24 Feb Investments and guaranteed quality of production helps to cope with international competition

In 2014, both Achema production volume and revenues have increased. Last year, the company produced 14 percent more production (281 thousand tons) comparing to 2013. 
Totally, Achema produced 2,308 thousand tons of main products in 2014: nitrogen fertilizers, dry fertilizer blends, liquid fertilizers for indoor and outdoor plants, ammonia, nitric acid, methanol, formalin, KF resins, carbon dioxide, oxygen, nitrogen, basic aluminium sulphate solution and other chemicals. Increased production volumes enabled also to increase incomes. In 2014, Achema has received 69 million Litas (nearly 4 per cent) more than in 2013, in total 1,832 billion Litas. Turnover in 2013 amounted to 1,763 billion litas.

"Although we finished the year with a higher result and a stable work, but an even greater increase in turnover last year was affected by the tense situation in the global fertilizer market. In 2014, global urea-ammonium nitrate solution (UAN) and urea prices were lower than in 2013, also the beginning of last year was difficult, which was caused by an unfavorable situation in agriculture - said Ramunas Miliauskas, General Manager of Achema, analyzing annual results. Stable performance is ensured by the 2 factors: Achema's production quality is higher than its competitors, and we can guarantee delivery times and quantities due to our complete service and logistics chain."

Investments to equipment improve the environmental situation

In 2014, Achema has invested over 70 mln. Litas to the upgrade of plant infrastructure. The company was implementing important long-term investment projects, which stay important also in 2015. In 2014, second-hand GP2 (Grand Parroise) nitric acid plant, which was acquired few years ago, was built. It will help to solve the energy problem, when the summer heat is produced in surplus. The new GP2 plant in Achema will replace two older nitric acid units, which demanded constant repair. Start-up of GP2 nitric acid plant is planned in early autumn of 2015. The investment to the new plant aims 74 million Litas. Payback of this investment is estimated 4 years due to the increased cost-effectiveness.
Another 15 million Litas were invested in the reconstruction of power sub-stations and 45 million Litas for the new medical oxygen production project. These projects, which should be completed by the fourth quarter of 2015, also are partly financed by the EU Structural Funds.
Within five years, significant environmental improvement was achieved - greenhouse gas (GHG) reduction project was implemented in the nitric acid production plants. During the period 2007-2014. 28.4 million Litas were invested (catalysts were purchased, emission-recording instrumentation installed, and periodic inspection of this instrumentation is carried out by the accredited companies). About 1 million Litas (3.5 mln. Euro) are spent annually for maintenance, including catalyst renewal, periodic inspection of emission monitoring system, and functionality maintenance. Last year, investment of more than one million Litas was dedicated to upgrade treatment system for exhaust air, steam and emissions from Ammonium Nitrate plant.

Results of 2015 will depend not only on market changes

R.Miliauskas, General Manager of Achema, plans that 2015 will be better than 2014. It is expected that the currently projected sales prices of fertilizers will remain in the level of 2014, but production costs would decrease due to gas discounts, which are still subject of ongoing negotiations with Gazprom. It is believed, that based on the decreased oil prices, the base price of gas should also decline.
In the first half of the year, revenue growth should be ensured by the growing seasonal fertilizer demand, as well, fertilizer shortage in the European market is caused by the situation in Ukraine and gas shortages in Trinidad and Egypt.

The situation in the second half of the year will depend on the general economic situation, prices of agricultural products, which will be determined by the next harvest season, and by the actions of China's nitrogen fertilizer exporters.

The negative impact on the company's results may arise from circumstances that are beyond control of AB Achema: imposition of an obligation to pay the LNG terminal infrastructure charge, even though it does not use terminal services. The fee can be as high as 28 million Euro annually, which will significantly reduce the company's ability to invest and compete with international producers.
In 2015, Achema plans to produce 2,310 thousand tons of product. Estimated turnover for the current year is 512 mln. Euro. It is expected that the company's investment could reach about 23 million. Euro.

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