Andrey Guryev at 31 is among the first heirs of Russia’s billionaire elite to run the family business and is seeking to make his mark.
OAO Phosagro’s Guryev, the youngest head of a major Russian mining company, is giving up on the Indian market that until recent years made up as much as a quarter of company exports.
The backdrop is a collapse in orders from farmers in India, one of the largest buyers of fertilizer, as the country tries to stave off a fiscal crisis and junk rating by cutting subsidies.
“Even if India renews fertilizer purchases this year, I think I will sell zero tons to the country,” Guryev said in an interview in Phosagro’s Moscow offices. “We prefer Europe, Brazil, Vietnam, Malaysia, the CIS and Russia more.”
The company, unlike some competitors, has the flexibility to switch to higher value products used outside India, he said.
Such decisions by the new chief executive officer herald a move into positions of power by the offspring of billionaires minted after the Soviet Union. Among them are Olga Rashnikova, on the board of her father’s OAO Magnitogorsk Iron & Steel, and Felix Evtushenkov, 35, first vice-president at his father’s AFK Sistema, owner of Russia’s largest mobile-phone operator.
“Phosagro may be one of the first examples in Russia where the owner transfers power to the heir,” said Yulia Bushueva, who helps manage about $500 million at Arbat Investment Services Ltd. in Moscow. While Guryev has been “well prepared,” there’s no guarantee heirs who reach the top at other families will be able to hold on to the positions, she said.
Not that the economics graduate hasn’t had to learn on the job. Guryev became CEO July 31, a day after the collapse of a trading venture between OAO Uralkali, the largest producer, and Belaruskali led to a slump in fertilizer prices. Phosagro lost $1 billion of its value after Uralkali quit Belarusian Potash Co., roiling a $20 billion market for the commodity.
“To be frank, we didn’t suppose that the situation with Uralkali and BPC would affect us so much as we have nothing to do with potash,” said Guryev, who studied in London before earning his PhD in economics at St. Petersburg Mining Institute.
The market’s returning to normal, with potash prices stabilizing and the phosphate and nitrogen fertilizers Phosagro produces up more than 25 percent since December, he said.
The price of diammonium phosphate fertilizer, exported from the Black Sea and Baltic regions, rose to as high as $485 a ton last week, Argus FMB Phosphates data show. It was near $350 at end-2013. Phosagro’s shares are up 15 percent this year.
For the future, Guryev says instead of working in India, it may focus on costlier products such as compound and sulfur content phosphate fertilizers that sell to premium markets.
“India sets the floor price for the global market,” he said. “It operates with long-term deals at the lowest price.”
Phosagro, Europe’s largest phosphate-fertilizer maker, may leave India to America’s Mosaic Inc. and Morocco’s OCP Group so it can focus elsewhere, said Guryev, whose billionaire father, also Andrey, began buying fertilizer assets in the late 1990s. The Guryev family now controls 67 percent of Phosagro, according to company data.
“We have very flexible production technology and can avoid having to overload markets” with the cheaper mono-ammonium and diammonium phosphate fertilizers India typically buys, he said. As recently as 2009, India made up about 10 billion rubles ($290 million) of the company’s exports, a quarter of the total.
Guryev, who worked for Phosagro from the age of 22 and as marketing chief first decided to ditch the Indian market last year, also sees a future in the business for his own offspring.
“There’s no better motivation for a CEO than being a co-owner or part of the profit distribution,” he said. “I’d love my children to work in the company when they grow up.”