Stirol plans UAH 600 mln in CapEx in 2011

Stirol plans to invest UAH 600 mln in CapEx in 2011, Interfax reported on Friday, citing Chairman of the Board Sergey Pavlyuchuk. The majority of the investment will be channeled to decreasing consumption of natural gas, targeting a decrease in gas usage by 30-40 cubic meters per 1 mt of ammonia. Major repair works are scheduled for summer, with full production to be restarted in September. Pavlyuchuk also announced plans in 2011 to increase ammonia output by 2x y-o-y to 1.27 mln mt, urea output by 2.4x y-o-y to 922 ths mt and to produce 640 ths mt of ammonia nitrate, which was not produced in 2010. Antonina Davydenko: We view the announced plans are achievable given that 1Q11 sales grew by 2.6 times y-o-y. The management’s announcement to load the plant at close to its full capacity indicates the availability of cheap gas. However, it is still questionable whether such output growth will result in an earnings increase considering Stirol’s history of transfer pricing.