2010 Full Year Results Conference Call 1 March 2011 2 Disclaimer - - PowerPoint PPT Presentation

2010 Full Year Results Conference Call

1 March 2011

2

This presentation has been prepared by OJSC MCC EuroChem (“EuroChem” or the “Company”) for informational purposes, and may include forward- looking statements or projections. These forward-looking statements or projections include matters that are not historical facts or statements and reflect the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, performance, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements and projections involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements and projections are not guarantees of future performance and that the actual results of operations, financial condition and liquidity of the Company and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements or projections contained in this presentation. Factors that could cause the actual results to differ materially from those contained in forward-looking statements or projections in this presentation may include, among other things, general economic conditions in the markets in which the Company operates, the competitive environment in, and risks associated with operating in, such markets, market change in the fertilizer and related industries, as well as many other risks affecting the Company and its operations. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements or projections contained in this presentation, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm expectations or estimates or to update any forward-looking statements or projections to reflect events that

• ccur or circumstances that arise after the date of this presentation.

This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company in any jurisdiction, nor shall it or any part of it nor the fact of its presentation, communication or distribution form the basis of, or be relied on in connection with, any contract or investment decision. No reliance may be placed for any purpose whatsoever

• n the information contained in this document or on assumptions made as to its completeness. No representation or warranty, express or implied, is given

by the Company, its subsidiaries or any of their respective advisers, officers, employees or agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents. By participating in this conference call, you agree to be bound by the foregoing.

Disclaimer

3

Industry context in 2010

 Droughts and floods in certain key markets affected

crops and pushed agricultural prices up

 Global demand for fertilizers picked up considerably

towards 2010-end on rising agricultural commodity prices, re-stocking in the supply chain, past under- fertilization (P, K)

 Certain specific supply issues and delays in important

supply additions added to tight supply-demand balance

 Industry consolidation continued driven by market

power considerations

 Strong demand for iron ore persisted in China on

• verall strength of the economy

 Global monetary easing is extremely supportive of

commodity prices

50 100 150 200 250 01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 07/10 09/10 11/10 US$ per tonne

Iron Ore

Iron Ore (CIF China)

200 400 600 800 1 000 1 200 1 400 01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 07/10 09/10 11/10 US$ per tonne Prilled urea (FOB Yuzhniy) DAP (FOB Baltics) MOP (FOB Baltics, Spot)

Key fertilizers

4

EuroChem: 2010 performance highlights

 Nitrogen: sales volumes up 5%; average urea prices 15% higher than in 2009  Phosphate: sales volumes up 14%; average DAP prices up 48% on 2009 levels  Iron ore sales volumes 10% above 2009 level; very strong price trend (CIF China: +80% yoy)  Revenues rose by 33% to RUB 97.8 bn on higher prices and volumes  EBITDA increased by 81% to RUB 29.9bn  Free cash flow positive (+RUB 11.9bn) despite heavy capital expenditure (RUB 20.5bn)  Growth-oriented investment program (potash, new products, N and P efficiency, logistics) is fully

• n track

FY 2010 FY 2009 Y-o-Y,% Q4 10 Q3 10 Q2 10 Q1 10 Revenues 97,788 73,577 +33% 28,137 24,261 23,780 21,609 EBITDA 29,937 16,516 +81% 10,581 6,347 7,717 5,292 % margin 31% 22% +9 p.p. 38% 26% 32% 24% Capex 20,464 18,702 +9% 6,877 6,323 4,269 2,994

Key Figures, RUB m

2 4 6 8 10 12 14 PotashCorp Mosaic Silvinit+Uralkali CF Industries Yara Belaruskali Agrium OCP Israel Chemicals EuroChem K+S AG TogliattiAzot PhosAgro Sinopec UralChem

PRIMARY PRODUCT CAPACITY, MMT OF NUTRIENTS

Ammonia (N) Phos Acid (P2O5) Potash (K2O)

5

EuroChem: market position and strategic goals

Vertically integrated producer:

Kovdor Kingisepp Kedaynyay Moscow Novomoskovsk Nevinnomyssk Perm Volgograd Murmansk Tuapse Tallin Novomoskovsk Azot Lifosa Phosphorit EBMU Kovdorsky GOK Gremyachinskoe deposit Verkhnekamskoe deposit Nevinnomyssk Azot

Potash Nitrogen Phosphate Transhipment terminals Apatite / iron ore mining

Belorechensk

Top 10 by nutrient capacity globally: EuroChem aims to become a top five player by size and profitability over the next 5 years

Ust-Luga

6

EuroChem Strategy

EuroChem’s overall strategy is best viewed as a collection of logically inter-related business segment strategies:

 Become top 5 global player by revenue and volume in all 3 fertilizer markets (nitrogen, phosphate and potash) by growing faster

than the market through investment in growth and M&A

 Maintain / increase cost advantage through vertical integration and investment in efficiency

Main strategic objectives:

– Build own distribution network and “sell

yield, not fertilizers” in Russia, Ukraine, Belarus, Kazakhstan Nitrogen

– Increase gas efficiency – Add capacity in value-adding products – Secure access to competitive feedstock

Strategy

Phosphate/mining

– Increase own P2O5 resource base – Increase production capacity – Improve energy efficiency

Potash Distribution Logistics

– Increase cost advantage to EuroChem

through own port facilities, freight/rail

• ptimization

Governance/social

– Maintain robust corporate governance

and exemplar social responsibility

– Gain economic exposure via K+S – Start own production by 2013-end

Russia and CIS 36% (+4) Asia and Australasia 19% (-6) Europe 19% (-2) LatAm 15% (+3) N.America 9% (+4) Africa 2% (-3)

7

Performance overview

Key Figures 2010 (v 2009) FY 2010 Change to 2009

Revenue RUBm 97,788 +33% EBITDA RUBm 29,937 +81% Net profit RUBm 20 052 +81% Gross margin % 49% +7 p.p. EBITDA margin % 31% +9 p.p. Sales volumes Nitrogen* KMT 5 671 +5% Phosphate (excl. iron ore and baddeleyite) KMT 2 415 +14% Phosphate (only iron ore and baddeleyite) KMT 6 124 +10%

* Includes organic synthesis products. Nitrogen 41% (-7) Phosphate 48% (+7) Distribution 9% (+2) Other 2% (-2)

External Sales by segment (2010) External Sales by region (2010)

(in brackets – change in percentage points relative to 2009) (in brackets – change in percentage points relative to 2009)

58,107

80,333

15,470 17,454 7,265 7,729 7,768 1,350 3,299 (434) (648) (3,650) (454) 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000 110 000

2009 Gross Revenue Realised price effect (N) Realised price effect (P) Realised price effect (Iron Ore + Badd.) Volume and mix effect (N) Volume and mix effect (P) 3rd party products sales Transport price and mix effect FX effect Other sales 2010 Gross Revenue

Transport costs Increase Decrease

Net revenue Transport Transport Net revenue

8

Revenue evolution in 2010

+33% (+38% net of transport costs)

29, 29,937 937 26, 26,194 194 11, 11,863 863

698 5,399 (3,736) (705) (20,464) (266)

5 000 10 000 15 000 20 000 25 000 30 000 35 000

EBITDA 12M 2010 Taxation Working capital Other items Operating cash flow CAPEX Equity investments Other items FCF 12M 2010

9

2010 Cash Flow

Mainly sale of K+S shares See slide 16 for CAPEX breakdown

FY 2010 FY 2009 EBITDA 29,937 16,516 Depreciation and amortisation (3,466) (2,976) Idle property, plant and equipment write-off (171) (84) Gains/(loss) on disposal of non-current assets (430) 359 Gains/(loss) on available-for-sale investments 1,407 967 Financial fx gain/(loss) - net (390) 749 Interest expense (2,066) (1,984) Other financial income/(loss) - net 135 193 Non-controlling interest 55 (36) Income tax expense (4,959) (2,629) Net profit 20,052 11,075

10

2010 Net Profit

Reconciliation of EBITDA to Net Profit, RUBm

Gain on disposal of subsidiary was reversed in 2010 Gains on sale of K+S shares Mainly due to RUB/USD exchange rate volatility

11

Business Segments: Nitrogen (1)

 Total nitrogen segment sales volumes up 5%  Volumes, pricing and mix improvement provided for a 19%

increase in revenues

 Rising gas costs partially mitigated by improved efficiency

Revenue*, RUBbn EBITDA margin Comment and key numbers

Nitrogen segment includes nitrogen fertilizers and organic synthesis products.

4Q 10 3Q 10 FY 2010 FY2009 Change 10/09 Revenue* RUBm 14,315 9,882 47,222 39,577 +19% Sales volumes*

• Urea

KMT 525 354 1,709 1,512 +13%

• AN

KMT 457 375 1,710 1,830

• 7%
• UAN

KMT 217 117 680 665 +2%

• CAN

KMT 61 28 140 16 +760%

• NPK

KMT 107 99 456 341 +33%

• Ammonia

KMT 85 133 521 643

• 19%
• Organic

Synthesis KMT 107 103 455 369 +23% EBITDA RUBm 5,324 1,680 13,569 9,314 +46%

*Revenue and sales volumes include sales to other segments

29% 24% 43% 37% 17% 26% 31% 19% 2010 2009 2008 4Q10 3Q10 2Q10 1Q10 4Q09 47,2 39,6 55,9 14,3 9,9 11,0 12,1 10,3 2010 2009 2008 4Q 10 3Q 10 2Q 10 1Q 10 4Q 09

12

Business Segments: Nitrogen (2)

Price chart Sales by product* (2010) Sales by region* (2010) Price chart

Russia and CIS 36% (+8) Asia 10% (-9) Europe 22% (+2) Latin America 15% (-3) North America 12% (+3) Africa 4% (-1) Australasia 1% (-) Urea 31% (+1) Ammonium Nitrate 23% (-2) UAN 9% (-) Complex 9% (-) Ammonia 9% (-2) Other 9% (+1) Acetic Acid 4% (-1) Methanol 6% (+1)

*including sales to other segments

(in brackets – change in percentage points relative to 2009) (in brackets – change in percentage points relative to 2009)

200 400 600 800 1 000 01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 07/10 09/10 11/10 US$ per tonne Prilled urea (FOB Yuzhniy) Ammonia (FOB Yuzhniy) Ammonium Nitrate (FOB Black Sea) UAN (FOB Black Sea) 200 400 600 800 1000 1200 01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 07/10 09/10 11/10 US$ per tonne Acetic Acid, Spot FD Methanol Spot FOB

4Q10 3Q10 FY 2010 FY 2009 Change 10/09 Revenue* RUBm 12,782 13,871 48,502 31,124 +56% Sales volumes*

• DAP, MAP

KMT 379 534 1,849 1,668 +11%

• DFP, MCP

KMT 64 65 236 163 +45%

• NP

KMT 9 24 87 52 +67%

• NPK

KMT 2 15 23 18 +31%

• Apatite

KMT 52 51 219 215 +2%

• Iron ore

KMT 1,579 1,549 6,116 5,579 +10%

• Baddeleyite

KMT 3 1 8 5 +44% EBITDA RUBm 5,081 5,003 16,792 4,427 +279%

13

Business Segments: Phosphate (1)

Comment and key numbers

 P fertilizer prices and volumes recovered strongly on increased

demand and supply shortages

 Non-fertilizer related mining products contributed RUB 16.3bn

(32%) to Phosphate segment revenues and RUB 7.6bn (45%) to EBITDA

Revenue*, RUBbn EBITDA margin

*Revenue and sales volumes include sales to other segments Phosphate segment includes iron ore and baddeleyite, byproducts of apatite production at Kovdorskiy GOK mine.

48,5 31,1 52,0 12,8 13,9 12,6 9,2 7,2 2010 2009 2008 4Q 10 3Q 10 2Q 10 1Q 10 4Q 09 35% 14% 39% 40% 36% 39% 19% 15% 2010 2009 2008 4Q 10 3Q 10 2Q 10 1Q 10 4Q 09

14

Business Segments: Phosphate (2)

Sales by product* (2010) Sales by region* (2010) Price chart Price chart

*including sales to other segments

(in brackets – change in percentage points relative to 2009) (in brackets – change in percentage points relative to 2009)

MAP, DAP 53% (-4) Iron ore 32% (+6) Feed 6% (+1) Apatite 2% (-1) NP, NPK 2% (-) Other 5% (-)

50 100 150 200 250 01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 07/10 09/10 11/10 US$ per tonne

Iron Ore

Iron Ore (CIF China) 200 400 600 800 1 000 1 200 1 400 01/08 03/08 05/08 07/08 09/08 11/08 01/09 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 07/10 09/10 11/10 US$ per tonne MAP (FOB Baltic Sea) DAP (FOB Baltics)

FY 2010 FY 2009 Change 10/09 Revenue RUBm

28,499

20,484

39%

• Distribution RUBm

8,544

5,395

58%

• Others

RUBm

19,955

15,089

32%

EBITDA RUBm

264

2,821

• 91%

15

Business Segments: Others

Revenue and EBITDA, other segments Retail distribution network in Russia and Ukraine Including logistic and other services rendered to other segments and third parties, third party product sales etc*

*Consists mostly of intra-group items, eliminated on consolidation.

16

Capital Expenditure



Nitrogen:

• 1. Construction of melamine production along with the revamp
• f urea shop at Nevinnomyssk
• 2. Final stages of construction of new granulated urea facility

with 1.15 KMT per day capacity at Novomoskovsk (Urea 4 shop)

• 3. Technical rehabilitation of plants to increase efficiency



Phosphate:

• 1. Rebuild sulphuric acid production with capacity increase by

720 KMT p.a.

• 2. Reconstruction of phosphate acid production with capacity

increase by 300 KMT p.a. / potential construction of 6 MW turbine

• 3. Technical rehabilitation and modernization of existing

facilities, including installation of heat recapture systems



Potash:

• 1. Active shaft sinking at the Gremyachinskoe and the start of

preparatory shaft works at Verkhnekamskoye deposit

• 2. Detailed engineering of the surface complex, industrial and

social infrastructure construction at Gremyachinskoye deposit



Other: Investments in Tuapse and Ust-Luga bulk terminals

Main Projects – 2010

5,25 6,79 7,01 4,94 2,65 2,98 6,97 6,40 8,05 3,31 2,85 0,78

5 10 15 20 25 2010 2009 2008 RUB bn Nitrogen Phosphate Potash Other

17

FY 2010 FY 2009 Change 10/09 Gas (raw materials) 12 12,006 006 9,250 +30% Sulphur 1,499 499 1,448 +4% Other materials and components 14 14,846 846 11,191 +33% Energy 5, 5,625 625 4,620 +22% Utilities and fuel 3, 3,001 001 2,063 +45% Transportation 15 15,719 719 14,935 +5% Labour 10 10,16 163 8,666 +17% Change in WIP and FG (585) 585) 2,065 NA Other 9,471 471 8,852 +7% Total 71, 1,745 745 63 63,09 090 +14%

Costs

Includes cost of sales, distribution and G&A expenses

Cost Structure, RUBm

Increased consumption on higher production volumes and gas price increase from 1 Jan 2010: for N plants, 2010 avg price = RUB 2,837/m3; 2009 avg price – 2,553/m3. Primarily due to increase in prices for utilities / fuel and higher production Increased materials consumption on higher production volumes Indexation of salaries and higher bonus accruals on stronger corporate performance

18

Debt

* Excluding transaction fees ** Including current portion of restricted cash *** In December 2008 US$ 10m of Eurobonds were redeemed

Comment Key debt metrics, RUBm Debt maturity profile, US$m

2010 Syndicated loan (PXF) 23,389 Eurobonds 8,838 Ruble bonds 10,000 ECA-backed facilities 2,212 Gross debt* 44,439 Less cash and cash equivalents** 8,934 Net debt 33,893

 Comfortable debt structure and maturity profile, remote

refinancing risk

 US$ 1.5bn 4-year pre-export, LIBOR + 1.8% (as at

31.12.10 US$ 767m outstanding)

 EuroBonds: US$ 300m*** issued in March 2007, 5

years bullet, coupon 7.88%

 Since March 2010:  US$ 261m, 10-year, ECA-backed (ECIC) line  2 x RUB 5bn, 5-year RUB bonds (series 02, 03)  EUR 36.7m, 13-year, ECA-backed (EGAP) line  US$ 250m, 5-year bi-lateral credit line  New debt financing opportunities:  RUB or US$ bonds  bi-lateral credit lines  margin loans (secured by K+S shares)  new pre-export facility (secured by phosphate

business flows)

 new ECA-backed facilities

100 200 300 400 500 600 700 2011 2012 2013 2014 2015 PXF Eurobonds Rouble bonds ECA

419 639 9 9 337 US$m

19

Outlook

 Strength in agricultural commodities to support fertilizers at levels above average-through-the-

cycle in the near term

 Delays in additional capacity keeping markets tight  Iron ore prices remain stronger than previously expected on continued China strength  Consolidation in the industry, on balance, supports industry margins  2011 average fertilizer prices to be materially higher than in 2010

20

Questions & Answers

ir@eurochem.ru www.eurochem.ru