Slimmer, faster and stronger Hydro Agri
(July 10, 2002) Hydro Agri has been through a tough change process since 1999. Manning is down 35 percent, and fixed costs have been reduced by an equivalent amount. Financial results have improved dramatically, and further improvements are expected.
The results of the wide-ranging Hydro Agri "Turnaround" process are more than satisfactory:
- Costs are down by more than NOK 2,700 million (€343 million).
- Annual production per employee is up to nearly 3,500 metric tons, compared with around 2,500 tons in the mid-1990s.
 LOOKING FORWARD: Hydro Agri is better prepared to meet the challenges of a changing global fertilizer market. |
| |
- Hydro has disposed of more than 30 business activities since 1999, including closure of production capacity in Europe. But there has also been some growth in the form of strategic investments in emerging markets and in a world-class plant for ammonia and urea in Qatar.
- The restructuring process has given Hydro Agri a much better nitrate balance, and it is now both the largest and most cost-efficient nitrate producer in Europe, where 3 million tons of production capacity have been shut down in the same period. Hydro Agri has closed down 1 million tons, and market balance and utilization of capacity have improved in the industry as a whole.
Executive vice president Thorleif Enger, who has overall responsibility for Hydro Agri, sums up the change process by pointing out the great improvement in competitive position and Hydro Agri's leadership in key areas for future profitability and growth. An important part of the Turnaround has been to face realities and set ambitious performance goals.
“We have been asking a lot of ourselves, but that has also been the key to success," Enger says. "And we have reasons to be proud of our achievements. We feel strongly that the difficult and tough Turnaround process we have been through has given us the strength and confidence to face future competition. But as our momentum is picking up, we also see a lot of opportunities for further improvements. Our size and global positions in the supply chain provide many possibilities for taking out synergies and scale effects.
"The fertilizer industry will change considerably in the next few years and the consolidation process will lead to fewer and bigger players. As the global leader, we have to play an active role in driving such a development. There will certainly be many exciting challenges ahead and there is no room for complacency.”
Daniel Clauw, senior vice president in Hydro Agri, believes it is possible to achieve even more improvements in the business area's international operations. "Decentralization of responsibility and authority have made us efficient at a national level, but we have not yet fully realized the global potential. Our new organization shall help us clarify how to proceed internationally, without neglecting our national markets," he says.
Clauw points out that Hydro Agri, with its extensive ammonia and shipping positions, can take on commitments few others are able to handle. Hydro Agri has a leading position for calcium nitrate, and through its cooperation with the Chilean company SQM, also has a strong position for potassium nitrate.
"This enables us to supply customers with an attractive range of products at good prices," says Clauw.
Clauw also points out that Hydro Agri has an increasing proportion of third-party and joint venture products, which give less exposure compared to owning all our plants.
The 1990s were years of crisis for parts of the fertilizer industry, but the total consumption of mineral fertilizer continues to increase by 2-3 percent a year, mostly because the world population continues to grow. This increase can most clearly be seen in Asia and Latin America, and is linked to the growing affluence in these areas, leading to a greater demand for food that requires more energy, and hence fertilizer, to produce.
Clauw believes that inclusion of China, India and Russia in the World Trade Organization could provide a lot of new opportunities in the longer term. This applies particularly to China where Hydro Agri already has a strong export position.
"The market for mineral fertilizer in Europe will remain fairly stable for a few years to come," says Bjørn Bach, senior vice president of marketing in Hydro Agri. New perspectives will arise as Eastern European countries prepare for membership in the European Union. "Countries like Poland, Hungary and Romania will have to modernize their agriculture in order to join the EU. This means that they will use more mineral fertilizer to increase food production and food exports to Western Europe.
Bach does not see this as a wholly negative development for the fertilizer industry in Western Europe.
"We should be prepared for the fact that the location of parts of the East European industry is such that they will also want to sell to the West European market," he says. "Agricultural and industrial growth is absolutely essential for these countries to be able to improve their standard of living. This can take away much of the pressure their fertilizer industry exerts on the industry in Western Europe."
| 