REG-PJSC PhosAgro: PhosAgro reports 2Q17 EBITDA of RUB 12.2 billion <Origin Href="QuoteRef">PHOR.MM</Origin>
24/08/2017 10:35
For Immediate Release 24 August 2017
PhosAgro reports EBITDA of RUB 12.2 billion for 2Q17 and RUB 24.9 billion for
1H17
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 and six months ended 30 June 2017.
Revenue in 2Q 2017 decreased by 3% year-on-year to RUB 44.7 billion (USD 783
mln), resulting in RUB 89.1 billion (USD 1.54 billion) revenue for the first
half of the year. EBITDA for 2Q 2017 was RUB 12.2 billion (USD 214 mln), with
an EBITDA margin of 27%. EBITDA for 1H 2017 was RUB 24.9 billion (USD 429
mln). Net income (adjusted for non-cash FX items) for 2Q 2017 decreased by 33%
year-on-year to RUB 6.1 billion (USD 106 mln), bringing adjusted net income
for 1H 2017 to RUB 11.7 billion (USD 202 mln).
2Q and 1H 2017 financial and operational highlights
RUB mln or % 2Q 2017 2Q 2016 Chng, %YoY 1H 2017 1H 2016 Chng, %YoY
Revenue 44,723 45,976 -3% 89,121 102,049 -13%
EBITDA* 12,212 16,306 -25% 24,887 41,555 -40%
EBITDA margin 27% 35% -8 pp 28% 41% -13 pp
Net income 1,469 13,483 -89% 13,732 36,114 -62%
Net income adj* 6,081 9,071 -33% 11,719 24,835 -53%
30-06-2017 31-12-2016
Net debt 109,964 105,115
ND/LTM EBITDA 2.0x 1.5x
Sales, 000' mt 2Q 2017 2Q 2016 Chng, %YoY 1H 2017 1H 2016 Chng, %YoY
Phosphate-based 1,638 1,447 13% 3,174 2,853 11%
Nitrogen-based 435 357 22% 896 787 14%
Phosphate rock 657 594 11% 1,344 1,226 10%
RUB/USD rates: average 2Q 2017:57.15; average 2Q 2016: 65.89; as of 30 June
2017: 59.09; as of 31 December 2016: 60.66
*EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
* - adjusted for non-cash FX items
Commenting on the results, PhosAgro CEO Andrey Guryev said:
“I am very pleased that PhosAgro has maintained EBITDA almost unchanged
quarter-on-quarter, despite further appreciation of the ruble and some weaking
in phosphate and nitrogen prices in the second quarter. This is primarily
thanks to our fundamental advantages, including production and sales
flexibility and organic growth through debottlenecking and modernisation.
“Our continued focus on cost control (cost of goods sold net of D&A per
tonne of production was down 5% year-on-year) and decrease in capex as we are
completing key projects enabled us to generate RUB 3.6 billion (USD 63 mln) of
free cash flow in the quarter, meaning that the Board was able to recommend
dividends of RUB 8 per GDR.
“In terms of operations, we further increased downstream phosphate-based
fertilizer production by almost 20% year-on-year in 2Q, on the back of
continued modernisation and debottlenecking. Phosphate rock production grew by
more than 18% year-on-year, and we are well on track to deliver on the goals
of our strategy to 2020. Looking at our sales mix, we achieved a 20%
year-on-year increase in sales to the priority Russian market, while more than
doubling volumes to Latin America and recording an 18% year-on-year increase
in sales of phosphates to Europe.
“During the quarter we saw additional pressure on phosphate prices from
higher exports of phosphates from China and the MENA region (in particular as
a result of the commissioning of a new unit in Morocco in March), which
coincided with a delay to the start of the high season in India.
“Looking ahead to the remainder of 2017, as application season comes to an
end in Russia, and Europe and the US are approaching low season, which
together with the ramp up of new capacities in MENA region might put
additional pressure on the prices. However, we may see a further rise in
phosphate prices this year with the onset of the winter season in Brazil and
India and subsequently the spring season in Europe and the US.
“In closing, I want to reiterate that our two key investment projects –
the construction of new ammonia and urea units – are both on schedule and
due to be fully operational in autumn.”
2Q 2017 market conditions
* The average price of DAP (FOB Tampa) in 2Q 2017 was USD 356 per tonne, which
represents a slight 1% year-on-year increase.
* Key factors putting pressure on phosphate prices were 1) a delay to the
start of the high season in India due to lack of certainty around the new tax
system, resulting in a 30% year-on-year decrease in DAP imports to India in 2Q
2017, and 2) the launch of new export-oriented capacities in Morocco and the
expected ramp-up of a new project in Saudi Arabia
* On the positive side, prices were supported by stable demand in Brazil. MAP
imports were 0.7 million tonnes in 2Q (flat year-on-year). Strong volumes at
the beginning of the year led to 1.5 million tonnes of MAP being imported in
1H 2017 (+56% year-on-year). The cumulative import of phosphates
(MAP/DAP/NP/NPK/TSP) in 2Q 2017 (in P(2)O(5) content) grew by 25%
year-on-year.
* Exports of phosphates (DAP/MAP/NP/TSP) from China in 2Q 2017 increased by
20% year-on-year to 2.8 million tonnes thanks to the strong increase in sales
of MAP and NPs.
* The average urea price (FOB Baltic) in 2Q 2017 was USD 191 per tonne vs. USD
196 per tonne in 2Q 2016 and USD 237 per tonne in 1Q 2017. Historically, the
second quarter represents mid-season for the urea market, with low activity in
key import markets.
Financial performance
Revenue in the second quarter decreased by 3% year-on-year to RUB 44.7 billion
(USD 783 mln). Year-on-year growth of 15% in total sales of fertilizers and
MCP was offset by the more than 13% year-on-year appreciation in the average
RUB/USD exchange rate and a 16% year-on-year decrease in the average realized
price for phosphate rock (in USD terms). On the positive side, revenue growth
was supported by a 3% and 5% year-on-year increase in the average price per
tonne (USD denominated) for phosphate and nitrogen-based fertilizers,
respectively. A more detailed revenue breakdown by key products is presented
below.
Revenue breakdown by key products
RUB mln 2Q 2017 2Q 2016 Chng, % YoY 1H 2017 1H 2016 Chng, % YoY
DAP/MAP 15,883 14,842 7% 31,034 34,706 -11%
NPK(S) 11,534 11,730 -2% 21,216 24,523 -13%
PhosRock 5,045 6,288 -20% 10,795 14,146 -24%
Nitrogen-based 5,300 4,767 11% 11,420 11,168 2%
Gross profit declined by 17% year-on-year to RUB 19.6 billion (USD 342 mln),
while the gross margin decreased by 7 p.p. year-on-year to 44%. Gross profit
and margin performance for the phosphate-based and nitrogen-based segments
were as follows:
* The phosphate-based segment saw an 16% year-on-year decrease in gross profit
to RUB 17.9 billion (USD 314 mln), with a gross margin of 46%, compared to 52%
in 2Q 2016.
* Gross profit for the nitrogen-based segment decreased by 28% year-on-year to
RUB 1.6 billion (USD 28 mln). Gross margin for the segment fell by 17 p.p.
year-on-year to 30%.
EBITDA decreased by 25% year-on-year to RUB 12.2 billion (USD 214 mln), while
the EBITDA margin declined by 8 p.p. to 27%, compared to 35% the previous
year. Net profit (adjusted for non-cash FX items) dropped by 33% year-on-year
to RUB 6.1 billion (USD 106 mln).
The ruble appreciated by more than 13% year-on-year during the quarter (the
average RUB/USD foreign exchange rates for 2Q 2017 and 2Q 2016 were RUB 57.15
and RUB 65.89, 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. In addition, the depreciation of the ruble as of 30 June
2017 (RUB 59.09 per USD) compared to 31 March 2017 (RUB 56.38 per USD)
resulted in an FX loss of RUB 4.6 billion (RUB 4.4 billion gain in Q2 2016).
Cash flow from operating activities decreased by 16% year-on-year, to RUB 9.3
billion (USD 162 mln), compared to RUB 11.0 billion (USD 168 mln) in 2Q 2016,
predominantly due to lower profitability and less favourable changes in
working capital due increase in inventories and account receivables.
Year-to-date operating cash flow stood at RUB 16.3 billion (USD 280 mln)
Gross debt (including finance lease liabilities) as of 30 June 2017 increased
marginally, by 4% quarter-on-quarter, to RUB 119 billion (USD 2 billion)
primarily due to ruble depreciation in June. Net debt as of 30 June 2017 stood
at RUB 110 billion (USD 1.9 billion). Most of the Company’s debt is
denominated in US dollars and thus is naturally hedged by primarily
USD-denominated sales. The net debt to LTM EBITDA ratio increased to 2.0x as
of 30 June 2017, up from 1.75x as of 31 March 2017.
Cost of Sales
RUB mln 2Q 2017 2Q 2016 Chng, % YoY 1H 2017 1H2016 Chng, % YoY
Materials and services 7,970 6,552 22% 14,771 12,614 17%
Salaries 2,715 3,082 -12% 5,458 5,764 -5%
Ammonia 2,157 1,415 52% 4,419 3,456 28%
Natural gas 1,993 1,996 0% 4,083 4,104 -1%
D&A 3,072 2,169 42% 5,873 4,434 32%
Fertilisers for resale 996 1,201 -17% 2,679 2,800 -4%
Potash 2,360 1,848 28% 3,928 3,664 7%
Fuel 746 508 47% 1,541 1,134 36%
Sulphur and sulphuric acid 1,577 1,457 8% 2,808 3,847 -27%
Electricity 1,332 1,057 26% 2,659 2,159 23%
Ammonium sulphate 275 515 -47% 1,075 1,329 -19%
Heating energy 160 121 32% 405 386 5%
Other items 1 7 -86% 2 9 -78%
Change in stock of WIP -186 407 n/m -116 626 n/m
Total 25,168 22,335 13% 49,585 46,326 7%
Cost of sales grew by 13% year-on-year in 2Q 2017 to RUB 25.2 billion (USD 440
mln). The key factors behind the growth were:
* Spending on materials and services grew by 22% year-on-year to RUB 8.0
billion (USD 140 mln) driven by an 18% year-on-year increase in phosphate rock
processing, 16% growth in overall fertilizer production and 4.2% year-on-year
CPI inflation.
* Spending on salaries decreased by 12% year-on-year to RUB 2.7 billion (USD
48 mln), as 2Q 2016 was affected by one-off factors such as bonuses linked to
the 15th anniversary of PhosAgro.
* A 52% year-on-year increase in spending on purchased ammonia to RUB 2.2
billion (USD 38 mln) was due to a 43% increase in purchase volumes and 6%
increase in RUB-denominated prices. The growth in purchased volumes was driven
by an almost 20% year-on-year increase in phosphate-based fertilizer
production, while processing of own ammonia was flat year-on-year.
* D&A was up significantly by 42% year-on-year to RUB 3.1 billion (USD 54 mln)
due to the commissioning of assets (Main Shaft #2 at Kirovsk mine and
modernization of Beneficiation Plant #3).
* A year-on-year increase in expenditure on potash of 28% to RUB 2.4 billion
(USD 41 mln) due to 53% growth in purchased volumes (thanks to the greater
share of NPKs with high potash content) that was partially offset by a 16%
decrease in RUB-denominated prices.
* Expenditures on sulphur and sulphuric acid were up 8% year-on-year to RUB
1.6 billion (USD 28 mln). The key reason was a 20% increase in purchased
volumes due to growth in production of phosphate-based fertilizers that was
offset by a 10% decrease in RUB-denominated prices.
* Electricity costs increased by 26% year-on-year to RUB 1.3 billion (USD 23
mln) on the back of 12% growth in purchasing from third-parties (resulting
from a 10% increase in extraction of apatite-nepheline ore from underground
mining, where electricity is primarily consumed) and a 13% increase in the
average electricity price.
Administrative expenses decreased by 8% year-on-year to RUB 3.4 billion (USD
60 mln) in 2Q 2017, primarily due to a 17% decrease in personnel costs to RUB
2.0 billion (USD 34 mln). The decrease was mainly due to changes to the bonus
accrual schedule. Since 1 January 2017, the company has been accruing bonuses
on a monthly basis, compared to semi-annually in prior periods.
In 2Q 2017 Selling expenses increased by 29% year-on-year to RUB 6.0 billion
(USD 106 mln). A 31% year-on-year rise in Russian Railways infrastructure
tariff and operators’ fees to RUB 2.4 billion (USD 42 mln) was triggered by
5% increase in the average rail tariff as well as a 20% year-on-year increase
in domestic sales (where the main basis is CPT). Freight, port and stevedoring
expenses grew by 25% year-on-year to RUB 2.8 billion (USD 49 million)
primarily due to a 15% year-on-year increase in export sales of rock and
fertilizers.
Cash spent on capex in 2Q 2017 amounted to RUB 5.9 billion (USD 104 mln), a
decrease of 38% year-on-year. Capital expenditure is primarily focused on
completing the construction of the new 760 ths tonnes/year ammonia plant and
the new 500 ths tonnes/year urea plant at PhosAgro-Cherepovets. Capex for 1H
2017 reached RUB 14.9 billion (USD 257 mln)
Outlook
Market outlook
* According to the IFA, phosphate consumption to 2021 is forecast to increase
at a CAGR of 1.6%. Africa (+4.1%), South Asia (+3.1%) and Latin America
(+2.8%) are expected to be the fastest-growing regions.
* Favourable weather conditions and final certainty on the new tax system
should support DAP consumption in India in 2H 2017. According to Fertecon and
CRU, overall DAP imports in 2017 to India are expected at 4.5-5.3 million
tonnes.
* Closer to 4Q 2017, we expect to see the beginning of the pre-winter season
for DAP/MAP in Europe and US as well as the kick-off of buying activity in
Africa (Ethiopia).
* In August 2017, Ma’aden put into trial mode its new phosphate complex in
Saudi Arabia with cumulative capacity of 3 million tonnes (DAP/MAP/NP/NPK).
The launch of commercial production (expected in September 2017) may put
additional pressure on prices closer to the end of the year.
Company
* All major development projects are on track. The ammonia unit is already
running in trial mode and is expected to be fully operational at the end of 3Q
or beginning of 4Q. The ramp-up of the granulated urea unit is also expected
at the end of 3Q or beginning of 4Q.
Conference call and webcast
PhosAgro will hold a conference call and webcast today at 13:00 London time
(15:00 Moscow; 08:00 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/r.htm?e=1490061&s=1&k=84D305E90D8698E347582A2CBABCE24D
Russian:
http://event.onlineseminarsolutions.com/r.htm?e=1490063&s=1&k=A8FB7C1123BCE42DB95D0100901DA231
Participant dial-in numbers:
Russian Federation +7 4952216523
Russian Federation 8-10-8002-0414011
United Kingdom +44 2030432440
United Kingdom 08082381774
United States 1 8778874163
Conference ID numbers:
English call: 79399835#
Russian call: 63017030#
For further information please contact:
PJSC 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
Tom Blackwell
Blackwell@em-comms.com
+7 919 102 9064
Notes to Editors
PhosAgro is one of the leading global vertically integrated phosphate-based
fertilizer producers. The Company focuses on the production of phosphate-based
fertilizers, feed phosphate and high-grade phosphate rock (P(2)O(5) content of
not less than 39%).
The Company is the largest phosphate-based fertilizer producer in Europe, the
largest producer of high-grade phosphate rock worldwide and the third largest
MAP/DAP producer in the world (excluding China), according to Fertecon.
PhosAgro is also one of the leading producers of feed phosphates (MCP) in
Europe, and the only producer in Russia. It is Russia’s only producer of
nepheline concentrate.
PhosAgro’s main products include phosphate rock, 33 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 six months ended 30 June 2017 (unaudited)
Six months ended 30 June Three months ended 30 June
2017 2016 2017 2016
RUB million RUB million RUB million RUB million
Revenues 89,121 102,049 44,723 45,976
Cost of sales (49,585) (46,326) (25,168) (22,335)
Gross profit 39,536 55,723 19,555 23,641
Administrative expenses (7,211) (6,600) (3,416) (3,697)
Selling expenses (11,542) (10,189) (6,045) (4,688)
Taxes, other than income tax (1,230) (1,072) (603) (555)
Other expenses, net (1,237) (1,354) (733) (882)
Operating profit 18,316 36,508 8,758 13,819
Finance income 261 472 112 308
Finance costs (2,224) (2,556) (1,206) (1,199)
Foreign exchange gain/(loss) 2,013 11,279 (4,612) 4,412
Share of profit of associates 151 65 26 38
Profit before tax 18,517 45,768 3,078 17,378
Income tax expense (4,785) (9,654) (1,609) (3,895)
Profit for the period 13,732 36,114 1,469 13,483
Attributable to:
Non-controlling interests ^ (2) 5 (5) (2)
Shareholders of the Parent 13,734 36,109 1,474 13,485
Other comprehensive income
Items that will never be reclassified to profit or loss
Actuarial gains and losses, net of tax - (18) - (8)
Items that will may be reclassified subsequently to profit or loss
Foreign currency translation difference (429) (1,760) 435 (665)
Other comprehensive (loss)/income for the period (429) (1,778) 435 (673)
Total comprehensive income for the period 13,303 34,336 1,904 12,810
Attributable to:
Non-controlling interests ^ (2) 5 (5) (2)
Shareholders of the Parent 13,305 34,331 1,909 12,812
Basic and diluted earnings per share (in RUB) 106 279 11 104
PJSC “PhosAgro”
Consolidated Interim Condensed Statement of Financial Position
as at 30 June 2017 (unaudited)
30 June 2017 31 December 2016
RUB million RUB million
Assets
Property, plant and equipment 160,834 154,713
Advances issued for property, plant and equipment 4,821 4,684
Intangible assets 1,657 1,165
Investments in associates 775 816
Deferred tax assets 5,440 5,110
Other non-current assets 2,202 2,226
Non-current assets 175, 729 168,714
Other current investments 2,859 3,282
Inventories 22,871 19,934
Trade and other receivables 28,895 30,013
Cash and cash equivalents 9,451 7,261
Current assets 64,076 60,490
Total assets 239,805 229,204
Equity
Share capital 372 372
Share premium 7,494 7,494
Retained earnings 79,730 74,932
Other reserves 5,057 5,486
Equity attributable to shareholders of the Parent 92,653 88,284
Equity attributable to non-controlling interests 130 137
Total equity 92,783 88,421
Liabilities
Loans and borrowings 77,386 96,409
Finance lease liabilities 1,375 1,830
Defined benefit obligations 846 767
Deferred tax liabilities 6,021 4,600
Non-current liabilities 85,628 103,606
Loans and borrowings 39,412 12,457
Finance lease liabilities 1,242 1,680
Trade and other payables 20,740 23,040
Current liabilities 61,394 37,177
Total equity and liabilities 239,805 229,204
PJSC “PhosAgro”
Consolidated Interim Condensed Statement of Cash Flows
for the six months ended 30 June 2017 (unaudited)
Six months ended 30 June
2017 2016
RUB million RUB million
Cash flows from operating activities
Profit before tax 18,517 45,768
Adjustments for:
Depreciation and amortisation 6,571 5,047
Loss on disposal of property, plant and equipment and intangible assets 754 285
Finance income (261) (472)
Finance costs 2,224 2,556
Share of profit of associates (151) (65)
Foreign exchange gain (1,784) (12,607)
Operating profit before changes in working capital and provisions 25,870 40,512
Increase in inventories (2,937) (450)
Decrease in trade and other receivables 1,891 1,835
Decrease in trade and other payables (1,415) (470)
Cash flows from operations before income taxes and interest paid 23,409 41,427
Income tax paid (5,061) (9,088)
Finance costs paid (2,085) (2,801)
Cash flows from operating activities 16, 2 6 3 29,538
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (14,889) (18,302)
Repayment of loans issued, net 107 270
Proceeds from disposal of property, plant and equipment 77 210
Finance income received 120 222
Disposal of investments, net 422 202
Cash flows used in investing activities (14,163) (17,398)
Cash flows from financing activities
Proceeds from borrowings 51,546 14,505
Repayment of borrowings (42,017) (10,248)
Dividends paid to shareholders of the Parent (8,936) (15,540)
Dividends paid to non-controlling interests (5) -
Finance leases paid (730) (1,078)
Proceeds from settlement of derivatives - 26
Other payments - (152)
Cash flows used in financing activities (142) (12,487)
Net increase/(decrease) in cash and cash equivalents 1 , 958 (347)
Cash and cash equivalents at 1 January 7,261 29,347
Effect of exchange rates fluctuations 232 (2,776)
Cash and cash equivalents at 30 June 9,451 26,224
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