REG-PJSC PhosAgro: PhosAgro reports 3Q17 EBITDA of RUB 13.6 billion <Origin Href="QuoteRef">PHOR.MM</Origin>
22/11/2017 10:05
For Immediate Release 22 November 2017
PhosAgro reports 3Q17 EBITDA of RUB 13.6 billion
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 nine months ended 30 September 2017.
Revenue in 3Q 2017 increased by 2% year-on-year to RUB 46.5 billion (USD 787
million), bringing 9M 2017 revenue to RUB 135.6 billion (USD 2.3 billion).
EBITDA for 3Q 2017 was RUB 13.6 billion (USD 231 million), with an EBITDA
margin of 29%. EBITDA for 9M 2017 was RUB 38.5 billion (USD 661 million). Net
income (adjusted for non-cash FX items) in 3Q 2017 decreased by 46%
year-on-year to RUB 5.8 billion (USD 98 million), bringing adjusted net income
for 9M 2017 to RUB 17.5 billion (USD 300 million).
3Q and 9M 2017 financial and operational highlights
RUB million or % 3Q 2017 3Q 2016 Chng, %YoY 9M 2017 9M 2016 Chng, %YoY
Revenue 46,452 45,558 2% 135,573 147,607 -8%
EBITDA* 13,624 17,368 -22% 38,511 58,923 -35%
EBITDA margin 29% 38% -9 pp 28% 40% -12 pp
Net income 7,343 12,401 -41% 21,075 48,515 -57%
Net income adj* 5,771 10,658 -46% 17,490 35,493 -51%
30-09-2017 31-12-2016
Net debt 109,055 105,115
ND/LTM EBITDA 2.1x 1.5x
Sales, 000' mt 3Q 2017 3Q 2016 Chng, %YoY 9M 2017 9M 2016 Chng, %YoY
Phosphate-based 1,716 1,558 10% 4,890 4,411 11%
Nitrogen-based 309 280 11% 1,205 1,067 13%
Phosphate rock 654 614 7% 1,998 1,840 9%
RUB/USD rates: average 3Q 2017:59.0; average 3Q 2016: 64.6; as of 30 September
2017: 58.0; as of 31 December 2016: 60.7
*EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
* - adjusted for non-cash FX items
PhosAgro CEO Andrey Guryev said: “I believe that, despite the challenging
macro environment for PhosAgro’s key products and FX headwinds, in the third
quarter the company passed through the bottom in terms of profitability and
managed to increase EBITDA compared to the second quarter by more than 10%,
mainly due to a constant focus on cash costs combined with the first revenue
contributions from our new production units. The quarter-on-quarter recovery
in EBITDA, coupled with a year-on-year decrease in capex due to completion of
key investment projects, enabled us to generate RUB 2.3 billion (USD 39
million) of free cash flow in the quarter, meaning that the Board was able to
recommend dividends of RUB 7 per GDR, representing a dividend payout to nearly
100% of free cash flow.
“In terms of operations, we managed to increase both upstream phosphate rock
and downstream fertilizer production by almost 20% year-on-year in the third
quarter. Together with results already achieved in the first half of the year,
we have a high degree of confidence that upstream phosphate rock and
downstream fertilizer production volumes for the full year may reach 9.5
million tonnes and 8.3 million tonnes, respectively. As for the new production
units, the ammonia and urea lines have been running in test mode since July
and August, respectively, and have produced almost 140 and 70 thousand tonnes
of product in the third quarter.
“Once these major investment projects are completed, the Company plans to
focus its capital expenditure on selected small- or mid-sized projects that
support either organic growth in phosphate production thanks to modernisation,
or further vertical integration (construction of new sulphuric acid and
ammonium sulphate plants). We currently expect overall fertilizer production
to reach 9.2 million tonnes by 2020.
“Looking at seaborne markets, the recent rally in the main feedstock prices
(ammonia and especially sulphur) has lead to significant inflation in the
industry’s cash costs. This, together with previously announced production
cuts, has lead to a more balanced supply-demand situation and provides extra
support to prices. However, the growing price of feedstocks draws more
attention to the scale of vertical integration. For non-integrated players,
the recent increase in spot fertilizer prices was fully offset by feedstock
inflation, meaning that sector profitability has remained near historic lows.
In this context, PhosAgro’s fundamental advantages such as near-100%
vertical integration into ammonia with the ramp-up of the new ammonia unit,
geographic proximity to sulphur producers, and lower sulphur consumption per
tonne of P(2)O(5) due to the quality of the phosphate rock we produce, should
help to extend margins throughout the upcycle in the phosphate markets that
has now started.”
3Q 2017 market conditions
* The average price of DAP (FOB Tampa) in 3Q 2017 was USD 340 per tonne,
virtually flat year-on-year.
* Phosphate prices were under pressure primarily as a result of high
inventories and low import demand in India due to the delayed decision on the
new tax system since 1 July 2017, as well as the start-up of Ma’aden’s new
Wa’ad Al Shamal project in Saudi Arabia.
* On the positive side, prices were supported by stable demand in Brazil. MAP
imports increased by 58% year-on-year to 1.4 million tonnes in 3Q 2017. Strong
volumes in the first half of the year brought total MAP imports for 9M 2017 to
2.7 million tonnes, up by 57% year-on-year. Brazil’s cumulative import of
phosphates (MAP/DAP/NP/NPK/TSP) in 3Q 2017 (in P(2)O(5) content) grew by 80%
year-on-year.
* Exports of phosphates (DAP/MAP/NP/TSP) from China in 3Q 2017 increased by
20% year-on-year to 3.7 million tonnes, due to a strong increase in sales of
MAP and NPs.
* The average price of urea (FOB Baltic) in 3Q 2017 was USD 205 per tonne vs.
USD 181 per tonne in 3Q 2016. The price increase was supported by seasonal
demand in South Asia and Brazil, coupled with a substantial decrease in
exports from China.
Financial performance
Revenue in the third quarter increased by 2% year-on-year to RUB 46.5 billion
(USD 787 million). Year-on-year growth of 10% in total sales of fertilizers
and MCP was offset by 9% year-on-year appreciation in the average RUB/USD
exchange rate and a 17% year-on-year decrease in the average realised price
for phosphate rock (in USD terms). On the positive side, revenue growth was
supported by 2% and 19% year-on-year increases 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 million 3Q 2017 3Q 2016 Chng, % YoY 9M 2017 9M 2016 Chng, % YoY
DAP/MAP 16,198 15,696 3% 47,233 50,401 -6%
NPK(S) 14,084 13,841 2% 36,190 39,150 -8%
PhosRock 5,006 6,131 -18% 15,801 20,277 -22%
Nitrogen-based 3,984 3,320 20% 15,404 14,488 6%
Gross profit declined by 15% year-on-year to RUB 19.3 billion (USD 327
million), while the gross margin decreased by 8 p.p. year-on-year to 42%.
Gross profit and margin performance for the phosphate-based and nitrogen-based
segments were as follows:
* The phosphate-based segment saw an 18% year-on-year decrease in gross profit
to RUB 17.4 billion (USD 295 million), with a gross margin of 41%, compared to
50% in 3Q 2016.
* Gross profit for the nitrogen-based segment increased by 76% year-on-year to
RUB 1.9 billion (USD 32 million). Gross margin for the segment increased by 13
p.p. year-on-year to 45%.
EBITDA decreased by 22% year-on-year in 3Q 2017, to RUB 13.6 billion (USD 231
million), while the EBITDA margin declined by 9 p.p. to 29%, compared to 38%
in 3Q 2016. Net profit (adjusted for non-cash FX items) dropped by 46%
year-on-year to RUB 5.8 billion (USD 98 million) in 3Q 2017.
The RUB appreciated by almost 9% year-on-year during the quarter (the average
RUB/USD foreign exchange rates for 3Q 2017 and 3Q 2016 were RUB 59.0 and RUB
64.6, 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 30 September 2017 (RUB 58.0 per
USD) compared to 30 June 2017 (RUB 59.1 per USD) resulted in an FX gain of RUB
1.6 billion (RUB 1.7 billion gain in Q3 2016).
Cash flow from operating activities decreased by 50% year-on-year, to RUB 10.2
billion (USD 173 million), compared to RUB 20.0 billion (USD 309 million) in
3Q 2016, predominantly due to lower profitability and less favourable changes
in working capital due to an increase in inventories and a decrease in
accounts payable. Year-to-date operating cash flow stood at RUB 26.5 billion
(USD 454 million)
Gross debt (including finance lease liabilities) as of 30 September 2017
decreased marginally, by 4% quarter-on-quarter, to RUB 115 billion (USD 2
billion) primarily due to slight RUB appreciation in the third quarter. Net
debt as of 30 September 2017 stood at RUB 109 billion (USD 1.9 billion). Most
of the Company’s debt is denominated in USD and thus is naturally hedged by
primarily USD-denominated sales. The net debt to LTM EBITDA ratio increased
marginally to 2.1x as of 30 September 2017, up from 2.0x as of 30 June 2017.
Cost of Sales
RUB million 3Q 2017 3Q 2016 Chng, % YoY 9M 2017 9M2016 Chng, % YoY
Materials and services 9,045 7,851 15% 23,816 20,759 15%
D&A 3,673 2,265 62% 9,546 6,699 42%
Potash 2,708 1,781 52% 6,636 5,445 22%
Salaries 2,694 2,536 6% 8,152 8,300 -2%
Natural gas 2,473 1,831 35% 6,556 5,935 10%
Sulphur and sulphuric acid 1,672 1,182 41% 4,480 5,029 -11%
Electricity 1,387 1,091 27% 4,046 3,250 24%
Ammonia 1,347 1,103 22% 5,766 4,559 26%
Fertilisers for resale 1,241 833 49% 3,920 3,633 8%
Fuel 666 510 31% 2,207 1,644 34%
Ammonium sulphate 278 459 -39% 1,353 1,788 -24%
Heating energy 67 76 -12% 472 462 2%
Other items 6 1 n/m 8 10 -20%
Change in stock of WIP -112 1,448 n/m -228 2,074 n/m
Total 27,145 22,967 18% 76,730 69,587 10%
Cost of sales grew by 18% year-on-year in 3Q 2017 to RUB 27.1 billion (USD 460
million). The key factors behind the growth were:
* Spending on materials and services grew by 15% year-on-year to RUB 9.0
billion (USD 153 million) driven by a 17% year-on-year increase in phosphate
rock processing, 19% growth in overall fertilizer production and 3.4%
year-on-year CPI inflation.
* D&A was up significantly by 62% year-on-year to RUB 3.7 billion (USD 62
million) due to the commissioning of assets (Main Shaft #2 at Kirovsk mine,
newly built assets including those related to the new ammonia unit) and
capitalized repairs depreceiation.
* A year-on-year increase in expenditure on potash of 52% to RUB 2.7 billion
(USD 46 million) due to 33% growth in purchased volumes (thanks to the greater
share of NPKs with high potash content) and a 14% increase in RUB-denominated
prices.
* Spending on natural gas increased by 35% year-on-year to RUB 2.5 billion
(USD 42 million) mainly due to a 32% year-on-year increase in ammonia
production where natural gas is the main feedstock.
* Expenditures on sulphur and sulphuric acid were up by 41% year-on-year to
RUB 1.7 billion (USD 28 million). The key reasons were a 19% increase in
purchased volumes due to growth in production of phosphate-based fertilizers
and an 18% increase in RUB-denominated prices.
* Electricity costs increased by 27% year-on-year to RUB 1.4 billion (USD 24
million) on the back of 12% growth in purchasing from third-parties (resulting
from extra purchases due to the rump up of the new ammonia and urea units) and
a 13% increase in the average electricity price.
* A 22% year-on-year increase in spending on purchased ammonia to RUB 1.3
billion (USD 23 million) was mainly due to a 19% increase in purchase volumes.
The growth in purchased volumes was driven by almost 16% and 32% year-on-year
increases in phosphate- and nitrogen-based fertilizer production,
respectively.
Administrative expenses increased by 32% year-on-year to RUB 3.7 billion (USD
63 million) in 3Q 2017, primarily due to a 74% increase in personnel costs to
RUB 2.1 billion (USD 37 million). The key items leading to this increase were
changes to the bonus accrual schedule, which is now done on a monthly basis
instead of the half-year approach used in 2016, indexation of top management
salaries, and selective one-off bonuses related to project activities.
In 3Q 2017 Selling expenses increased by 19% year-on-year to RUB 5.0 billion
(USD 85 million). The main factors behind the growth were: 1) freight, port
and stevedoring expenses grew by 16% year-on-year to RUB 2.0 billion (USD 34
million) primarily due to a 10% year-on-year increase in export sales of rock
and fertilizers; 2) materials and services more than doubled to RUB 0.7
billion (USD 12 million) due to higher import duties paid as the company
increasing export sales to European markets, as well as higher transportation
and storage expenses due to expanding retail business in Russia.
Cash spent on capex in 3Q 2017 amounted to RUB 8.4 billion (USD 142 million),
a decrease of 25% year-on-year. Capital expenditure was primarily focused on
completing the construction of new ammonia and urea units, modernisation of
Benefeciation Plant #3 and extra underground drilling at Apatit. Capex for 9M
2017 reached RUB 23.3 billion (USD 400 million)
Outlook
Market outlook
* Substantial growth in feedstock prices (ammonia and sulphur) over the last
two months has inflated cash costs for major producers worldwide, and
especially for Chinese phosphate manufacturers. The increase in sulphur prices
was due to low inventories and high season domestic demand in China. The
ammonia price increase was driven by lower volumes available for spot sales
after the start-up of Ma’aden’s phosphate complex.
* Mosaic announced the idling one of its downstream facilities. Plant City,
with a total capacity 950 thousand tonnes in P(2)O(5) is expected to be idled
from 1 January 2018 for one year, which may help to balance the market in the
short-term and support DAP/MAP prices.
* Inflation in the main feedstocks should support prices at recently achieved
levels (USD 380 per tonne MAP FOB Baltics and USD 370 per tonne DAP FOB
Tampa), despite the beginning of low season, with a higher upside risk as the
spring season approaches.
Conference call and webcast
PhosAgro will hold a conference call and webcast today at 14:00 London time
(17:00 Moscow; 09:00 New York).
The call will be held in English, with simultaneous translation into Russian
on a separate line.
Webcast links:
English:
http://event.onlineseminarsolutions.com/r.htm?e=1551055&s=1&k=1685C4D98C85463DFCC7ECD3FF6085E0
Russian:
http://event.onlineseminarsolutions.com/r.htm?e=1551058&s=1&k=EF0664F231FBFA7566CFEB8492F8A1B7
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: 57785958#
Russian call: 74132117#
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
Notes to Editors
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 37% (according to IFA, Fertecon and CRU).
The Company is the largest phosphate-based fertilizer producer in Europe, the
largest producer of high-grade phosphate rock (with a P(2)O(5) content of not
less than 37%) worldwide and one of the top three MAP/DAP producers in the
world, according to IFA. PhosAgro is also one of the leading producers of feed
phosphates (MCP) in Europe, and the only producer in Russia, according to CRU
and the RAFP. PhosAgro is Russia’s only producer of nepheline concentrate,
according to the RAFP.
PhosAgro’s main products include phosphate rock, over 35 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.
Consolidated Interim Condensed Statements of Profit or Loss and Other
Comprehensive Income for the nine months ended 30 September 2017 (unaudited)
Nine months ended 30 September Three months ended 30 September
2017 2016 2017 2016
RUB million RUB million RUB million RUB million
Revenues 135,573 147,607 46,452 45,558
Cost of sales (76,730) (69,587) (27,145) (22,967)
Gross profit 58,843 78,020 19,307 22,591
Administrative expenses (10,917) (9,403) (3,706) (2,803)
Selling expenses (16,533) (14,095) (4,991) (4,200)
Taxes, other than income tax (1,869) (1,574) (639) (502)
Other expenses, net (1,660) (1,680) (423) (326)
Operating profit 27,864 51,268 9,548 14,760
Finance income 415 732 154 298
Finance costs (4,246) (3,634) (2,022) (1,116)
Foreign exchange gain 3,585 13,022 1,572 1,743
Share of profit of associates 251 67 100 2
Profit before tax 27,869 61,455 9,352 15,687
Income tax expense (6,794) (12,940) (2,009) (3,286)
Profit for the period 21,075 48,515 7,343 12,401
Attributable to:
Non-controlling interests ^ (3) - (1) (5)
Shareholders of the Parent 21,078 48,515 7,344 12,406
Other comprehensive income
Items that will never be reclassified to profit or loss
Actuarial gain and losses, net of tax - (21) - (3)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation difference (600) (2,086) (171) (326)
Other comprehensive loss for the period (600) (2,107) (171) (329)
Total comprehensive income for the period 20,475 46,408 7,172 12,072
Attributable to:
Non-controlling interests ^ (3) - (1) (5)
Shareholders of the Parent 20,478 46,408 7,173 12,077
Basic and diluted earnings per share (in RUB) 163 375 57 96
Consolidated Interim Condensed Statement of Financial Position as at 30
September 2017 (unaudited)
30 September 2017 31 December 2016
RUB million RUB million
Assets
Property, plant and equipment 165,943 154,713
Advances issued for property, plant and equipment 3,581 4,684
Intangible assets 1,763 1,165
Investments in associates 859 816
Deferred tax assets 5,361 5,110
Other non-current assets 1,990 2,226
Non-current assets 179,497 168,714
Other current investments 2,018 3,282
Inventories 24,273 19,934
Trade and other receivables 25,247 30,013
Cash and cash equivalents 6,128 7,261
Current assets 57 ,666 60,490
Total assets 237, 163 229,204
Equity
Share capital 372 372
Share premium 7,494 7,494
Retained earnings 84,355 74,932
Other reserves 4,886 5,486
Equity attributable to shareholders of the Parent 97,107 88,284
Equity attributable to non-controlling interests 129 137
Total equity 97,236 88,421
Liabilities
Loans and borrowings 79,240 96,409
Finance lease liabilities 1,132 1,830
Defined benefit obligations 844 767
Deferred tax liabilities 6,095 4,600
Non-current liabilities 87,311 103,606
Loans and borrowings 33,429 12,457
Finance lease liabilities 1,382 1,680
Trade and other payables 17,805 23,040
Current liabilities 52,616 37,177
Total equity and liabilities 237,163 229,204
Consolidated Interim Condensed Statement of Cash Flows for the nine months
ended 30 September 2017 (unaudited)
Nine months ended 30 September
2017 2016
RUB million RUB million
Cash flows from operating activities
Profit before tax 27,869 61,455
Adjustments for:
Depreciation and amortisation 10,647 7,655
Loss on disposal of property, plant and equipment and intangible assets 764 259
Finance income (415) (732)
Finance costs 4,246 3,634
Share of profit of associates (251) (67)
Foreign exchange gain (3,589) (14,202)
Operating profit before changes in working capital and provisions 39,271 58,002
(Increase)/decrease in inventories (4,336) 1,273
Decrease in trade and other receivables 5,618 7,472
Decrease in trade and other payables (4,159) (2,004)
Cash flows from operations before income taxes and interest paid 36,394 64,743
Income tax paid (6,743) (11,222)
Finance costs paid (3,184) (4,026)
Cash flows from operating activities 26,467 49,495
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (23,294) (29,536)
Repayment of loans issued, net 414 174
Proceeds from disposal of property, plant and equipment 193 285
Finance income received 228 349
Disposal of investments, net 381 446
Cash flows used in investing activities (22,078) (28,282)
Cash flows from financing activities
Proceeds from borrowings 76,254 27,668
Repayment of borrowings (69,215) (26,080)
Acquisition of non-controlling interests - (218)
Dividends paid to shareholders of the Parent (11,655) (23,699)
Dividends paid to non-controlling interests (5) (8)
Finance leases paid (1,012) (1,588)
Proceeds from settlement of derivatives - 174
Other payments - (290)
Cash flows used in financing activities (5,633) (24,041)
Net decrease in cash and cash equivalents (1,244) (2,828)
Cash and cash equivalents at 1 January 7,261 29,347
Effect of exchange rates fluctuations 111 (3,325)
Cash and cash equivalents at 30 September 6,128 23,194
Copyright (c) 2017 PR Newswire Association,LLC. All Rights ReservedRecent news on PhosAgro PAO
See all newsREG-PhosAgro PJSC PhosAgro PJSC: PhosAgro Successfully Debuts on Russian Debt Market with Yuan-Denominated Bonds
AnnouncementREG-PhosAgro PJSC PhosAgro PJSC: Independent Director Viktor Cherepov Re-elected Chairman of PhosAgro’s Board of Directors
AnnouncementREG-PhosAgro PJSC PhosAgro PJSC: PhosAgro Receives First-Ever Credit Rating from Expert RA: AAA (RU) with Stable Outlook
AnnouncementREG-PhosAgro PJSC PhosAgro PJSC: PhosAgro’s First-Ever ACRA Credit Rating at Highest Possible Level: AAA (RU) with Stable Outlook
AnnouncementREG-PhosAgro PJSC PhosAgro PJSC: PhosAgro Shareholders Elect New Board of Directors and Approve 2022 Annual Report
Announcement