Seasonal fluctuations and fertiliser demand cycle

Seasonal fluctuations and the cycle of demand on the global fertiliser market are key risk factors for the industry. A fertiliser producer’s operating and financial results are directly influenced by its ability to adequately apportion product flows based on the intensity of agricultural activity in various regions of the world.

Acron Group supplies products to 66 countries on multiple continents, ensuring year-round capacity utilisation and independence from the sowing season in particular regions. With a clear understanding of key markets, proper supply planning and long-term agreements, the Group is able to minimise the impact of seasonal factors on its operating results.

Demand Cycle in Key Markets

Latin America

Brazil, Argentina, Peru and Mexico are the major fertiliser consumers in the region. The climate in these countries allows farmers to harvest 2-3 times a year, on average. As a result, Latin American consumers acquire fertilisers throughout the year, with demand peaking in May-August. The lowest demand is in the first quarter, since this is the summer period in Latin America.

Long-term contracts for future delivery considerably mitigate demand cycle risks.

China (Russian export and Hongri Acron sales)

China generates almost year-round demand for complex fertilisers, which allows for ongoing intense capacity utilisation at the Group’s Hongri Acron facility in China and supports active supplies from Russia to the Chinese market. Sales peak in the second quarter.

United States of America and Canada

The U.S. generates year-round demand for nitrogen fertilisers, specifically UAN, with several peak seasons. In 2014, sales spread evenly over the four quarters.

Russia

Fertiliser sales in the Russian market are clearly seasonal, peaking in February-May and November-December. With its own distribution network, which creates considerable inventory reserves for the peak season, the Group is the third-largest fertiliser supplier in Russia.

Southeast Asia

This region sees intense agricultural activity during almost the entire calendar year, which secures uninterrupted sales of the Group’s products under long-term agreements.

Europe

The European mineral fertiliser market creates strong demand, with sales peaking in the fourth quarter. The third quarter sees lower sales. The wide range of supplied products and short transportation distance make the Group’s products attractive and competitive for European customers.

CIS

In the CIS market, demand is seasonal, with active sales in spring and autumn. The Group’s Russian production assets are located near its biggest CIS buyers, Ukraine and Belarus, ensuring minimal transportation costs and contributing to the competitiveness of Acron’s products.

In 2014, fertiliser sales to Ukraine did not change year-on-year and held steady at 235,000 tonnes, with major supplies in the first and third quarters.

Africa and Other Regions

The Group has been actively increasing fertiliser sales in Africa. There are not many clear seasonal fluctuations in Africa. Most of the region is located close to the Equator, allowing for year-round agricultural activity.

The second quarter saw maximum sales of Acron Group’s fertilisers (2013 sales peaked in the third quarter). With sales diversification across multiple regions, sales volume spreads fairly evenly over the quarters: in the top sales quarter the Group shipped 27% of its annual volume, and it shipped 23% in the minimum sales quarter.

Quarterly Seasonality of Acron Group’s Fertiliser Shipments by Region

  Minimum Sales Maximum Sales
Q1 Latin America, Southeast Asia Russia, CIS
Q2 CIS Latin America, China, South-East Asia
Q3 Russia, Europe Latin America, the USA and Canada
Q4 China, Latin America, Africa, CIS Europe, Russia, the USA and Canada

In the first quarter, the major demand for Acron’s fertilisers comes from the CIS, Russian and Chinese markets and coincides with the low sales season in Latin America. In the second quarter, lower shipments to the CIS are offset by higher demand from Latin America and Southeast Asia. Sales to Latin America peak in the third quarter, compensating for the low season in Russia and Europe. In the fourth quarter, the Group enjoys higher sales in Russia and Europe while shipments to Latin America decrease.

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