Stirol resumes production at idled ammonia plants

Stirol (UX: STIR UK) restarted production at two idled ammonia plants, which have a total production capacity of 1 mln mt per year, according to local media reports. Ruslan Patlavskyy: Based on our conversation with Stirol’s management, the company expected a seasonal increase in demand for fertilizer in August-September, which favored the launch of the two idled ammonia plants. We estimate that the current ammonia price of USD 320/mt (+48% y-o-y, +20% ytd) allows Stirol to produce ammonia with a gross margin of 4.5-5.5%, in the black for the first time since 2008. Ammonia price growth should stimulate a 10-15% increase in the price for urea, currently at USD 250/mt (-4% yoy, -4% YTD), as ammonia is used as one of the key components in urea production. In 2009, urea comprised 53% of Stirol’s sales, and ammonia made up another 15%, and we expect that in 2010 the company’s revenue will grow 49%, to UAH 2,832 mln. That said, we estimate the company to remain loss-making in 2010E (EBITDA: UAH -541 mln; net loss: UAH -551 mln (+70% yoy) and its EBITDA to turn positive only in 2013.