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REG-PJSC PhosAgro: PhosAgro 2Q18 EBITDA Grows 53% YoY to RUB 18.7 bn

For Immediate Release   23 August 2018 

PhosAgro 2Q18 EBITDA Grows 53% YoY to RUB 18.7 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 interim condensed consolidated IFRS
financial results for the three months (2Q) and six months (1H) ended 30 June
2018.

Revenue grew by 27% year-on-year in 2Q 2018 to RUB 56.6 billion (USD 916
million). EBITDA for the second quarter amounted to RUB 18.7 billion (USD 302
million), with PhosAgro’s EBITDA margin expanding to 33% in 2Q 2018 from 27%
in 2Q 2017. Net income (adjusted for non-cash FX items) for 2Q 2018 jumped by
91% year-on-year to RUB 11.6 billion (USD 188 million), bringing 1H 2018
adjusted net income to RUB 18 billion (USD 303 million).

2Q 2018 financial and operational highlights

 RUB million or %    2Q 2018      2Q 2017    Chng, %YoY  1H 2018   1H 2017  Chng, %YoY  
 Revenue              56,626       44,723        27%     111,248   89,121       25%     
 EBITDA*              18,674       12,212        53%      32,967   24,887       32%     
 EBITDA margin         33%          27%         6 pp       30%       28%       2 pp     
 Net income           2,955        1,469        101%      9,833    13,732      -28%     
 Net income adj**     11,627       6,081         91%      17,970   11,719       53%     
                   30.06.201 8  31 .12.2017                                             
 Net debt            122,910      119,985                                               
 ND/LTM EBITDA        2.07x        2.34x                                                
 Sales, 000' mt      2Q 2018      2Q 2017    Chng, %YoY  1H 2018  1H 2 017  Chng, %YoY  
 Phosphate-based      1,646        1,637         1%       3,399     3,170       7%      
 Nitrogen-based        600          435          38%      1,267      896        41%     
 Phosphate rock        733          657          12%      1,424     1,344       6%      

RUB/USD rates: average 2Q 2018: 61.8; average 2Q 2017: 57.2; as of 30 June
2018: 62.8; as of 31 December 2017: 57.6
** EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
** Net Income adjusted calculated as Net Income minus Foreign exchange gain
(net)
 

PhosAgro CEO Andrey Guryev said: “We have been able to significantly
strengthen our financial performance by delivering on PhosAgro’s
carefully-chosen long-term development strategy, which includes a focus on
organic production growth and vertical integration, constant control
over operating costs, and completion of large-scale investment projects on
time and on budget at a time when the first signs of price recovery have begun
to emerge. With a 50% increase in EBITDA, doubling of net income and a
reduction in our leverage, we continue to strictly adhere to our dividend
policy (the size of the dividend recommended by the Board of Directors nearly
doubled year-on-year) while maintaining investments at the level required to
further advance our development.

“As part of our long-term strategy, PhosAgro has spent up to 50-60% of
EBITDA on investments into its Russian assets over the past five years. In
addition to nearly double-digit growth in production output, this has allowed
us to maintain our industry leadership in terms of cash cost of production,
and to weather a period of consistently low prices and trade
restrictions—both embargoes and duties—with minimal impact on our
financial stability. In an extremely volatile macroeconomic situation, the
predictability and stability of fiscal policy remains a fundamental factor in
making investment decisions, especially taking into account the long period
required to earn a return on investments and our status as a public company
with a significant share of foreign minority shareholders.

“In terms of the medium-term outlook, we believe that the positive trend in
prices is sustainable, as is PhosAgro’s return to mid-cycle profitability
levels, enabling us to balance the volume of new investments to ensure stable
high growth rates while offering existing and new shareholders profitability
on par with our top peers in Russia and abroad.”

2Q 2018 market conditions
* The average price of DAP (FOB Tampa) in 2Q 2018 was USD 410 per tonne, which
implies a year-on-year increase of USD 54, or 15%, per tonne.
* The key drivers of 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) robust import demand in India due to loss-making domestic
production of DAP 3) slower than expected ramp up of new units in Saudi Arabia
and Morocco. 
* The average price of urea (FOB Baltic) in 2Q 2018 was USD 223 per tonne vs.
USD 191 per tonne in 2Q 2017. The price increase was driven by further cuts in
urea exports from China, growing cash costs for nitrogen producers in Europe
(due to higher gas prices) and expectations of lower export from Iran once
sanctions are fully back in force.
Financial performance

In 2Q 2018 revenue increased by 27% year-on-year to RUB 56.6 billion (USD 916
million) on the back of doubling in revenues from DAP and urea sales, which
was partially offset by a 19% year-on-year drop in MAP revenue (overall
company’s MAP sales declined by 35% year-on-year due to lower demand in
Brazil). The weighted average revenue per tonne (in RUB) for DAP/MAP, NPK and
Urea increased by 25%, 20% and 23% year-on-year, respectively.  

Comparing export and domestic markets, the Company managed to increase export
revenue by 38% year-on-year due to an increase in overall volumes (up by 13%
year-on-year) and an increase in RUB-denominated prices (up by 23%
year-on-year), while domestic revenue remained almost flat, growing by 5%
year-on-year.

A detailed revenue breakdown by key products is presented below:

Revenue by key products

 RUB million     2Q 2018  2Q 2017  Chng, % YoY  1H 2018  1H 2017  Chng, % YoY  
 DAP/MAP          18,884   15,883      19%       37,514   31,035      21%      
 NPK(S)           14,651   11,534      27%       27,764   21,216      31%      
 PhosRock         5,491    5,045        9%       10,354   10,795      -4%      
 Nitrogen-based   9,082    5,342       70%       18,637   11,476      62%      

In 2Q 2018 gross profit increased by 37% year-on-year to RUB 26.8 billion (USD
433 million), with gross profit margin expanding to 47% from 44% in 2Q 2017.
Gross profit and margin performance for the phosphate and nitrogen segments
were as follows:
* The phosphate segment saw a 24% year-on-year increase in gross profit to RUB
22.0 billion (USD 356 million), with a gross margin of 48%, compared to 47% in
2Q 2017.
* Gross profit for the nitrogen segment almost tripled year-on-year to RUB 4.7
billion (USD 76 million). Gross margin for the segment jumped by 22 p.p.
year-on-year to 52%.
EBITDA in 2Q 2018 amounted to RUB 18.7 billion (USD 302 million), up by 53%
year-on-year, while EBITDA margin expanded to 33% from 27% in 2Q 2017. Net
profit adjusted for non-cash FX items amounted to RUB 11.6 billion (USD 188
million) in 2Q 2018, up by 91% year-on-year.

The RUB depreciated by 8% year-on-year against the USD during the quarter (the
average RUB/USD exchange rates for 2Q 2018 and 2Q 2017 were RUB 61.8 and RUB
57.2 respectively), which had a net positive impact, as prices for most of the
Company’s products are denominated in USD, while costs are primarily
RUB-based. The depreciation of the RUB as of 30 June 2018 (RUB 62.8 per USD)
compared to 31 March 2018 (RUB 57.3 per USD) resulted in an FX loss of RUB 8.7
billion (vs. a RUB 4.6 billion loss in 2Q 2017).

Net operating cash flow in 2Q 2018 increased by 74% year-on-year to RUB 16.1
billion (USD 260 million) primarily driven by the growth in profitability.
Free cash flow in the second quarter was positive at RUB 8.4 billion (USD 136
million).

Capital expenditure in 2Q 2018 was RUB 7.6 billion (USD 124 million), up by
29% year-on-year primarily due to the low base effect (in 2017 some capex
payments were postponed until the second half). The main capex spending was on
scheduled maintenance and development of the upstream business, as well as on
construction of new sulphuric and nitric acid plants.

As of the end of June 2018, net debt totalled RUB 122.9 billion (USD 1.96
billion), representing a decrease in the net debt/LTM EBITDA ratio to 2.07x
thanks to positive dynamics in EBITDA performance.

Cost of Sales

 RUB million              2Q 2018  2Q 2017  Chng, % YoY  1H 2018  1H 2017  Chng, % YoY  
 Materials and services    9,110    7,739       18%       17,915   14,736      22%      
 D&A                       4,882    3,072       59%       9,636    5,873       64%      
 Natural gas               3,221    1,967       64%       6,718    3,904       72%      
 Salaries                  3,174    2,703       17%       6,375    5,576       14%      
 Sulphur and sulph. acid   2,296    1,594       44%       5,174    2,772       87%      
 Potash                    2,284    2,295        0%       4,556    3,739       22%      
 Fertilisers for resale    1,169    1,031       13%       3,031    2,678       13%      
 Electricity               1,441    1,307       10%       2,868    2,725        5%      
 Ammonium sulphate          500      285        75%       1,599    1,020       57%      
 Ammonia                    715     2,196       -67%      1,806    4,364       -59%     
 Fuel                       889      805        10%       1,888    1,756        8%      
 Heating energy             163      150         9%        332      418        -21%     
 Total                     29,844   25,144      19%       61,898   49,561      25%      

Cost of sales grew by 19% year-on-year in 2Q 2018 to RUB 29.8 billion (USD 483
million). The key factors behind the growth were:
* Materials and services grew by 18% year-on-year to RUB 9.1 billion (USD 147
million) mainly driven by an 8.5% year-on-year increase in PPI and 9.2% growth
in overall fertilizer production;
* Depreciation rose by 59% year-on-year to RUB 4.9 billion (USD 79 million) as
a result of the commissioning of new ammonia and urea facilities in 3Q 2017
and modernisation of ANOF-3;
* Costs for natural gas were up by 64% year-on-year to RUB 3.2 billion (USD 52
million) on the back of 60% year-on-year growth in ammonia production, where
gas is the main feedstock;
* Salaries and social contributions increased by 17% year-on-year to RUB 3.2
billion (USD 51 million), due to an increase in headcount and growth in
average salary;
* Sulphur and sulphuric acid costs increased by 44% year-on-year to RUB 2.3
billion (USD 37 million) on the back of a 52% year-on-year increase in the
average realised sulphur price (sulphur equivalent);
* Electricity costs rose by 10% year-on-year to RUB 1.4 billion (USD 23
million) on the back of a 13% growth in purchase prices, which was partially
offset by lower consumption;
* Ammonium sulphate costs were up by 75% year-on-year to RUB 0.5 billion (USD
8 million) due to more than doubling NPS production volumes year-on-year;
* Costs for ammonia decreased by 67% year-on-year to RUB 0.7 billion (USD 12
million) thanks to the ramp up of PhosAgro’s new ammonia line and the
ensuing substantial decrease in purchased volumes.
Administrative expenses for 2Q 2018 grew by 5% year-on-year to RUB 3.4 billion
(USD 54 million) due to an increase in personnel costs to RUB 2.0 billion (USD
32 million).

In 2Q 2018, selling expenses increased by 36% year-on-year to RUB 8.7 billion
(USD 140 million). The main factors behind this growth were: 1) freight, port
and stevedoring expenses rose by 76% year-on-year to RUB 4.4 billion (USD 71
million) primarily due to a 27% year-on-year increase in export sales of
fertilizers shipped by sea, as well as 18% growth in shipping rates and
changes in incoterms (more CFR sales) combined with RUB devaluation; 2)
spending on transportation grew by 8% year-on-year to RUB 2.6 billion (USD 43
million), driven by the 10% year-on-year growth in overall volumes.

Outlook

Market outlook
* The demand outlook remains firm on the back of: * Healthy imports of
phosphates to India, which are expected to reach 5.5 million tonnes of DAP in
2018/19, despite the current weakness in the rupee;
* Seasonal growth in demand for DAP/MAP in Europe, US and Africa (Ethiopia);
* More activity from Brazil as a result of the favourable price environment
for soybeans (growth in demand from China) and the lag in buying activity in
2018 (10-30% year-on-year decrease);
* The start of the high season in China in October-December, when local
producers will turn their focus to the domestic market.

* At the same time, rising competition and the ramp-up of new capacities from
Ma’aden 2 and the final, fourth unit at OCP are the main factors that could
limit further upward movement in phosphate prices.   
* According to IFA, global fertilizer consumption between 2018/19 and 2022/23
is due to rise with a CAGR of 2.0-2.5%. The growth in consumption of
phosphates and potash (excluding China) is forecast to outperform growth in
nitrogen fertilizer use.
Conference call and webcast

PhosAgro will hold a conference call and webcast today at 14:00 London time
(16:00 Moscow; 09:00 New York).

The call will be held in English, with simultaneous translation into Russian
on a separate line.

Webcast links:

English:
https://event.onlineseminarsolutions.com/eventRegistration/EventLobbyServlet?target=registration.jsp&partnerref=rss-events&eventid=1819200&sessionid=1&key=6A0AC5F2EEB4465220F594CECC5EC927®Tag=&sourcepage=register

Russian:
https://event.onlineseminarsolutions.com/eventRegistration/EventLobbyServlet?target=registration.jsp&partnerref=rss-events&eventid=1819203&sessionid=1&key=A141320F8C96EF2C65B82A91CF21578F®Tag=&sourcepage=register

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: 82882668#
Russian call: 30905574#
 

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 P2O5
content of 39% and higher (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.

PJSC “PhosAgro” Consolidated Interim Condensed Statements of Profit or
Loss and Other Comprehensive Income for the three and six months ended 30 June
2018 (unaudited)

                                                                        Six months ended 30 June              Three months ended 30 June      
                                                                      2018                    2017           2018                    2017     
                                                                  RUB million             RUB million    RUB million             RUB million  
 Revenues                                                              111,248                  89,121         56,626                  44,723 
 Cost of sales                                                        (61,898)                (49,561)       (29,844)                (25,144) 
 Gross profit                                                           49,350                  39,560         26,782                  19,579 
                                                                                                                                              
 Administrative expenses                                               (7,011)                 (7,005)        (3,368)                 (3,218) 
 Selling expenses                                                     (16,910)                (11,951)        (8,650)                 (6,363) 
 Taxes, other than income tax                                          (1,805)                 (1,230)          (918)                   (603) 
 Other expenses, net                                                   (1,254)                 (1,058)          (562)                   (637) 
 Operating profit                                                       22,370                  18,316         13,284                   8,758 
                                                                                                                                              
 Finance income                                                            123                     274             51                      84 
 Finance costs                                                         (2,445)                 (2,237)        (1,243)                 (1,178) 
 Foreign exchange (loss)/gain                                          (8,137)                   2,013        (8,672)                 (4,612) 
 Share of profit/(loss) of associates                                       84                     151            (3)                      26 
 Profit before tax                                                      11,995                  18,517          3,417                   3,078 
                                                                                                                                              
 Income tax expense                                                    (2,162)                 (4,785)          (462)                 (1,609) 
 Profit for the period                                                   9,833                  13,732          2,955                   1,469 
                                                                                                                                              
 Attributable to:                                                                                                                             
 Non-controlling interests ^                                                25                     (2)              9                     (5) 
 Shareholders of the Parent                                              9,808                  13,734          2,946                   1,474 
                                                                                                                                              
 Other comprehensive income                                                                                                                   
 Items that may be reclassified subsequently to profit or loss                                                                                
 Foreign currency translation difference                                 1,438                   (429)          1,096                     435 
 Other comprehensive income/(loss) for the period                        1,438                   (429)          1,096                     435 
 Total comprehensive income for the period                              11,271                  13,303          4,051                   1,904 
                                                                                                                                              
 Attributable to:                                                                                                                             
 Non-controlling interests ^                                                25                     (2)              9                     (5) 
 Shareholders of the Parent                                             11,246                  13,305          4,042                   1,909 
 Basic and diluted earnings per share (in RUB)                              76                     106             23                      11 

   PJSC “PhosAgro” Consolidated Interim Condensed Statement of Financial
Position as at 30 June 2018 (unaudited)

                                                        30 June 2018    31 December 2017  
                                                         RUB million       RUB million    
 Assets                                                                                   
 Property, plant and equipment                                178,354             175,113 
 Advances issued for property, plant and equipment              3,701               2,334 
 Intangible assets                                              1,865               1,773 
 Investments in associates                                        958                 969 
 Deferred tax assets                                            7,244               5,371 
 Other non-current assets                                       1,878               1,955 
 Non-current assets                                           194,000             187,515 
                                                                                          
 Other current investments                                        389                 352 
 Inventories                                                   27,397              27,345 
 Trade and other receivables                                   36,005              33,727 
 Cash and cash equivalents                                      3,460               2,691 
 Current assets                                                67,251              64,115 
 Total assets                                                 261,251             251,630 
                                                                                          
 Equity                                                                                   
 Share capital                                                    372                 372 
 Share premium                                                  7,494               7,494 
 Retained earnings                                             90,626              85,480 
 Other reserves                                                 6,205               4,767 
 Equity attributable to shareholders of the Parent            104,697              98,113 
 Equity attributable to non-controlling interests                 154                 129 
 Total equity                                                 104,851              98,242 
                                                                                          
 Liabilities                                                                              
 Loans and borrowings                                         112,688              76,530 
 Finance lease liabilities                                        694               1,004 
 Defined benefit obligations                                      941                 950 
 Deferred tax liabilities                                       8,496               7,914 
 Non-current liabilities                                      122,819              86,398 
                                                                                          
 Loans and borrowings                                          12,078              44,025 
 Finance lease liabilities                                        910               1,117 
 Trade and other payables                                      20,593              21,848 
 Current liabilities                                           33,581              66,990 
 Total equity and liabilities                                 261,251             251,630 

   PJSC “PhosAgro” Consolidated Interim Condensed Statement of Cash
Flows for the six months ended 30 June 2018 (unaudited)

                                                                                    Six months ended 30 June       
                                                                                  2018                    2017     
                                                                              RUB million             RUB million  
 Cash flows from operating activities                                                                              
 Profit before tax                                                                  11,995                  18,517 
 Adjustments for:                                                                                                  
 Depreciation and amortisation                                                      10,597                   6,571 
 Loss on disposal of property, plant and equipment and intangible assets               281                     754 
 Finance income                                                                      (123)                   (261) 
 Finance costs                                                                       2,445                   2,224 
 Share of profit of associates                                                        (84)                   (151) 
 Foreign exchange loss/(gain)                                                        8,137                 (1,784) 
 Operating profit before changes in working capital and provisions                  33,248                  25,870 
 Decrease/(increase) in inventories                                                    290                 (2,937) 
 (Increase)/decrease in trade and other receivables                                (1,859)                   1,891 
 Decrease in trade and other payables                                                (434)                 (1,415) 
 Cash flows from operations before income taxes and interest paid                   31,245                  23,409 
 Income tax paid                                                                   (1,959)                 (5,061) 
 Finance costs paid                                                                (2,757)                 (2,085) 
 Cash flows from operating activities                                               26,529               16, 2 6 3 
                                                                                                                   
 Cash flows from investing activities                                                                              
 Acquisition of property, plant and equipment and intangible assets               (16,596)                (14,889) 
 Repayment of loans issued, net                                                         90                     107 
 Proceeds from disposal of property, plant and equipment                                13                      77 
 Finance income received                                                                79                     120 
 Other payments                                                                      (418)                       - 
 Disposal of investments, net                                                            -                     422 
 Cash flows used in investing activities                                        (16 , 832)              (14 , 163) 
                                                                                                                   
 Cash flows from financing activities                                                                              
 Proceeds from borrowings                                                           61,618                  51,546 
 Repayment of borrowings                                                          (67,163)                (42,017) 
 Dividends paid to shareholders of the Parent                                      (3,836)                 (8,936) 
 Dividends paid to non-controlling interests                                             -                     (5) 
 Finance leases paid                                                                 (496)                   (730) 
 Cash flows used in financing activities                                           (9,877)                   (142) 
 Net (decrease)/increase in cash and cash equivalents                                (180)                 1 , 958 
 Cash and cash equivalents at 1 January                                              2,691                   7,261 
 Effect of exchange rates fluctuations                                                 949                     232 
 Cash and cash equivalents at 30 June                                                3,460                   9,451 



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