Uralkali Quits London Next Month, Starts Shares Buyback

Updated on
  • GDRs likely to be delisted from London Exchange Dec. 22
  • Uralkali plans to buy 6.5% stake from market by March 31

Uralkali PJSC, the world’s largest potash producer, said its board approved a third share buyback program this year and the delisting of its stock in London next month.

The company, which also trades in Moscow, will repurchase as much as 6.5 percent of its shares from the open market by the end of March with the help of Renaissance Capital, it said in a statement Monday. A 6.5 percent stake is currently valued at about $500 million.

After spending more than $3 billion buying almost 34 percent of its stock through its units this year, the company is left with a free float of 13.9 percent. Uralkali said London trading of its global depository receipts is expected to stop on Dec. 22, while the new buyback may cut its float to a level where the Moscow Exchange may downgrade its remaining listing.

Uralkali shares jumped as much as 2.9 percent to 174 rubles, the highest in more than a month on Monday before paring gains to close up 0.6 percent in Moscow. In London, the global depository receipts fell 1.4 percent.

The board decided on the new buyback after “having considered the interest of minority shareholders,” Chief Financial Officer Anton Vishanenko said on an investor call on Monday. Management doesn’t plan to recommend a dividend payout in 2016, he said.

The company plans to keep its net debt to earnings before interests, taxes, depreciation and amortization ratio below 3 after the new buyback, Vishanenko said. Net debt rose to $5.07 billion at the end of September from $3.53 billion at the end of the first half, following the second buyback, according to Uralkali’s presentation.

Potash Market

The $20 billion world market for the potash has been plagued this year by an excess of supply, with prices in the Brazilian spot market, one of the largest, falling by more than 27 percent. The slump has pressured the share prices of global producers.

Uralkali plans to produce over 11 million metric tons of potash this year, still down from the last year’s 12 million tons, Chief Executive Officer Dmitry Osipov said on the conference call. It is preparing an application for permission to expand operations at its Solikamsk-2 mine, which started to flood last year as the situation on the mine is stable, he said.

Earlier Monday, Osipov said the company statement that production and sales targets may still be reviewed. Third-quarter revenue totaled $819 million in the third quarter, down 9 percent from the year earlier. Sales volumes dropped 6 percent to 2.9 million tons in the period.

Talks with China on the next year supply contract will start in the first quarter, Vladislav Lyan, the head of the Uralkali Trading unit, said on the conference call. Separately, Osipov said that China isn’t holding an official anti-trust probe against Uralkali as reported this month. The Asian country’s regulator asked some questions that the company should answer, he said.