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Aug 04, 2009

Foskor FY profit doubles on strong commodity prices

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South African phosphate rock and phosphoric acid producer Foskor’s net profit increased by 128% to R1,9-billion in the 2009 financial year, compared with R841-million the year before, driven by strong commodity prices.

“Foskor’s renewed focus on fiscal and managerial discipline yielded great returns in the past financial year and were further boosted by strong commodity prices throughout most of 2008,” CEO Alfred Pitse said in a statement on Tuesday.

He noted that phosphoric acid prices had, in the year ended March 31, 2009, almost doubled from the start of the financial year, peaking at about $2 200/t in August 2008.

However, this was an unprecedented price, which would not likely be repeated in future, said Pitse.

Further, he noted that the company had seen buoyant demand for monoammonium phosphates and diammonium phosphates on the back of global demand for crops as inventory levels reached historical lows.

Foskor produced 2,41-billion tons of phosphate rock in 2009, a 1,38% increase on the 2,38-billion tons produced the year before.

However, rock sales prices increased by 161% year-on-year, with an average price of $188/t in 2009, compared with $72/t in 2008.

Phosphoric acid production volumes were down nearly 5% to 659 000 t in 2009, compared with 692 000 t in 2008. The average phosphoric acid price had, however, increased by 148% to $1 505/t, compared with $607/t the year before.

Foskor’s revenues increased by 163% to R10,2-billion in the year ended March 31, 2009, compared with R3,87-billion the year before.

“Although Foskor’s revenues and profitability were enhanced by higher commodity prices, the costs of raw materials such as sulphur and ammonia also increased exponentially. Foskor was, however, able to counter some of the input cost increases as it is one of the few vertically integrated companies in the world,” stated Foskor CFO Theuns Koekemoer.

Meanwhile, the producer said that its pyroxenite expansion project phase one (PEP 1) was in progress.

PEP 1 would be completed at a cost of R550-million and would raise Foskor’s phosphate rock concentrate production to 2,65-million tons a year, up 150 000 t/y on its current production.

The second phase, called PEP 2, was expected to be commissioned by 2011 at a cost of about R652-million. This would lead to an increase in capacity of about 200 000 t/y.

Further, Foskor was also conducting feasibility studies to broaden its product range away from conventional fertiliser as part of its growth strategy.

Meanwhile, Pitse noted that the business cycle for the producer had “turned sharply within a very short space of time”, following the end of its financial year.

“We are concerned about the impact that the global recession and financial crisis will have on our bottom line in the next financial year,” he warned.

However, as there would always be demand for food, and thus fertiliser, the producer was still reaching sales volumes that enables it to retain its employees.

“We will also continue to market our noncore products and raise operational efficiencies consistently to ensure that Foskor remains a sustainable business for the benefit of all its stakeholders,” he concluded.

Edited by: Mariaan Webb
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