Russian Prime Minister Vladimir Putin held a meeting on Sunday at Acron’s Novgorod facility. The meeting, which focused on opportunities and problems in the mineral fertiliser industry, was attended by Igor Sechin, deputy prime minister, Sergey Mitin, governor of the Novgorod region, Denis Manturov, deputy minister of industry and trade, and Acron’s management.
Manturov stressed in his report that the global financial crisis has triggered a decrease in mineral fertiliser output and brought global prices down to 2006 levels. Among measures to support the industry, Manturov favoured state subsidies to local farmers to boost domestic consumption of mineral fertilisers.
On the topic of securing raw materials supplies for fertiliser producers, the Russian Ministry of Industry and Trade envisions using state-owned facilities, assets, stakes or subsoil and production licenses to establish integrated companies. Manturov noted that Acron has already voiced a similar initiative, and said that the ministry will soon draw up specific proposals for the plan. The deputy minister also said that his ministry is trying to help producers reach consensus with raw materials suppliers and achieve long-term contracts. He pledged his assistance in developing the price formula for such contracts.
Manturov suggested lifting export duties on mineral fertilisers as an emergency measure to help Russian producers maintain their competitive edge.
Prime Minister Putin said that the government must support domestic manufactures and is committed to doing so, but warned that the interests of all industries should be balanced. Fertiliser producers have fairly high margins because they buy raw materials at domestic prices. Because this segment of Russian industry does not operate under free market rules, other segments of the economy, specifically agriculture, have the right to claim a certain degree of protection.
The prime minister’s address was followed by Acron management reports. Alexander Popov, who chairs Acron’s board of directors, stressed that today Acron is truly a global company, both in terms of its output and its corporate governance standards. The company’s strategy is to enhance its vertical integration, ensure its raw materials security, and provide Russian farmers with ample supplies of mineral fertilisers at prices far below global levels.
Popov mentioned that 2008 was a record year for the industry, with fertiliser prices hitting an all-time high in the middle of the year. However, later in 2008 prices for certain products fell 2.5-3 times due to the global economic downturn. Today the company’s margin is minimal; rouble depreciation is the only factor keeping Acron’s export margin at 10-15 per cent.
Acron’s CEO Ivan Antonov stated that the company has re-invested USD 1 billion in expansion since 2000, including the construction of five new facilities and acquisition of phosphate and potash licenses. Vladimir Gavrikov, Acron’s executive director, discussed the company’s achievements in the social sphere. The Novgorod plant provides excellent social benefits for its 5,300 employees, including healthcare centres, sports facilities, recreation centres and housing programs for young specialists who relocate from other cities. Acron’s robust benefits package makes it the best employer in the mineral fertiliser industry.
Acron management backed the plan to lift export duties proposed by the Ministry of Industry and Trade, as well as measures to settle disagreements between raw material suppliers and fertiliser producers.