Sept. 22--AMMAN -- The Arab Potash Company (APC) has decided to operate at a reduced rate due to uncertainties in world potash markets and the resultant impact on demand.
In a disclosure sent last week to the Amman Stock Exchange, APC Acting General Manager William Flahr announced that operations for the foreseeable future will be at approximately 20 per cent of total production capacity.
"The company will return to producing at full capacity when potash markets support such a decision," the disclosure said, noting that APC will continue to serve customers and fulfil its commitments from its inventories.
At the end of Thursday's trading on the Amman Bourse, the APC share price dropped by 7.5 per cent to JD29.13. Last year, the APC share price came close to JD50 level.
Besides the unfavourable market conditions, APC's midyear financial results showed that the company is under pressure from higher production costs which went up by 17.1 per cent to a JD256.7 million gross total at the end of June 2013 from JD219.3 million at the end of June 2012.
According to the midyear report showing financial results as of June 30, 2013, net after-tax profit amounted to JD93.3 million, down from JD125.7 million at the end of June 2012. The firm attributed the 25.8 per cent drop to fuel and energy costs.
Consolidated net pretax profit during the first half of this year stood at JD107.4 million, down from 145.2 million during the first half of last year.
The lower profitability came despite an increase in production and sales.
Potash production reached 976,000 tonnes during the January-June period of 2013 compared to 972,000 tonnes during the same period of 2012. The production volume represented 91 per cent of the 1,069,000 tonnes set as a target.
Midyear sales were higher by 17 per cent reaching 1,089,000 tonnes compared to 931,000 tonnes during the first six months of last year. The volume represented 146 per cent of the 745,000 tonnes targeted by APC.
To address the mounting challenges resulting from the continued rise in energy (electricity and heavy fuel) prices, the company is currently weighing options to generate energy and come up with integrated energy solutions.
"A tender has been awarded to a specialised adviser and a study is being carried out," the disclosure said.
It added that after completing a study which covered several options for a 5th potash production expansion, APC is now working to define the optimum length of existing dikes at the northern area that can be used in the future pond's construction.
Disclosing latest developments regarding the subsidiaries and affiliates, the report said that by the end of the first half of 2013, the committee appointed by the general assembly to liquidate Jordan Safi Salt Company did not finish the insolvency procedures.
Wholly owned by APC, Numeira Mixed Salts and Mud Company generated JD310,800 net profit during the January-June period of this year. Numeira, capitalised at JD800,000, was established to handle packaging and distribution of mixed salts and Dead Sea mud for the cosmetic industry.
Another wholly owned by APC, Arab Fertilisers & Chemicals Industries (KEMAPCO) generated JD3.3 million net profit during the first six months of 2013. KEMAPCO, capitalised at JD29 million, produces potassium nitrate and de-calcium phosphate.
Jordan Bromine Company (JBC) was also profitable netting JD24.7 million between January and June of this year. Under a marketing agreement, US-based Albemarle Corporation markets the bromine and its derivatives produced by JBC.
JBC's JD30 million capital and JD24.7 million additional paid in capital is equally shared between both parties.
The report revealed that APC intends to raise its stake in Jordan Magnesia Company (JORMAG) to 92.549 per cent during 2013 from the 55.3 per cent equity at present.
Noting that JD62.3 million was allocated as provision for JORMAG's losses as of June 30, 2013, APC indicated that by capitalising the accrued liabilities of Jordan Magnesia to Arab Potash, it will be injecting an investment that brings up JORMAG's capital to JD60 million.
JORMAG, established with a share capital of JD30 million to produce magnesium oxide, used in fire bricks industry, and magnesium hydroxide and magnesium derivatives, has not been in operation since 2005.
The report did not provide operational information on other subsidiaries and affiliates except to indicate that APC owns 20 per cent of Nippon-Jordan Fertilises Company whose capital stands at JD16.7 million and which produces NPK and phosphate ammonium fertiliser and markets the output in Japan.
Also wholly owned by APC is the Jordan Dead Sea Industries Company which is a limited liability company capitalised at JD100,000.
The last investment is the Jordan Industrial Ports Company (JIPC) which was established in May 2009 to develop the existing industrial jetties through rehabilitation, refurbishment and construction of new deep jetty to accommodate vessels up to 100,000 tonnes DWT at the Aqaba industrial port.
JIPC is a joint venture company established between APC and Jordan Phosphate Mines Company as equal shareholders with JD1 million authorised capital. All going well, the project is expected for completion by June 2016.