- Revenue amounted to 36.54 bln RUB, compared to 40.06 bln RUB in the first half of 2013.

- Operating profit amounted to 9.70 bln RUB, compared with 12.22 bln RUB in the first half of 2013.

- Adjusted EBITDA comprised 11.57 bln RUB, compared to 14.01 bln RUB in the first half of 2013.

- Net profit amounted to 1.23 bln RUB, compared to 8.02 bln RUB in the first half of 2013.

Moscow, Russia – 02 September, 2014. URALCHEM, OJSC (hereinafter URALCHEM or the Company), the holding company of the URALCHEM Group, one of the largest producers of nitrogen fertilizers in Russia, announced its unaudited IFRS financial results for the first six months of 2014.

The Group’s Key Financial Figures for six months in 2014 and 2013 (million RUB)

	Six months, 2014	Six months, 2013	Year-on-year change
Revenue	36,537	40,062	-9%
Gross profit	21,199	23,145	-8%
Gross profit margin	58%	58%
Operating profit	9,705	12,218	-21%
Operating profit margin	27%	30%
Net profit	523	8,018	-94%
Net profit margin	1.4%	20%
Adjusted EBITDA	11,569	14,012	-17%
Adjusted EBITDA margin	32%	35%
Cash generated from operating activities	10,208	9,839	4%

Revenue for the first six months of 2014 decreased by 9% to 36.54 bln RUB, compared to 40.06 bln RUB in January – June, 2013. Operating profit amounted to 9.70 bln RUB compared to 12.22 bln RUB in the first half of 2013. Operating profit margin in the reporting period was 27% compared with 30% in the same period of 2013.

Adjusted EBITDA in the reporting period comprised 11.57 bln RUB, compared to 14.01 bln RUB, a decrease of 17%. The adjusted EBITDA margin for the first six months of 2014 amounted to 32% of revenue, compared with 35% of revenue for the same period of 2013.

The decrease in net profit and operating profit is connected with the Company’s expenses on its debt service and the sharp rise in the foreign exchange rate in the first quarter of 2014. It is also due to the forced shut down of the Voskresensk Mineral Fertilizers enterprise. In early 2014 the plant had to go into forced downtime caused by the absence of the main raw material for the production of phosphate fertilizers, apatite concentrate.

Despite the difficult situation for the producers of mineral fertilizers market in 2014, URALCHEM is showing the sustainability of its business model and feels comfortable in the unfavourable conditions. The company continues to upgrade production facilities, and to develop its distribution network, as well as to increase its logistics capacity.

Markets

In January, activity on the ammonia markets remained low. Quotes on the basis of FOB Yuzhny Port remained in the area of $410 to $430/tonne. In February, prices for ammonia in the ports of the CIS began to rise; this continued until mid-April, when quotes exceeded $500/tonne. However, in May there began a decline related to the decrease in demand from the United States as well as to the shut down of production of caprolactam and acrylonitrile in Asia. The average price for ammonia in the first half of 2014 amounted to $462/tonne, which is 13.2% lower than in the first six months of 2013.

In January urea prices reached a peak growth of $350 - $360 per tonne FOB Baltic due to the high activity in the USA, Europe and Brazil markets. In late January - early February, prices started to decline due to the devaluation of the national currency of Turkey and Brazil, making it difficult to import. The decline continued in March, when expectations of imports in South Asia were not fulfilled. In the first half of April, prices continued to decline due to the lack of spot demand. Mid-April marked stabilization of the prices was associated with the beginning of the end users’ product procurement and product purchases by traders for delivery execution. From the beginning to the middle of May prices went down due to lack of current demand. The second half of May marked recovery in prices associated with large procurement orders in Brazil and China for the delivery of the product to the United States. In June, prices stabilized and even showed a slight increase due to the limited supply from Egypt, Ukraine and Libya. The average price for six months of this year amounted to $311/tonne FOB Baltic, compared with $361/tonne in the same period last year.

During January and February, there was steady growth of quotations for ammonium nitrate due to the lack of product available for export, caused by the supplies to the domestic market of the CIS countries: FOB Baltic quotes grew from $300/tonne up to $320/tonne. But from the beginning of March, quotations began to decline amid weakening demand in the domestic markets of the CIS countries and growing volumes of available products. In May, the market reached the “bottom”: prices dropped to 245 to 250 $/tonne, FOB Baltic / Black Sea. Since early June, prices stabilized and even grew slightly stronger thanks to the return to the market of Brazilian buyers, as well as to the suspension of production at the plants of the Ostchem holding (Ukraine).

In the segment of phosphate fertilizers (MAP / DAP) average quotations (FOB Black Sea) for the first quarter of 2014 amounted to $469/tonne, which is 6% lower than a year earlier. Since mid-March, the activity of the demand in this segment declined markedly; importers, relying on high inventories postponed new purchases in anticipation of more lucrative offers. In the first months of the second quarter, prices continued to decline, but in June there began a steep rise - distributors in the United States, Russia and China sent large volumes to the domestic markets, providing a higher yield. By the end of the first half of 2014, quotes almost reached the peak values ​of $500/tonne registered in March.

Production and sales

Thanks to the modernization of production facilities and effective marketing policy in the first half of 2014, the Company was able to increase production and sales of key products, ammonium nitrate and its derivatives. The main reason for the decline in the performance of some other segments is the shut down of the Voskresensk Mineral Fertilizers enterprise.

Sales figures of the Group for the six months in 2014 and 2013 (thousand tonnes):

Name of product	Six months, 2014	Six months, 2013	Year-on-year change
Ammonium nitrate and its derivatives	1,507	1,332	13%
Urea	609	607	0%
Ammonia	362	358	1%
NPK fertilizers	248	320	-23%
Phosphate fertilizers	51	262	-80%
Other chemicals	77	196	-60%
Total	2,854	3,075	-7%

Financial Situation

Cash generated from operating activities in the first half of 2014 amounted to 10.21 bln RUB, compared to 9.84 bln RUB in the same period last year. As at 30 June 2014, the Company’s net debt amounted to 151.28 bln RUB.

Annex to the press release about the financial results for the first half of 2014

EBITDA is a profit / loss from financial and economic activities during the reporting period, before deduction of income tax on profits, income and interest costs, depreciation and amortization. "Adjusted EBITDA" is EBITDA for the reporting period before goodwill, profit / loss from associates, profit / loss on foreign exchange differences arising on financial performance and profit / loss on operations with derivative financial instruments. Adjusted EBITDA is operating profit before depreciation and amortization and financial results of operations with derivative financial instruments. In accordance with International Financial Reporting Standards ("IFRS"), depreciation and amortization are included in cost structure, and in the selling, general and administrative expenses. IFRS does not require the disclosure and does not describe the calculation of EBITDA and adjusted EBITDA, among other financial indicators, so they can not substitute for net profit for the period when evaluating the results of operations or the measure of cash provided by operating activities when evaluating liquidity. Approach to the calculation of EBITDA and adjusted EBITDA, as described earlier, may not coincide with the approaches used by other companies, therefore, comparability may be limited. We believe that EBITDA and adjusted EBITDA provide useful information to investors because they are indicators of the stability and efficiency of our business and our ability to fund discretionary spending such as capital expenditures, the acquisition of subsidiaries and other investments, as well as indicators of our ability to incur and service debt. IFRS classifies depreciation and amortization to operating costs, while in fact they are distributed to the current period non-cash expenses for the acquisition or creation of fixed assets, incurred in previous periods, and are not affiliated with the movement of funds.

Calculation of EBITDA for the first six month of year 2014 and year 2013 (thousand RUB)

	Six months, 2014	Six months, 2013
Net profit	522,812	8,017,826
Add:
Income tax	1,488,314	1,531,809
Interest and other financial income	(25,083)	(465,110)
Interest and other financial costs	3,922,072	1,290,413
Amortisation	1,864,295	1,794,365
Share of (gain)/loss of associates	(231,147)	788
Foreign exchange loss from financing activities	4,011,770	1,841,788
Loss on impairment of fixed assets	15,983	-
Adjusted EBITDA	11,569,016	14,011,879