operational efficiency.||
|Given unpredictable natural factors associated with mining, the Company takes a conservative approach to mitigating environmental risks.||
|Risks related to the incidents at Berezniki-1, Solikamsk-2||The flooding of Berezniki-1 in October 2006 as well as an accident at Solikamsk-2 in 2014 had a significant impact on the size of mineral reserves and may lead to additional costs, losses and obligations.||
|The Company adheres to its safety and social responsibility policies and adopts a conservative approach.||The Company follows its social responsibility policy, under which it maintains a constructive and consistent relationship with state authorities to respond to any issues in a timely manner.|
|Noncompliance with environmental and health and safety regulations||
|In 2015, the Company implemented comprehensive programmes to minimise such risks.||
|Potash demand decline||Macroeconomic factors, including global population changes, insufficient cultivated land per capita, decreases in personal income and difficulties in raising loans to purchase potash fertilisers, may weaken global demand for potash.||
|Due to macroeconomic and geopolitical instability, the potash demand growth rate does not match current market supply.||
|Potash price decrease||Producers’ pursuit of high capacity utilisation together with insufficient demand may result in excessive supply and a subsequent drop in global potash prices, reducing the Company's revenue and profit.||
|A mismatch between the potash demand growth rate and current market supply affects sales prices.|
|Lack of specific products||With its production capacity fully utilised, the Company may face a deficit of a particular product for a specific market.||
|The accident at Solikamsk-2 temporarily increases the risk of a shortage of a particular product.||In 2015, the Company balanced its production capacity.|
|Risks, connected with the licensing of use of natural resources||
|In 2013 Uralkali has extended its main mining licences.||
|Political, legal and regulatory risks||
|PJSC Uralkali is registered in Russia and operates in a number of developing markets, which are exposed to higher risks than more developed markets, including legal, economic and political risks, i.e. rapidly changing legislation and legal practice.||
|Compliance with applicable legislation and internal policies||
|Uralkali is subject to special state regulations in various jurisdictions. Due to macroeconomic instability, regulators can increase their requirements.||The Company is developing a set of measures and internal controls to ensure its legal compliance, including compliance with anti-monopoly laws.|
Probability of the risk decreased
Probability of the risk increased
Probability of the risk unchanged