REG - Ros Agro PLC - 3rd Quarter Results
16 November 2020
ROS AGRO financial results for 9M 2020 and 3Q 2020
16 November 2020 - Today ROS AGRO PLC (the "Company"), the holding company of Rusagro Group (the "Group"), a leading Russian diversified food producer with vertically integrated operations, has announced the financial results for the Nine months ended 30 September 2020.
9M 2020 Highlights
- Sales amounted to RR 108,762 million (US$ 1,534 million1), an increase of RR 9,686 million (+10%) compared to 9M 2019;
- Adjusted EBITDA2 amounted to RR 20,739 million (US$ 292 million), an increase of
RR 8,747 million (+73%) compared to 9M 2019;
- Adjusted EBITDA margin rose from 12% in 9M 2019 to 19% in 9M 2020;
- Net profit for the period amounted to RR 19,018 million (US$ 268 million), an increase of RR 13,405 million (+239%);
- Net debt position3 as of 30 September 2020 amounted to RR 53,302 million (US$ 669 million);
- Net Debt/ Adjusted EBITDA (LTM4) as of 30 September 2020 was 1.90x.
Commenting on the results, Maxim Basov, a member of the Board of Directors of ROS AGRO PLC and CEO of the Group, said:
"In 3Q 2020 sales and adjusted EBITDA of the Group improved significantly. Sales of all segments except Sugar have increased mainly due to sales prices growth of Oil and Fat products, pork and all crops despite the decrease of sales volumes in Oil and Fat and Agricultural Segments. Sales volumes in Meat Segments increased substantially as the result of higher volumes of processed pork due to production expansion in Tambov Region. Sugar price has also improved as the result of lower sugar beet harvest. However, Sugar Segment's sales decreased due to the management decision to postpone sales volumes in expectation of further price growth.
Adjusted EBITDA margins of Oil and Fat, Meat and Agricultural Segments improved mostly as the result of sales prices growth in all product lines while costs were quite stable. Sugar Segment in addition to price growth benefited from significant decrease in cost of sales due to sugar beet price drop in season 2019/2020 compared to 2018/2019.
In 9M 2020 the Company operated in the world pandemic environment, which had two key effects. The first one was the growth of demand for consumer products, and the second one was rouble devaluation as a result of oil price drop.
Despite several identified cases among employees, travel and logistical disruptions, government restrictions Ros Agro managed to operate all plants at high capacity, continue construction and harvest crops well. The company implemented new production protocols, improved liquidity position and supported the medical infrastructure of the main regions of operation."
Key consolidated financial performance indicators
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales 1
108,762
99,076
9,686
10
37,526
33,756
3,771
11
Gross profit
30,988
15,446
15,543
101
15,572
6,303
9,269
147
Gross margin, %
28%
16%
12 pp
41%
19%
22 pp
Adjusted EBITDA 2
20,739
11,992
8,747
73
8,614
4,211
4,403
105
Adjusted EBITDA margin, %
19%
12%
7 pp
23%
12%
11 pp
Net profit for the period 3
19,018
5,612
13,405
239
11,018
3,044
7,973
262
Net profit margin %
17%
6%
11 pp
29%
9%
20 pp
1 Sales and COS for 9M19 related to Oil & Fats (RR 7,396 million) and Other (RR 1,120 million) have been netted versus each other with no effect on Gross profit in accordance with p. 17(a) and 17(b) of IFRS15
2 Adjusted EBITDA calculation now also includes other operating income/(expenses), while other non-operating expenses are excluded, effect for 9M19 RR -580 million
Adjusted EBITDA for 3Q19 was decreased by RR 156 million due to revaluation procedure, performed at the year end
3 Net profit for the period is affected by non-cash income/ (loss) on revaluation of biological assets and agricultural produce. See details in business-sections below
Key financial performance indicators by segments
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales, incl.
108,762
99,076
9,686
10
37,526
33,756
3,771
11
Sugar
21,078
23,242
(2,164)
(9)
6,809
7,568
(758)
(10)
Meat
22,847
18,296
4,551
25
8,767
7,126
1,641
23
Agriculture
14,751
15,041
(290)
(2)
7,082
5,884
1,197
20
Oil and Fat
51,953
44,579
7,374
17
17,509
15,638
1,871
12
Milk Products
2,764
2,829
(65)
(2)
945
997
(52)
(5)
Other
397
224
174
78
109
68
41
60
Eliminations
(5,028)
(5,134)
105
2
(3,695)
(3,526)
(169)
(5)
Gross profit, incl.
30,988
15,446
15,543
101
15,572
6,303
9,269
147
Sugar
5,373
3,301
2,072
63
1,491
464
1,028
222
Meat
5,294
2,722
2,572
94
2,776
1,290
1,487
115
Agriculture
9,256
2,944
6,312
214
7,443
1,673
5,771
345
Oil and Fat
11,062
5,551
5,511
99
4,197
2,507
1,691
67
Milk Products
307
250
57
23
94
101
(6)
(6)
Other
76
125
(49)
(39)
33
12
21
185
Eliminations
(381)
552
(933)
-
(463)
258
(721)
-
Adjusted EBITDA, incl.
20,739
11,992
8,747
73
8,614
4,211
4,403
105
Sugar
5,005
2,471
2,535
103
1,451
169
1,282
758
Meat
5,480
3,558
1,922
54
2,790
1,585
1,205
76
Agriculture
5,016
3,997
1,019
25
2,912
1,400
1,512
108
Oil and Fat
7,393
1,498
5,895
394
3,043
1,092
1,952
179
Milk Products
(26)
37
(63)
-
(8)
36
(44)
-
Other
(1,094)
(1,056)
(38)
(4)
(479)
(243)
(235)
(97)
Eliminations
(1,035)
1,488
(2,523)
-
(1,096)
173
(1,269)
-
Adjusted EBITDA margin, %
19%
12%
7 pp
23%
12%
11 pp
Sugar
24%
11%
13 pp
21%
2%
19 pp
Meat
24%
19%
5 pp
32%
22%
10 pp
Agriculture
34%
27%
7 pp
41%
24%
17 pp
Oil and Fat
14%
3%
11 pp
17%
7%
10 pp
Milk Products
(1)%
1%
(2) pp
(1)%
4%
(5) pp
Sugar Segment
The financial results of the Sugar Segment of 9M20 and 3Q20 compared to 9M19 and 3Q19 respectively are presented in the table below:
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales
21,078
23,242
(2,164)
(9)
6,809
7,568
(758)
(10)
Cost of sales
(15,716)
(19,936)
4,220
21
(5,318)
(7,105)
1,786
25
Net gain/ (loss) from trading derivatives
11
(5)
16
-
(0)
1
(1)
-
Gross profit
5,373
3,301
2,072
63
1,491
464
1,028
222
Gross profit margin
25%
14%
11 pp
22%
6%
16 pp
Distribution and selling expenses
(1,485)
(1,274)
(212)
(17)
(395)
(432)
37
8
General and administrative expenses
(1,047)
(1,118)
71
6
(361)
(395)
34
9
Other operating income/ (expenses), net
143
59
84
143
48
42
7
17
Other non-operating income/ (expenses), net
490
453
37
8
23
47
(24)
(51)
Operating profit
3,474
1,421
2,053
144
806
(275)
1,081
-
-
-
-
-
Adjusted EBITDA
5,005
2,471
2,535
103
1,451
169
1,282
758
Adjusted EBITDA margin
24%
11%
13 pp
21%
2%
19 pp
Sales decreased in 9M20 compared to 9M19 due to both sales volume reduction of 8% and sale price drop of 8%. The decrease of selling prices was caused by sugar overproduction in Russia. However, in comparison to 4Q19 the sale price showed increase of 25% in 9M20 as a result of demand growth triggered by lower harvest of sugar beet in 2020 and the implications of the COVID-19 pandemic. Sales volumes decreased due to management decision to postpone sales in 3Q20 with expectation of prices growth on the market with lower supply. Sugar sales decrease in 9M20 compared to 9M19 was partially compensated by sugar pulp sales growth of RR 868 million and buckwheat sales growth of RR 364 million.
Sales decrease in 3Q20 vs 3Q19 was mainly attributable to sugar sales volume reduction of 25% due to the decision to postpone sales which was partially compensated by sale price growth of 14%. The sugar pulp sales growth of RR 229 million lessened the overall segment's Sales decrease.
Sugar sales, production volumes and average sales prices per kilogram (excl. VAT) were
as follows:
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sugar production volume (in thousand tonnes)
289
238
51
21
179
211
(32)
(15)
Sales volume (in thousand tonnes)
670
727
(57)
(8)
205
274
(69)
(25)
Average sales price (rubles per kg, excl. VAT)
27.4
29.8
(2.4)
(8)
30.1
26.5
3.6
14
Cost of sales in 9M20 showed in comparison to 9M19 a higher decrease than Sales mainly due to the significant drop of sugar beet purchase prices by 36% when seasons 2019/2020 and 2018/2019 are compared. The launch of second line of desugarization at the end of 2019 led to increase of high-margin sugar produced out of molasses and therefore additional Cost of sales decrease.
Meat Segment
The financial results of the Meat Segment of 9M20 and 3Q20 compared to 9M19 and 3Q19 respectively are presented in the table below:
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales
22,847
18,296
4,551
25
8,767
7,126
1,641
23
Net gain/ (loss) on revaluation of biological assets and agricultural produce
823
(456)
1,279
-
503
(200)
703
-
Cost of sales
(18,376)
(15,117)
(3,258)
(22)
(6,494)
(5,636)
(857)
(15)
Gross profit
5,294
2,722
2,572
94
2,776
1,290
1,487
115
Gross profit margin
23%
15%
8 pp
32%
18%
14 pp
Gross profit excl. effect of biological assets revaluation
4,471
3,178
1,293
41
2,274
1,490
784
53
Adjusted gross profit margin
20%
17%
3 pp
26%
21%
5 pp
-
-
-
-
Distribution and selling expenses
(863)
(552)
(311)
(56)
(304)
(184)
(120)
(66)
General and administrative expenses
(960)
(881)
(79)
(9)
(179)
(284)
104
37
Other operating income/ (expenses), net
117
(43)
160
-
67
40
27
67
incl. reimbursement of operating costs (government grants)
63
50
13
27
64
48
16
32
Other non-operating income/ (expenses), net
279
171
108
63
75
46
30
65
Operating profit income/ (expenses), net
3,868
1,418
2,450
173
2,435
908
1,527
168
-
-
-
-
Adjusted EBITDA
5,480
3,558
1,922
54
2,790
1,585
1,205
76
Adjusted EBITDA margin
24%
19%
5 pp
32%
22%
10 pp
Sales of the Meat Segment increased by 25% in 9М20 and by 23% in 3Q20 compared to the respective periods of the prior year because of increase in production volumes of pork mainly due to launch of 3rd stage of Tambov Bacon in 3Q19 and increase in productivity. In addition, Sales increased as the result of sales price growth in 3Q20 of all meat product categories and livestock pigs by 4% and 13%, respectively, and increased export sales with a premium price relative to the domestic price.
Cost of sales increased by 22% due to higher volumes of livestock pigs transferred to meat processing.
Net gain on revaluation of biological assets and agricultural produce in 9M20 resulted mainly from an increase in market prices for livestock pigs during the period compared to market prices at the end 2019 and respective increase in fair value of livestock in the closing balance.
An increase in Distribution and selling expenses in 9М20 and 3Q20 compared to the same prior year periods included an increase in transportation costs as a result of higher sales volume of processed pork and an increase in payroll costs related to launch of 3rd stage of Tambov Bacon, and also as a result of the rise in the costs of marketing activities.
Pork sales volumes and the average pork sales prices per kilogram (excl. VAT) were as follows:
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales volume (in thousand tonnes), incl.
177
139
38
27
61
53
8
16
livestock pigs
19
18
1
5
8
10
(2)
(16)
processed pork
158
121
37
31
53
43
10
23
Average sale prices (rubles per kg, excl. VAT):
livestock pigs
78.5
77.6
0.9
1
91.6
81.3
10.3
13
processed pork
134.8
138.5
(3.7)
(3)
151.2
145.0
6.2
4
An increase in Other operating income in 9M20 compared to the same prior year period is due to the launch of the grain elevator in Primorie and the reimbursement for part of the costs under the animal insurance program with state support.
Agricultural Segment
As at 30 September 2020 Group's area of controlled land stands at 648 thousand hectares
(30 September 2019: 648 thousand hectares). The financial results of the Agricultural Segment
of 9M20 and 3Q20 compared to 9M19 and 3Q19 respectively are presented below:
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales
14,751
15,041
(290)
(2)
7,082
5,884
1,197
20
Net gain/ (loss) on revaluation of biological assets and agricultural produce
3,638
(2,245)
5,883
-
4,645
550
4,095
744
Cost of sales
(9,133)
(9,852)
719
7
(4,283)
(4,762)
479
10
Net gain/ (loss) from trading derivatives
-
-
-
-
-
-
-
-
Gross profit
9,256
2,944
6,312
214
7,443
1,673
5,771
345
Gross profit margin
63%
20%
43 pp
105%
28%
77 pp
Gross profit excl. effect of biological assets and agricultural produce revaluation
5,618
5,189
429
8
2,799
1,123
1,676
149
Adjusted gross profit margin
38%
34%
4 pp
40%
19%
21 pp
Distribution and selling expenses
(1,452)
(2,007)
555
28
(474)
(416)
(58)
(14)
General and administrative expenses
(949)
(943)
(6)
(1)
(330)
(352)
21
6
Other operating income/ (expenses), net
40
(87)
127
-
116
(22)
138
-
incl. reimbursement of
operating costs (government
grants)
111
100
11
11
50
28
22
77
Other non-operating income/ (expenses), net
81
(17)
98
-
(33)
27
(60)
-
Operating profit
6,977
(109)
7,086
-
6,722
910
5,812
638
Adjusted EBITDA
5,016
3,997
1,019
25
2,912
1,400
1,512
108
Adjusted EBITDA margin
34%
27%
7 pp
41%
24%
17 pp
Sales in 9M20 vs 9M19 decreased due to lower sales volumes of sugar beet, wheat, barley and corn, which was compensated by higher sales prices of crops. Significantly higher soybean export sales volume was supported by higher export prices due to the devaluation of the ruble in March.
Higher Sales in 3Q20 compared to 3Q19 were the result of higher sales prices of all crops.
Sales volumes by product were as follows:
Thousand tonnes
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
sugar beet
832
944
(112)
(12)
769
944
(175)
(19)
wheat
268
474
(206)
(44)
186
212
(26)
(12)
barley
92
248
(156)
(63)
41
127
(86)
(68)
corn
92
137
(45)
(33)
26
12
14
122
sunflower seeds
18
10
9
87
-
2
(1)
(80)
soybean
234
174
59
34
55
45
10
23
The average sale prices per kilogram (excl. VAT) were as follows:
RR per kilogram, excl. VAT
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
sugar beet
3.0
1.8
1.2
70
3.2
1.8
1.4
79
wheat
11.6
11.0
0.5
5
11.7
8.8
2.9
33
barley
9.8
10.3
(0.6)
(6)
9.9
9.5
0.4
4
corn
14.6
12.6
2.0
16
13.9
12.2
1.8
15
sunflower seeds
20.2
18.5
1.7
9
25.9
17.0
8.9
52
soybean
26.3
20.0
6.3
31
28.6
19.2
9.4
49
Net gain on revaluation of biological assets and agricultural produce in 9M20 represents the realisation of gain from revaluation of 2019 crops harvest remained in stock as at 31 December 2019 and being subsequently sold to customers during 2020, which is overturned by the gain recognised from revaluation of crops for 2020 harvest collected in Q3 2020.
The gain on revaluation of crops and its subsequent realisation do not affect the Adjusted EBITDA figure.
Distribution and selling expenses decreased in 9M20 and 3Q20 vs 2019 figures due to lower sales volumes of crops.
Other non-operating income/(expenses),net include result from PPE disposal and foreign exchange. Foreign exchange gain is higher by RR 43 million in 9M20 vs 9M19 (in 3Q20 foreign exchange loss totalled RR 45 million against RR 1 million gain in 3Q19). In 9M20 gain from PPE disposal was RR 38 million against RR 18 million of loss in 9M19 (in 3Q20 gain from PPE disposal decreased by RR 14 million vs 3Q19).
Oil and Fat Segment
The financial results of the Oil and Fat Segment for 9M20 and 3Q20 compared to 9M19 and 3Q19 respectively are presented below:
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales
51,953
44,579
7,374
17
17,509
15,638
1,871
12
Cost of sales
(40,891)
(39,028)
(1,863)
(5)
(13,311)
(13,131)
(180)
(1)
Gross profit
11,062
5,551
5,511
99
4,197
2,507
1,691
67
Gross profit margin
21%
12%
9 pp
24%
16%
8 pp
Distribution and selling expenses
(2,880)
(3,110)
230
7
(1,072)
(1,093)
21
2
General and administrative expenses
(1,386)
(1,185)
(201)
(17)
(401)
(443)
42
9
Other operating income/ (expenses). net
119
(216)
334
-
153
(25)
178
-
Other non-operating income/ (expenses). net
(355)
6
(361)
-
(179)
25
(205)
-
Operating profit/ (loss)
6,559
1,046
5,513
527
2,698
971
1,727
178
-
-
-
-
Adjusted EBITDA
7,393
1,498
5,895
394
3,043
1,092
1,952
179
Adjusted EBITDA margin
14%
3%
11 pp
17%
7%
10 pp
Sales volumes to third parties by product were as follows:
thousand tons
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
mayonnaise
102
93
9
9
38
37
1
3
margarine
30
30
0
0
10
11
(1)
(11)
bottled oil
115
104
11
11
32
37
(5)
(14)
industrial fats
232
162
71
44
99
70
29
41
bulk oil
287
299
(12)
(4)
71
92
(21)
(23)
meal
443
470
(27)
(6)
126
136
(10)
(8)
The average sale prices per kilogram (excl. VAT) for sales to third parties were as follows:
RR per kilogram, excl. VAT
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
mayonnaise
84.0
79.9
4.1
5
85.6
79.9
5.8
7
margarine
85.9
80.8
5.2
6
91.1
80.4
10.8
13
bottled oil
60.6
53.8
6.8
13
65.4
54.1
11.3
21
industrial fats
55.8
47.8
8.0
17
57.1
45.4
11.7
26
bulk oil
49.1
44.4
4.7
11
54.4
45.8
8.5
19
meal
14.2
15.0
(0.7)
(5)
16.3
15.1
1.1
8
Sales increased as a result of increased capacity rented from SolPro (since 3Q19), and, as a result, higher sales volumes of industrial fats, supported by regained market share in 2H19, and higher sales volumes mayonnaise, while SolPro continued to sell own products in 1H19. Also increase in sales in 9M20 is due to higher sales prices for all products (except meal). At the same time, EBITDA margin increased to 14% in 9M20 as in 1H19 all sales have been transferred to Rusagro, while profit remained on SolPro entities and has been further withdrawn through interest income reflected in Other segment below EBITDA. Starting from July 2019 all the SolPro plants are rented by Rusagro and margin is reflected in Rusagro EBITDA. EBITDA margin has increased by 11 pp in 9M20 compared to 9M19 due to higher sales prices for all products while cost of sales have changed insignificantly because during 2020 sunflower, purchased at lower prices in 2019, was used.
Increase in General and administrative expenses in comparison to the prior period is attributed to higher number of employees in administrative function in Oil and Fat segment.
Decrease in Other operating expenses by RR 156 million in 1H20 was mainly due to the write-off of RR 175 million as result of sunflower technological losses in 2Q19, additionally transport subsidies were received in the amount of RR 153 million in 3Q20.
Increase in Other non-operating expenses by RR 361 million in 9M20 was caused by a change in the exchange rate and charity expenses.
Milk Products Segment
The financial results of the Milk Products Segment for 9M20 and 3Q20 compared to 9M19 and 3Q19 respectively are presented in the table below:
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Sales
2,764
2,829
(65)
(2)
945
997
(52)
(5)
Cost of sales
(2,457)
(2,579)
122
5
(851)
(896)
46
5
Gross profit
307
250
57
23
94
101
(6)
(6)
Gross profit margin
11%
9%
2 pp
10%
10%
-
0.00
0.00
0.00
0.00
Distribution and selling expenses
(199)
(100)
(99)
(99)
(72)
(26)
(46)
(179)
General and administrative expenses
(108)
(104)
(4)
(4)
(31)
(30)
(0)
(1)
Other operating income/ (expenses). net
(30)
(11)
(19)
(167)
0
(9)
9
-
Other non-operating income/ (expenses). net
(3)
(0)
(3)
(5,288)
(2)
0
(2)
-
Operating profit
(32)
35
(67)
-
(10)
35
(46)
-
-
-
-
-
Adjusted EBITDA
(26)
37
(63)
-
(8)
36
(44)
-
Adjusted EBITDA margin
(1)%
1%
(2) pp
(1)%
4%
(5) pp
Group is now focusing on entering the retail chains with a consumer product, developing brands and increasing sales profitability.
Sales volumes by product were as follows:
Thousand tonnes
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
cheese and cheese product
6
6
0
5
2
2
0
3
butter and spread
1
2
(1)
(67)
0
0
(0)
(46)
dry mixes
11
11
(1)
(5)
4
4
(0)
(9)
cream
3
1
2
264
1
1
0
43
The average sale prices per kilogram (excl. VAT) were as follows:
RR per kilogram, excl. VAT
Nine months ended
Variance
Three months ended
Variance
30 September 2019
30 September 2018
Units
%
30 September 2019
30 September 2018
Units
%
cheese and cheese product
209.4
217.1
(7.6)
(4)
207.1
203.0
4.0
2
butter and spread
240.3
279.0
(38.7)
(14)
236.8
235.4
1.4
1
dry mixes
73.2
80.0
(6.8)
(9)
71.0
82.0
(11.0)
(13)
cream
181.0
197.5
(16.5)
(8)
173.5
197.5
(24.0)
(12)
Sales of milk products decreased in 9M20 (RR -65 million, -2%) as a result of decrease of sales volume and shift of sales volume from cheese (more expensive product) to cheese products and significant decrease of milk fat prices due to oversupply in the market.
Growth of Selling, General and Administrative expenses due to newly hired during 2019 staff, including key personnel.
Key consolidated cash flow indicators (not IFRS presentation*)
The key consolidated cash flow indicators presented according to management accounts methodology were as follows:
in mln Roubles
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Net cash from operating activities, incl.
24,677
28,631
(3,954)
(14)
5,623
9,808
(4,185)
(43)
Operating cash flow before working capital changes
20,915
12,461
8,454
68
8,051
3,796
4,255
112
Working capital changes
4,748
16,127
(11,379)
(71)
(1,701)
5,879
(7,580)
-
Net cash from investing activities, incl.
(9,866)
(20,670)
10,804
52
(5,101)
(14,562)
9,461
65
Purchases of property plant and equipment and inventories intended for construction
(10,090)
(12,390)
2,300
19
(5,266)
(5,985)
719
12
Net cash from financing activities
(7,620)
(4,607)
(3,013)
(65)
5,788
7,045
(1,257)
(18)
Net effect of exchange rate changes on cash and cash equivalents
291
(114)
405
-
118
(0)
119
-
Net increase / (decrease) in cash and cash equivalents
7,482
3,240
4,242
131
6,428
2,290
4,138
181
(*) See Appendix 4
The key investments in property, plant and equipment and inventories intended for construction during 9M20 were made in Meat Segment in the amount of RR 5,725 million (9M19: RR 8,127 million), purchases related to the construction project in Far East region. Investments in Sugar Segment in the amount of RR 1,368 million (9M19: RR 2,690 million), Agriculture Segment in the amount of RR 1,755 million (9M19: RR 1,423 million), Oil and Fat Segment in the amount of RR 1,217 million (9M19: RR 150 million) and in Milk Products Segment in the amount of RR 25 million (no investments in 9M19) mainly relate to purchases of machinery and equipment for production facilities renewal and maintenance.
Debt position and liquidity management
in RR million
30 September 2020
31 December 2019
Variance
Units
%
Gross debt
96,920
97,876
(956)
(1)
Short-term borrowings
28,590
31,835
(3,245)
(10)
Long-term borrowings
68,330
66,041
2,289
3
Cash and cash equivalents, bank deposits and bonds
(43,618)
(36,136)
(7,482)
(21)
Short-term cash, deposits and bonds
(9,653)
(2,171)
(7,482)
(345)
Long-term cash, deposits and bonds
(33,965)
(33,965)
0
0
Net debt
53,302
61,740
(8,438)
(14)
Short-term borrowings, net
18,937
29,664
(10,727)
(36)
Long-term borrowings, net
34,365
32,076
2,289
7
Adjusted EBITDA (LTM4)
28,119
19,448
8,671
45
Net debt/ Adjusted EBITDA (LTM)
1.90
3.17
(1.3) pp
Adjusted EBITDA (LTM)* without other operating income/expenses
28,359
20,045
8,314
41
Net debt/ Adjusted EBITDA (LTM)* without other operating income/expenses
1.88
3.08
(1.2) pp
Net finance income/ (expense)
in RR million
Nine months ended
Variance
Three months ended
Variance
30 September 2020
30 September 2019
Units
%
30 September 2020
30 September 2019
Units
%
Net interest expense
(3,720)
(3,918)
198
5
(1,138)
(1,217)
79
6
Gross interest expense
(4,891)
(4,846)
(45)
(1)
(1,534)
(1,504)
(29)
(2)
Reimbursement of interest expense
1,170
928
242
26
396
288
108
38
Interest income
4,630
6,012
(1,382)
(23)
1,058
2,016
(958)
(48)
Net gain/ (loss) from bonds held for trading
(16)
(21)
5
23
1
2
(1)
(45)
Other financial income, net
(1,492)
(419)
(1,073)
(256)
(140)
(337)
196
58
Net foreign exchange gain/ (loss)
(1,118)
(32)
(1,086)
(3,400)
97
(43)
140
-
Other financial income / (expenses), net
(374)
(387)
13
3
(237)
(293)
56
19
Total net finance income/ (expenses)
(598)
1,655
(2,253)
-
(219)
465
(684)
-
Net debt decreased at 30 September 2020 compared at 31 December 2019 as a result of an increase in short-term bank deposits and as a result of repayment of loans received.
In 9M20 the Group continued to enjoy benefits from the state agriculture subsidies programme. The Group continued to receive bank loans with decreased preferential interest rates under the programme of government support. Under this programme, the government provides subsidies to the banks to compensate the loss of income on credits with decreased interest rates, given by the banks to agricultural producers. In 9M20 IFRS accounts these credits are accounted according to its face value with no adjustments to prevailing market rates. The differences between nominal and market interest rate is recognized as either government grants in a statement of financial position for borrowings received with the purpose to finance investment projects or interest expenses in a statement of comprehensive income for general purpose borrowings.
Net finance income of 9M19 in the sum of RR 1,655 million changed to net finance expense in the amount of RR 598 million in 9M20 as the result of negative dynamics in forex losses and decrease in interest income as a result of accrual of interest on rights to claims SolPro entities and interest receivable on bonds.
________________________________
(1) The exchange rates used for translation of RR amounts into USD represent average Central Bank official exchange rate for the respective reporting period for income, expenses and profits and the Central Bank official exchange rate as at the reporting date for balance figures.
(2) Adjusted EBITDA is defined as operating profit before taking into account (i) depreciation included in operating profit, (ii) other non-operating income/ (expenses), net, (iii) net gain/ (loss) on revaluation of biological assets and agricultural produce, (iv) share-based remuneration (see Appendix 2 for the detailed calculation of Adjusted EBITDA). Adjusted EBITDA is not a measure of financial performance under IFRS. It should not be considered as an alternative to profit for the period as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and therefore comparability may be limited. We believe that Adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of subsidiaries and other investments and our ability to incur and service debt.
(3) The Group determines the net debt as short-term borrowings and long-term borrowings less cash and cash equivalents, bank deposits, bank promissory notes and bonds held for trading.
(4) LTM - The abbreviation for the "Last twelve months".
Note:
ROS AGRO PLC (LSE: AGRO) - a holding company of Rusagro Group, a leading Russian diversified food producer with vertically integrated operations in the following branches:
Sugar:
Rusagro is one of the leading Russian sugar producers (№3 with 12% share in sugar production in Russia and №1 with 50% share of cube white sugar market), producing sugar from sugar beet at nine production sites in four regions. Group produces white and brown cube sugar and packaged sugar sold under the brands Russkii Sakhar, Chaikofsky, Mon Cafe and Brauni. Sugar Segment is vertically integrated and sugar beet is supplied by Rusagro's Agriculture Segment, which ensures a consistent supply of raw material. Sugar Segment also operates a cereal plant and sell buckwheat and rice under the brand Tyoplye Traditsii.
Meat:
Rusagro is the fourth largest pork producer in Russia with 5% share of pork produced in Russia. It operates 18 commercial pork complexes with correspondence to high biosecurity standards, has own compound feed production, slaughterhouses and meat processing plants in Tambov and Belgorod Regions. Since 2016 Rusagro sells retail products under its own brand Slovo Myasnika (Butcher's word).
Agricultural:
The Group currently controls one of the largest land banks among Russian agriculture producers, with 640 thousand hectares of land under control located in the highly fertile Black Earth region of Russia (in the Belgorod, Tambov, Voronezh, Kursk and Orel regions)
and in the Far East Primorie Region. Land and production sites are strategically located within
the same regions to optimize efficiency and minimize logistical costs. Rusagro is one
of the major sugar beet producers in Russia, but it also produces wheat and barley, sunflower seeds and soybeans. These products are partially consumed by the Meat Segment, supporting a synergistic effect and lowering price change risk.Oil and Fat:
Rusagro is the leading crude sunflower oil and consumer margarine producer, second largest industrial fats and mayonnaise producerin Russia with products sold under eight key brands, such as EZhK, Schedroye Leto, Mechta Khozyaiki, Moskovskiy Provansal, Novosibirskiy Provansal, Saratovskiy Provansal, Rossiyanka and Saratovskiy Slivochniy. The Group operates (including through ownership and the lease) five crushing and three oil and fats plants. Own sunflower and soy oil production allows to control the source of the vegetable oil required to produce oil and fats products.
Milk Products:
Launched at the end of 2018 Milk Products Segment operates two plants in Samara and Ulyanovsk Regions. It produces dry industrial mixes, cheeses, butter and cream. Consumer products are sold under three brands, which are Milie, Buterbrodnoe utro and Syrnaya Kultura.
Forward-looking statements
This announcement includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements do not relate to historical or current events,
or to any future financial or operational activity of the Group.
By their nature, forward-looking statements involve risk and uncertainty because they relate
to future events and circumstances, a number of which are beyond the Rusagro Group's control. As a result, actual future results may differ materially from the plans and expectations set out
in these forward-looking statements.
The Group undertakes no obligation to release the results of any revisions to any forward-looking statements that may occur due to any change in its expectations or to reflect events
or circumstances after the date of this document.
Rusagro management is organizing a conference call about its 9M and 3Q 2020 financial results for investors and analysts.
Details of the call:
Date
16 November 2020
Time
4:00 PM (Moscow) / 1:00 PM (London)
Subject
ROS AGRO PLC 3Q 2020 Financial results
UK Toll Free
UK Local Line
0 800 376 61 83
+44 207 194 37 59
USA Toll Free
1 844 286 06 43
Russia Toll Free
8 800 500 98 63
Russian Local Line
+7 495 646 93 15
Conference ID
11257377#
Contacts:
Svetlana Kuznetsova, Chief Investment Officer
Phone: +7 495 363 1661, e-mail: ir@rusagrogroup.ru
Appendix 1. Consolidated statement of comprehensive income for the Nine and Three months ended 30 September 2020 (in RR thousand)
Nine months ended
30 September
Three months ended
30 September
2020
2019
2020
2019
Sales
108,762,201
99,076,027
37,526,390
33,755,783
Net gain/(loss) on revaluation of biological assets and agricultural produce
5,428,963
(3,284,330)
5,810,291
626,763
Cost of sales
(83,213,519)
(80,340,888)
(27,764,364)
(28,080,203)
Net gain/(loss) from trading derivatives
10,552
(5,145)
(4)
678
Gross profit
30,988,197
15,445,664
15,572,313
6,303,021
Distribution and selling expenses
(6,507,851)
(6,959,034)
(2,192,283)
(2,040,778)
General and administrative expenses
(5,485,491)
(5,128,268)
(1,803,461)
(1,672,670)
Other operating income/ (expenses), net
57,435
(375,235)
230,584
541
Other non-operating income/ (expenses), net
1,325,009
1,122,538
(291,640)
63,276
Operating profit / (loss)
20,377,299
4,105,665
11,515,513
2,653,390
Interest expense
(3,720,171)
(3,917,730)
(1,137,894)
(1,216,575)
Interest income
4,629,848
6,012,123
1,058,041
2,016,116
Net (loss)/gain from bonds
(15,977)
(20,649)
1,025
1,866
Other financial income/ (expenses), net
(1,491,564)
(418,704)
(140,318)
(336,599)
Profit before income tax
19,779,435
5,760,705
11,296,367
3,118,198
Income tax expense
(761,848)
(148,517)
(278,776)
(73,773)
Profit for the period
19,017,587
5,612,188
11,017,591
3,044,425
Other comprehensive income
Total comprehensive income for the period
19,017,587
5,612,188
11,017,591
3,044,425
Profit is attributable to:
Owners of ROS AGRO PLC
19,057,563
5,695,968
11,022,734
3,105,618
Non-controlling interest
(39,976)
(83,780)
(5,143)
(61,193)
Profit for the period
19,017,587
5,612,188
11,017,591
3,044,425
Total comprehensive income is attributable to:
Owners of ROS AGRO PLC
19,057,563
5,695,968
11,022,734
3,105,618
Non-controlling interest
(39,976)
(83,780)
(5,143)
(61,193)
Total comprehensive income for the period
19,017,587
5,612,188
11,017,591
3,044,425
Earnings per ordinary share for profit attributable to the owners of ROS AGRO PLC, basic and diluted
(in RR per share)708.33
211.75
409.67
115.45
Appendix 2. Segment information for the Nine months ended 30 September 2020 (in RR thousand)
9M 2020
Sugar
Meat
Agriculture
Oil and Fat
Other
Eliminations
Total
Sales
21,078,432
22,846,644
14,751,307
51,952,757
3,161,373
(5,028,312)
108,762,201
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
823,030
3,638,467
-
-
967,466
5,428,963
Cost of sales
(15,716,077)
(18,375,571)
(9,133,386)
(40,890,601)
(2,778,083)
3,680,199
(83,213,519)
incl. Depreciation
(1,961,133)
(2,552,374)
(1,561,901)
(353,134)
(8,936)
(15,048)
(6,452,526)
Net loss from trading derivatives
10,552
-
-
-
-
-
10,552
Gross profit / (loss)
5,372,907
5,294,103
9,256,388
11,062,156
383,290
(380,647)
30,988,197
Distribution and Selling, General and administrative expenses
(2,532,701)
(1,822,449)
(2,400,957)
(4,266,472)
(1,625,093)
654,330
(11,993,342)
incl. Depreciation
(60,979)
(161,437)
(197,050)
(125,459)
(133,679)
15,048
(663,556)
Other operating income/(expenses), net
143,038
117,204
40,012
118,699
(20,695)
(340,823)
57,435
incl. Reimbursement of operating costs (government grants)
72,170
63,118
110,709
240,315
-
-
486,312
Other non-operating income/(expenses), net
490,447
279,059
81,433
(355,405)
9,127,940
(8,298,465)
1,325,009
incl. Reimbursement of non-operating costs (government grants)
-
-
-
-
-
-
-
Operating profit / (loss)
3,473,691
3,867,917
6,976,876
6,558,978
7,865,442
(8,365,605)
20,377,299
Adjustments:
-
Depreciation included in Operating Profit
2,022,112
2,713,811
1,758,951
478,593
142,615
-
7,116,082
Other non-operating (income) /expenses, net
(490,447)
(279,059)
(81,433)
355,405
(9,127,940)
8,298,465
(1,325,009)
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
(823,030)
(3,638,467)
-
-
(967,466)
(5,428,963)
Adjusted EBITDA*
5,005,356
5,479,639
5,015,927
7,392,976
(1,119,883)
(1,034,606)
20,739,409
* Non-IFRS measure
Appendix 2 (continued). Segment information for the Nine months ended 30 September 2019 (in RR thousand)
9M 2019
Sugar
Meat
Agriculture
Oil and Fat
Other
Eliminations
Total
Sales
23,241,962
18,295,504
15,041,099
44,578,652
3,052,465
(5,133,655)
99,076,027
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
(455,968)
(2,244,641)
-
-
(583,721)
(3,284,330)
Cost of sales
(19,935,916)
(15,117,184)
(9,852,344)
(39,027,780)
(2,677,219)
6,269,555
(80,340,888)
incl. Depreciation
(1,446,071)
(1,761,631)
(1,648,801)
(354,396)
(9,606)
(11,212)
(5,231,717)
Net gain/ (loss) from trading derivatives
(5,139)
-
-
-
(6)
-
(5,145)
Gross profit
3,300,907
2,722,352
2,944,114
5,550,872
375,240
552,179
15,445,664
Distribution and Selling, General and administrative expenses
(2,392,048)
(1,432,950)
(2,950,049)
(4,294,934)
(1,369,560)
352,239
(12,087,302)
incl. Depreciation
(56,815)
(93,754)
(196,070)
(102,845)
(54,815)
11,212
(493,087)
Other operating income/(expenses), net
58,941
(43,030)
(86,737)
(215,553)
(88,856)
-
(375,235)
incl. Reimbursement of operating costs (government grants)
53,088
49,631
99,939
-
-
-
202,658
Other non-operating income/(expenses), net
453,264
171,157
(16,533)
5,995
11,411,050
(10,902,395)
1,122,538
incl. Reimbursement of non-operating costs (government grants)
-
-
-
-
-
-
-
Operating profit / (loss)
1,421,064
1,417,529
(109,205)
1,046,380
10,327,874
(9,997,977)
4,105,665
Adjustments:
-
Depreciation included in Operating Profit
1,502,886
1,855,385
1,844,871
457,241
64,421
-
5,724,804
Other non-operating (income) /expenses, net
(453,264)
(171,157)
16,533
(5,995)
(11,411,050)
10,902,395
(1,122,538)
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
455,968
2,244,641
-
-
583,721
3,284,330
Adjusted EBITDA*
2,470,686
3,557,725
3,996,840
1,497,626
(1,018,755)
1,488,139
11,992,261
* Non-IFRS measure
Appendix 3. Consolidated statement of financial position as at 30 September 2020
(in RR thousand)
30 September 2020
31 December 2019
ASSETS
Current assets
Cash and cash equivalents
9,652,679
2,170,779
Restricted cash
52
39
Short-term investments
1,687,323
23,456,552
Trade and other receivables
7,618,100
8,068,349
Prepayments
3,454,592
3,018,658
Current income tax receivable
474,461
225,315
Other taxes receivable
3,199,495
4,349,400
Inventories and short-term biological assets
51,755,921
49,386,797
Total current assets
77,842,623
90,675,889
Non-current assets
Property, plant and equipment
85,098,263
80,629,483
Inventories intended for construction
3,903,105
3,157,369
Right-of-use assets
6,888,924
6,230,707
Goodwill
2,364,942
2,364,942
Advances paid for non-current assets
7,371,027
8,721,155
Long-term biological assets
2,732,872
2,279,335
Long-term investments and receivables
64,997,580
42,636,323
Investments in associates
228,070
165,070
Deferred income tax assets
3,248,075
1,852,983
Other intangible assets
571,020
608,635
Other non-current assets
235,149
173,002
Total non-current assets
177,639,027
148,819,004
Total assets
255,481,650
239,494,893
LIABILITIES and EQUITY
Current liabilities
Short-term borrowings
28,589,753
31,834,699
Lease liabilities
701,134
916,791
Trade and other payables
18,894,035
17,492,614
Current income tax payable
19,235
123,846
Other taxes payable
2,773,884
3,468,034
Total current liabilities
50,978,041
53,835,984
Non-current liabilities
Long-term borrowings
68,329,920
66,040,784
Government grants
8,714,343
8,306,779
Lease liabilities
4,931,370
3,989,801
Deferred income tax liability
1,822,205
494,977
Total non-current liabilities
83,797,838
78,832,341
Total liabilities
134,775,879
132,668,325
Equity
Share capital
12,269
12,269
Treasury shares
(490,607)
(490,607)
Additional paid-in capital
26,964,479
26,964,479
Other reserves
1,313,691
1,313,691
Retained earnings
92,882,814
78,960,843
Equity attributable to owners of ROS AGRO PLC
120,682,646
106,760,675
Non-controlling interest
23,125
65,893
Total equity
120,705,771
106,826,568
Total liabilities and equity
255,481,650
239,494,893
Appendix 4. Consolidated statement of cash flows for the Nine months ended 30 September 2020 (in RR thousand) - NOT IFRS PRESENTATION (*)
Nine months ended
30 September 2020
30 September 2019
Cash flows from operating activities
Profit before income tax
19,779,435
5,760,705
Adjustments for:
Depreciation and amortization
7,116,082
5,724,804
Interest expense
4,890,502
4,845,680
Government grants
(2,137,782)
(1,479,913)
Interest income
(4,629,848)
(6,012,123)
Loss / (gain) on disposal of property, plant and equipment
(75,710)
35,785
Net (gain) / loss on revaluation of biological assets and agricultural produce
(5,428,963)
3,284,330
Lease finance expense
359,122
437,627
Realised deferred day-one gain
(780,723)
(538,803)
Change in provision for net realisable value of inventory
351,315
335,458
Change in provision for impairment of receivables and prepayments
31,234
91,244
Foreign exchange (gain) / loss, net
1,525,153
50,650
Lost harvest write-off
189,841
101,327
Net (gain) / loss from bonds held for trading
15,977
20,649
Settlement of loans and accounts receivable previously written-off
(2)
(160)
Change in provision for impairment of advances paid for property, plant and equipment
(23,168)
19,642
Dividend income
(186,506)
-
Gain on sale of subsidiaries, net
-
(364,880)
Loss / (gain) on other investments
-
(144,302)
Other non-cash and non-operating expenses, net
(80,857)
292,887
Operating cash flow before working capital changes
20,915,102
12,460,607
Change in trade and other receivables and prepayments
(481,067)
(1,900,204)
Change in other taxes receivable
1,149,905
569,949
Change in inventories and short-term biological assets
2,625,194
6,653,520
Change in trade and other payables
2,092,873
10,456,524
Change in other taxes payable
(639,320)
347,273
Cash generated from operations
25,662,687
28,587,669
Income tax paid
(986,154)
43,196
Net cash from operating activities
24,676,533
28,630,865
Appendix 4 (continued). Consolidated statement of cash flows the Nine months ended 30 September 2020 (in RR thousand) - NOT IFRS PRESENTATION (*)
Nine months
Cash flows from investing activities
30 September 2020
30 September 2019
Purchases of property, plant and equipment
(8,707,154)
(11,810,722)
Purchases of other intangible assets
(335,686)
(257,819)
Proceeds from sales of property, plant and equipment
375,220
169,621
Purchases of inventories intended for construction
(1,383,337)
(579,313)
Purchases of investments in third parties
-
(8,500,000)
Purchases of associates
(63,000)
(73,150)
Dividends received
186,506
-
Movement in restricted cash
-
(242,491)
Proceeds from sale of subsidiaries, net of cash disposed
-
478,710
Proceeds from sales of other investments
-
145,000
Other investing activities
61,211
-
Net cash from investing activities
(9,866,240)
(20,670,164)
Cash flows from financing activities
Proceeds from borrowings
38,830,604
32,885,674
Repayment of borrowings
(43,477,527)
(40,909,438)
Interest and other finance cost paid
(2,960,414)
(3,519,091)
Change in cash on bank deposits*
-
2,594,903
Proceeds from sales of bonds with maturity over three months*
-
2,323,560
Proceeds from sales of promissory notes*
-
100,000
Purchases of loan issued*
(8,191)
(188,649)
Loans repaid*
910,270
1,864,389
Interest received*
2,757,453
2,883,286
Proceeds from government grants
1,490,823
915,104
Dividends paid to owners Ros Agro PLC
(5,134,426)
(3,401,658)
(Repayment)/proceeds of lease liabilities-principal
(28,111)
(154,834)
Net cash from financing activities
(7,619,519)
(4,606,754)
Net effect of exchange rate changes on cash and cash equivalents
291,126
(114,226)
Net increase/ (decrease) in cash and cash equivalents
7,481,900
3,239,721
Cash and cash equivalents at the beginning of the period
2,170,779
1,728,396
Cash and cash equivalents at the end of the period
9,652,679
4,968,117
(*) For the purpose of conformity with the methodology of the Group's net debt calculation investments in financial assets related to financial activities are presented in Cash flows from financing activities in the Group's management accounts.
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