Sergey Chemezov
Chairman of the Board of Directors
Independent Director
Uralkali Integrated Report 2013
global opportunity
Welcome to our 2013 Integrated Report. Our aim is to clearly articulate our business, results and objectives to our key audiences, focusing on important issues and maintaining our commitment to address and report on our responsibilities and actions.
Maintaining global leadership
We strive to be an efficient and transparent company for all our stakeholders.
We create value by the joint efforts of a dedicated team to become the leader of the potash industry in every aspect. While we are working hard to maintain our cost leadership position in the industry, our top priorities are: zero accidents and incidents, minimisation of negative environmental impacts, and the high quality of our products.
At the same time,
we invest in our people and in developing and promoting high-performing employees.
- Our mission
- Our values
- Our business model
- Our strategy
- Creating value
We produce potash fertilisers to ensure people all over the world are provided with food, and to support the growth of our Company and the welfare of our employees and local communities, through efficient and responsible development of unique potash deposits.
Our activities are guided by the following values:
Safety:
Life is priceless
Openness:
We have the courage to hear and tell the truth
Decency:
Honesty towards yourself and others creates the basis for trust
Professionalism
and efficiency:
Results make our work valuable
Initiative and
responsibility:
All of us can improve the
Company’s work
Commitment to excellence and ambition:
We strive to do everything better
than others
Mutual respect
and team work:
Only through collaboration
can we reach set targets
Our vertically integrated business model enables us to maintain control across our entire value chain from potash ore reserves to end customers, which helps to reduce supplier risks and allows us the flexibility to optimise across all stages.
Our customer-focused revenue maximisation strategy is aimed at Uralkali being a global leader in the potash industry, responding to market opportunities, which is consistent with our continued commitment to the long-term growth of our shareholder value.
Enhance global responsible leadership
position
Focus on enhanced
relationships with end customers
Maintain cash cost leadership
positions
Balance investment in growth with
shareholder returns
Focus on people, communities,
safety and environment
Continued focus
on corporate governance
Creating value through vertical integration
Solid demand for potash fertilisers is supported by the growing need for food globally. At Uralkali, we create long-term value through our focus on meeting the world’s growing demand for food, taking advantage of the control that we have over our entire vertically integrated production chain – from potash ore mining through to the supply of potash to customers.
Production
Our existing assets include five mines, one carnallite plant and six potash plants where we make standard white and pink potash, as well as the premium granular potash. We have two greenfield expansion projects that, together with optimisations and capacity growth in our existing operations, will contribute to our capacity expansion programme. We also benefit from the lowest cash costs in the industry, which helps us maintain our leadership position.
Logistics
We have the advantage of one of the shortest transportation routes from mine to port, as well as to key customer markets, to which we deliver via our own 8,000 specialised railcar fleet and Baltic transhipment terminal. A recently acquired strategic stake in the port terminal of Antonina, Brazil, ensures efficient supply to this region with its fast-growing potash demand. This enables us to build on our market-leading position, optimise storage at our warehouses and expand capacity in the short and medium term.
Sales
We are focused on building strong relationships with our customers in more than 60 countries. Our strategy is to maximise revenue and sustain our historical market share, with focus on fast-growing markets such as Latin America, South East Asia, China and India, which have traditionally accounted for around 60% of our total sales.
Feeding the world
As the global population grows together with the need for agriculture products, our leadership position and capacity development programme enable us to increase deliveries in line with rising demand. Moreover, we share agronomic expertise with our customers to provide them with the knowledge to use our products in the most efficient way for optimal yields.
Our strategy in action
Engaging with our stakeholders
A proactive stakeholder engagement programme helps us to respond effectively to changes in the Company’s operating environment. This table identifies our key stakeholder groups. It outlines why we engage with them and reflects the key sustainability issues and progress on our performance and engagement with them.
- Customers and partners
- Shareholders and financial community
- Employees
- Trade unions
- Government and local authorities
- Local communites
- Media
- Why we engage
- Key focus areas
- What we are doing
As a vital element of the Company’s strategy, the reliable and transparent relationship with our customers and partners drives the Company’s performance. Positioned as an industry leader, Uralkali aims to sustain this mutually beneficial partnership to ensure progress and promote development in all spheres.
Customers:
- The quality of goods and services provided
- Reliability of supplies
- Mandatory compliance with contract provisions and legal requirements
- Client support for the use of the Company’s products
Partners:
- Procurement standards outlined in all tenders
- Rigorous due diligence of all partners to establish their integrity and solvency
- Publication of regular market bulletins on the website.
- Meetings with customers, including industry conferences, round tables and workshops
- Master classes and practical training in mineral fertiliser use
- Customer surveys
- Procurement standards and information on the Company’s tenders and procurement plans
- Meetings with (potential) suppliers and business partners
- Conclusion of supply contracts for products and monitoring performance of requirements for counterparties.
- Why we engage
- Key focus areas
- What we are doing
As a publicly listed company we need to provide open, timely and transparent information to help our investors make informed decisions about our financial and non-financial performance.
- Corporate governance
- Financial results
- Potash market developments
- Strategy and KPIs
- Risks
- Sustainability information
- Presentations, webcasts and conference calls between management and financial community
- Website publication of relevant AGM/EGM documents
- Management’s presentations at industry and regional conferences
- Meetings between management and financial community, including road shows and industry conferences
- Investor and analyst days, including site visits
- General meetings of shareholders
- Perception studies among investor and financial community
- Press releases on material issues and key company events
- Why we engage
- Key focus areas
- What we are doing
Every aspect of our strategy is based on the commitment of our people. Their knowledge, their willingness to work and their satisfaction are the keys to the Company’s successful operations. We put an emphasis on creating the conditions for professional and career growth for our people. It is essential for us, and strengthens loyalty to the business.
- Principles of social partnership
- Mutual respect and trust that underpin HR Policy
- Financial and non-financial incentives
- Learning and development opportunities
- Health, safety and environmental standards
- Employing HR Policy and Health and Safety Policy
- The system of internal communications and feedback
- Regular meetings between management and employees
- Feedback on hotline messages
- Ensuring safety in the workplace
- Implementation of social programmes and financial incentive programmes
- Employee satisfaction and employee engagement surveys
- Why we engage
- Key focus areas
- What we are doing
Efficient cooperation with the trade unions is essential for the Company in understanding and fulfilling employees’ expectations. Trade unions help to monitor the implementation of all health and safety rules and other important agreements.
- Employees’ loyalty
- Compliance with health and safety regulations
- Feedback from employees
- Important decisions on social issues
- Reports on execution of the provisions and development of the Collective Bargaining Agreement and health and safety agreements
- Regular face-to-face meetings with management and trade union members
- Collecting written opinions on material and social issues
- Why we engage
- Key focus areas
- What we are doing
The Company’s leading position implies
a responsibility to follow industry standards
and comply with local and international
laws and regulations.
Uralkali aims to establish and maintain stable
and constructive relations with national and local
government authorities, based on the principles
of accountability, good faith and mutual benefit.
- Reporting to regulators
- Taxation
- Planning and implementing local community development projects and social projects
- Maintaining a dialogue with government authorities on current legislative and regulatory issues
- Corporate philanthropy
- Information disclosure and reporting
- Dialogue with government authorities on legislative and regulatory issues
- Development of partnership agreements
- Participation in workshops and expert panels
- Implementation of joint projects
- Local community development planning
- Why we engage
- Key focus areas
- What we are doing
The development of the Company needs to
be supported by the local communities
wherever it operates.
Sustainability of ecosystems, biodiversity and a
healthy environment are vital conditions for the
wellbeing of future generations.
A better quality of life for our people and local
communities through our social and cultural projects
contributes to regional social and economic
development and ensures the sustainability of our
operations, helping us to fulfil our commitments as
an industry leader.
- Environmental safety and mitigation of the consequences of industrial accidents
- Housing infrastructure development and modernisation
- Social infrastructure development and modernisation
- Sports development
- Supporting cultural events
- Support for disadvantaged sections of the community
- Meetings with representatives of local communities
- Economic, environmental and social initiatives
- Implementation of CSR projects and local community development programmes
- Assisting in the design of development plans for the regions in which Uralkali operates
- Publications in local media
- Public consultations
- Maintaining contacts with NGOs
- Why we engage
- Key focus areas
- What we are doing
The Company needs accurate and timely coverage
by the various media channels when disclosing its
financial and operational results, important external
and internal events, community involvement,
participation in industry conferences, international
and local exhibitions, etc.
The correct perception of the Company and its
strategy by all stakeholders is mutually beneficial for
Uralkali and its target audiences.
- Adequate media coverage of the Company’s strategic messages
- Timely disclosure of corporate news and events
- Getting feedback from the society and international media
- Maintaining the relationship with stakeholders at all levels
- Press releases on material issues and key events
- Interviews with management
- Media visits and press conferences
- Relationship building events for media
- Perception studies among target media
Committed to devepmentand responsibility
“We seek to apply global best practices in our own organisation and
introduce
them into our relations with our business partners.”
- Sir Robert Margetts, Chairman of the CSR Committee
Health & Safety
Why these issues are
important to us
Absence of fatalities, incidents, accidents and occupational diseases is one of the key goals of an efficient business. Each employee expects to work in a healthy environment. At the same time the Company expects its employees to follow the safety rules. Jointly supporting these principles we will be able to bring our business to a higher level of performance and a sustainable future.
Health & Safety
Key priorities
- Absence of fatalities.
- Absence of industrial accidents.
- Prevention and reduction of occupational diseases amongst employees.
Environmental
protection
Why these issues are
important to us
Sustainability of ecosystems, biodiversity and a healthy environment are vital conditions for the wellbeing of future generations. For this reason, a responsible approach to the environment is core to our business.
Environmental
protection
Key priorities
- Reduction of waste discharges into water, balanced water consumption.
- Efficient waste management.
- Reduction of air emissions.
- Minimisation of energy consumption and CO2 emissions.
Our people
Why these issues are
important to us
The successful realisation of a business strategy is entirely dependent on people: their management skills, professional knowledge and commitment to the Company’s values and corporate ethos. Therefore, Uralkali creates ideal conditions for professional growth and career progression and develops ways to build and strengthen company loyalty and team efficiency.
Our people
Key priorities
- Provide the business with qualified personnel
- Increase workforce productivity
- Increase staff loyalty and commitment
- Improve HR processes
Our communities
Why these issues are
important to us
Realisation of major projects is a very demanding task without an open dialogue within society as we work for sustainable development in the territories where the Company operates. We improve the living standards of local communities and create a close partnership with society.
Our communities
Key priorities
- Socio-economic development in the regions where we operate.
- Provision of comfortable and safe living conditions.
- Partnership, trust and efficient dialogue with local communities and legal authorities.
Reinforcing our leading position
“The Company is well positioned for 2014 and beyond as global demand recovers.”
Meet our new Chairman
I highly value the trust shown in me by the Company’s shareholders.
In cooperation with the management, we will work efficiently in the interests of all shareholders while observing corporate governance best practices.
Sergey Chemezov
Paul Ostling
Member of the Board of Directors
Independent Director
Jian Chen
Member of the Board of Directors
Non-Executive Director
Victor Belyakov
Director for Economics and Finance
Nadezhda Kiryanova
Procurement Director
Marina Shvetsova
Director for Legal and Corporate Affairs
A year of transition
“The challenging market environment in H1 2013 had a negative impact on our operational and financial results. However, following the adjustment in the Company’s sales strategy in July 2013, we saw some improvement in H2 2013 and are planning to maintain this momentum in 2014.” Viktor Belyakov, CFO
1. Calculated on a pro-forma basis, including financial results of Uralkali and Silvinit starting from 2011, except for earnings per GDR which is calculated on an IFRS basis.
2. Net revenue represents adjusted revenue (sales net of freight, railway tariff and transhipment costs).
3. EPS is calculated as net profit divided by the weighted average number of GDRs in issue.
4. EBITDA is calculated as operating profit plus depreciation and amortisation and does not include one-off expenses.
5. LTIFR is calculated based on the total number of lost time injuries per 200,000 hours worked.
Meeting the global food challenge
Meeting the global food challenge
Uralkali capitalises on long-term market fundamentals. Demand for potash is expected to improve steadily in the coming years, as agriculture remains the key source of food and an important provider of fibre and fuel for the world’s constantly growing population.
Increasing global population
Declining arable land per capita
Emerging market dietary shift
Increase in the potash proportion of total fertilizer application by emerging economies
Demand for
higher/optimal
yields
higher/optimal
yields
Uralkali
capitalizes on
long-term market
fundamentals Positive underlying
long-term
fundamentals largely
remain intact
capitalizes on
long-term market
fundamentals Positive underlying
long-term
fundamentals largely
remain intact
Substantial
barriers to
entry
barriers to
entry
High
industry
concentration
industry
concentration
Economically
mineable deposits
are geographically
concentrated
mineable deposits
are geographically
concentrated
No other products can
be substituted for
potash
be substituted for
potash
Major consumer
markets in Asia and
Latin America have
little or no potash
production capability
and rely primarily on
imports to meet their
needs
markets in Asia and
Latin America have
little or no potash
production capability
and rely primarily on
imports to meet their
needs
Significant
investment required
for greenfield
projects
investment required
for greenfield
projects
Lengthy development is required to build a new greenfield mine
Why is potash important?
Potash is a vitally important element, necessary for the functioning of all living cells. It is a natural component of soils and, along with phosphorus and nitrogen, an irreplaceable nutrient for plants and agricultural crops. Balanced plant nutrition can only be ensured by regular and timely application of these three main macronutrients.
Benefits for crops
Improves the nutritional value, taste, color and structure of crops
Increases resistance to crop diseases and pests
Helps resist adverse weather conditions
Facilitates assimilation of nitrogen
Does not pollute the environment or affect the quality of natural spring water
Benefits for users
Consistently high yields
The maximum effect of use of NPK fertilisers
Consistently high product quality
Preservation of the natural balance of micronutrients in the soil and minimisation of impacts on land