What will happen to the oligarch’s Eurochem stake remains unclear.
(Photo: Bloomberg)
Dusseldorf It was to be a special year for Eurochem. In 2021, the Swiss fertilizer manufacturer owned by the Russian oligarch Andrei Melnichenko passed the ten billion dollar mark. The IPO was being planned, but before that a larger takeover in Austria was to be secured.
But these projects have now failed in the course of the Ukraine war. The fourth largest fertilizer manufacturer in the world faces an uncertain future. Melnichenko left the company because of the Western sanctions against him – his further role is unclear.
However, the operative business should continue, the company explains in a letter to the Handelsblatt. “As a leading global fertilizer manufacturer, we are confident that we can deliver on the promises we make to our customers.” The company is flexible and regionally diversified and can “quickly adapt to changing circumstances”.
This is basically good news for the international fertilizer market. Eurochem is one of the largest manufacturers of plant nutrients based on nitrogen and potash. A failure would have significantly increased the bottleneck in fertilizer supply.
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Suppliers such as Yara from Norway and Borealis from Austria have recently reduced their production of nitrogen fertilizers. The reason for this is the high price of natural gas. Gas accounts for a good 80 percent of the costs of production because it is both a raw material and an energy supplier.
Fertilizer manufacturers were able to raise prices last year and made very good money as a result. But many plants can hardly be operated economically at the current energy and raw material price level. Farmers and consumers will have to bear the consequences. There is a risk of bad harvests because not enough fertilizer can be bought and the quantities available are extremely expensive. Food prices are likely to rise.
Eurochem is not currently planning any cuts and promises to deliver its plant nutrients to customers in good time. The company delivers to farmers and traders in Europe, USA, Russia, Latin America and Asia. Production takes place in Belgium, China, Russia and Lithuania.
Sailing yacht confiscated in Italy
Although Eurochem is based in Switzerland, it is of Russian origin and was majority-owned by Melnichenko. This has been on the EU sanctions list since last Thursday, which is also being implemented by Switzerland. The oligarch resigned as majority shareholder and board member of Eurochem last Wednesday. What exactly becomes of his share remains unclear. The company only confirms that he is “no longer a beneficiary” of a 90 percent stake in Eurochem.
Melnitschenko lives in St. Moritz and settled Eurochem in Zug before 2015. It is said in the industry that he feared sanctions in the Ukraine conflict that arose at the time and was looking for a safe haven for the company. Eurochem is currently not affected by sanctions – unlike its founder. His ship was confiscated in Italy at the weekend, causing a sensation. It is the world’s largest sailing yacht with a built-in submarine, valued at around half a billion euros.
Melnichenko’s superyacht was confiscated in Italy over the weekend.
(Photo: Reuters)
Melnitschenko himself is also causing a stir. Like many other oligarchs, he is said to be close to Russian President Vladimir Putin. On Tuesday, however, he sent an email to the public and warned of the consequences of the war in Ukraine. He feels “great pain and disbelief when I see brotherly peoples fighting and dying,” wrote Melnichenko, whose mother is Ukrainian.
He warned of the impending global food crisis. “The events in Ukraine are really tragic. We urgently need peace.”
Stock exchange plans and acquisitions have been stopped
Whether he is the first oligarch to “stab Putin in the back”, as the “Bild” newspaper wrote, is an open question. In the mail, Melnichenko avoids the word “war” and defining who the aggressor is. In addition to Eurochem, he owns a majority interest in the Suek Group, Russia’s largest coal producer and one of the country’s largest heat and power producers.
One thing is clear: with the expansion plan for Eurochem, the Russian has failed for the time being. In December, it was said in financial circles that he was preparing the IPO and had already mandated the investment banks Goldman Sachs, JP Morgan and UBS. The timing seemed ideal: in 2021, Eurochem managed to jump 66 percent in sales to $10.2 billion with a profit margin of 38 percent.
The group previously wanted to strengthen itself with the purchase of the fertilizer division of Borealis – a chemical subsidiary of the Viennese OMV group – with a volume of 455 million euros. Both sides have been working on the final details of the deal since early February. In Austria and in the EU, the deal has long been criticized because no more European fertilizer capacities should go into Russian ownership. The Austrian Ministry of Economics also had the deal in its sights and was examining an investment control procedure. However, Borealis only halted the sales talks last week.
More: Fertilizer manufacturers are curbing production: there is a risk of crop losses worldwide