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By John Helmer in Moscow

Acron reports big jump in complex fertilizer revenue, but Uralkali tanks on potash nerves.

Acron, Russia’s leading producer of complex fertilizers, has reported that in the first quarter to March 31, sales revenue reached $493 million; that is a jump of 72%, compared with the corresponding quarter of 2007. It is the largest quarterly growth rate yet recorded by the Moscow-based company, which consolidates three production subsidiaries – Acron plant, Dorogobuzh and Hongri-Acron (in China).

Net profit, calculated according to Russian Accounting Standards, more than quadrupled — from $116 mllion in 1Q07 to $558 million in 1Q08. Part of this profit reflects the jump in share value of stakes Acron holds in potash producer, Silivinit (8.1%); in phosphate producer Apatit (5.3%), and Sibneftegaz (21%). The growth rate for Acron’s profit figure, if this equity gain is removed from the calculation, is 343% — from $47 million to $161 million.

Ebitda surged 206% from $73.8 million in 1Q 2007 to $227.5 million in Q1 2008.

Complex fertilizers are a combination of the three basic chemical nutrients for plant growth — nitrogen, potassium, and phosphorous; or a combination of urea, phosphate, and potash, referred to by the acronym NPK. Nitrogenous fertilizers are derived from natural gas; potash and phosphates are mined. Acron produces and trades the NPK product in higher volumes than any other fertilizer producer in Russia, earning a higher margin on the spot price than the individual fertilizers which comprise it. Acron estimates that roughly 48% of its revenues are generated by NPK; 27% by ammonia products.

According to a report by Renaissance Capital, “we believe the growth of prices for potash and phosphates will likely result in a significant upswing in NPK prices as well. Despite Acron meeting the growth of prices for raw materials, its margins look solid and its potential projects in phosphate and potash should create solid long-term prospects for the company.”

Alfa Bank analyst Roydel Stewart reports the latest results “indicate the strength of the market for nitrogen and complex fertilizers. At its current pace, Acron’s total revenue should reach $1.97 bln for 2008….which is 16% higher than our forecast.”

According to Alfa, Acron’s share price should grow by up to 8% to a forecast target of $100. The Russian stock market responded by lifting the share by 3% in trading immediately after the financial report was released.

Then on Thursday, before the start of the long Russian May Day holiday, Akron dropped 1% on the day, but was at $97, just below the year-to-date high of $98 registered the day before. These prices put Akron well past RenCap’s target share price of $83.20.

Akron’s share price, along with that of Silvinit, Russia’s second potash producer, have remained relatively stable at close to year-to-date highs throughout the past week of trading. But Uralkali, the leading potash producer, has seen its share price cut by 10% to 20% in the last two days. It is now at $10.45, having lost almost two billion dollars in market cap since the week began.

Market analysts are at a loss to explain why. Stewart, Alfa Bank’s specialist on the sector, said “people are afraid that this is a bubble. They think that the price of potash may fall. They are simply fixing their profits, and selling out. The main evidence is that [potash pricing] did 1,000% for one year. So they suppose it is bubble, and that it can blow. Personally, I disagree with such opinions.”

Mikhail Stiskin, analyst at Troika Dialog in Moscow, told Mineweb: “The only thing which has affected the Uralkali price is that investors became afraid of such intensive growth of potash prices. That is the only news.”

Neither explanation accounts for the stability of Akron and Silvinit.

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