9 February 2011 Chemical Sector. Severodonetsk
Ownership In Severodonetsk "Azot" Holding Goes To Dmitry Firtash, Chairman Of The Board Of Directors Of Group DFBy acquiring a corporation “Azot” based in Severodonetsk (Lugansk region, Ukraine), Dmitry Firtash enlarges his group of chemical industries in pursuit of a goal of strengthening his business positions in the global nitrogen fertilizers market.
Assets consolidation in the chemical sector will allow preserving and enhancing the positions of Ukraine’s carbamide and ammonium nitrate producers on international markets. At the moment, the global nitrogen fertilizers market is recorded at approximately 102 million tons a year while the growth rate is estimated to reach 2 – 2.5 percent. The accessibility of the primary input for nitrogen fertilizers production – natural gas – drives the world producers to launch new facilities in regions featuring the ever-growing demand for this product, more specifically in Asian and Middle-East countries. As a result, European nitric productions yield their export advantages while Ukrainian companies’ share is under the threat of downsizing. As of today, the total capacity of nitrogen fertilizers producers controlled by Mr. Firtash is 1.82 percent of the global output while the capacity of Ukraine-based companies equals 1.66 percent. In this connection, Group DF coordinates Ukrainian companies’ positions on international markets in a way which will secure their uninterrupted operation and a 100-percent workload thereby containing the competition.
One of the priorities for Mr. Firtash is the restoration of Ukrainian chemical industries presence in the domestic market. As gas supplies to Rivneazot were reduced for several months in 2008, Russian companies enlarged the share of their presence in the Ukrainian market up to 30 percent.
The corporate management system which will enable the products competitiveness improvement is being introduced at Severodonetsk “Azot”. This effort in particular involves investment activities centralization, innovative solutions incorporation, professionals training and retraining, financial operations and reporting standardization, materials and equipment acquisitions optimization, repairs, reconstruction and construction works integration. This management system will secure substantial savings of coordination-related management cost and enables, among other things, compensation of the high cost of natural gas at the expense of other costs minimization.
An integrated corporate policy in energy saving and environmental protection makes it possible to universally apply the practice of reducing the share of the natural gas value in the cost of finished products which also promotes Ukrainian fertilizers’ competitiveness. For instance, the share of natural gas in the cost of Rivneazot’s output is 65 percent vis-à-vis 75-80 percent at other industries.
Ukraine’s chemical sector integration is an optimum strategy being key to the nation’s production potential preservation and enhancement. The world’s leading players in the market like Potash Corp., Terra, Yara and Agrium have chosen the same development strategy for themselves.
NOTESeverodonetsk “Azot” was commissioned in 1951 and remains one of the leading enterprises in Ukraine’s chemical sector. Currently employs about 9 thousand people.
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