REG-PJSC PhosAgro: PhosAgro 1Q18 EBITDA Grows 13% YoY to RUB 14.3 bn
30/05/2018 11:05
For Immediate Release 30 May 2018
PhosAgro 1Q18 EBITDA Grows 13% YoY to RUB 14.3 bn
Moscow – PhosAgro ("PhosAgro" or the “Company") (Moscow Exchange, LSE:
PHOR), one of the world’s leading vertically integrated phosphate-based
fertilizer producers, today announces its consolidated IFRS financial results
for the three months ended 31 March 2018 (“1Q 2018”).
Revenue in 1Q 2018 increased by 23% year-on-year to RUB 54.6 billion (USD 960
million). EBITDA for 1Q 2018 was RUB 14.3 billion (USD 251 million), advancing
by 13% year-on-year, with an EBITDA margin of 26%. Net income (adjusted for
non-cash FX items)*** in 1Q 2018 increased by 13% year-on-year to RUB 6.3
billion (USD 111 million).
1Q 2018 financial and operational highlights
RUB million or % 1Q 2018 1Q 2017 Chng, % YoY
Revenue 54,622 44,398 23%
EBITDA** 14,293 12,675 13%
EBITDA margin 26% 29% -3pp
Net income 6,878 12,263 -4 4 %
Net income adj* 6,343 5,638 1 3 %
31.03.2018 31.12.2017
Net debt 120,105 119,985
ND/LTM EBITDA 2.27x 2.34x
Sales, 000' mt 1Q 2018 1Q 2017 Chng, % YoY
Phosphate-based 1,753 1,533 14%
Nitrogen-based 652 461 4 1 %
Phosphate rock 956 911 5%
RUB/USD rates: average 1Q 2018: 56.9; average 1Q 2017: 58.8; as of 31 March
2018: 57.3; as of 31 December 2017: 57.6
**EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
* adjusted for non-cash FX items
*** Net Income adjusted calculated as Net Income minus Foreign exchange gain
(net)
PhosAgro CEO Andrey Guryev said: “I am proud of the financial results
PhosAgro has delivered for the first quarter of 2018. I would particularly
underscore the year-on-year improvements in EBITDA and free cash flow
generation, which shareholders have been eagerly awaiting following
management’s successful implementation of our multi-year strategy. We have
grown production organically, kept operating costs under control and completed
major construction projects on time and on budget. These achievements,
combined with a sustainable recovery in phosphate prices and our expectation
of a weaker year-on-year ruble, give us a high degree of confidence that the
Company has passed the bottom in terms of profitability.
“Operationally, PhosAgro is off to a strong start in 2018, with nearly 20%
year-on-year growth in downstream production and a more than 10% year-on-year
rise in upstream output. The impressive growth in our downstream operations
was provided by a nearly 50% year-on-year jump in production of nitrogen
products after the launch of our new granulated urea line in August 2017.
“Our sales strategy, which is based on the principle of moving closer to our
end customers, is also a cornerstone of our long-term strategy. In 1Q 2018
sales volumes increased by more than 20% year-on-year, while sales to our
priority European and Latin American markets advanced by over 60% and nearly
20% year-on-year, respectively. At the same time, we have maintained a focus
on a core principal of our sales strategy, which is to leverage our flexible
business model to maximise our net-back price. We boosted sales to North
America by almost 60% year-on-year as the North American market has become
highly attractive after the idling of Plant City by Mosaic.
“Looking ahead to market conditions in the second half of 2018, we remain
constructive on prices. Our view is based on exceptionally firm import demand
from India after two consecutive increases in phosphoric acid prices, and weak
import numbers in 1Q 2018 in Brazil (MAP imports were down by half
year-on-year), which means additional demand is likely to appear during the
summer ahead of the high season. Taken together, these factors should help the
market to avoid any traditional softening in prices in May-June and to move
into the traditionally strong July-September period, which is the autumn
season for markets like Russia, Europe and North America.”
1Q 2018 market conditions
* The average price of DAP (FOB Tampa) in 1Q 2018 was USD 404 per tonne, which
implies a year-on-year increase of USD 48, or 13%, per tonne.
* The key reasons behind the recovery in phosphate prices were: 1) idling of
Plant City by Mosaic, resulting in a deficit on the North American market and
higher import volumes; 2) a nearly 10% cut in exports from China during the
domestic market’s high season; and 3) lower shipments from Morocco as a
result of bad weather conditions.
* The average price of urea (FOB Baltic) in 1Q 2018 was USD 226 per tonne vs.
USD 238 per tonne in 1Q 2017. The price decrease was due to cold spring
weather conditions in Europe and North America, which delayed the beginning of
seasonal demand.
Financial performance
Revenue in 1Q 2018 was up by 23% year-on-year to RUB 54.6 billion (USD 960
million), primarily driven by 21% year-on-year growth in the sales of
fertilizers and MCP and a 13% year-on-year increase in the average realised
price (in USD terms) for MAP/DAP/NPK/NPS products. These were partially
balanced on the negative side by further RUB strengthening against USD of 3%
year-on-year as well as a 13% year-on-year decrease in realised USD prices for
phosphate rock.
A more detailed revenue breakdown by key products is presented below.
Revenue breakdown by key products
RUB million 1Q 2018 1Q 2017 Chng, % YoY
DAP/MAP 18,631 15,151 23%
NPK(S) 10,880 7,888 38%
PhosRock 4,862 5,750 -15%
Nitrogen-based products 9,555 6,134 56%
Gross profit was RUB 22.6 billion (USD 397 million) in 1Q 2018, up by 13%
year-on-year, with the gross profit margin declining to 41%, versus 45% in 1Q
2017. Gross profit and margin performance for the phosphate-based and
nitrogen-based segments in 1Q 2018 were as follows:
* The phosphate-based segment saw a 2% year-on-year increase in gross profit
to RUB 17.3 billion (USD 303 million), while the gross margin decreased to
41%, from 47% in 1Q 2017.
* Gross profit for the nitrogen-based segment was up by 74% year-on-year to
RUB 5.0 billion (USD 88 million). The gross margin for the segment increased
to 52%, from 46% in 1Q 2017.
EBITDA increased by 13% year-on-year in 1Q 2018 to RUB 14.3 billion (USD 251
million), while the EBITDA margin declined to 26% from 29% in 1Q 2017. Net
profit (adjusted for non-cash FX items)*** amounted to RUB 6.3 billion (USD
111 million) in 1Q 2018, up by 13% year-on-year.
The RUB appreciated by 3% year-on-year against the USD during the quarter (the
average RUB/USD exchange rates for 1Q 2018 and 1Q 2017 were RUB 56.9 and RUB
58.8, respectively), which had a net negative impact, as prices for most of
the Company’s products are denominated in USD, while costs are primarily
RUB-based. The appreciation of the RUB as of 31 March 2018 (RUB 57.26 per USD)
compared to 31 December 2017 (RUB 57.60 per USD) resulted in an FX gain of RUB
0.5 billion (vs. a RUB 6.6 billion gain in 1Q 2017).
Cash flow from operating activities in 1Q 2018 increased by 49% year-on-year
to RUB 10.4 billion (USD 183 million), mainly driven by lower income tax and
interest payments.
Gross debt (including finance lease liabilities) as of 31 March 2018 increased
marginally by 1% quarter-on-quarter to RUB 124 billion (USD 2.2 billion).
Nonetheless, net debt as of 31 March 2018 remained flat in comparison to
end-December 2017, at RUB 120 billion (USD 2.1 billion), representing a net
debt/LTM EBITDA ratio of 2.27x, versus 2.34x as of 31 December 2017.
Cost of Sales
RUB million 1Q 2018 1Q 2017 Chng, % YoY
Materials and services 8,805 7,008 26%
D&A 4,754 2,801 70%
Natural gas 3,497 1,937 81%
Salaries and social contributions 3,201 2,873 11%
Sulphur and sulph. acid 2,878 1,178 144%
Potash 2,272 1,444 57%
Fertilisers and other products for resale 1,862 1,647 13%
Electricity 1,427 1,418 1%
Ammonium sulphate 1,099 735 50%
Ammonia 1,091 2,168 -50%
Fuel 999 940 6%
Heating energy 169 268 -37%
Total 32,054 24,417 31%
Cost of goods sold grew by 31% year-on-year in 1Q 2018 to RUB 32.1 billion
(USD 564 million). The key factors behind the growth were as follows:
* Spending on materials and services grew by 26% year-on-year to RUB 8.8
billion (USD 155 million), mainly driven by 19% year-on-year growth in overall
fertilizer production and 6% year-on-year PPI inflation.
* D&A reached RUB 4.8 billion (USD 84 million), up 70% year-on-year, due to
the commissioning of the new ammonia and urea units.
* Spending on natural gas increased by 81% year-on-year to RUB 3.5 billion
(USD 61 million), mainly due to nearly 80% year-on-year growth in ammonia
production after the launch of PhosAgro’s new ammonia unit, where natural
gas is the main feedstock.
* Salaries were up by 11% year-on-year to RUB 3.2 billion (USD 56 million),
mainly due to a higher headcount at the Kirovsk branch of Apatit.
* Spending on sulphur and sulphuric acid was up by 144% year-on-year to RUB
2.9 billion (USD 51 million). The key reason for this was a more than doubling
of RUB-denominated prices (in sulphur equivalent) and 12% year-on-year growth
in production of phosphate-based fertilizers.
* Expenses on potash purchases came to RUB 2.3 billion (USD 40 million), up by
57% year-on-year, mainly driven by 26% growth in purchased volumes as a result
of an increase in production of NPK and by a 13% increase in RUB-denominated
prices.
* The 50% year-on-year decrease in spending on purchased ammonia, to RUB 1.1
billion (USD 19 million), was mainly due to a 50% year-on-year decrease in
purchase volumes after the launch of PhosAgro’s new ammonia unit.
* Spending on ammonium sulphate increased by 50% year-on-year to RUB 1.1
billion (USD 19 million), primarily as a result of 22% growth in consumption
(on the back of higher NPK and NPS production) and 4% growth in average
RUB-denominated prices.
Administrative expenses decreased by 4% year-on-year to RUB 3.6 billion (USD
64 million) in 1Q 2018, primarily due to an 18% year-on-year decrease in
personnel costs to RUB 2.0 billion (USD 36 million) on the back of lower bonus
payments
In 1Q 2018 selling expenses increased by 48% year-on-year to RUB 8.3 billion
(USD 145 million). The main factors behind the growth were: 1) freight, port
and stevedoring expenses grew by 68% year-on-year to RUB 4.1 billion (USD 73
million) primarily due to a 24% year-on-year increase in export sales of
phosphate rock and fertilizers, as well as growth in shipping rates and
changes in incoterms (more CFR sales); 2) spending on transportation grew by
19% year-on-year to RUB 2.8 billion (USD 50 million), driven by the 16%
year-on-year growth in overall sales and the indexation in railroad tariffs.
Capital expenditure for 1Q 2018 came in at RUB 8.9 billion (USD 157 million),
flat year-on-year. Capital expenditures were primarily focused on the further
development of the upstream business, as well as modernisation of the
phosphate business and construction of new sulphuric and nitric acid plants.
Outlook
Market outlook
* Imports of phosphates to India are expected to reach 5.0-5.5 million tonnes
of DAP in 2018, implying a 25%+ year-on-year increase over the 4.0 million
tonnes imported in 2017. The growth in imports is being driven by the increase
in phosphoric acid prices, which currently stand at USD 730 per tonne of
P(2)O(5), or USD 150 higher than a year ago, making Indian domestic production
loss-making.
* PhosAgro expects to see typically high activity in 2Q and 3Q in the domestic
Russian market, as well as postponed demand in Latin America driven by the
artificial cut in import to Brazil in 1Q 2018.
* Rising competition and the ramping-up new capacities from Maaden 2 and the
final fourth unit of OCP are the main factors that could limit the further
upward trend in phosphate prices.
* Stable prices for the main phosphate products means demand and prices for
sulphur are due to firm.
Conference call and webcast
PhosAgro will hold a conference call and webcast today at 14:30 London time
(16:30 Moscow; 09:30 New York).
The call will be held in English, with simultaneous translation into Russian
on a separate line.
Webcast links:
English:
http://event.onlineseminarsolutions.com/wcc/r/1679371-1/48997544507D22B55F037772E08AF95B?partnerref=rss-events
Russian:
http://event.onlineseminarsolutions.com/wcc/r/1679393-1/9CF8DC84B49481BE021D474D23B52BEF?partnerref=rss-events
Participant dial-in numbers:
Russian Federation +7 495 221 6523
Russian Federation 8 10 8002 041 4011
United Kingdom +44 203 043 2440
United Kingdom 0808 238 1774
United States 1 877 887 4163
Conference ID numbers:
English call: 67573894#
Russian call: 37002369#
For further information please contact:
PhosAgro
Alexander Seleznev, Head of Investor Relations Department
+7 495 232 9689 ext 2187
ir@phosagro.ru
Timur Belov, Press Officer
Anastacia Basos, Deputy Press Secretary
+7 495 232 9689
EM
Sam VanDerlip
vanderlip@em-comms.com
+44 7554 993 032
+7 499 918 3134
PhosAgro (www.phosagro.ru) is one of the world’s leading vertically
integrated phosphate-based fertilizer producers in terms of production volumes
of phosphate-based fertilizers and high-grade phosphate rock with a P(2)O(5)
content of not less than 39% (according to IFA, Fertecon and CRU).
PhosAgro’s main products include phosphate rock, 39 grades of fertilizers,
feed phosphates, ammonia, and sodium tripolyphosphate, which are used by
customers in 100 countries spanning all of the world’s inhabited continents.
The Company’s priority markets outside of Russia and the CIS are Latin
America, Europe and Asia.
PhosAgro’s shares are traded on the Moscow Exchange, and global depositary
receipts (“GDRs”) for shares trade on the London Stock Exchange (under the
ticker PHOR). Since 1 June 2016, the Company’s GDRs have been included in
the MSCI Russia and MSCI Emerging Markets indexes.
Three months ended 31 March
2018 2017
RUB million RUB million
Revenues 54,622 44,398
Cost of sales (32,054) (24,417)
Gross profit 22,568 19,981
Administrative expenses (3,643) (3,787)
Selling expenses (8,260) (5,588)
Taxes, other than income tax (887) (627)
Other expenses, net (692) (421)
Operating profit 9,086 9,558
Finance income 99 192
Finance costs (1,229) (1,061)
Foreign exchange gain, net 535 6,625
Share of profit of associates 87 125
Profit before tax 8,578 15,439
Income tax expense (1,700) (3,176)
Profit for the period 6,878 12,263
Attributable to:
Non-controlling interests ^ 16 3
Shareholders of the Parent 6,862 12,260
Other comprehensive income
Items that will never be reclassified to profit or loss
Actuarial gains and losses, net of tax - -
Items that may be reclassified subsequently to profit or loss
Foreign currency translation difference 342 (864)
Other comprehensive income/(loss) for the period 342 (864)
Total comprehensive income for the period 7,220 11,399
Attributable to:
Non-controlling interests ^ 16 3
Shareholders of the Parent 7,204 11,396
Basic and diluted earnings per share (in RUB) 53 95
31 March 2018 31 December 2017
RUB million RUB million
Assets
Property, plant and equipment 176,635 175,113
Advances issued for property, plant and equipment 3,180 2,334
Intangible assets 1,810 1,773
Investments in associates 960 969
Deferred tax assets 5,543 5,371
Other non-current assets 1,910 1,955
Non-current assets 190,038 187,515
Other current investments 385 352
Inventories 26,132 27,345
Trade and other receivables 35,215 33,727
Cash and cash equivalents 3,879 2,691
Current assets 65,611 64,115
Total assets 255,649 251,630
Equity
Share capital 372 372
Share premium 7,494 7,494
Retained earnings 89,622 85,480
Other reserves 5,109 4,767
Equity attributable to shareholders of the Parent 102,597 98,113
Equity attributable to non-controlling interests 145 129
Total equity 102,742 98,242
Liabilities
Loans and borrowings 104,810 76,530
Finance lease liabilities 848 1,004
Defined benefit obligations 942 950
Deferred tax liabilities 8,552 7,914
Non-current liabilities 115,152 86,398
Loans and borrowings 17,392 44,025
Finance lease liabilities 934 1,117
Trade and other payables 19,429 21,848
Current liabilities 37,755 66,990
Total equity and liabilities 255,649 251,630
Three months ended 31 March
2018 2017
RUB million RUB million
Cash flows from operating activities
Profit before tax 8,578 15,439
Adjustments for:
Depreciation and amortisation 5,207 3,117
Loss on disposal of property, plant and equipment and intangible assets 127 575
Finance income (99) (192)
Finance costs 1,229 1,061
Share of profit of associates (87) (125)
Foreign exchange gain, net (575) (6,673)
Operating profit before changes in working capital and provisions 14,380 13,202
Decrease in inventories 1,161 153
(Increase)/Decrease in trade and other receivables (1,990) 2,523
Decrease in trade and other payables (1,516) (4,900)
Cash flows from operations before income taxes and interest paid 12,035 10,978
Income tax paid (616) (2,864)
Finance costs paid (988) (1,107)
Cash flows from operating activities 10,431 7,007
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (8,954) (8,949)
Repayment of loans issued, net 15 115
Proceeds from disposal of property, plant and equipment 3 26
Finance income received 46 70
Other payments (213) -
Disposal of investments, net - 245
Cash flows used in investing activities (9,103) (8,493)
Cash flows from financing activities
Proceeds from borrowings 43,164 18,470
Repayment of borrowings (41,961) (8,056)
Dividends paid to shareholders of the Parent (1,563) (5,051)
Finance leases paid (371) (483)
Other proceeds - 63
Cash flows (used in)/from financing activities (731) 4,943
Net increase in cash and cash equivalents 597 3,457
Cash and cash equivalents at 1 January 2,691 7,261
Effect of exchange rates fluctuations 591 (514)
Cash and cash equivalents at 31 March 3,879 10,204
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