REG-PJSC PhosAgro: PhosAgro's revenue in 4Q17 up 14% y/y to RUB 45.8 bln
21/03/2018 09:00
For Immediate Release 21 March 2018
PhosAgro’s revenue in 4Q 2017 increased by 14% y/y to RUB 45.8 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 consolidated IFRS financial results
for the three months (4Q) and twelve months (FY) ended 31 December 2017.
Revenue in 4Q 2017 increased by 14% year-on-year to RUB 45.8 billion (USD 784
million), bringing FY 2017 revenue to RUB 181.4 billion (USD 3.1 billion).
EBITDA for 4Q 2017 was RUB 12.8 billion (USD 219 million), with an EBITDA
margin of 28%. EBITDA for FY 2017 was RUB 51.3 billion (USD 879 million). Net
income (adjusted for non-cash FX items) in 4Q 2017 decreased by 50%
year-on-year to RUB 3.7 billion (USD 63 million), bringing adjusted net income
for FY 2017 to RUB 21.2 billion (USD 363 million).
4Q and FY 2017 financial and operational highlights
RUB million or % 4Q 2017 4Q 2016 Chng, %YoY FY 2017 FY 2016 Chng, %YoY
Revenue 45,778 40,135 14% 181,351 187,742 -3%
EBITDA** 12,752 13,442 -5% 51,263 72,365 -29%
EBITDA margin 27.8% 33.5% -6 pp 28.3% 38.5% -10 pp
Net income 4,256 11,371 -63% 25,331 59,886 -58%
Net income adj* 3,700 7,431 -50% 21,190 42,924 -51%
31-12-2017 31-12-2016
Net debt 119,985 105,115
ND/LTM EBITDA 2.3x 1.5x
Sales, 000' mt 4Q 2017 4Q 2016 Chng, %YoY FY2017 FY2016 Chng, %YoY
Phosphate-based 1,599 1,418 13% 6,489 5,829 11%
Nitrogen-based 411 327 26% 1,616 1,394 16%
Phosphate rock 734 609 21% 2,732 2,448 12%
RUB/USD rates: average 4Q 2017: 58.4; average 4Q 2016: 63.1; as of 31 December
2017: 57.6; 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: “Despite the effects of the RUB
appreciation, which remain unfavourable for all exporters, I believe that
PhosAgro has successfully passed the peak of its capex cycle and remains well
positioned to benefit from the ongoing recovery in fertilizer prices. The
contribution from our newly-built ammonia and urea units, as well as further
organic growth in both upstream and downstream operations, should multiply the
positive effects of our efforts to keep operating and capital expenses, as
well as working capital, under control. Going forward, our primary focus will
be on continuing to enhance vertical integration and on further optimising
existing business processes.
“We successfully reached our highly ambitious production milestones in 2017,
and do not plan to stop there: in 2018 we are targeting a year-on-year
increase in downstream fertilizer production of up to 10%. We have a strong
track record of delivering organic production growth, and this enables us to
address the key issue of growing revenue while keeping opex under control
thanks to the ‘scale effect’.
“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 2017 we
increased the share of direct sales to more than 90%, which helps us to
maximise net-back prices. However, this benefit was balanced by growth in
working capital, which put pressure on the Company’s cash flows in 4Q 2017.
To mitigate this negative impact and normalise working capital, we plan to
evaluate new financial instruments.
“Looking ahead to 2018 market conditions, we remain optimistic on price
dynamics on the back of inflated feedstock prices and the tight supply/demand
balance throughout 1Q and beginning of 2Q, with more upside to prices expected
as the high season kicks off in Latin America and India. Despite a significant
30% year-on-year decrease in phosphate exports in 4Q 2017, China is still
considered the wild card in the phosphate segment, and we will all be paying
close attention to Chinese export numbers for April and May. At the same time,
we remain confident that ongoing inflation in coal and sulphur prices,
combined with significant tightening of environmental regulations in the
country, should put additional pressure on production and export numbers in
China.”
4Q 2017 market conditions
* The average price of DAP (FOB Tampa) in 4Q 2017 was USD 364 per tonne, which
implies a year-on-year increase of USD 41, or 13%, per tonne.
* The key reasons behind the recovery in phosphate prices were: 1) a nearly
30% year-on-year decrease in phosphate exports (DAP/MAP/NP/TSP) from China in
4Q 2017 due to a spike in feestock prices and stricter environmental
regulations; 2) robust activity on the Indian market, where overall DAP
imports grew by more than 60% year-on-year to 900k+ tonnes; and 3) idling of
Plant City by Mosaic.
* The average price of urea (FOB Baltic) in 4Q 2017 was USD 241 per tonne vs.
USD 206 per tonne in 4Q 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 4Q 2017 increased by 14% year-on-year to RUB 45.8 billion (USD 784
million). Year-on-year growth of 15% in total sales of fertilizers and MCP was
offset by a further 7% 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 respective increases of 10% and nearly 25% year-on-year in the
average realised prices (USD-denominated) for phosphate- and nitrogen-based
fertilizers on export markets, which accounted for over 80% of total sales in
4Q 2017. A more detailed revenue breakdown by key products is presented below.
Revenue breakdown by key products
RUB million 4Q 2017 4Q 2016 Chng, % YoY FY 2017 FY 2016 Chng, % YoY
DAP/MAP 14,955 13,505 11% 62,188 63,906 -3%
NPK(S) 12,297 10,543 17% 48,487 49,693 -2%
PhosRock 5,357 5,760 -7% 21,158 26,037 -19%
Nitrogen-based 6,362 4,266 49% 21,766 18,754 16%
Gross profit remained virtually flat year-on-year at RUB 20.9 billion (USD 358
million), while the gross margin decreased by 8 p.p. year-on-year to 46%.
Gross profit and margin performance for the phosphate-based and nitrogen-based
segments were as follows:
* The phosphate-based segment saw a 10% year-on-year decrease in gross profit
to RUB 18.4 billion (USD 315 million), with a gross margin of 48%, compared to
58% in 4Q 2016.
* Gross profit for the nitrogen-based segment more than doubled year-on-year
to RUB 2.5 billion (USD 43 million). The gross margin for the segment
increased by 10 p.p. year-on-year to 37%.
EBITDA decreased by 5% year-on-year in 4Q 2017, to RUB 12.8 billion (USD 219
million), while the EBITDA margin declined by 6 p.p. to 28%, compared to 33%
in 4Q 2016. Net profit (adjusted for non-cash FX items) dropped by half
year-on-year to RUB 3.7 billion (USD 63 million) in 4Q 2017.
The RUB appreciated by almost 7% year-on-year during the quarter (the average
RUB/USD foreign exchange rates for 4Q 2017 and 4Q 2016 were RUB 58.4 and RUB
63.1, 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 December 2017 (RUB 57.6 per
USD) compared to 30 September 2017 (RUB 58.0 per USD) resulted in an FX gain
of RUB 0.6 billion (RUB 3.9 billion gain in Q4 2016).
Cash flow from operating activities in 4Q 2017 stood at RUB 3.5 billion (USD
60 million) compared to RUB 0.9 billion (USD 14 million) in 4Q 2016,
predominantly due to slower growth in accounts receivables. Operating cash
flow for the year stood at RUB 30 billion (USD 514 million).
Gross debt (including finance lease liabilities) as of 31 December 2017
increased by 7% quarter-on-quarter, to RUB 122.7 billion (USD 2.1 billion),
primarily due to extra short-term financing for working capital, which was
partially counterbalanced by the slight RUB appreciation in the fourth
quarter. Net debt as of 31 December 2017 stood at RUB 120 billion (USD 2.1
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 2.3x as of 31 December 2017, up from 2.1x
as of 30 September 2017.
Cost of Sales
RUB million 4Q 2017 4Q 2016 Chng, % YoY FY 2017 FY 2016 Chng, % YoY
Materials and services 7,785 6,734 16% 31,597 27,199 16%
D&A 4,173 2,725 53% 13,719 9,424 46%
Salaries 3,082 2,637 17% 11,234 10,937 3%
Natural gas 3,159 2,149 47% 9,715 8,084 20%
Potash 2,136 1,659 29% 8,772 7,104 23%
Sulphur and sulph. acid 1,991 1,036 92% 6,471 6,065 7%
Electricity 1,493 1,212 23% 5,539 4,462 24%
Ammonium sulphate 1,071 759 41% 2,424 2,547 -5%
Ammonia 884 1,242 -29% 6,650 5,801 15%
Fertilisers for resale 833 621 34% 4,753 4,254 12%
Fuel 827 655 26% 3,034 2,299 32%
Heating energy 199 214 -7% 671 676 -1%
Other items -3 32 n/m 9 42 n/m
Change in stock of WIP -2,931 -2,924 n/m -3,159 -850 n/m
Total 24,699 18,751 32% 101,429 88,044 15%
Cost of sales grew by 32% year-on-year in 4Q 2017 to RUB 24.7 billion (USD 424
million). The key factors behind the growth were:
* Spending on materials and services grew by 16% year-on-year to RUB 7.8
billion (USD 134 million), driven by a 6% year-on-year increase in phosphate
rock processing, 13% growth in overall fertilizer production and 2.6%
year-on-year CPI inflation.
* D&A was up significantly by 53% year-on-year to RUB 4.2 billion (USD 72
million), due to the commissioning of assets (Main Shaft #2 at the Kirovsk
mine, as well as newly built assets including those related to the new ammonia
and urea unit) and depreciation of capitalised repairs.
* Salaries increased by 17% year-on-year to RUB 3.1 billion, mainly due to
additional headcount hired for the newly built ammonia and urea units and
additional accruals for vacation and bonuses.
* Spending on natural gas increased by 47% year-on-year to RUB 3.2 billion
(USD 55 million), mainly due to a 60% year-on-year increase in ammonia
production, for which natural gas is the main feedstock.
* A year-on-year increase in expenditure on potash of 29%, to RUB 2.1 billion
(USD 36 million), due to 11% growth in purchased volumes (thanks to the
greater share of NPKs with high potash content) and a 16% increase in
RUB-denominated prices.
* Expenditures on sulphur and sulphuric acid were up by 92% year-on-year to
RUB 2.0 billion (USD 34 million). The key reason behind this was the almost
doubling of RUB-denominated prices (in sulphur equivalent)
* Electricity costs increased by 23% year-on-year to RUB 1.5 billion (USD 26
million), mostly on the back of 21% growth in the average electricity price.
* A 29% year-on-year decrease in spending on purchased ammonia, to RUB 0.9
billion (USD 15 million), was mainly due to a 38% year-on-year decrease in
purchase volumes after the launch of PhosAgro’s new ammonia unit. The drop
in purchased volumes was partially compensated by an 18% year-on-year increase
in average RUB-denominated prices
* Spendings on ammonium sulphate increased by 41% year-on-year to RUB 1.1
billion (USD 19 million), mostly on the back of 18% growth in average
RUB-denominated prices and 19% growth in consumption (on the back of the
higher NPK and NPS production).
Administrative expenses decreased by 11% year-on-year to RUB 3.7 billion (USD
63 million) in 4Q 2017, primarily due to a 30% decrease in personnel costs to
RUB 1.8 billion (USD 31 million) on the back of lower bonus payments and lower
reserves created for future payments.
In 4Q 2017 selling expenses increased by 44% year-on-year to RUB 7.7 billion
(USD 132 million). The main factors behind the growth were: 1) freight, port
and stevedoring expenses grew by 52% year-on-year to RUB 4.1 billion (USD 71
million) primarily due to a 26% year-on-year increase in export sales of rock
and fertilizers as well as growth in shipping rates; 2) materials and services
grew significantly to RUB 0.9 billion (USD 15 million) due to higher import
duties paid as the Company increased export sales to European markets, as well
as higher transportation and storage expenses due to expanding distribution
and retail business operations in Russia and abroad; 3) spending on
transportation grew by 29% year-on-year to RUB2.3 billion (USD39 million),
driven by the 16% year-on-year growth in overall sales and the indexation in
railroad tariffs.
Cash spent on capex in 4Q 2017 amounted to RUB 12.6 billion (USD 216 million),
an increase of 18% year-on-year. Capex for FY 2017 reached RUB 35.9 billion
(USD 615 million).
Outlook
Market outlook
* Phosphate exports from China in 1Q 2018 remain limited due to the
traditional high season for domestic consumers.
* We expect the US to be active on DAP/MAP import markets after the cut in
domestic production due to the idling of Plant City by Mosaic.
* The supply/demand balance in 1Q /early 2Q18 will remain tight in the light
of export and production cuts in Tunisia (due to a shortage of phosphate rock
production) and Morocco (due to bad weather), and this may push prices up to
USD 410-415 per tonne of DAP FOB Tampa.
* Significant growth in the price of phosphoric acid in India (by USD 110 per
tonne of P(2)O(5) to USD 678 CFR India in 1Q 2018), coupled with low
inventories will lead to earlier than usual import activity.
* We expect Latin America to be active on the market in 2Q 2018.
Conference call and webcast
PhosAgro will hold a conference call and webcast today at 13:00 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:
http://event.onlineseminarsolutions.com/r.htm?e=1636389&s=1&k=C5A852D0ABA87CA26D487FF8678FB9EC
Russian:
http://event.onlineseminarsolutions.com/r.htm?e=1636391&s=1&k=80A5B43F3A454019592ED88C05ED021D
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: 16535899#
Russian call: 88979477#
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).
The Company is the largest phosphate-based fertilizer producer in Europe, the
largest producer of high-grade phosphate rock worldwide, and one of the
top-three MAP/DAP producers in the world (by production volumes, 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 RAFP).
PhosAgro is Russia’s only producer of nepheline concentrate (according to
RAFP).
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.
2017 2016
RUB Million RUB Million
Revenues 181,351 187,742
Cost of sales (101,429) (88,044)
Gross profit 79,922 99,698
Administrative expenses (14,662) (13,598)
Selling expenses (24,466) (19,769)
Taxes, other than income tax (2,679) (2,261)
Other expenses, net (2,136) (2,472)
Operating profit 35,979 61,598
Finance income 615 909
Finance costs (6,980) (4,682)
Foreign exchange gain, net 4,141 16,962
Share of profit of associates 287 140
Profit before tax 34,042 7 4 , 927
Income tax expense (8,711) (15,041)
Profit for the year 25,331 59,886
Attributable to:
Non-controlling interests ^ (2) 2
Shareholders of the Parent 25,333 59,884
Other comprehensive income
Items that will never be reclassified to profit or loss
Actuarial gains and losses (342) (68)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation difference (377) (3,105)
Other comprehensive loss for the year (719) (3,173)
Total comprehensive income for the year 24,612 56,713
Attributable to:
Non-controlling interests ^ (2) 2
Shareholders of the Parent 24,614 56,711
Basic and diluted earnings per share (in RUB) 196 462
31 December 2017 31 December 2016
RUB million RUB million
Assets
Property, plant and equipment 175,113 154,713
Advances issued for property, plant and equipment 2,334 4,684
Intangible assets 1,773 1,165
Investments in associates 969 816
Deferred tax assets 5,371 5,110
Other non-current assets 1,955 2,226
Non-current assets 187,515 168,714
Other current investments 352 3,282
Inventories 27,345 19,934
Trade and other receivables 33,727 30,013
Cash and cash equivalents 2,691 7,261
Current assets 64,115 60,490
Total assets 251,630 229,204
Equity
Share capital 372 372
Share premium 7,494 7,494
Retained earnings 85,480 74,932
Other reserves 4,767 5,486
Equity attributable to shareholders of the Parent 98,113 88,284
Equity attributable to non-controlling interests 129 137
Total equity 98,242 88,421
Liabilities
Loans and borrowings 76,530 96,409
Finance lease liabilities 1,004 1,830
Defined benefit obligations 950 767
Deferred tax liabilities 7,914 4,600
Non-current liabilities 86,398 103,606
Loans and borrowings 44,025 12,457
Finance lease liabilities 1,117 1,680
Trade and other payables 21,848 23,040
Current liabilities 66,990 37,177
Total equity and liabilities 251,630 229,204
2017 2016
RUB million RUB million
Cash flows from operating activities
Profit before tax 34,042 74,927
Adjustments for:
Depreciation and amortisation 15,284 10,767
Loss on disposal of property, plant and equipment and intangible assets 614 614
Finance income (615) (909)
Finance costs 6,980 4,682
Share of profit of associates (287) (140)
Foreign exchange gain, net (4,371) (18,040)
Operating profit before changes in working capital and provisions 51,647 71,901
Increase in inventories (7,409) (2,120)
Increase in trade and other receivables (1,240) (4,023)
(Decrease)/increase in trade and other payables (119) 3,019
Cash flows from operations before income taxes and interest paid 42,879 68,777
Income tax paid (8,326) (13,451)
Finance costs paid (4,558) (4,965)
Cash flows from operating activities 29,995 50, 361
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (35,918) (40,246)
Repayment of loans issued, net 475 253
Proceeds from disposal of property, plant and equipment 365 270
Finance income received 371 432
Disposal of investments, net 359 1,277
Cash flows used in investing activities (34,348) (38,014)
Cash flows from financing activities
Proceeds from borrowings 90,094 34,149
Repayment of borrowings (74,245) (33,727)
Dividends paid to shareholders of the Parent (14,763) (27,974)
Dividends paid to non-controlling interests (5) (9)
Finance leases paid (1,365) (1,951)
Acquisition of non-controlling interests - (218)
Proceeds from settlement of derivatives - 127
Other payments (22) (243)
Cash flows used in financing activities (306) (29,846)
Net decrease in cash and cash equivalents (4,659) (17,499)
Cash and cash equivalents at 1 January 7,261 29,347
Effect of exchange rates fluctuations 89 (4,587)
Cash and cash equivalents at 31 December 2,691 7,261
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