Accelerating growth momentum
“Our strategy and investments place EuroChem among the global leaders in our industry. We’re now embarking on a period of profound change, with the start of potash production poised to accelerate our growth.” Alexander Landia – Chairman of the EuroChem Group AG Board
We can reflect on 2017 with pride: as the year when all the pieces came together ahead of the Group’s transformational leap.
Our potash sites ended the year with several thousand tonnes of ore in storage. This ore, raised from deep underground, is the result of an endeavour that commenced nearly a decade ago. As this report goes to press, the potash ore is being beneficiated into muriate of potash (MOP). It will undergo further value-added transformation at the Group’s production sites – and then journey onward through our distribution network to global markets.
Over the last two years, as the start of potash mining approached, we took the necessary steps to prepare for our growing fertilizer output. This involved securing a robust presence across key markets, as well as developing a foothold in regions where we see considerable growth potential. In 2017, we bolstered our extensive on-the-ground presence with several acquisitions. These have significantly enhanced our distribution capabilities, ensuring our system can efficiently bring the Group’s potash production to market as it increases to more than eight million tonnes per year by 2025.
Our expectations of sustained demand growth in Latin America prompted the Board to approve further expansion in the world’s new bread basket. The acquisition of Emerger Fertilizantes, an Argentinian fertilizer distributor, followed our successful integration of Fertilizantes Tocantins in Brazil, and will provide a wider range of value-added fertilizers to our customers in Argentina – as well as Bolivia, Paraguay and Uruguay.
We also reinforced the Group’s position in Europe, one of its key home markets. In addition to the launch of EuroChem Agro Bulgaria, which brings together the assets of Agricola Bulgaria, acquired in March 2017, the Board approved the acquisition of a stake in Hispalense de Liquidos, a producer of liquid NPK blends located in southern Spain.
As the global population grows, so does pressure on farmers to produce more crops, more efficiently from less land and with a reduced environmental impact. A key pillar of EuroChem’s strategy centers on investments in innovative agricultural technologies, which we see as intrinsically linked to unlocking yield growth.
Our in-house R&D efforts continued to focus on creating the next generation of fertilizers. These are efficient and safe to produce, require less water to be effective and emit fewer greenhouse gases when used. Our development successes have greatly expanded the Group’s portfolio, adding several lines of enhanced-efficiency products offering controlled nutrient release, while reducing waste and run-off. To complement our premium product ranges, we launched a new line of water-soluble fertilizers. We also expanded our research into biostimulants to help improve the soil-root interface, with encouraging results validating our approach.
On a much more sombre note, I speak for all – and to all – our 25,700 employees in recognising the need to substantially improve our safety record. Yes, we have been growing at great pace, simultaneously managing several major industrial and mining construction sites, but we must be able to guarantee a safe work environment to all our employees and colleagues. Urgent steps have been taken to further drive accountability and ensure additional safety training acrossall our units. The nature and scale of our activities demands nothing less than a robust, embedded safety culture – and we will pursue this ever more vigorously in the light of this year’s experience.
During the year, the Board expanded its oversight of strategy, project management and risk mitigation, which included changes to the leadership structure. Our focus for the year ahead is to manage our potash sites as they transition from construction projects to operational assets. In parallel, we developed and implemented risk management systems and operational strategies to ensure these investments deliver adequate returns and lasting value. This also meant restructuring the executive team to align the talent and skills required for our new business profile.
The Board approved the creation of several new functions to reflect EuroChem’s widening global reach and market-driven approach. In October 2017, we were delighted that Dmitry Strashnov joined us as the Group’s first Chief Operating Officer. Dmitry previously held several senior executive roles within the Philips Group of companies, at Tele2 Russia and more recently as CEO of Russian Post. His extensive skills and experience will be a considerable asset to EuroChem as we grow.
With ore mining underway at both potash sites, including at a virgin deposit over 1,000 metres below ground, Clark Bailey, the chief architect of our potash mining efforts, moved to a mining development role from January 2018, with Evgeny Kotlyar taking over the Mining Division. A veteran of the Berezniki potash landscape, Evgeny’s impressive credentials, including his latest role as Head of Production, Chief Engineer and Chief Technical Officer at Uralkali, will serve the Group well as potash production begins. The Board is grateful to Clark for his significant contribution, and looks forward to working with him in his new role.
The Board’s composition also evolved in 2017. We welcomed Kuzma Marchuk as a non-executive Director in March and Kent Potter, Chairman of the Audit Committee, retired in September 2017. We thank Kent for his contribution to Group over the last three years and wish him well.
Highlighting our growth path, over 1,000 new employees joined EuroChem in 2017. As the year’s milestones have shown, and our upcoming growth phase indicates, we are fortunate to have such a talented and committed team. I thank all our employees for their contribution over this period of considerable change. Their sustained efforts and dedication allow us to look forward with excitement and confidence.