INTEGRATED REPORT 2016
Key Performance Indicators
Despite the unfavourable situation on global markets, Uralkali managed to maintain its leading position in the industry. In 2016, the Company produced 10.8 million tonnes and sold 11.0 million tonnes of potash. Due to a sharp drop in potash prices and a slight decrease in sales, the Company’s net revenue for the year decreased by 30% to US$1.85 billion.
Maintain industry leadership positions
mln
Relevance to the strategy
Net revenue is the key financial metric that measures the success of the revenue maximisation strategy. We use net revenue to eliminate the effect of trading operations and transportation costs in order to provide for better cross-industry comparison.
Measurement
Net revenue represents revenue net of freight, railway tariff and transshipment costs.
Performance overview
Net revenue decreased in 2016 due to falling prices for potash fertilisers, caused by a decline in global demand.
tonnes/person
Relevance to the strategy
Output per capita (production personnel) measures manpower productivity and how efficiently we can produce our product.
Measurement
Potash output divided by average production personnel headcount.
Performance overview
The unfavourable situation on the world market for potash fertilisers and the subsequent decrease in production slightly influenced this indicator.
Focus on enhanced relationships with end customers
mln tonnes of KCl
Relevance to the strategy
Achieved production shows the volume of products that the Company produced based on the market conditions and the current strategy.
Measurement
The amount of potash produced within the period.
Performance overview
In 2016, the Company continued to implement its renewed capacity development programme. However, due to the decline in global potash demand in the first half of 2016 and the resulting drop in prices, the Company showed a 5% decrease in production compared to 2015.
mln tonnes of KCl
Relevance to the strategy
Sales volume is one of the indicators representing the efficiency of our logistics, trading performance and route to market.
Measurement
The amount of potash sold within the period.
Performance overview
Despite adverse market conditions, the Company sold 0.2 million tonnes more potash fertilisers than it produced during the reporting period, which indicates Uralkali’s success in optimising inventories.
Maintain cash cost leadership positions
per tonne
Relevance to the strategy
Cash cost of goods sold (COGS) per tonne measures our competitive cost position in the industry.
Measurement
COGS less depreciation and amortisation per tonne.
Performance overview
In 2016, our cash costs increased to US$35 per tonne. The main reason for this increase in COGS per tonne were larger cost of materials and energy resources as well as payroll indexation.
mln
Relevance to the strategy
Sustenance CAPEX measures how efficiently we can sustain our assets post commissioning.
Measurement
Capital expenditures aimed at maintaining the current production facilities in sound technical condition.
Performance overview
To improve financial performance, the Company optimised its maintenance CAPEX in 2016.
Relevance to the strategy
The EBITDA margin demonstrates our pricing success, cost efficiency, advantages of being a pure-potash producer, and reflects the attractive fundamentals of our business.
Measurement
Adjusted EBITDA divided by Net Revenue. Adjusted EBITDA is Operating Profit plus depreciation and amortisation and does not include one-off expenses. Net Revenue is revenue less railway tariff, freight and transshipment.
Performance overview
The EBITDA margin in 2016 fell from 72% to 64%, mainly due to a significant decrease in the potash price.
Balance investment in growth with shareholder returns
Relevance to the strategy
Net debt/LTM EBITDA measures how robust our capital structure is and how we manage our balance sheet.
Measurement
Net debt = Debt (including bank loans and bonds) less cash and deposits.
Performance overview
The rise in the Net debt/EBITDA ratio was caused by a decrease in EBITDA due to adverse market conditions in 2016 and the growth of net debt.
mln
Relevance to the strategy
Expansion CAPEX reflects how efficiently we bring new potash capacity on line.
Measurement
Capital expenditures attributable to the expansion programme.
Performance overview
In 2016, we continued to implement our expansion programme. Our expansion CAPEX in 2016 was in line with the anticipated budget. An expansion of capacity may also be influenced by equipment upgrades, and so sustaining investments totalled US$120 mln in 2016.
Focus on people, communities, safety and environment
FREQUENCY RATE (FIFR)
FIFRs
Relevance to the strategy
FIFR is the core indicator of responsible health and safety management. It is central to our focus on operational excellence
Measurement
FIFR is calculated based on the number of fatalities per 200,000 hours worked.
Performance overview
In 2016, PJSC Uralkali, its subsidiaries and affiliates did not record any fatalities.
FREQUENCY RATE (LTIFR)
LTIFR
Relevance to the strategy
LTIFR reflects work-related injury frequency. The rate helps us to measure the efficiency of our health and safety initiatives and controls across our operations.
Measurement
LTIFR is calculated based on the number of lost time injuries per 200,000 hours worked.
Performance overview
The LTIFR rate has been consistently declining following the implementation of the Cardinal Rules in 2012.
mln
Relevance to the strategy
Social investments demonstrate and reflect the Company’s important role in the community in which we operate.
Measurement
Total amount of social expenditures including charity, support of infrastructure and sport.
Performance overview
In 2016, Uralkali continued to support sport activities, donate to charity and contribute to the development of the region where we operate. Significant decrease of this indicator in comparison to the previous year occurs due to completion of the relocation programme which ended in 2015.
TURNOVER
Relevance to the strategy
Labour turnover represents the ability to retain our people, which is key to the Company’s strategy to be positioned as an employer of choice.
Measurement
Turnover is the number of permanent employee resignations as a percentage of total employees (excl. transfer to another employer).
Performance overview
In 2016, labour turnover increased mainly in subsidiaries of Uralkali Group due to organisational and structural changes, including optimisation of functions in these companies.
Relevance to the strategy
Average annual wages per employee in the main production unit measures how competitive we are in the market in relation to attracting and retaining the best people.
Measurement
The annual payroll is divided by the average number of employees in the main production unit, excluding top managers and the Moscow office.
Performance overview
In 2016, average annual wages denominated in US dollars remained virtually unchanged, despite the strengthening of the rouble against the US dollar. Uralkali constantly monitors salary rates and pays the utmost attention to retaining people through ensuring its salary levels remain attractive.
kWh/t*
Relevance to the strategy
Energy utilisation as a result of a number of mitigating actions demonstrates how the Company responds to climate change.
Measurement
Energy consumed (electricity) per tonne of production for industrial needs.
Performance overview
Lower production volumes and energy efficiency programmes resulted in a slight increase in energy consumption per tonne in 2016.
Continued focus on corporate governance
MAINTENANCE
- 2016: Stable credit outlook maintained.
- 2015: Stable credit outlook maintained.
- 2014: Investment-grade ratings maintained.
- 2012, 2013: Investment-grade ratings received and maintained.
Relevance to the strategy
Investment-grade ratings acknowledge that Uralkali is a firstclass borrower with strong industry position, balanced financial policy, prudent risk management, and adherence to leading corporate governance standards.
Measurement
Type of ratings assigned to the Company by three rating agencies: Fitch, Moody’s and Standard & Poor’s.
Performance overview
As of 31 December 2016, all three agencies retained Uralkali’s investment-grade ratings, given the Company’s strong fundamentals. On 12 April, S&P changed the outlook for PJSC Uralkali from stable to negative due to a significant deterioration in the fertiliser market over the previous six months and expectations that prices for NPK fertilisers would remain well below 2015 levels for several years. On 30 September, Fitch changed the outlook for PJSC Uralkali’s securities from stable to negative, which reflected the Company’s high leverage above the expected level.
NOT NEGATIVELY CITED BY RATING AGENCIES / REGULATORS
- 2016: Uralkali continued to pursue a consistent policy of enhancing its corporate governance and information transparency. No claims made by regulators.
- 2015: Uralkali continued to pursue a consistent policy of enhancing its corporate governance and information transparency. No claims made by regulators.
- 2014: Uralkali continued to pursue a consistent policy of enhancing its corporate governance and information transparency. No claims made by regulators.
- 2013: The Company pursued a consistent policy of enhancing its corporate governance and information transparency. This included improving the information uploaded to its website and the quality of public reporting. No claims made by regulators.
Relevance to the strategy
The corporate governance system, based on the best international standards, is the backbone of shareholders’ trust.
Measurement
Any defects in the Company’s corporate governance, transparency, disclosure or ethical standards, practices or procedures cited by any rating agency or regulator with jurisdiction over the Company’s securities as a reason for an adverse decision with respect to the Company.
Performance overview
Corporate governance continued to be one of the top priorities for the Company in 2016. The decision-making process in the Company is strictly in line with legal and regulatory requirements and in full accordance with the best international corporate governance practices.