Russia's PhosAgro to enjoy strong future growth – bank

14 October 2011 17:10  [Source: ICIS news]

LONDON (ICIS)--The world’s leading producer of high-grade phosphate rock, Russia's PhosAgro, can expect robust growth in the years ahead, Austria-based Raiffeisen Centrobank said on Friday.

The continuing global decline in available arable land on which to grow food for the increasingly prosperous and expanding world population – which is demanding more premium foods such as fresh vegetables and meat – mean PhosAgro's products will remain in strong demand, the bank added.

Raiffeisen expects PhosAgro's 2011 net profit to reach rouble (Rb) 24.5bn ($785.0m, €569.1m), compared to Rb10.8bn in 2010, with sales rising to Rb105.4m from Rb77.0m.

PhosAgro is the world’s third-largest producer of phosphate rock overall, and the second-largest manufacturer of diammonium phosphate (DAP) and monoammonium phosphate (MAP) fertilizers, excluding Chinese low-grade production, with a capacity of 3.5m tonnes/year, according to Raiffeisen.

Approximately 90% of PhosAgro's revenues are generated by phosphate-based products, making the company nearly a pure play on the phosphate market, Raiffeisen added. The bank has initiated coverage of the company, with a “buy” recommendation on its stock.

“Due to the company’s vertical integration, PhosAgro enjoys a 100% self-sufficiency in phosphate rock supplies and 94% in ammonia, which significantly reduces cash costs of phosphate fertilizer production,” said Raiffeisen analyst Konstantin Yuminov.

“Moreover, since domestic prices for potash and sulphur are still relatively low, the company ranks among the global cost leaders in production,” he added.

PhosAgro held a 52% market share in the Russian phosphate market in 2010, and also dominated the Russian compound fertilizers market with a market share of 44%, Raiffeisen figures showed. The company is also the sole producer of feed phosphates in Russia.

According to the International Plant Nutrition Institute, phosphate-based fertilizers increase corn yield by at least 25%, depending on the use of other nutrients.

($1 = Rb30.9, €1 = Rb42.8)

($1 = €0.72)

By: Will Conroy
+44 20 8652 3214

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