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ACRON INVESTOR PRESENTATION 2006. 2 3 COMPANY OVERVIEW Acron Holding is a major mineral fertilizer producer in the world. It ranks fourth in Europe in.

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Presentation on theme: "ACRON INVESTOR PRESENTATION 2006. 2 3 COMPANY OVERVIEW Acron Holding is a major mineral fertilizer producer in the world. It ranks fourth in Europe in."— Presentation transcript:

1 ACRON INVESTOR PRESENTATION 2006

2 2

3 3 COMPANY OVERVIEW Acron Holding is a major mineral fertilizer producer in the world. It ranks fourth in Europe in terms of output volume of nitrogen and phosphate fertilizers. Acron Holding is a major mineral fertilizer producer in the world. It ranks fourth in Europe in terms of output volume of nitrogen and phosphate fertilizers. Acron owns and operates three agrochemical facilities: JSC Acron (Veliky Novgorod, Russia), JSC Dorogobuzh (Smolensk Region, Russia) and Shandong Hongri Acron Chemical Joint Stock Company, Ltd. (Shandong Province, the PRC)*. Acron owns and operates three agrochemical facilities: JSC Acron (Veliky Novgorod, Russia), JSC Dorogobuzh (Smolensk Region, Russia) and Shandong Hongri Acron Chemical Joint Stock Company, Ltd. (Shandong Province, the PRC)*. Besides, Acron holds stakes in two producers of raw materials for fertilizer industry – JSC Apatit, JSC Silvinit, and gas-producing JSC Sibneftegaz. Besides, Acron holds stakes in two producers of raw materials for fertilizer industry – JSC Apatit, JSC Silvinit, and gas-producing JSC Sibneftegaz. In addition, in October 2006 CJSC North-Western Phosphorous Company established by Acron Holding, won the tender for development of two apatite- nephelinic ore deposits in Oleniy Ruchey (reserves of 392 million tonnes) and Partomchorr (reserves of 800 million tonnes), which will provide in full the Holding’s facilities with the apatite raw material. In addition, in October 2006 CJSC North-Western Phosphorous Company established by Acron Holding, won the tender for development of two apatite- nephelinic ore deposits in Oleniy Ruchey (reserves of 392 million tonnes) and Partomchorr (reserves of 800 million tonnes), which will provide in full the Holding’s facilities with the apatite raw material. Among Acron’s projects is the construction of its own transhipment port terminal in Sillamae (Estonia) with the capacity of 1 million t/y of ammonia and 700,000 t/y of liquid fertilizers, which will significantly improve Acron’s logistics. Among Acron’s projects is the construction of its own transhipment port terminal in Sillamae (Estonia) with the capacity of 1 million t/y of ammonia and 700,000 t/y of liquid fertilizers, which will significantly improve Acron’s logistics. * Since Hongri Acron was incorporated in Acron Holding in May 2005, all figures through 2004 present consolidated data for JSC Acron and JSC Dorogobuzh, and exclude Hongri Acron performance. 2005, 2006 and prospective data include JSC Acron, Dorogobuzh and Hongri Acron. * Since Hongri Acron was incorporated in Acron Holding in May 2005, all figures through 2004 present consolidated data for JSC Acron and JSC Dorogobuzh, and exclude Hongri Acron performance. 2005, 2006 and prospective data include JSC Acron, Dorogobuzh and Hongri Acron.

4 4 COMPANY STRUCTURE Figures show stakes in charter capital in percentage terms. Voting interests in percentage terms are specified in brackets. 7.73% (10.3%) 11.8% (14.28%) 65.57% (77,26%) 51% 50.5% 21% 6.08% (8.1%) % 95,0% (100%)

5 5 KEY COMPETITIVE ADVANTAGES Domestic facilities of the Holding are most advantageously located in terms of proximity to ports as compared with other producers – the distance from Acron to the nearest Baltic port is 190 km, from Dorogobuzh – 680 km, while most plants are 1,500 to 2,500 km away from main sea terminals. Domestic facilities of the Holding are most advantageously located in terms of proximity to ports as compared with other producers – the distance from Acron to the nearest Baltic port is 190 km, from Dorogobuzh – 680 km, while most plants are 1,500 to 2,500 km away from main sea terminals. Acron Holding is one of the most efficient producers of nitrogen fertilizers in the CIS with gas consumption ratio of m 3 and m 3 per ton of ammonia for Acron and Dorogobuzh, respectively, which is significantly below the CIS average of m 3 per ton. Acron Holding is one of the most efficient producers of nitrogen fertilizers in the CIS with gas consumption ratio of m 3 and m 3 per ton of ammonia for Acron and Dorogobuzh, respectively, which is significantly below the CIS average of m 3 per ton. A wide product range allows the company to offset the negative effects of cyclical revenues from the sales of mineral fertilizers. A wide product range allows the company to offset the negative effects of cyclical revenues from the sales of mineral fertilizers. Regional sales diversification allows the company to respond flexibly to fall in demand in some regions by increasing deliveries to other markets (in particular, the company has strong market position in China and Russia). Regional sales diversification allows the company to respond flexibly to fall in demand in some regions by increasing deliveries to other markets (in particular, the company has strong market position in China and Russia). Low gas consumption Well-diversified product mix Well-diversified market Advantageous location in terms of proximity to ports

6 6 PRODUCTION OF MINERAL FERTILIZERS IN RUSSIA BASIC TRENDS Economic downturn in the late 1980s through early 1990s resulted in a fertilizer consumption plunge in the domestic market. Between 1988 and 1944 it decreased by more than ten times. Economic downturn in the late 1980s through early 1990s resulted in a fertilizer consumption plunge in the domestic market. Between 1988 and 1944 it decreased by more than ten times. Russian domestically oriented fertilizer producers were forced to notably cut their production and redirect their sales abroad. Russian domestically oriented fertilizer producers were forced to notably cut their production and redirect their sales abroad economic crisis led to a considerable devaluation of the Russian currency and to a respective improvement of the exporters’ financial standing, which enabled the Russian fertilizer producers to rise their businesses. Consequently, in 2005 the domestic fertilizer output nearly doubled to 1990 level economic crisis led to a considerable devaluation of the Russian currency and to a respective improvement of the exporters’ financial standing, which enabled the Russian fertilizer producers to rise their businesses. Consequently, in 2005 the domestic fertilizer output nearly doubled to 1990 level. Russian fertilizers are highly competitive globally due to low internal energy tariffs. Russian fertilizers are highly competitive globally due to low internal energy tariffs. It is anticipated that within next years the domestic fertilizer consumption will increase in line with a general economic upturn and the consolidation of farms into large holdings. It is anticipated that within next years the domestic fertilizer consumption will increase in line with a general economic upturn and the consolidation of farms into large holdings.

7 7 OPERATIONAL DATA Acron Holding offers over 40 types of products. Mineral fertilizers account for more than 80% of total revenues, while the rest 20% are generated by organic and non- organic synthetic products. Acron Holding offers over 40 types of products. Mineral fertilizers account for more than 80% of total revenues, while the rest 20% are generated by organic and non- organic synthetic products. Key Products: - ammonia - ammonia - urea - urea - ammonium nitrate - ammonium nitrate - complex fertilizers - complex fertilizers - methanol - methanol - formalin - formalin - urea-formaldehyde resins - urea-formaldehyde resins - liquid carbon dioxide - liquid carbon dioxide - polyethylene and polypropylene products - polyethylene and polypropylene products - catalysts, etc. - catalysts, etc. Acron’s market share of mineral fertilizer production in Russia stands at 15%. Acron’s market share of mineral fertilizer production in Russia stands at 15%.

8 8 TARGET MARKETS DOMESTIC MARKET The Russian fertilizer market offers huge growth potential. The Russian fertilizer market offers huge growth potential. As Acron production units are advantageously located close to major farming regions the company emerged as one of the leading suppliers of fertilizers in Russia. As Acron production units are advantageously located close to major farming regions the company emerged as one of the leading suppliers of fertilizers in Russia. Acron Holding sells its products to 55 administrative regions of the Russian Federation. Acron Holding sells its products to 55 administrative regions of the Russian Federation. The Holding’s distribution network comprises 10 regional representative offices and 16 specialized agro- chemical businesses, in all key farming regions of the country. Total capacity of dedicated storage facilities amounts to over 200,000 tons. The Holding’s distribution network comprises 10 regional representative offices and 16 specialized agro- chemical businesses, in all key farming regions of the country. Total capacity of dedicated storage facilities amounts to over 200,000 tons.

9 9 TARGET MARKETS EXPORTS Company’s products find a ready sale on global markets. Acron exports over 80% of its fertilizers. Company’s products find a ready sale on global markets. Acron exports over 80% of its fertilizers. Key markets include China, the USA, Western Europe, and South America. Key markets include China, the USA, Western Europe, and South America. Acron Holding is actively developing the Chinese market, which accounts for over 50% of global mineral fertilizers consumption. In China, the company registered A KANG, a proprietary brand for complex fertilizers, which is constantly in great request. Acron Holding is actively developing the Chinese market, which accounts for over 50% of global mineral fertilizers consumption. In China, the company registered A KANG, a proprietary brand for complex fertilizers, which is constantly in great request. All products produced by Hongri Acron are sold on the Chinese market. All products produced by Hongri Acron are sold on the Chinese market.

10 10 FINANCIAL HIGHLIGHTS In 2005, Acron Holding managed to materially improve its financial performance due to both increased physical production volumes and growing prices for the whole range of its products.

11 11 CAPEX Investments in USD mln Year Blended fertilizer production facility, 200,000 tpa (Hongri Acron) Methanol production facility, 100,000 tpa (Hongri Acron) Formalin/urea-formaldehyde concentrate, 75,000 tpa and resins, 105,000 tpa production facilities (Acron production unit) Increasing existing methanol capacities to 192,000 tpa (Acron production unit) + ADB 25, UAN production facility, 500,000 tpa (Acron production unit) 24, Power plant, MW (Acron production unit) Urea production facility, 300,000 tpa (Dorogobuzh) 35, Construction of transhipment port terminal in Sillamae (Estonia) with the capacity of 1 million t/y of ammonia and 700,000 t/y of liquid fertilizers. 73, Reconstruction of urea production facilities, add 300,000 tpa (Acron production unit) Ammonia production facility, 400,000 tpa (Dorogobuzh) Increasing existing ammonia capacities, add 60,000 tpa (Dorogobuzh) 18, Power plant, 50 MW (Dorogobuzh) Increasing existing methanol capacities to 375,000 tpa (Acron production unit) Railroad from the station to the plant (Hongri Acron) Production of acetic acid (methanol processing), 150,000 tpa (Acron production unit) Ammonia production facility, 700,000 tpa (Acron production unit) Development of apatite-nephelinic ore reserves by CJSC North-Western Phosphorous Company with the capacity of 1.9 million t/y of apatite concentrate and 1.8 million t/y of nephelinic concentrate. 429, Sulphuric acid production facility, 200,000 tpa (Hongri Acron) Formalin, urea-formaldehyde concentrate, resins production facilities, 100,000 tpa (Dorogobuzh) Ammonia processing facility (Acron production unit) Ammonia processing facility (Dorogobuzh) TOTAL 1,

12 12 STOCK MARKET During 2004 and 2005, the aggregate market capitalization of the top ten Russian producers of mineral fertilizers in the domestic stock market increased nearly sixfold to USD8.2 billion from USD1.4 billion. During 2004 and 2005, the aggregate market capitalization of the top ten Russian producers of mineral fertilizers in the domestic stock market increased nearly sixfold to USD8.2 billion from USD1.4 billion. Strong share performance in the industry is explained by enhanced financial performance, a favorable price environment for mineral fertilizer producers in global markets, and improved transparency. Strong share performance in the industry is explained by enhanced financial performance, a favorable price environment for mineral fertilizer producers in global markets, and improved transparency. *** Shares conversion at 5,800 ratio took place on November 24. After the split 8,222 Acron’s ordinary shares with a par value of RUR29,000 were converted into 47,687,600 shares with a par value RUR5. Prices on graph reduced to nominal value after conversion.

13 13 DIVIDEND HISTORY %

14 14 ACRON HOLDING DEVELOPMENT STRATEGY Acquisition and construction of new production facilities (up to USD3 billion over the next decade) Maximum transparency Capitalization growth An increase in fertilizer deliveries to the domestic market, while maintaining current export volumes Achievement of definite leadership in the sector

15 15 CORPORATE GOVERNANCE IAS reporting Quarterly disclosures IAS results auditor RAS consolidated results auditor since 1998 since 1997 PriceWaterhouse Coopers Baker Tilly Russaudit Corporate Governance Code since 2005

16 16 CONTACTS Acron Holding Alexander Popov Vice-President for Corporate Construction and Financial Control Deputy Chairman of the Administration Board Alexei Milenkov Head of Information and Analysis Department Nadezhda Bashkirtseva Head of Securities Department e-mai: 37 (2) Prechistenka, Moscow, , Russia phone: +7 (495) fax: +7 (495)


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