In line with an Acron press-release and pursuant to the Agreement on Cooperation for the Purpose of Satisfying Russian Agricultural Producers’ Needs in Mineral Fertilizers in 2008-1009, signed between the Russian Union of Fertilizer Manufacturers and the Agricultural Union, Acron Group has established an overall price level for mineral fertilizers for domestic agricultural producers.
Until late 2008, the maximum price levels for mineral fertilizers will be fixed at their current levels and amount to RUB 3,122 or USD 114 per ton for ammonia nitrate, RUB 5,202 or USD 190 for carbamide, and RUB 8,130 or USD 296 per ton for NPK 16:16:16. Meanwhile, mineral fertilizer prices have gone down in 4Q 2008 against the backdrop of slackening demand in the wake of the global financial crisis. Thus, by the end of the year, price levels should fall by 48% compared to September 2008 for ammonia nitrate, 30% for carbamide and 25% for NPK.
In 1H 2009, the overall price level per ton of ammonia nitrate should rise by 60% to RUB 5,000; the price level for carbamide should grow by 48% to RUB 7,700, while that for NPK fertilizers should advance by 25% to RUB 10,200 per ton. Prices are expected to grow due to an expected upturn in the cost of raw materials and an increase in other expenses.
In general, this news is moderately positive for Acron. In view of the ongoing financial crisis and slackening demand, the company has had to reduce its price levels; however, this outcome was generally anticipated. In early 2009, prices should return to their previous levels, which should help Acron restore its revenues. In addition, thanks to the company’s predictable and proper pricing policy on the domestic market, which has been coordinated with the government, we may expect Russian fertilizer producers, Acron in particular, to successfully lobby for the cancellation of export duties on mineral fertilizers in the future.
We currently do not have an official recommendation for Acron (RTS: AKRN).
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