OREANDA-NEWS  On 25 November Uralkali announced that the company’s financial performance in 2008 as well as its production plans for 2009 might be seriously affected by the current adverse situation in the global financial markets.

The turmoil in the global financial markets, that has impacted all areas of the commodities sector, including agriculture, has triggered a drop in demand for crops, thereby hindering farmers’ capacity to purchase planned volumes of fertilizers. As a result, demand for potash has decreased in some markets. Weakened demand for fertilizers has already prompted the company’s decision to cut production in November and December by 50%. Overall, this will result in 10% reduction in annual output, and will affect Uralkali’s financial performance. The company expects that the 500 000 tonnes decline in production in Q4 2008 will result in a decrease in the company’s cash revenues by 650 million dollars. Hence, the company’s cash on the balance sheet for the end of 2008 is expected to be around 300 million dollars with debt of 470 million dollars in loans.

We remain of the view that the unfavorable market situation is likely to continue through early 2009, and the company’s production will be curtailed as a result. The company is currently unable to give firm guidance for utilizing its production facilities in 2009 and will inform its investors and the public about its decisions as the situation becomes clearer.

In order to tackle the risks produced by the current unfavorable market situation, the company has designed a turnaround programme that includes intensified repairing of its production facilities, canceling overtime work and optimization of employees’ schedules, suspension of the bonus plan and a reduction in various expenses. All measures taken will be implemented in strict accordance with labor contracts and Russian labor regulations and will not affect the majority of the company’s social programmes.