20 November 2008 10:48 [Source: ICIS news]
The company recently announced it would reduce production by 500,000 tonnes in the fourth quarter on the back of global financial uncertainty and a downturn in demand.
This output loss would lead to a substantial decrease in the company’s cash revenues, it said in a statement on Thursday.
This comes weeks after the Russian government decided to re-open its investigation into the 2006 Berezniki mine flood, which could see Uralkali face a massive cash penalty if found culpable.
"The turmoil in the global financial markets, that has impacted all areas of the commodities sector, including agriculture, has triggered a drop in demand for crops," said the company.
"Weakened demand for fertilizers has already prompted the company’s decision to cut production in November and December by 50%. Overall, this will result in [a] 10% reduction in annual output, and will affect Uralkali’s financial performance," it added.
The company said the loss of output would result in a $650m drop in 2008 revenue. Therefore at the end of the year, Uralkali expects to have around $300m on its balance sheet against loan debt of $470m.
"We remain of the view that the unfavourable market situation is likely to continue through early 2009, and the company’s production will be curtailed as a result," it said.
"The company is currently unable to give firm guidance for utilising its production facilities in 2009 and will inform its investors and the public about its decisions as the situation becomes clearer," the company added.
Uralkali has devised a number of measures to mitigate the issue, including the cancellation of overtime and suspension of bonuses.
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