September 22, 2011 / 7:03 AM / in 7 years

UPDATE 2-Uralkali pledges 50 pct of profit in divs

* Says booming market allows for higher divi

* Potash demand growing despite market volatility

* Plans new $2.5 bln mine from 2018

* H1 profit $794 mln vs forecast $725 mln

* Shares down 7 percent (Adds detail on new mine, analyst comment, updates shares)

By John Bowker and Alfred Kueppers

MOSCOW/BEREZNIKI, Sept 22 (Reuters) - Russian potash miner Uralkali URKAq.L will pay at least 50 percent of its profit in dividends, citing strong cash flow and increased production, while also unveiling plans for a potential new $2.5 billion greenfield mine from 2018.

The company, controlled by billionaire Suleiman Kerimov and associates, said the new mine could have 2.5 million tonnes of capacity, a move that would help it leapfrog Canada’s Potash Corp as the world’s biggest producer of the fertiliser ingredient.

“We predict a significant growth of cash flow in Uralkali in the next few years due to favorable market situation and our increasing production capacities,” Chief Executive Vladislav Baumgertner said in a statement.

“Taking this into account, the Board of Directors resolved to pay shareholders at least 50 percent of the net profit as dividends for maintaining the optimal capital structure,” he added.

Uralkali became the world’s second biggest producer of potash when it merged with domestic rival Silvinit earlier this year.

It said first half net profit came in at $794 million on a pro forma basis — assuming Silvinit had been part of the company for the full six month period — compared with analysts expectations of $725 million.

Shares in Uralkali were down 7.4 percent by 1238 GMT, caught up in a day of markets turmoil that saw similar drops on both MICEX and RTS Russian exchanges.

“We think that in the current environment of high economic uncertainty, Uralkali’s low leverage, strong cash flow generation and high dividend payment should position its stock as more defensive,” UBS analyst Alexei Morozov said in a note.

Uralkali also said revenue came in at $1.97 billion, ahead of analyst forecasts for $1.95 billion.

Fertiliser demand has grown due to pressure on farmers to produce enough food for a growing world population amid unpredictable weather conditions.

“Despite the volatility on the international commodities markets, the potash market continues to be very resilient, largely due to strong demand,” Baumgertner said.

He told Reuters earlier this month that production capacity would grow to 13 million tonnes next year from 11 million, with the possible new mine still to come from 2018. (Reporting By John Bowker; Editing by Maria Kiselyova and David Cowell)

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