On September 1 Uralkali released its 1H 2008 financials calculated to IFRS. The statement says revenue soared by 133.7% y-o-y in dollar terms to USD 1,194.1 million. The operating profit jumped by 267.5% to USD 714.5 million and EBITDA leapt by 229.6% to USD 764.8 million. The operating margin widened to 59.8% and the EBITDA margin increased to 64%. The net profit amounted to USD 576.8 million, surging by 3.9x y-o-y, with the net margin at 48.3%.
Table 1. Uralkali: basic 1H 2008 financials to IFRS, USD mn
| Indicator | 1H2007 | 1H2008 | 1H2008/1H2007 |
|---|
| Revenue | 511.0 | 1 194.1 | 133.7% |
| Cost of production | 119.6 | 193.8 | 62.0% |
| Gross profit | 391.4 | 1 000.3 | 155.6% |
| Gross margin | 76.6% | 83.8% | +7.2% |
| Commercial expenses | 144.2 | 219.1 | 51.9% |
| General and administrative expenses | 39.5 | 52.8 | 33.7% |
| Operating profit | 194.4 | 714.5 | 267.5% |
| Operating margin | 38.0% | 59.8% | +21.8% |
| EBITDA | 232.1 | 764.8 | 229.6% |
| EBITDA margin | 45.4% | 64.0% | +18.6% |
| Net profit | 146.7 | 576.8 | 293.2% |
| Net margin | 28.7% | 48.3% | +19.6% |
Source: company data, Finam estimates
The company cited higher sales volumes and a strong pricing environment on its domestic and external markets as reason for the growth in its financial indices. Potash fertilizer sales expanded by 8% to 2.643 million tons, with domestic sales rising by 35% to 294,000 tons, sales in developed countries surging by 4x to 699,000 tons, and sales in developing countries picking up by 20% to 1.65 million tons. The price of potash fertilizer has doubled, with the price for buyers in developed countries jumping by 2.7x and that for domestic consumers increasing by 20%.
We are upbeat about the 1H 2008 financials reported by Uralkali, which outpaced expectations. We expect the company to demonstrate even stronger financial results in the second half of the year, as its new contracts come into play, including those on spot markets at USD 1,000 per ton.
The robust financial results should lend support to the company’s stock valuations in the mid term.
Investors are advised to BUY Uralkali shares (RTS: URKA), with a target price for the shares at USD 18.5 per share.
0.569
0.073
