Phosagro Cuts Spending Program on Weaker Ruble

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OAO Phosagro, Europe’s largest phosphate-fertilizer producer, cut its spending forecast by 7.5 percent after benefiting from a weaker ruble and dropping a project.

Capital expenditure will be $990 million from 2015 through 2017, compared with a November estimate of $1.07 billion, Chief Executive Officer Andrey Guryev said in an interview in Moscow.

The ruble slid almost 46 percent in 2014 as oil prices sank and U.S. and European sanctions against Russia began to bite. A falling currency helps exporters such as Phosagro as they amass income in dollars or euros and spend mostly in rubles.

The company abandoned a project to build a new production line for nitrogen, phosphorous and potash fertilizers in Cherepovets in Vologda region, deciding to expand the output at its existing units instead, Guryev said last week. Phosagro also approved a new dividend policy after the ruble’s decline. The board agreed last month to pay out 30 percent to 50 percent of available net income, up from 20 percent to 40 percent.

Phosagro approved its budget for this year at an exchange rate of 60 rubles to the dollar, according to Guryev, who said the strengthening of the Russian currency this year isn’t justified because it doesn’t correlate with movements in oil.

The company froze prices in February and March as Russian farmers hurt by the ruble’s plunge sought government support. Phosagro’s prices for local customers have been linked to world markets since May, Guryev said. It’s interested in selling more and would sell all of its output in Russia “with pleasure.”

An increase in local sales is possible if a government plan to support agriculture comes into force, he said. Russian sales made up about 41 percent of the company’s revenue last year.

Phosagro will cut debt by 20 billion rubles ($390 million) this year as it pays back short-term loans from 2013 and 2014. It has no plans to buy back Eurobonds or sell new public debt.

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