Annual Report 2012

Other business segments: Industrial products, Logistics, Distribution, Financial investments

Industrial products

Primary objectives of the segment

  • Product range diversification.
  • Extra profit and lower environmental impact in the Group’s footprint regions through reduction of waste storage by means of inorganic products sales, which are partially by-products of mineral fertiliser production.

Operating performance

Acron

Methanol and formalin are mainly used by Acron for further conversion and production of UFR (90% and 94% of the total output, respectively). In 2012, the Company was the second largest producer of UFR in Russia. The Russian UFR market is highly competitive and is constantly tightening its product quality requirements. In the reporting year, Acron continued to convert production to resins with low formaldehyde content and started supplies of dipping and melamine resins. In 2013, the Company will start production of melamine-urea-formaldehyde resins.

Output of low-density and technical-grade AN, liquid carbon dioxide and argon did not change year-on-year on the back of strong demand for these products both in Russia and abroad. Sales of calcium carbonate (a byproduct of NPK) were down 5% due to lower NPK output and reduced demand.

Hongri Acron

Hydrochloric acid sales were down 8% due to weaker demand in the Chinese domestic market.

Dorogobuzh

Output of low-density and technical-grade AN in the reporting year was up 38%; liquid carbon dioxide output did not change year-on-year. Sales of calcium carbonate were lower mainly due to a slump in demand in the region.

Production performance (‘000 t)

  Acron Dorogobuzh Hongri Acron Total
Organic compounds       389
Methanol 80 80
Formalin 139 139
UFR 170 170
Non-organic compounds       743
Low-density and technical-grade AN 233 9 242
Calcium carbonate 297 7 304
Liquid carbon dioxide 20 36 56
Argon 7 7
Hydrochloric acid 134 134

Apatite-nepheline ore integrated processing

Acron Group is implementing two innovative projects: development of pilot facilities for nepheline concentrate processing and extracting rare-earth elements from apatite concentrate.

Nepheline-10 project

In 2012, as part of the design work on a pilot 10-ktpa nepheline concentrate processing facility, Acron obtained State Expert Evaluation Department approval for its design documentation, continued developing the design documentation and pursued purchasing the necessary equipment.

After receiving the construction permit, the Group commenced construction and assembly work (groundwork and steel framing for production buildings). Research and development and preparation of documentation for the final product are underway.

Completion and launch of the pilot nepheline production facility are scheduled for 2013.

 

Rare-earth elements project

Acron developed a technology for extracting rare-earth element concentrate from the apatite concentrate processing workflow to obtain five products: lanthanum, cerium, neodymium, light and heavy REE concentrates.

A pilot unit used for technology fine-tuning was launched in 2012. As part of an upgrade of NPK production with the construction of a rare-earth-based production line with a capacity of 200 tpa of dioxides, the Group is developing the engineering documentation, purchasing the capital equipment, and preparing the production areas for equipment installation. The launch is scheduled for 2013.

Because of the importance of REE production in Russia, this project has been included in the Rare and Rare-Earth Elements sub-programme of a national government programme entitled Industrial Development and Competitive Growth.

Logistics

Primary objectives of the segment

  • Low-cost transportation for the Group’s Russian facilities.
  • Flexibility of product shipments and delivery term guarantees.
  • Extra profit from provision of services to third-party fertiliser producers.

AS DBT, AS BCT and Andrex sea port terminals

op-review-other-dbt.jpg

Operating performance

  • Bulk fertiliser shipping through AS DBT and Andrex terminals was up 23% in 2012 to 2.5 million tonnes, with 41% of the total cargo coming from Acron and Dorogobuzh and 59% from thirdparty fertiliser producers.
  • Turnover at AS BCT liquid fertiliser shipping terminal was up 21% in 2012 to 1 million tonnes. A 34% increase in UAN shipping was due to increased output at Acron’s production facility. Ammonia shipping was down 16% year-on-year, which was offset by methanol shipments to third-party producers that commenced in the reporting year.

Development plans

  • AS DBT In 2012, the Group commenced construction of three new dome-shaped warehouses for bulk blends with a total capacity of 27,000 tonnes. During the reporting year, the Group prepared the construction site and started acquiring equipment and construction materials. In 2013, the Group plans to complete dome construction, steelworks and conveyor installation and obtain approval for operating the new facilities. The increased warehouse capacity will expand opportunities for simultaneous storage of bulk cargoes and the terminal complex’s shipping capacity.
  • AS BCT In 2012, the Group completed construction of an additional fourth 20,000-tonne tank for storing UAN. Increased UAN tank storage capacity will allow the Group to ramp up liquid fertiliser shipping in compliance with the UAN production capacity expansion programme.

Rail fleet

op-review-other-rail.jpg

In 2012, Acron Group’s Russian companies moved a total of 5.8 million tonnes of rail cargo. Acron-Trans, the Group’s logistics arm, provides all rail transportation for the Group’s Russian companies commodities and finished products heading to port terminals and customers in Russia and the CIS. Acron‑Trans operates roughly 2,500 railcars and rail freight containers owned by the Group, as well as hired rolling-stock.

2012 shipment (‘000 t)

Bulk fertilisers1,0391,504
Liquid fertilisers707
Ammonia97 140
Methanol 44
0 500 1000 1500 2000 2500 3000
.Acron Group .Third-party producers

Distribution

Primary objectives of the segment

  • Efficient distribution strategy in the global mineral fertiliser market.
  • Most dynamic response to changes in market conditions and redistribution of product flows to regions with strong demand and prices.
  • Strengthening positions in key sales markets: Russia and China.

Operating peformance

  • Russia (Agronova) In the reporting year, fertiliser sales in the Russian domestic market were up 10% to 840,000 tonnes year-on-year (including technical-grade and low-density AN). The Group supplies fertilisers to 65 regions of Russia. Through the distribution network, Acron and Dorogobuzh market the fertilisers that are most popular in Russia: AN and NPK. By the end of 2012, the Group accounted for 15% of the Russian AN market and for 23% of all types of NPK (according to the Russian Association of Fertilizer Producers).
  • China (YSF) In 2012, YSF’s sales in the Chinese domestic market were up 5% to 269,000 tonnes. By offering quality fertilisers via an extended sales network, the Company was able to sustain dynamic sales, despite the highly competitive Chinese market.
  • International trading companies (Agronova Europe AG and Agronova International Inc.) In the reporting year, aggregate sales by Agronova Europe AG and Agronova International Inc. were 3.1 million tonnes (+7% year-on-year).

Key results by sales markets

Asia

Increased NPK supplies in Thailand, with the Group’s share of complex fertiliser import rising to 55%. Promotion of the Group’s products in new markets: higher sales in Vietnam, direct contracts with major fertiliser traders in Indonesia.

China

Volatility in the Chinese fertiliser market and general cut in prices in the reporting year notwithstanding, Acron Group remains the biggest NPK exporter to the Chinese market and continues to develop its distribution network. The Group accounted for 30% of total NPK imports in China.

The US and Canada

Increased UAN sales in the US. In 2012, the Group accounted for 20% of total imports to the US and 90% to Canada.

Latin America

The Group’s share of AN imports to the Brazilian market remained at 30%, and its share of UAN sales in Argentina reached 30%. The Group concluded long-term contracts to supply 200–250 ktpa of low-density and technical-grade AN to Latin American countries. In 2012, the Group boosted urea supplies to the region on the back of a strong increase in demand.

Financial investments

Primary objectives of the segment

  • The Group’s financial investments are liquid assets and are therefore included in the shareholder value. The Group may raise additional funds at any time through monetisation of these assets.
  • Acquisition of promising assets in compliance with the Group’s growth strategy.

Stake in Uralkali

In 2012, as a result of a decrease in Uralkali’s authorised capital, Acron’s stake increased to 2.88%. The value of Acron’s shareholding in Uralkali as of December 31, 2012, was RUB 19.9 billion.

Stake in Azoty Tarnów

In May 2012, Acron Group announced its tender offer for shares of the major Polish fertiliser producer Azoty Tarnów, up to 66% of votes at the general meeting. The transaction resulted in acquisition of a 12.03% stake in Azoty Tarnów worth USD 103 million. By the end of 2012, the Group’s stake increased to 13.78%.

After an additional issue of Azoty Tarnów’s shares and a subsequent merger with ZA Pulawy, the Group’s stake in the merged company was 8.91%. Azoty Tarnów’s shares (traded at the Warsaw Stock Exchange) have gone up since the date of acquisition, and as of December 31, 2012, the Group’s stake was valued at RUB 4.1 billion (USD 134 million).

Back to top