Dear shareholders,

I am delighted to have become the CEO of Uralkali. I have worked with the Company on many occasions in my previous roles in the Russian chemical industry. It is a recognised industry leader and, since joining, I have been able to witness first-hand the dedication and motivation of Uralkali’s team, which make it the best in the field.

Uralkali is a successful and ambitious company that strives to be the global industry leader, a trend setter in Russia in terms of corporate governance practices and the voice of agricultural development to foster global food security.

2013 was a year of transition for the Company and a challenging year for the industry. Despite this, Uralkali continued to generate sufficient funds to carry out all of its expansion and maintenance projects, return cash to shareholders through dividends and a share buyback programme, and implement social projects. You can find further details of the Company’s performance and financials in the Management Discussion and Analysis section.

2014 opened a new chapter for Uralkali. The Company has a newly elected Board, which will provide the management team with strategic guidance. The market is improving inventory levels decreased, demand for our product is growing again, and crop prices are recovering.

The macroeconomic instability of the last several years remains, and geopolitical developments add to the uncertainty. However, we expect that the solid fundamentals of the potash industry will ensure strong demand for our products.

Enhancing our global leadership position

As CEO, I am focusing on the following strategic goals:

  • enhancing our position as a responsible global leader;
  • promoting dialogue with end customers;
  • maximising revenue and maintaining cash cost leadership;
  • balancing investment in growth with shareholder returns;
  • continuing our social and environmental development work;
  • following corporate governance best practices.

We aim to sustain our global market share at historic levels in the changed potash market environment. Last summer, Uralkali assumed a more flexible market approach with the aim of maximising revenue. After parting with our Belarusian partner, the Company further strengthened its first-rate sales team. In addition, the development of our logistics network enabled Uralkali to become a more attractive trading partner. As a result, by the end of 2013, the Company had re-established its former market positions, which had been lost to peers due to the previous price over volume approach. We will continue to enhance our trading and logistics to remain the supplier of choice for our customers.

At the same time, we will take advantage of our best-in-class resource base by selectively growing our production capacity. At present, we are expanding primarily by increasing the effectiveness of our production cycle, and we are nearing the completion of our debottlenecking project that will add both our powder and granular potash capacity, with demand for the latter growing strongly. We will continue aligning the current capacity development programme with our customer requirements.

Promoting dialogue with end customers

Developing regions, such as China, India, South East Asia and Latin America, account for over 60% of Uralkali’s sales. Potash consumption in these countries is growing, but it is still below the levels recommended by experts for maximum yields.

We see huge potential for increased utilisation in these regions. To stimulate this growth we are sharing our expertise with local agricultural producers, and our specialists, together with international scientific and research institutes and industry associations, are implementing educational programmes for farmers.

Global Potash Cash COGS

(US$ per tonne)

Source: MS report, April 2014.

Maximising revenue and maintaining cash cost leadership

Given the uncertain macroeconomic environment, cost control remains the focus of our team. Uralkali’s production expenses are among the lowest in the industry. However, we are not complacent. We constantly seek to optimise all business processes, increase our productivity and efficiency, and improve our logistics and procurement to maximise profitability and preserve our cost leadership position.

Balancing investment in growth and shareholder returns

We aim to generate high and sustainable shareholder returns. Uralkali has implemented a buyback programme over the past two years. At the same time, the Company adhered to its dividend policy, paying shareholders not less than 50% of its IFRS net profit. We will continue maintaining a balance between investing in capacity development and returning available cash to shareholders.

Continuing social and environmental development

I meet with the local administration of the Perm region regularly and reiterate the Company’s commitment to the social and environmental development of both the towns where we operate and the wider region. Uralkali has its roots in the area and will continue to work in partnership with our stakeholders to improve the safety and wellbeing of our people and the environment in which we operate.

2014 is the 80th anniversary of the start of development of the Verkhnekamskoye deposit. The lives of entire generations are closely connected with potash production and it is important to us that our people take pride in their profession and in their employer, and that they want to continue to live and work in the region.

Following corporate governance best practices

The Company has the full support of the Board of Directors and the shareholders, all of whom are committed to encouraging further transparency and adhering to international best practices, which are described in our corporate governance report.

Outlook

Uralkali’s strategy targets long-term growth in shareholder value. Potash fundamentals remain very strong. With the need for agricultural products constantly rising and insufficient fertiliser application in many countries, we expect demand for potash to rise by 2-4% a year on average.

This presents growth potential for Uralkali and our investors, as we continue to expand and improve production, develop premium product capacity, encourage the spread of agronomic expertise, and ultimately contribute to global food security.

I would like to thank the Board of Directors and my team for their support and guidance during my first few months at the Company. I am grateful to everyone who has helped me to settle into my new role and I will do my best to lead the Company for the benefit of all stakeholders.

Dmitry Osipov

Chief Executive Officer