EuroChem

Distribution Segment

Agricultural production growth in Russia and the CIS may outpace global growth rates, and EuroChem is well-positioned to help farmers in its domestic markets increase output

Key facts:

  • We expect long-term growth in Russian and CIS agricultural markets after underinvestment in the sector during the previous two decades, during which fertilizer application fell 90%
  • We sell yields, not fertilizers through our network, providing agronomics advisory services and third-party seeds and crop protection products in addition to EuroChem’s own fertilizers
  • Our distributors buy products from our plants and other producers, and sell at a margin to customers

Where we work:

Own distributors

Independent distributors

Strategy:

  • “Sell yield, not fertilizers” – we take an advisory approach to farmers, helping them to increase yields through a range of methods, rather than just boost their fertilizer consumption
  • Contribute to the recovery of efficient and effective agriculture in Russia and the CIS, and benefit from the agricultural recovery in this region
  • Better balance sales with a strong foothold in our home market, which helps to mitigate the effects of trade barriers if and when they arise

SWOT Analysis:

Strengths Weaknesses
  • Good coverage of most important agricultural areas of Russia and Ukraine
  • Agrochemical expertise and sale of high quality seeds and crop protection items
  • Brand associated with quality and reliability; good brand recognition
  • High storage capacity
  • Lack of presence in certain important agricultural areas (mostly in Ukraine)
Opportunities Threats
  • Improve coverage of Southern and Central Russia and Ukraine
  • Launch sales of new products that only EuroChem produces in Russia such as granulated urea
  • Establish presence in Belarus and Kazakhstan
  • Further price regulation in Russia leading to margin erosion for the domestic sales
  • Intensified competition from the other players such as PhosAgro, UralChem, Acron
  • Currency and credit risks in Ukraine; credit risks in Russia
10th largest fertilizer producer globally by nutrient capacity
2.3 mmt p.a. capacity of potash fertilizers is expected to be reached in 2015, with first potash production launched towards 2014
№1 fertilizer poducer in Russia
5.3 bn US$ is the current estimate of the total investment in EuroChem’s two potash projects over 2011-2021.