PhosAgro Russian plans joint venture to grow in Brazil

The Russian company PhosAgro, one of the largest producers of fertilizers in Europe, is considering making joint venture, have port facility and other options to expand your business in Brazil-its main buyer's market-and in Latin America.
In an interview with Value in Moscow, the company's Executive Chairman, Andrey Guryev, said that a team of the company is in Sao Paulo to open a sales office in this year, which has not been easy because the Brazilian bureaucracy be complicated even by Russian standards.
He said a joint venture must initially be focused on improvement of the distribution of the products of the PhosAgro. Already the idea of having a port facility can pass through participation in concessions that the Brazilian Government will soon auction, for example. "Our team in Brazil examines all the possibilities," he said.
As the Executive, the PhosAgro has no problems, despite the fragile situation of Russian companies at the moment. The reason is that two-thirds of its revenues are in hard currency, with sales abroad. And even with the u.s. sanctions and from Europe to Russia, the company has access to the international market. "What has changed is that the credit was slightly more expensive," he said. Today, the five-year funding has interest rate of 4.5% compared to 3.7% before 2014.
The Brazil is the main global importer of fertilizers from Russia. In 2014, the total of $ 3 billion of imports from the country, 60% of fertilizer. Only the PhosAgro exported 1.2 million tons in 2014 to Brazil. This volume represents nearly 25% of the total exported globally by the company, and equates to $ 500 million. Since 2010, the company's sales to the Canadian market increased 2.5 times, both traditional products of nitrogen, phosphate and fertilizers complex especially developed to soy crops, sugar cane and coffee in the country.
But Guryev acknowledged that the deal with Brazil's challenges. This year the Russians see a steep decline in import demand. The India, which increased by three times their purchases compared to 2014, overcame Brazil as the largest buyer. "This is a temporary situation, and Brazil will continue to be our biggest client and is a priority for us," he said.
One of the reasons for the fall in imports from Brazil is the lack of credit, he said. Guryev negotiates with Moscow for Exiar, the Russian Agency of export and import, increase the limit for insurance companies to sell more to Brazil.
In addition, he said, the fertilizer market is pressed. "The currency devaluation in Brazil and in India puts pressure on demand. The real devalued more than 35 percent against the dollar since the beginning of the year. And it can affect the price of fertilizers. " For Guryev, "prices of mineral fertilizers in Brazil tend to grow at lower rates because commodities like soybeans and corn are in their lowest levels in 5 to 6 years. This "correction" in prices, however, tends to stimulate consumption, with producers being able to speed up their stocks in the coming months.
For the us interest for allowances PhosAgro farmers buy equipment and fertilizers directly from producers could be positive in Brazil. "The subsidies are not differentiated, which puts various intermediaries in the market, increasing costs for imports and to the final consumer," he said.
In addition to the devaluation of the ruble, the PhosAgro has been benefited by demand from India. The company raised in 10% sales globally in the first half. And expects additional impetus in the coming two to three years with a ban on imports of agricultural products from the United States and the European Union. This should stimulate the production of Russia and boost local demand for fertilizer.