REG - Ros Agro PLC - Half-year Report
14 August 2020
ROS AGRO financial results for 1H 2020 and 2Q 2020
14 August 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 six months ended 30 June 2020.
1H 2020 Highlights
- Sales amounted to RR 71,236 million (US$ 1,027 million1), an increase of RR 5,916 million (+9%) compared to 1H 2019;
- Adjusted EBITDA2 amounted to RR 12,125 million (US$ 175 million), an increase of
RR 4,344 million (+56%) compared to 1H 2019;
- Adjusted EBITDA margin rose from 12% in 1H 2019 to 17% in 1H 2020;
- Net profit for the period amounted to RR 8,000 million (US$ 115 million), an increase of RR 5,432 million (+212%);
- Net debt position3 as of 30 June 2020 amounted to RR 51,620 million (US$ 738 million);
- Net Debt/ Adjusted EBITDA (LTM4) as of 30 June 2020 was 2.17x.
Commenting on the results, Maxim Basov, a member of the Board of Directors of ROS AGRO PLC and CEO of the Group, said:
"Q2 2020 showed good results as sales and adjusted EBITDA of the Group continued to improve. Sales of Oil and Fat and Meat Segments increased significantly as the result of higher sales volumes of oil-and-fat products due to the lease of SolPro assets and increased sales volumes of processed pork due to production expansion in Tambov Region. Sugar and Agricultural Segments experienced decrease in sales mainly due to sugar sales price drop and management decision to postpone sales of sugar, wheat, barley and soybean from the beginning of 2019 towards 2Q 2019.
Margins of Oil and Fat and Sugar Segments contributed the most to Group's adjusted EBITDA margin improvement. High margin was drawn from SolPro product sales, while it remained at SolPro entities in 1H 2019 under the tolling scheme. Sugar Segment benefited from the significant decrease of sugar beet purchase prices as well as the launch of second line of desugarisation, which increased volumes of higher margin sugar produced out of molasses. Meat and Agricultural Segments' margins remained rather flat.
In 1H 2020 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 ruble 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 and construction plants at high capacity and prepare for planting 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
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales 1
71,236
65,3202
5,916
9
38,302
37,350
952
3
Gross profit
15,416
9,143
6,273
69
8,251
4,677
3,574
76
Gross margin, %
22%
14%
8 pp
22%
13%
9 pp
Adjusted EBITDA 3
12,125
7,7814
4,344
56
6,963
3,825
3,138
82
Adjusted EBITDA margin, %
17%
12%
5 pp
18%
10%
8 pp
Net profit for the period 5
8,000
2,568
5,432
212
4 802
915
3,887
425
Net profit margin %
11%
4%
7 pp
13%
2%
11 pp
1 Sales for Agriculture segment were allocated between 1Q19 and 2Q19, effect RR -503 million for 1Q19 and RR +503 million for 2Q19
2 Sales and COS for 1H19 related to Oil & Fats (RR 7,396 million) and Other (RR 457 million) have been netted versus each other with no effect on Gross profit in accordance with p. 17(a) and 17(b) of IFRS15
3 Adjusted EBITDA calculation now also includes other operating income/(expenses), while other non-operating expenses are excluded, effect for 1Н19 RR -449 million; Cost of Sales for Agriculture segment were allocated between 1Q19 and 2Q19, effect RR +685 million for 1Q19 and RR -685 million for 2Q19 in terms of EBITDA
4 Adjusted EBITDA for 2Q19 was decreased by RR 311 million due to revaluation procedure, performed at the year end
5 Net profit for the period is affected by non-cash loss on revaluation of biological assets and agricultural produce. See details in business-sections below
Key financial performance indicators by segments
in RR million
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales, incl.
71,236
65,320
5,916
9
38,302
37,350
952
3
Sugar
14,269
15,674
(1,405)
(9)
9,028
11,149
(2,121)
(19)
Meat
14,079
11,169
2,910
26
7,270
5,983
1,287
22
Agriculture
7,670
9,157
(1,487)
(16)
3,246
4,282
(1,036)
(24)
Oil and Fat
34,444
28,941
5,503
19
18,297
15,519
2,778
18
Dairy Products
1,819
1,832
(13)
(1)
829
969
(140)
(14)
Other
289
156
133
85
170
110
60
55
Eliminations
(1,334)
(1,609)
275
17
(538)
(662)
124
19
Gross profit, incl.
15,415
9,142
6,273
69
8,250
4,678
3,572
76
Sugar
3,882
2,837
1,045
37
2,666
1,589
1,077
68
Meat
2,517
1,432
1,085
76
1,201
1,279
(78)
(6)
Agriculture
1,813
1,271
542
43
683
315
368
117
Oil and Fat
6,865
3,044
3,821
126
3,490
1,607
1,883
117
Dairy Products
213
150
63
42
94
86
8
9
Other
43
114
(71)
(62)
38
108
(70)
(65)
Eliminations
82
294
(212)
(72)
78
(306)
384
-
Adjusted EBITDA, incl.
12,125
7,781
4,344
56
6,963
3,825
3,138
82
Sugar
3,554
2,302
1,252
54
2,533
1,283
1,250
97
Meat
2,690
1,973
717
36
1,523
1,287
236
18
Agriculture
2,104
2,597
(493)
(19)
786
1,024
(238)
(23)
Oil and Fat
4,350
406
3,944
971
2,338
103
2,235
2,170
Dairy Products
(18)
1
(19)
-
(14)
9
(23)
-
Other
(615)
(813)
198
24
(216)
(164)
(52)
(32)
Eliminations
60
1,315
(1,255)
(95)
13
283
(270)
(95)
Adjusted EBITDA margin, %
17%
12%
5 pp
18%
10%
6%
Sugar
25%
15%
10 pp
28%
12%
16 pp
Meat
19%
18%
1 pp
21%
22%
(1) pp
Agriculture
27%
28%
(1) pp
24%
24%
0 pp
Oil and Fat
13%
1%
12 pp
13%
1%
12 pp
Dairy Products
(1)%
0%
(1) pp pp
(2)%
1%
(3) pp
Sugar Segment
The financial results of the Sugar Segment of 1H20 and 2Q20 compared to 1H19 and 2Q19 respectively are presented in the table below:
in RR million
Six months ended
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Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales
14,269
15,674
(1,405)
(9)
9,028
11,149
(2,121)
(19)
Cost of sales
(10,398)
(12,831)
2,433
19
(6,373)
(9,557)
3,184
33
Net gain/ (loss) from trading derivatives
11
(6)
17
-
11
(3)
14
-
Gross profit
3,882
2,837
1,045
37
2,666
1,589
1,077
68
Gross profit margin
27%
18%
9 pp
30%
14%
16 pp
Distribution and selling expenses
(1,091)
(841)
(250)
(30)
(580)
(466)
(114)
(24)
General and administrative expenses
(686)
(723)
37
5
(337)
(358)
21
6
Other operating income/ (expenses), net
95
17
78
459
75
16
59
367
Other non-operating income/ (expenses), net
468
406
62
15
415
347
68
20
Operating profit
2,668
1,696
972
57
2,239
1,128
1,111
98
Adjusted EBITDA
3,554
2,302
1,252
54
2,533
1,283
1,250
97
Adjusted EBITDA margin
25%
15%
10 pp
28%
12%
16 pp
Sales decreased in 1H20 compared to 1H19 mainly due to sale price drop of 18% compensated by sales volumes increase of 3%. The decrease of selling prices was caused by sugar overproduction in Russia. However, in comparison to 4Q19 the sale price showed increase of 20% in 1H20 as a result of demand growth triggered by the implications of the COVID-19 pandemic, which also led to sales volumes increase. Quarterly sales volumes decreased in 2Q20 compared to 2Q19 due to management decision to postpone sales from 1Q19 to 2Q19 with expectation of prices growth. Sugar sales decrease was partially compensated by the sugar pulp sales growth of RR 635 million in 1H20 compared to 1H19 and of RR 388 million in 2Q20 compared to 2Q19.
Sugar sales, production volumes and average sales prices per kilogram (excl. VAT) were
as follows:
Six months ended
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Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sugar production volume
(thousand tonnes)
109
27
82
304
52
9
43
464
Sales volume
(thousand tonnes)
466
453
13
3
297
348
(51)
(15)
Average sales price
(rubles per kg, excl. VAT)
26.2
31.8
(5.6)
(18)
26.9
30.3
(3.4)
(11)
Cost of sales in 1H20 showed in comparison to 1H19 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 1H20 and 2Q20 compared to 1H19 and 2Q19 respectively are presented in the table below:
in RR million
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales
14,079
11,169
2,910
26
7,270
5,983
1,287
22
Net gain/ (loss) on revaluation of biological assets and agricultural produce
320
(256)
576
-
(108)
103
(211)
-
Cost of sales
(11,882)
(9,481)
(2,401)
(25)
(5,961)
(4,807)
(1,154)))
(24)
Gross profit
2,517
1,432
1,085
76
1,201
1,279
(78)
(6)
Gross profit margin
18%
13%
5 pp
17%
21%
(4) pp
Gross profit excl. effect of biological assets revaluation
2,197
1,688
509
30
1,309
1,176
133
11
Adjusted gross profit margin
16%
15%
1 pp
18%
20%
(2) pp
Distribution and selling expenses
(559)
(368)
(191)
(52)
(354)
(211)
(143)
(68)
General and administrative expenses
(781)
(598)
(183)
(31)
(322)
(212)
(110)
(52)
Other operating income/ (expenses), net
51
(83)
134
-
(23)
(76)
53
70
incl. reimbursement of operating costs (government grants)
-
2
(2)
-
(0)
2
(2)
-
Other non-operating income/ (expenses), net
204
125
79
63
135
66
69
104
incl. reimbursement of non-operating costs (government grants)
-
-
-
-
-
-
-
-
Operating profit income/ (expenses), net
1,432
510
922
181
637
848
(211)
(25)
Adjusted EBITDA
2,690
1,973
717
36
1,523
1,287
236
18
Adjusted EBITDA margin
19%
18%
1 pp
21%
22%
(1) pp
Sales of the Meat Segment increased by 26% in 1H20 and by 22% in 2Q20 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. Sales volumes increase was partly compensated by decrease in sales price of livestock pigs and processed pork by 5% and 6% respectively, due to continuous domestic production growth and, thus, increased competition.
Cost of sales increased by 25% due to higher volumes of livestock pigs transferred to meat processing.
Net gain on revaluation of biological assets and agricultural produce in 1H20 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. There was a decrease of net gain on revaluation of biological assets and agricultural produce in 2Q20 as a result of culling pigs from the reproductive herd for fattening and respective reflecting the effect of their revaluation.
An increase in Distribution and selling expenses in 1H20 and 2Q20 compared to the same prior year periods due to the rise in the costs of marketing activities.
Pork sales volumes and the average pork sales prices per kilogram (excl. VAT) were as follows:
Six months ended
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Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales volume
(thousand tonnes), incl.
116
86
30
35
59
45
14
31
livestock pigs
11
8
3
38
6
4
2
46
processed pork
105
78
27
35
53
41
12
28
Average sale prices
(rubles per kg, excl. VAT):
livestock pigs
69.2
73.2
(4)
(5)
71.4
76.1
(5)
(8)
processed pork
126.6
134.8
(8.2)
(6)
129.0
136.4
(7.4)
(5)
An increase in General and administrative expenses in 1H20 compared to prior year period related to expenses of farms in construction.
An increase in Other operating income in 1H20 compared to the same prior year period is due to the launch of the grain elevator in Primorie.
Agricultural Segment
As at 30 June 2020 Group's area of controlled land stands at 642 thousand hectares (30 June 2019: 648 thousand hectares). The financial results of the Agricultural Segment of 1H20 and 2Q20 compared to 1H19 and 2Q19 respectively are presented below:
in RR million
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales
7,670
9,157
(1,487)
(16)
3,246
4,282
(1,036)
(24)
Net gain/ (loss) on revaluation of biological assets and agricultural produce
(1,006)
(2,795)
1,789
64
(560)
(1,392)
832
60
Cost of sales
(4,850)
(5,090)
240
5
(2,003)
(2,575)
572
22
Net gain/ (loss) from trading derivatives
-
-
-
-
-
-
-
-
Gross profit
1,814
1,272
542
43
683
315
368
117
Gross profit margin
24%
14%
10 pp
21%
7%
14 pp
Gross profit excl. effect of biological assets and agricultural produce revaluation
2,820
4,067
(1,247)
(31)
1,243
1,707
(464)
(27)
Adjusted gross profit margin
37%
44%
(7) pp
38%
40%
(2) pp
Distribution and selling expenses
(978)
(1,592)
614
39
(498)
(700)
202
29
General and administrative expenses
(619)
(591)
(28)
(5)
(304)
(319)
15
5
Other operating income/ (expenses), net
(76)
(65)
(11)
(17)
(44)
(78)
34
44
incl. reimbursement of
operating costs (government
grants)
61
72
(11)
(15)
61
36
25
69
Other non-operating income/ (expenses), net
115
(43)
158
-
57
8
49
618
incl. reimbursement of non-operating costs (government grants)
-
-
-
-
-
-
-
-
Operating profit
256
(1,019)
1,275
-
(105)
(774)
669
86
-
-
-
-
Adjusted EBITDA
2,105
2,597
(492)
(19)
787
1,024
(237)
(23)
Adjusted EBITDA margin
27%
28%
(1) pp
24%
24%
- pp
Sales in 1H20 vs 1H19 decreased due to lower sales volumes of wheat, barley and corn and lower sales prices of wheat and barley. Higher soybean volumes were sold in 1H20 mainly during 1Q20. Increased volumes of export sales were supported by higher export prices due to the devaluation of the ruble in March.
Lower Sales in 2Q20 compared to 2Q19 were affected by management decision in 2018 to push sales timing towards 2Q19.
Sales volumes by product were as follows:
Thousand tonnes
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
wheat
82
262
(180)
(69)
36
83
(47)
(57)
barley
51
121
(70)
(58)
28
72
(44)
(61)
corn
67
125
(58)
(46)
59
40
19
47
sunflower seeds
18
8
10
125
1
8
(7)
(84)
soybean
179
130
49
38
57
91
(34)
(37)
The average sale prices per kilogram (excl. VAT) were as follows:
RR per kilogram, excl. VAT
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
wheat
11.2
12.8
(1.6)
(13)
11.6
12.9
(1.3)
(10)
barley
9.7
11.2
(1.5)
(13)
9.5
11.0
(1.5)
(14)
corn
14.8
12.6
2.2
17
15.0
12.6
2.4
20
sunflower seeds
20.1
18.8
1.3
7
22.8
18.8
4.0
21
soybean
25.5
20.3
5.2
26
26.9
19.2
7.7
40
Net loss on revaluation of biological assets and agricultural produce in 1H20 and 2Q20 vs 2019 figures represents the realisation of gain from crops revaluation, recognised in the previous year financial statements and remained unrealised as at the year-end.
Net gain/ (loss) on revaluation of crops and its subsequent realisation do not affect the adjusted EBITDA figure.
Distribution and selling expenses decreased in 1H20 and 2Q20 vs 2019 figures as significantly lower volumes of crops were sold in the current year.
Other non-operating income/(expenses),net include result from PPE disposal and foreign exchange.
In 2Q20 Other non-operating income increased by RR 49 million compared to 2Q19 mainly as a result of higher foreign exchange gain.
Oil and Fat Segment
The financial results of the Oil and Fat Segment for 1H20 and 2Q20 compared to 1H19 and 2Q19 respectively are presented below:
in RR million
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales
34,444
28,941
5,503
19
18,297
15,519
2,778
18
Cost of sales
(27,579)
(25,897)
(1,682)
(6)
(14,807)
(13,912)
(895)
(6)
Gross profit
6,865
3,044
3,821
126
3,490
1,607
1,883
117
Gross profit margin
20%
11%
9 pp
19%
10%
9 pp
Distribution and selling expenses
(1,808)
(2,017)
209
10
(844)
(1,070)
226
21
General and administrative expenses
(985)
(742)
(243)
(33)
(456)
(422)
(34)
(8)
Other operating income/ (expenses). net
(34)
(190)
156
82
(10)
(179)
169
94
Other non-operating income/ (expenses). net
(176)
(19)
(157)
(826)
(238)
(12)
(226)
(1,883)
Operating profit/ (loss)
3,862
76
3,786
4,982
1,943
(76)
2,019
-
Adjusted EBITDA
4,350
406
3,944
971
2,338
103
2,234
2,148
Adjusted EBITDA margin
13%
1%
12 pp
13%
1%
12 pp
Sales volumes to third parties by product were as follows:
thousand tonnes
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
mayonnaise
64
57
7
12
33
37
(4)
(10)
margarine
20
19
1
5
10
10
0
1
bottled oil
83
67
16
24
47
36
11
32
industrial fats
134
91
43
47
57
62
(5)
(7)
bulk oil
216
207
9
4
115
96
19
20
meal
317
333
(16)
(5)
155
168
(13)
(8)
The average sale prices per kilogram (excl. VAT) for sales to third parties were as follows:
RR per kilogram, excl. VAT
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
mayonnaise
83.1
79.9
3.2
4
85.4
80.2
5.2
7
margarine
83.3
81.0
2.3
3
86.2
80.7
5.5
7
bottled oil
58.7
53.6
5.1
10
61.6
52.7
8.9
17
industrial fats
54.9
49.7
5.2
10
57.2
48.9
8.3
17
bulk oil
47.4
43.8
3.6
8
48.7
44.4
4.3
10
meal
13.4
14.9
(1.5)
(10)
14.5
14.1
0.4
3
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. At the same time, EBITDA margin increased to 13% in 1H20 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 12 pp in 1H20 compared to 1H19.
Increase in General and administrative expenses by RR 243 million in 1H20 and by RR 34 million in 2Q20 compared 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 and by RR 169 million in 2Q20 was mainly write-off of RR 175 million as result of sunflower technological losses in 2Q19.
Increase in Other non-operating expenses by RR 182 million in 1H20 was caused by a change in the exchange rate.
Dairy Products Segment
The financial results of the Dairy Products Segment for 1H20 and 2Q20 compared to 1H19 and 2Q19 respectively are presented in the table below:
in RR million
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Sales
1,819
1,832
(13)
(1)
829
969
(140)
(15)
Cost of sales
(1,606)
(1,682)
76
5
(735)
(883)
148
17
Gross profit
213
150
63
42
94
86
8
9
Gross profit margin
12%
8%
4 pp
11%
9%
2 pp
Distribution and selling expenses
(126)
(74)
(52)
(70)
(68)
(32)
(36)
(113)
General and administrative expenses
(77)
(73)
(4)
(5)
(41)
(46)
6
12
Other operating income/ (expenses). net
(30)
-
(30)
-
(1)
-
(1)
-
Other non-operating income/ (expenses). net
(1)
(2)
1
50
1
(1)
2
-
Operating profit
(21)
1
(22)
-
(14)
7
(21)
-
Adjusted EBITDA
(18)
1
(19)
-
(14)
9
(23)
-
Adjusted EBITDA margin
(1)%
0%
(1) pp
(2)%
1%
(3) 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
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
cheese and cheese product
4
4
-
-
2
2
-
(3)
butter and spread
0
1
(1)
-
0
1
(1)
(69)
dry mixes
7
7
-
-
3
4
(1)
(19)
cream
2
0
2
-
1
0
1
-
The average sale prices per kilogram (excl. VAT) were as follows:
RR per kilogram, excl. VAT
Six months ended
Variance
Three months ended
Variance
30 June 2019
30 June 2018
Units
%
30 June 2019
30 June 2018
Units
%
cheese and cheese product
210.7
224.7
(14.0)
(6)
218.4
237.7
(19.3)
(8)
butter and spread
242.1
290.3
(48.2)
(17)
250.9
309.3
(58.4)
(19)
dry mixes
74.4
79.0
(4.6)
(6)
73.5
81.2
(7.7)
(9)
cream
185.9
0.0
185.9
-
175.5
0.0
175.5
-
Sales of dairy products decreased in 1H20 (RR -13 million, -1%) as a result of decrease of sales volume and shift of sales volume from cheese (more expensive product) to cheese products.
Growth of Distribution and selling expenses due to brand development and promotion. Growth of 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
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Net cash from operating activities, incl.
19,053
18,823
230
1
12,574
15,060
(2,486)
(17)
Operating cash flow before working capital changes
12,864
8,665
4,200
48
7,622
5,853
1,770
30
Working capital changes
6,449
10,248
(3,800)
(37)
5,005
9,260
(4,256)
(46)
Net cash from investing activities, incl.
(4,765)
(6,108)
1,343
22
(2,745)
(3,143)
398
13
Purchases of property plant and equipment and inventories intended for construction
(4,825)
(6,405)
1,580
25
(2,675)
(3,437)
762
22
Net cash from financing activities
(13,407)
(11,651)
(1,756)
(15)
(9,484)
(9,996)
512
5
Net effect of exchange rate changes on cash and cash equivalents
173
(114)
287
-
(147)
(88)
(59)
(67)
Net increase / (decrease) in cash and cash equivalents
1,054
949
104
11
198
1,832
(1,635)
(89)
(*) See Appendix 4
The main investments in property, plant and equipment and inventories intended for construction in 1H20 were made in the Meat Segment in the amount of RR 2,083 million (1H19: RR 3,795 million) related to the construction project in Far East region. Investments in Sugar Segment in the amount of RR 913 million (1H19: RR 1,672 million), Agriculture Segment in the amount of RR 1,181 million (1H19: RR 838 million) and Oil and Fat Segment in the amount of RR 648 million (1H19: RR 100 million) mainly relate to purchases of machinery and equipment for production facilities renewal and maintenance.
Debt position and liquidity management
in RR million
30 June 2020
31 December 2019
Variance
Units
%
Gross debt
88,809
97,876
(9,067)
(9)
Short-term borrowings
25,102
31,835
(6,733)
(21)
Long-term borrowings
63,707
66,041
(2,334)
(4)
Cash and cash equivalents, bank deposits and bonds
(37,189)
(36,136)
(1,053)
(3)
Short-term cash, deposits and bonds
(3,225)
(2,171)
(1,054)
(49)
Long-term cash, deposits and bonds
(33,964)
(33,965)
1
0
Net debt
51,620
61,740
(10,120)
(16)
Short-term borrowings, net
21,877
29,664
(7,787)
(26)
Long-term borrowings, net
29,743
32,076
(2,333)
(7)
Adjusted EBITDA (LTM4)
23,793
19,448
4,345
22
Net debt/ Adjusted EBITDA (LTM)
2.17
3.17
(1.0) pp
Adjusted EBITDA (LTM) without other operating income/expenses
24,186
20,045
4,141
21
Net debt/ Adjusted EBITDA (LTM) without other operating income/expenses
2.13
3.08
(0.9) pp
Net finance income/ (expense)
in RR million
Six months ended
Variance
Three months ended
Variance
30 June 2020
30 June 2019
Units
%
30 June 2020
30 June 2019
Units
%
Net interest expense
(2,582)
(2,701)
119
4
(1,235)
(1,134)
(101)
(9)
Gross interest expense
(3,357)
(3,341)
(15)
(0)
(1,655)
(1,531)
(124)
(8)
Reimbursement of interest expense
775
640
134
21
420
397
23
6
Interest income
3,572
3,996
(424)
(11)
1,801
993
809
81
Net gain/ (loss) from bonds held for trading
(17)
(23)
6
24
(16)
(19)
3
15
Other financial income, net
(1,351)
(82)
(1,269)
(1,546)
(211)
113
(324)
-
Net foreign exchange gain/ (loss)
(1,215)
11
(1,226)
-
(138)
69
(207)
-
Other financial income / (expenses), net
(137)
(93)
(43)
(47)
(73)
44
(117)
-
Total net finance income/ (expenses)
(379)
1,190
(1,569)
-
339
(47)
386
-
Net debt decreased at 30 June 2020 compared at 31 December 2019 as a result of repayment of loans and borrowings received and as a result of increase in cash balances and short-term bank deposits.
In 1H20 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 1H20 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 presented in interest expenses in a statement of comprehensive income.
Net finance income of 1H19 in the sum of RR 1,190 million changed to net finance expense in the amount of RR 379 million in 1H20 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 642 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 producer in 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.
Dairy Products:
Launched at the end of 2018 Dairy 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 1H and 2Q 2020 financial results for investors and analysts.
Details of the call:
Date
14 August 2020
Time
4:00 PM (Moscow) / 2:00 PM (London)
Subject
ROS AGRO PLC 2Q 2020 Financial results
UK Toll Free
UK Local Line
0 800 376 61 83
+44 207 194 37 59
USA Toll Free
USA Local Line
1 844 286 06 43
+1 646 722 49 16
Russia Toll Free
8 800 500 98 63
Russian Local Line
+7 495 646 93 15
Conference ID
12614968#
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 Six and Three months ended 30 June 2020 (in RR thousand)
Six months ended
30 June
Three months ended
30 June
2020
2019
2020
2019
Sales
71,235,810
65,320,244
38,302,446
37,349,303
Net gain/(loss) on revaluation of biological assets and agricultural produce
(381,327)
(3,911,093)
(467,306)
(1,951,989)
Cost of sales
(55,449,155)
(52,260,687)
(29,595,151)
(30,717,410)
Net gain/(loss) from trading derivatives
10,556
(5,823)
10,639
(2,542)
Gross profit
15,415,884
9,142,641
8,250,628
4,677,362
Distribution and selling expenses
(4,315,568)
(4,918,258)
(2,212,587)
(2,599,163)
General and administrative expenses
(3,682,032)
(3,455,599)
(1,672,556)
(1,576,627)
Other operating income/ (expenses), net
(173,149)
(375,776)
(83,708)
(344,200)
Other non-operating income/ (expenses), net
1,616,650
1,059,262
826,635
991,675
Operating profit / (loss)
8,861,785
1,452,270
5,108,412
1,149,047
Interest expense
(2,582,278)
(2,701,155)
(1,234,833)
(1,133,815)
Interest income
3,571,808
3,996,008
1,801,308
992,612
Net (loss)/gain from bonds
(17,002)
(22,515)
(16,143)
(19,013)
Other financial income/ (expenses), net
(1,351,245)
(82,101)
(211,247)
113,001
Profit before income tax
8,483,068
2,642,507
5,447,497
1,101,832
Income tax expense
(483,072)
(74,746)
(645,269)
(186,465)
Profit for the period
7,999,996
2,567,761
4,802,228
915,367
Other comprehensive income
Total comprehensive income for the period
7,999,996
2,567,761
4,802,228
915,367
Profit is attributable to:
Owners of ROS AGRO PLC
8,034,829
2,590,348
4,809,911
928,945
Non-controlling interest
(34,833)
(22,586)
(7,683)
(13,578)
Profit for the period
7,999,996
2,567,761
4,802,228
915,367
Total comprehensive income is attributable to:
Owners of ROS AGRO PLC
8,034,829
2,590,348
4,809,911
928,945
Non-controlling interest
(34,833)
(22,586)
(7,683)
(13,578)
Total comprehensive income for the period
7,999,996
2,567,761
4,802,228
915,367
Earnings per ordinary share for profit attributable to the owners of ROS AGRO PLC, basic and diluted
(in RR per share)298.65
96.30
178.77
34.53
Appendix 2. Segment information for the Six months ended 30 June 2020 (in RR thousand)
1H 2020
Sugar
Meat
Agriculture
Oil and Fat
Other
Eliminations
Total
Sales
14,268,955
14,079,193
7,669,632
34,444,160
2,107,471
(1,333,601)
71,235,810
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
320,426
(1,006,369)
-
-
304,616
(381,327)
Cost of sales
(10,397,787)
(11,881,721)
(4,850,232)
(27,579,255)
(1,851,412)
1,111,252
(55,449,155)
incl. Depreciation
(1,316,686)
(1,670,932)
(823,449)
(234,117)
(5,809)
(8,858)
(4,059,851)
Net loss from trading derivatives
10,556
-
-
-
-
-
10,556
Gross profit / (loss)
3,881,724
2,517,898
1,813,031
6,864,905
256,059
82,267
15,415,884
Distribution and Selling, General and administrative expenses
(1,776,525)
(1,339,052)
(1,596,788)
(2,793,445)
(932,687)
440,897
(7,997,600)
incl. Depreciation
(37,737)
(109,775)
(134,094)
(77,863)
(88,504)
8,858
(439,116)
Other operating income/(expenses), net
94,547
50,585
(75,780)
(33,884)
(51,181)
(157,435)
(173,149)
incl. Reimbursement of operating costs (government grants)
72,144
(439)
60,951
86,569
-
-
219,225
Other non-operating income/(expenses), net
467,585
203,824
114,620
(176,136)
5,635,172
(4,628,415)
1,616,650
incl. Reimbursement of non-operating costs (government grants)
-
-
-
-
-
-
-
Operating profit / (loss)
2,667,331
1,433,255
255,083
3,861,440
4,907,363
(4,262,687)
8,861,785
Adjustments:
Depreciation included in Operating Profit
1,354,423
1,780,707
957,543
311,980
94,313
-
4,498,966
Other non-operating (income) /expenses, net
(467,585)
(203,824)
(114,620)
176,136
(5,635,172)
4,628,415
(1,616,650)
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
(320,426)
1,006,369
-
-
(304,616)
381,327
Adjusted EBITDA*
3,554,169
2,689,712
2,104,375
4,349,556
(633,496)
61,112
12,125,428
* Non-IFRS measure
Appendix 2 (continued). Segment information for the Six months ended 30 June 2019 (in RR thousand)
1H 2019
Sugar
Meat
Agriculture
Oil and Fat
Other
Eliminations
Total
Sales
15,674,283
11,169,171
9,156,605
28,940,747
1,987,194
(1,607,756)
65,320,244
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
(255,627)
(2,794,959)
-
-
(860,507)
(3,911,093)
Cost of sales
(12,831,202)
(9,480,699)
(5,090,364)
(25,896,557)
(1,724,163)
2,762,298
(52,260,687)
incl. Depreciation
(971,860)
(1,271,581)
(658,246)
(236,525)
(6,381)
(5,853)
(3,150,446)
Net gain/ (loss) from trading derivatives
(5,817)
-
-
-
(6)
-
(5,823)
Gross profit
2,837,264
1,432,845
1,271,282
3,044,190
263,025
294,035
9,142,641
Distribution and Selling, General and administrative expenses
(1,565,172)
(965,518)
(2,182,756)
(2,759,082)
(1,061,815)
160,486
(8,373,857)
incl. Depreciation
(40,251)
(61,621)
(120,082)
(74,453)
(35,909)
5,853
(326,463)
Other operating income/(expenses), net
17,360
(82,930)
(64,679)
(190,234)
(55,293)
-
(375,776)
incl. Reimbursement of operating costs (government grants)
-
1,575
71,783
-
-
-
73,358
Other non-operating income/(expenses), net
406,349
125,498
(43,305)
(19,260)
10,944,321
(10,354,341)
1,059,262
incl. Reimbursement of non-operating costs (government grants)
-
-
-
-
-
-
-
Operating profit / (loss)
1,695,801
509,895
(1,019,458)
75,614
10,090,238
(9,899,820)
1,452,270
Adjustments:
Depreciation included in Operating Profit
1,012,111
1,333,202
778,328
310,978
42,290
-
3,476,909
Other non-operating (income) /expenses, net
(406,349)
(125,498)
43,305
19,260
(10,944,321)
10,354,341
(1,059,262)
Net gain/ (loss) on revaluation of biological assets and agricultural produce
-
255,627
2,794,959
-
-
860,507
3,911,093
Adjusted EBITDA*
2,301,563
1,973,226
2,597,134
405,852
(811,793)
1,315,028
7,781,010
* Non-IFRS measure
Appendix 3. Consolidated statement of financial position as at 30 June 2020
(in RR thousand)
30 June 2020
31 December 2019
ASSETS
Current assets
Cash and cash equivalents
3,224,443
2,170,779
Restricted cash
44
39
Short-term investments
23,498,905
23,456,552
Trade and other receivables
7,106,118
8,068,349
Prepayments
2,486,015
3,018,658
Current income tax receivable
390,054
225,315
Other taxes receivable
3,365,188
4,349,400
Inventories and short-term biological assets
45,023,884
49,386,797
Total current assets
85,094,651
90,675,889
Non-current assets
Property, plant and equipment
83,029,805
80,629,483
Inventories intended for construction
3,566,226
3,157,369
Right-of-use assets
6,209,375
6,230,707
Goodwill
2,364,942
2,364,942
Advances paid for non-current assets
6,646,467
8,721,155
Long-term biological assets
2,306,739
2,279,335
Long-term investments and receivables
42,633,422
42,636,323
Investments in associates
200,070
165,070
Deferred income tax assets
2,611,150
1,852,983
Other intangible assets
592,790
608,635
Other non-current assets
47,477
173,002
Total non-current assets
150,208,463
148,819,004
Total assets
235,303,114
239,494,893
LIABILITIES and EQUITY
Current liabilities
Short-term borrowings
25,101,545
31,834,699
Lease liabilities
841,340
916,791
Trade and other payables
17,379,947
17,492,614
Current income tax payable
288,547
123,846
Other taxes payable
2,807,425
3,468,034
Total current liabilities
46,418,804
53,835,984
Non-current liabilities
Long-term borrowings
63,707,011
66,040,784
Government grants
8,340,857
8,306,779
Lease liabilities
3,954,209
3,989,801
Deferred income tax liability
1,272,019
494,977
Total non-current liabilities
77,274,096
78,832,341
Total liabilities
123,692,900
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
83,782,115
78,960,843
Equity attributable to owners of ROS AGRO PLC
111,581,947
106,760,675
Non-controlling interest
28,267
65,893
Total equity
111,610,214
106,826,568
Total liabilities and equity
235,303,114
239,494,893
Appendix 4. Consolidated statement of cash flows for the Six months ended 30 June 2020 (in RR thousand) - NOT IFRS PRESENTATION (*)
Six months ended
30 June 2020
30 June 2019
Cash flows from operating activities
Profit before income tax
8,483,068
2,642,507
Adjustments for:
Depreciation and amortization
4,498,966
3,476,909
Interest expense
3,356,941
3,319,155
Government grants
(1,306,625)
(950,006)
Interest income
(3,571,808)
(3,996,008)
Loss / (gain) on disposal of property, plant and equipment
(50,577)
93,300
Net (gain) / loss on revaluation of biological assets and agricultural produce
381,327
3,911,093
Lease finance expense
129,700
107,863
Realised deferred day-one gain
(823,967)
(359,202)
Change in provision for net realisable value of inventory
366,003
273,376
Change in provision for impairment of receivables and prepayments
(4,045)
71,869
Foreign exchange (gain) / loss, net
1,361,408
19,874
Lost harvest write-off
179,563
82,785
Net (gain) / loss from bonds held for trading
17,002
22,515
Settlement of loans and accounts receivable previously written-off
(2)
(11)
Change in provision for impairment of advances paid for property, plant and equipment
113,203
29,235
Dividend income
(186,506)
-
Gain on sale of subsidiaries, net
-
(364,880)
Loss / (gain) on other investments
-
575
Other non-cash and non-operating expenses, net
(79,171)
283,800
Operating cash flow before working capital changes
12,864,480
8,664,749
Change in trade and other receivables and prepayments
1,307,967
(2,152,188)
Change in other taxes receivable
984,212
631,855
Change in inventories and short-term biological assets
3,978,409
4,609,438
Change in trade and other payables
618,965
7,127,098
Change in other taxes payable
(441,051)
32,176
Cash generated from operations
19,312,982
18,913,128
Income tax paid
(259,734)
(90,134)
Net cash from operating activities
19,053,248
18,822,994
Appendix 4 (continued). Consolidated statement of cash flows the Six months ended 30 June 2020 (in RR thousand) - NOT IFRS PRESENTATION (*)
Six months
Cash flows from investing activities
30 June 2020
30 June 2019
Purchases of property, plant and equipment
(4,016,179)
(5,643,964)
Purchases of other intangible assets
(237,792)
(47,092)
Proceeds from sales of property, plant and equipment
79,507
142,458
Purchases of inventories intended for construction
(808,586)
(761,049)
Purchases of associates
(35,000)
-
Dividends received
186,506
-
Movement in restricted cash
-
(277,327)
Proceeds from sale of subsidiaries, net of cash disposed
-
478,710
Other investing activities
66,487
-
Net cash from investing activities
(4,765,057)
(6,108,264)
Cash flows from financing activities
Proceeds from borrowings
31,110,339
19,753,266
Repayment of borrowings
(42,937,117)
(34,813,882)
Interest and other finance cost paid
(2,161,798)
(3,040,947)
Change in cash on bank deposits*
-
2,594,903
Proceeds from sales of bonds with maturity over three months*
-
2,323,560
Purchases of loan issued*
(1,840)
(87,189)
Loans repaid*
696,560
1,629,718
Interest received*
2,628,790
2,741,880
Proceeds from government grants
544,868
770,390
Dividends paid to owners Ros Agro PLC
(3,216,539)
(3,401,828)
(Repayment)/proceeds of lease liabilities-principal
(70,432)
(121,227)
Net cash from financing activities
(13,407,169)
(11,651,356)
Net effect of exchange rate changes on cash and cash equivalents
172,642
(114,008)
Net increase/ (decrease) in cash and cash equivalents
1,053,664
949,366
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
3,224,443
2,677,762
(*) 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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