Russian fertiliser major Uralkali plans to delist in Moscow

By bne IntelliNews November 8, 2017

Russia's potash major Uralkali has decided to delist from the Moscow Exchange and sell another 10% stake to fertiliser peer Uralchem, the company said on November 8.

After delisting in London in 2015, Uralkali has been spending money on a share buyback, cutting the free-float in Moscow from 28% to little over 5%, causing common shares to be downgraded to Level 3 quotation list and raising net debt to $5.5bn.

The buyout program was undermined Uralkali's performance according to analysts and led to downgrades by Fitch Ratings and Moody's Investors Service, as well as inflating the quasi-treasury stock to 54.77% creating governance risks.

A 20% stake in Uralkali belongs to Uralchem fertiliser major controlled by Dmitri Mazepin, and another 20% to Belarusian businessman Dmitri Lobyak, who reportedly acquired it from Oneksim Group of tycoon Mikhail Prokhorov.

Since mid-2015, global potash prices have fallen and sector competition in Russia has risen amid uncertainty over the future governance structure of Uralkali under Uralchem, the investment case further underminded by LSE delisting and a series of costly buybacks.

Now the company will place more preferred stock to existing shareholders to cut debt, and will not pay any dividends in 2017, according to the latest announcements.

As of end of June 2017 debt burden of Uralkali stood at 4.43x Ebitda at net debt of $5.5bn, slightly below 4.67x leverage in the beginning of 2017.

Fitch Ratings previously said that even in the periods of weak prices Urakali showed ability to service its debt and could bring the leverage to below 4x Ebtda by the first half of 2018.

Finally delivering some good news, in July Uralkali closed the first long-term supplies deal this year with a consortium of Chinese buyers, beating its Belarus rival Belaruskali on the Chinese market for the first time in two years and possibly extending the gains to India.

Two years ago, Uralkali shook the market as it withdrew from the Belarusian Potash Company (BPC), the joint export cartel with Belaruskali that had a 'price over volume' export strategy.

While Uralkali's decision sent global potash prices plummeting, the Russian company argued that it had been forced to quit because the Belarusian side was allegedly negotiating sales outside the cartel.

In response, Belarusian authorities accused Uralkali of attempting to undermine the country's potash industry. Uralkali's chief executive Vladislav Baumgertner was arrested in Minsk after travelling to the capital at the invitation of the Belarusian prime minister. After Kerimov agreed to sell his stake in Uralkali, Baumgertner was allowed to return to Moscow. Consequently Kerimov's stake was sold to Uralchem.


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