Updated April 15, 2008

   OJSC EuroChem Mineral and Chemical Company (MMC) summed up the 2007 activity. According to the year results the company return has upped by 38%, and the net income has grown 2,3 times, despite the capital investments in the production have increased by 43%. Analysts forecast that in the nearest future the growth dynamics of EuroChem financial indices can deteriorate over the price growth stop for the mineral fertilizers and the beginning of the company potassium projects realization.

   EuroChem has published the 2007 reporting by International Financial Reporting Standards (IFRS). According to the reporting the company return has upped by 38%, to RUR 73,8 billion as compared to 2006, the net income – 2,3 times, to RUR 16,2 billion. In EuroChem add that in 2007 the company has brought the maximum capital investments into the production – RUR 7,7 billion, that exceeds the 2006 level by 43%. Among the main investments MMC names the opening of a new factory Kovdorsky GOK (around RUR 1,7 billion), which permitted to increase production of apatite concentrate by 25%. EuroChem financial director Nikolay Pilipenko explains such high indices by "the very favorable price situation at the mineral fertilizers market and significant growth of production volumes".

   OJSC EuroChem MMC is the largest Russian mineral fertilizers producer (around 7 million tons a year). The company comprises such enterprises as Nevinnomyssky Azot, Novomoskovsky Azot, Belorechenskie Minudobreniya, Phosphorit Industrial Group, Kovdorsky GOK and Lifosa AB located in Lithuania. Andrey Melnichenko owns 95% EuroChem stocks, and director general Dmitry Strezhnev has an option for 5% stocks.

   Previous year EuroChem has directed the majority of capital investments to Novomoskovsky Azot (RUR 2,3 billion): the aggregate for ammonia production was upgraded at the enterprise, and its production volumes had been upped by 50 000 tons a year. As Nikolay Pilipenko said, in 2007 the enterprise melamine production line was closed, while it had been declared economically inefficient. Moreover, in 2007 by $400 million were invested in development of Belorechenskie Minudobreniya and Phosphorit, which managed to breakeven for the first time due to these investments.

   But the highest expenses wait for EuroChem ahead. So, in May MMC plans to receive licenses to develop Gremyachensky potassium deposit in the Volgograd region with orders to the specified reserves volume. According to Nikolay Pilipenko, on the assumption of production volumes at 2 million tons of potassium salts a year, the project investments should total $1,5 billion. The equipment purchase and construction of the concentrating mill will start in 2010, and in 2012 a production should be put into operation. However, Mr. Pilipenko specifies, that the planned capacities and investments volume can be increased. Also in March MMC has purchased licenses for two sections in Verkhnekamsky deposit. The license envisages preparation of pre-project documents in 2011 and beginning of mine development in 2012.

   Analysts mark that the further EuroChem financial performance dynamics would depend on the prices for phosphorous and nitrogenous fertilizers. "The situation at the mineral fertilizers market is perfect, but these dynamics would deteriorate in a long-term prospect", considers Troika Dialog analyst Mikhail Stiskin. He adds that in the nearest future EuroChem capital investments would significantly grow with a view to potassium deposits development. The analyst considers the investments into Gremyachensky deposit and terms of factory putting into operation rather optimistic taking into consideration the infrastructural tasks and the depth of ore settings. Alfa Bank analyst Andrey Fedorov doubts also the project can be completed within the framework of the stated budget. According to Mr. Fedorov estimations, such mine development can cost $2,5 billion. An analyst also supposes that EuroChem has enough private funds to finance potassium projects, while the price rise for products is outrunning and MMC floating capital has edged down by 12% in 2007, and according to his opinion, it is the indicator of the efficient company activity.