Building on success
Against the backdrop of a growing global population, the pressure on arable land to produce increasing quantities of food is greater than ever. Fertilizers are essential to help satisfy this increasing demand and, as a leading global producer, our products play a vital part in helping farmers around the world improve their crop yields.
We reflect on the Group’s achievements in 2015 with particular satisfaction – and look forward to an exciting future.
Last year we experienced falling commodity prices and short-term economic uncertainty across most of our markets. This uncertainty was mitigated for us by EuroChem’s vertically integrated model with support from favorable currency shifts. Our margins remained healthy and we continued to invest in our operations.
“We have achieved much over the past 15 years, promoting best practices – both within the Group and in farming as a whole. While it is gratifying to reflect on how far we’ve come, we continually seek to refine our offering to address the challenge of sustainable practices.” Alexander Landia – Chairman
Our vertically integrated model
The economic turmoil of 2015 highlighted the resilience of our business model, underpinned by a substantial reserves base and low-cost production, which enables us to create value along the entire production chain. The quality of our resources, our state-of-the-art facilities and technologies, sophisticated global logistics and the skill and expertise of our people are the foundations of our model’s success.
Control of upstream resources takes us closer to self-sufficiency and enhances our global competitiveness. We know well the importance of securing access to low-cost raw materials and were proud to complete our first intra-group shipment of phosphate rock from Kazakhstan this year. At the opposite end of the chain, we acquired a distributor in the US to enhance our reach in this key agricultural market.
Investing for growth
Our roots are what ultimately make us sustainable. We are proud of the value EuroChem has built – and continues to create – through investment in production capacity, efficiency and crucially, innovation. In the last ten years alone we invested a total of US$7.3 billion in the Group. This decade of investment has given us a solid platform for further growth. As part of our strategy to improve our level of self-sufficiency through greater control over our raw material base, we made good progress with our two potash projects in Russia in the Perm and Volgograd regions. These are on schedule for start-up in 2017-18.
As a prime investment location for fertilizer plants, Russia is a very attractive proposition and we commenced construction of a high-tech ammonia plant in Kingisepp, due for completion at the end of 2018 by Maire Tecnimont. The project showcases the continued support from our banking relationships and Italy’s export credit agency SACE, which together helped deliver a landmark facility for the Group with EUR 557 million of project finance.
In addition to investing in our raw materials capacity, we continue to enhance our position at the heart of the evolving fertilizer industry. In January 2016 we announced equity investment and marketing, distribution, sales and R&D collaborations with Agrinos, a global leader in biological crop nutrition products. These actions will help us expand our portfolio with innovative specialty products and environmentally friendly crop-enhancing solutions. This is our first foray into advanced scientific applications and indicative of the way forward for EuroChem as we evolve in line with our customers’ requirements.
Corporate structure and governance
Our new corporate structure is our springboard to future growth and this is the first time we are reporting a full 12 months as EuroChem Group AG, following the establishment of the Swiss holding company in summer 2014.
The reorganization was designed to allow the business to grow globally, with a view to ensuring that our investments in Russia – which are perhaps the largest industrial investments outside of the oil and gas space – remain sustainable over the long term. While EuroChem’s international workforce now comprises of 23,407 people, of whom over 1,600 are within the EU, we remain proud of our origins – and of the importance of our activities to many of the regions in which we operate. This is especially true in certain Russian towns and cities, where many of our assets – acquired over the years – form the economic backbone of entire regions, with generations of families having contributed to EuroChem’s success today. Our global aspirations, underpinned by our dynamic growth and ambitious strategy, cemented our ability to attract and retain top talent as we moved our headquarters to Switzerland. The internationalization of the Group and our quest for global expertise is well reflected in the more than 34 nationalities working within EuroChem.
Our Board is now constituted in line with Swiss law. While there were no changes to its composition, Nicholas Page joined the Audit Committee at the end of the year. We are fortunate to have such a depth of extensive industry expertise and international experience in our Boardroom. I extend my thanks to my fellow Directors for their wise counsel in a busy year – and to our senior management team for their hard work.
Building a sustainable business
We have achieved a lot over the past 15 years, promoting best practices – both within the Group and in farming as a whole. While it is gratifying to reflect on how far we’ve come, we continually seek to refine our offering to address the challenge of sustainable practices. During the year we continued to invest in our people and the development of a pipeline of emerging talent within EuroChem. We are also committed to embedding sustainable practices across all aspects of our business, whether through recycling, waste and emissions reduction or enhanced energy efficiency.
With support from best-in-class advisors, we continued our implementation of new systems and behaviors throughout EuroChem and will extend this activity across the business in the coming year. In 2015, EuroChem’s Integrated Management System was recertified in accordance with ISO9001 (Quality), OHSAS 18001 (Health & Safety) and ISO 14001 (Environment) requirements, which encapsulates our commitment to ensuring continual QHSE performance improvement.
These steps – and our ongoing efforts to implement safe working practices – help drive us closer to our stated ambition of becoming a safety exemplar. It was therefore deeply regrettable that we experienced three fatalities in 2015. This distressing loss of life only reinforces our determination to create a safe working environment for all our people.
To ensure our strategic goals are achieved, we have begun implementing a Quality Management Project, which will transform management procedures and decisions into agile and best-in-class processes, supported by proprietary IT systems.
Fertilizers have a key part to play in the development of sustainable agricultural practices. At EuroChem we take a holistic view – both of our own business and of the role we play at a global level. Regardless of economic volatility and the vagaries of the sector, our simple mission remains to help farmers increase production and productivity. The combination of our prized Russian asset base and our international growth ambitions mean we are well placed to rise to this challenge in the years ahead.