Subscribe via e-mail
 
RSS
 

Share link
 

PhosAgro reports 3Q17 EBITDA of RUB 13.6 billion

22.11.2017
ТемаCompany News

Moscow – PhosAgro ("PhosAgro" or the “Company") (Moscow Exchange, LSE: PHOR), one of the world’s leading vertically integrated phosphate-based fertilizer producers, today announces its interim condensed consolidated IFRS financial results for the three and nine months ended 30 September 2017.

Revenue in 3Q 2017 increased by 2% year-on-year to RUB 46.5 billion (USD 787 million), bringing 9M 2017 revenue to RUB 135.6 billion (USD 2.3 billion). EBITDA for 3Q 2017 was RUB 13.6 billion (USD 231 million), with an EBITDA margin of 29%. EBITDA for 9M 2017 was RUB 38.5 billion (USD 661 million). Net income (adjusted for non-cash FX items) in 3Q 2017 decreased by 46% year-on-year to RUB 5.8 billion (USD 98 million), bringing adjusted net income for 9M 2017 to RUB 17.5 billion (USD 300 million).

3Q and 9M 2017 financial and operational highlights

RUB million or %

3Q 2017

3Q 2016

Chng, %YoY

9M 2017

9M 2016

Chng, %YoY

Revenue

46,452

45,558

2%

135,573

147,607

-8%

EBITDA*

13,624

17,368

-22%

38,511

58,923

-35%

EBITDA margin

29%

38%

-9 pp

28%

40%

-12 pp

Net income

7,343

12,401

-41%

21,075

48,515

-57%

Net income adj*

5,771

10,658

-46%

17,490

35,493

-51%

30-09-2017

31-12-2016





Net debt

109,055

105,115





ND/LTM EBITDA

2.1x

1.5x





Sales, 000' mt

3Q 2017

3Q 2016

Chng, %YoY

9M 2017

9M 2016

Chng, %YoY

Phosphate-based

1,716

1,558

10%

4,890

4,411

11%

Nitrogen-based

309

280

11%

1,205

1,067

13%

Phosphate rock

654

614

7%

1,998

1,840

9%

RUB/USD rates: average 3Q 2017: 59.0; average 3Q 2016: 64.6; as of 30 September 2017: 58.0; as of 31 December 2016: 60.7
*EBITDA is calculated as operating profit adjusted for depreciation and amortisation.
* - adjusted for non-cash FX items

PhosAgro CEO Andrey Guryev said: “I believe that, despite the challenging macro environment for PhosAgro’s key products and FX headwinds, in the third quarter the company passed through the bottom in terms of profitability and managed to increase EBITDA compared to the second quarter by more than 10%, mainly due to a constant focus on cash costs combined with the first revenue contributions from our new production units. The quarter-on-quarter recovery in EBITDA, coupled with a year-on-year decrease in capex due to completion of key investment projects, enabled us to generate RUB 2.3 billion (USD 39 million) of free cash flow in the quarter, meaning that the Board was able to recommend dividends of RUB 7 per GDR, representing a dividend payout to nearly 100% of free cash flow.

“In terms of operations, we managed to increase both upstream phosphate rock and downstream fertilizer production by almost 20% year-on-year in the third quarter. Together with results already achieved in the first half of the year, we have a high degree of confidence that upstream phosphate rock and downstream fertilizer production volumes for the full year may reach 9.5 million tonnes and 8.3 million tonnes, respectively. As for the new production units, the ammonia and urea lines have been running in test mode since July and August, respectively, and have produced almost 140 and 70 thousand tonnes of product in the third quarter.

“Once these major investment projects are completed, the Company plans to focus its capital expenditure on selected small- or mid-sized projects that support either organic growth in phosphate production thanks to modernisation, or further vertical integration (construction of new sulphuric acid and ammonium sulphate plants). We currently expect overall fertilizer production to reach 9.2 million tonnes by 2020.

“Looking at seaborne markets, the recent rally in the main feedstock prices (ammonia and especially sulphur) has lead to significant inflation in the industry’s cash costs. This, together with previously announced production cuts, has lead to a more balanced supply-demand situation and provides extra support to prices. However, the growing price of feedstocks draws more attention to the scale of vertical integration. For non-integrated players, the recent increase in spot fertilizer prices was fully offset by feedstock inflation, meaning that sector profitability has remained near historic lows. In this context, PhosAgro’s fundamental advantages such as near-100% vertical integration into ammonia with the ramp-up of the new ammonia unit, geographic proximity to sulphur producers, and lower sulphur consumption per tonne of P2O5 due to the quality of the phosphate rock we produce, should help to extend margins throughout the upcycle in the phosphate markets that has now started.”

3Q 2017 market conditions

  • The average price of DAP (FOB Tampa) in 3Q 2017 was USD 340 per tonne, virtually flat year-on-year.
  • Phosphate prices were under pressure primarily as a result of high inventories and low import demand in India due to the delayed decision on the new tax system since 1 July 2017, as well as the start-up of Ma’aden’s new Wa’ad Al Shamal project in Saudi Arabia.
  • On the positive side, prices were supported by stable demand in Brazil. MAP imports increased by 58% year-on-year to 1.4 million tonnes in 3Q 2017. Strong volumes in the first half of the year brought total MAP imports for 9M 2017 to 2.7 million tonnes, up by 57% year-on-year. Brazil’s cumulative import of phosphates (MAP/DAP/NP/NPK/TSP) in 3Q 2017 (in P2O5 content) grew by 80% year-on-year.
  • Exports of phosphates (DAP/MAP/NP/TSP) from China in 3Q 2017 increased by 20% year-on-year to 3.7 million tonnes, due to a strong increase in sales of MAP and NPs.
  • The average price of urea (FOB Baltic) in 3Q 2017 was USD 205 per tonne vs. USD 181 per tonne in 3Q 2016. The price increase was supported by seasonal demand in South Asia and Brazil, coupled with a substantial decrease in exports from China.

Financial performance

Revenue in the third quarter increased by 2% year-on-year to RUB 46.5 billion (USD 787 million). Year-on-year growth of 10% in total sales of fertilizers and MCP was offset by 9% year-on-year appreciation in the average RUB/USD exchange rate and a 17% year-on-year decrease in the average realised price for phosphate rock (in USD terms). On the positive side, revenue growth was supported by 2% and 19% year-on-year increases in the average price per tonne (USD denominated) for phosphate- and nitrogen-based fertilizers, respectively. A more detailed revenue breakdown by key products is presented below.

Revenue breakdown by key products

RUB million

3Q 2017

3Q 2016

Chng, % YoY

9M 2017

9M 2016

Chng, % YoY

DAP/MAP

16,198

15,696

3%

47,233

50,401

-6%

NPK(S)

14,084

13,841

2%

36,190

39,150

-8%

PhosRock

5,006

6,131

-18%

15,801

20,277

-22%

Nitrogen-based

3,984

3,320

20%

15,404

14,488

6%

Gross profit declined by 15% year-on-year to RUB 19.3 billion (USD 327 million), while the gross margin decreased by 8 p.p. year-on-year to 42%. Gross profit and margin performance for the phosphate-based and nitrogen-based segments were as follows:

  • The phosphate-based segment saw an 18% year-on-year decrease in gross profit to RUB 17.4 billion (USD 295 million), with a gross margin of 41%, compared to 50% in 3Q 2016.
  • Gross profit for the nitrogen-based segment increased by 76% year-on-year to RUB 1.9 billion (USD 32 million). Gross margin for the segment increased by 13 p.p. year-on-year to 45%.

EBITDA decreased by 22% year-on-year in 3Q 2017, to RUB 13.6 billion (USD 231 million), while the EBITDA margin declined by 9 p.p. to 29%, compared to 38% in 3Q 2016. Net profit (adjusted for non-cash FX items) dropped by 46% year-on-year to RUB 5.8 billion (USD 98 million) in 3Q 2017.

The RUB appreciated by almost 9% year-on-year during the quarter (the average RUB/USD foreign exchange rates for 3Q 2017 and 3Q 2016 were RUB 59.0 and RUB 64.6, respectively), which had a net negative impact, as prices for most of the Company’s products are denominated in USD, while costs are primarily RUB-based. The appreciation of the RUB as of 30 September 2017 (RUB 58.0 per USD) compared to 30 June 2017 (RUB 59.1 per USD) resulted in an FX gain of RUB 1.6 billion (RUB 1.7 billion gain in Q3 2016).

Cash flow from operating activities decreased by 50% year-on-year, to RUB 10.2 billion (USD 173 million), compared to RUB 20.0 billion (USD 309 million) in 3Q 2016, predominantly due to lower profitability and less favourable changes in working capital due to an increase in inventories and a decrease in accounts payable. Year-to-date operating cash flow stood at RUB 26.5 billion (USD 454 million)

Gross debt (including finance lease liabilities) as of 30 September 2017 decreased marginally, by 4% quarter-on-quarter, to RUB 115 billion (USD 2 billion) primarily due to slight RUB appreciation in the third quarter. Net debt as of 30 September 2017 stood at RUB 109 billion (USD 1.9 billion). Most of the Company’s debt is denominated in USD and thus is naturally hedged by primarily USD-denominated sales. The net debt to LTM EBITDA ratio increased marginally to 2.1x as of 30 September 2017, up from 2.0x as of 30 June 2017.

Cost of Sales

RUB million

3Q 2017

3Q 2016

Chng, % YoY

9M 2017

9M2016

Chng, % YoY

Materials and services

9,045

7,851

15%

23,816

20,759

15%

D&A

3,673

2,265

62%

9,546

6,699

42%

Potash

2,708

1,781

52%

6,636

5,445

22%

Salaries

2,694

2,536

6%

8,152

8,300

-2%

Natural gas

2,473

1,831

35%

6,556

5,935

10%

Sulphur and sulphuric acid

1,672

1,182

41%

4,480

5,029

-11%

Electricity

1,387

1,091

27%

4,046

3,250

24%

Ammonia

1,347

1,103

22%

5,766

4,559

26%

Fertilisers for resale

1,241

833

49%

3,920

3,633

8%

Fuel

666

510

31%

2,207

1,644

34%

Ammonium sulphate

278

459

-39%

1,353

1,788

-24%

Heating energy

67

76

-12%

472

462

2%

Other items

6

1

n/m

8

10

-20%

Change in stock of WIP

-112

1,448

n/m

-228

2,074

n/m

Total

27,145

22,967

18%

76,730

69,587

10%

Cost of sales grew by 18% year-on-year in 3Q 2017 to RUB 27.1 billion (USD 460 million). The key factors behind the growth were:

  • Spending on materials and services grew by 15% year-on-year to RUB 9.0 billion (USD 153 million) driven by a 17% year-on-year increase in phosphate rock processing, 19% growth in overall fertilizer production and 3.4% year-on-year CPI inflation.
  • D&A was up significantly by 62% year-on-year to RUB 3.7 billion (USD 62 million) due to the commissioning of assets (Main Shaft #2 at Kirovsk mine, newly built assets including those related to the new ammonia unit) and capitalized repairs depreceiation.
  • A year-on-year increase in expenditure on potash of 52% to RUB 2.7 billion (USD 46 million) due to 33% growth in purchased volumes (thanks to the greater share of NPKs with high potash content) and a 14% increase in RUB-denominated prices.
  • Spending on natural gas increased by 35% year-on-year to RUB 2.5 billion (USD 42 million) mainly due to a 32% year-on-year increase in ammonia production where natural gas is the main feedstock.
  • Expenditures on sulphur and sulphuric acid were up by 41% year-on-year to RUB 1.7 billion (USD 28 million). The key reasons were a 19% increase in purchased volumes due to growth in production of phosphate-based fertilizers and an 18% increase in RUB-denominated prices.
  • Electricity costs increased by 27% year-on-year to RUB 1.4 billion (USD 24 million) on the back of 12% growth in purchasing from third-parties (resulting from extra purchases due to the rump up of the new ammonia and urea units) and a 13% increase in the average electricity price.
  • A 22% year-on-year increase in spending on purchased ammonia to RUB 1.3 billion (USD 23 million) was mainly due to a 19% increase in purchase volumes. The growth in purchased volumes was driven by almost 16% and 32% year-on-year increases in phosphate- and nitrogen-based fertilizer production, respectively.

Administrative expenses increased by 32% year-on-year to RUB 3.7 billion (USD 63 million) in 3Q 2017, primarily due to a 74% increase in personnel costs to RUB 2.1 billion (USD 37 million). The key items leading to this increase were changes to the bonus accrual schedule, which is now done on a monthly basis instead of the half-year approach used in 2016, indexation of top management salaries, and selective one-off bonuses related to project activities.

In 3Q 2017 Selling expenses increased by 19% year-on-year to RUB 5.0 billion (USD 85 million). The main factors behind the growth were: 1) freight, port and stevedoring expenses grew by 16% year-on-year to RUB 2.0 billion (USD 34 million) primarily due to a 10% year-on-year increase in export sales of rock and fertilizers; 2) materials and services more than doubled to RUB 0.7 billion (USD 12 million) due to higher import duties paid as the company increasing export sales to European markets, as well as higher transportation and storage expenses due to expanding retail business in Russia.

Cash spent on capex in 3Q 2017 amounted to RUB 8.4 billion (USD 142 million), a decrease of 25% year-on-year. Capital expenditure was primarily focused on completing the construction of new ammonia and urea units, modernisation of Benefeciation Plant #3 and extra underground drilling at Apatit. Capex for 9M 2017 reached RUB 23.3 billion (USD 400 million)

Outlook

Market outlook

  • Substantial growth in feedstock prices (ammonia and sulphur) over the last two months has inflated cash costs for major producers worldwide, and especially for Chinese phosphate manufacturers. The increase in sulphur prices was due to low inventories and high season domestic demand in China. The ammonia price increase was driven by lower volumes available for spot sales after the start-up of Ma’aden’s phosphate complex.
  • Mosaic announced the idling one of its downstream facilities. Plant City, with a total capacity 950 thousand tonnes in P2O5 is expected to be idled from 1 January 2018 for one year, which may help to balance the market in the short-term and support DAP/MAP prices.
  • Inflation in the main feedstocks should support prices at recently achieved levels (USD 380 per tonne MAP FOB Baltics and USD 370 per tonne DAP FOB Tampa), despite the beginning of low season, with a higher upside risk as the spring season approaches.

Conference call and webcast

PhosAgro will hold a conference call and webcast today at 14:00 London time (17:00 Moscow; 09:00 New York).

The call will be held in English, with simultaneous translation into Russian on a separate line.

Webcast links:

English: http://event.onlineseminarsolutions.com/r.htm?e=1551055&s=1&k=1685C4D98C85463DFCC7ECD3FF6085E0

Russian: http://event.onlineseminarsolutions.com/r.htm?e=1551058&s=1&k=EF0664F231FBFA7566CFEB8492F8A1B7

Participant dial-in numbers:

Russian Federation    +7 495 221 6523
Russian Federation    8 10 8002 041 4011
United Kingdom          +44 203 043 2440
United Kingdom          0808 238 1774
United States              1 877 887 4163

Conference ID numbers:

English call: 57785958#
Russian call: 74132117#

For further information please contact:

PhosAgro

Alexander Seleznev, Head of Investor Relations Department
+7 495 232 9689 ext 2187
ir@phosagro.ru

Timur Belov, Press Officer
Anastacia Basos, Deputy Press Secretary
+7 495 232 9689

EM
Sam VanDerlip
vanderlip@em-comms.com
+44 7554 993 032
+7 499 918 3134

Notes to Editors

PhosAgro (www.phosagro.ru) is one of the world’s leading vertically integrated phosphate-based fertilizer producers in terms of production volumes of phosphate-based fertilizers and high-grade phosphate rock with a P2O5 content of not less than 37% (according to IFA, Fertecon and CRU).

The Company is the largest phosphate-based fertilizer producer in Europe, the largest producer of high-grade phosphate rock (with a P2O5 content of not less than 37%) worldwide and one of the top three MAP/DAP producers in the world, according to IFA. PhosAgro is also one of the leading producers of feed phosphates (MCP) in Europe, and the only producer in Russia, according to CRU and the RAFP. PhosAgro is Russia’s only producer of nepheline concentrate, according to the RAFP.

PhosAgro’s main products include phosphate rock, over 35 grades of fertilizers, feed phosphates, ammonia, and sodium tripolyphosphate, which are used by customers in 100 countries spanning all of the world’s inhabited continents. The Company’s priority markets outside of Russia and the CIS are Latin America, Europe and Asia.

PhosAgro’s shares are traded on the Moscow Exchange, and global depositary receipts (“GDRs”) for shares trade on the London Stock Exchange (under the ticker PHOR). Since 1 June 2016, the Company’s GDRs have been included in the MSCI Russia and MSCI Emerging Markets indexes.

PJSC “PhosAgro”
Consolidated Interim Condensed Statements of Profit or Loss and Other Comprehensive Income
for the nine months ended 30 September 2017 (unaudited)

Nine months ended

30 September

Three months ended

30 September

2017

2016

2017

2016

RUB million

RUB million

RUB million

RUB million

Revenues

135,573

147,607

46,452

45,558

Cost of sales

(76,730)

(69,587)

(27,145)

(22,967)

Gross profit

58,843

78,020

19,307

22,591

Administrative expenses

(10,917)

(9,403)

(3,706)

(2,803)

Selling expenses

(16,533)

(14,095)

(4,991)

(4,200)

Taxes, other than income tax

(1,869)

(1,574)

(639)

(502)

Other expenses, net

(1,660)

(1,680)

(423)

(326)

Operating profit

27,864

51,268

9,548

14,760

Finance income

415

732

154

298

Finance costs

(4,246)

(3,634)

(2,022)

(1,116)

Foreign exchange gain

3,585

13,022

1,572

1,743

Share of profit of associates

251

67

100

2

Profit before tax

27,869

61,455

9,352

15,687

Income tax expense

(6,794)

(12,940)

(2,009)

(3,286)

Profit for the period

21,075

48,515

7,343

12,401

Attributable to:

      Non-controlling interests ^

(3)

-

(1)

(5)

      Shareholders of the Parent

21,078

48,515

7,344

12,406

Other comprehensive income

Items that will never be reclassified to profit or loss

Actuarial gain and losses, net of tax

-

(21)

-

(3)

Items that may be reclassified subsequently to profit or loss

Foreign currency translation difference

(600)

(2,086)

(171)

(326)

Other comprehensive loss for the period

(600)

(2,107)

(171)

(329)

Total comprehensive income for the period

20,475

46,408

7,172

12,072

Attributable to:

      Non-controlling interests ^

(3)

-

(1)

(5)

      Shareholders of the Parent

20,478

46,408

7,173

12,077

Basic and diluted earnings per share (in RUB)

163

375

57

96

PJSC “PhosAgro”
Consolidated Interim Condensed Statement of Financial Position
as at 30 September 2017 (unaudited)

30 September 2017

31 December 2016

RUB million

RUB million

Assets

Property, plant and equipment

165,943

154,713

Advances issued for property, plant and equipment

3,581

4,684

Intangible assets

1,763

1,165

Investments in associates

859

816

Deferred tax assets

5,361

5,110

Other non-current assets

1,990

2,226

Non-current assets

179,497

168,714

Other current investments

2,018

3,282

Inventories

24,273

19,934

Trade and other receivables

25,247

30,013

Cash and cash equivalents

6,128

7,261

Current assets

57,666

60,490

Total assets

237,163

229,204

Equity

Share capital

372

372

Share premium

7,494

7,494

Retained earnings

84,355

74,932

Other reserves

4,886

5,486

Equity attributable to shareholders of the Parent

97,107

88,284

Equity attributable to non-controlling interests

129

137

Total equity

97,236

88,421

Liabilities

Loans and borrowings

79,240

96,409

Finance lease liabilities

1,132

1,830

Defined benefit obligations

844

767

Deferred tax liabilities

6,095

4,600

Non-current liabilities

87,311

103,606

Loans and borrowings

33,429

12,457

Finance lease liabilities

1,382

1,680

Trade and other payables

17,805

23,040

Current liabilities

52,616

37,177

Total equity and liabilities

237,163

229,204

PJSC “PhosAgro”
Consolidated Interim Condensed Statement of Cash Flows
for the nine months ended 30 September 2017 (unaudited)

Nine months ended 30 September

2017

2016

RUB million

RUB million

Cash flows from operating activities

Profit before tax

27,869

61,455

Adjustments for:

Depreciation and amortisation

10,647

7,655

Loss on disposal of property, plant and equipment and intangible assets

764

259

Finance income

(415)

(732)

Finance costs

4,246

3,634

Share of profit of associates

(251)

(67)

Foreign exchange gain

(3,589)

(14,202)

Operating profit before changes in working capital and provisions

39,271

58,002

(Increase)/decrease in inventories

(4,336)

1,273

Decrease in trade and other receivables

5,618

7,472

Decrease in trade and other payables

(4,159)

(2,004)

Cash flows from operations before income taxes and interest paid

36,394

64,743

Income tax paid

(6,743)

(11,222)

Finance costs paid

(3,184)

(4,026)

Cash flows from operating activities

26,467

49,495

Cash flows from investing activities

Acquisition of property, plant and equipment and intangible assets

(23,294)

(29,536)

Repayment of loans issued, net

414

174

Proceeds from disposal of property, plant and equipment

193

285

Finance income received

228

349

Disposal of investments, net

381

446

Cash flows used in investing activities

(22,078)

(28,282)

Cash flows from financing activities

Proceeds from borrowings

76,254

27,668

Repayment of borrowings

(69,215)

(26,080)

Acquisition of non-controlling interests

-

(218)

Dividends paid to shareholders of the Parent

(11,655)

(23,699)

Dividends paid to non-controlling interests

(5)

(8)

Finance leases paid

(1,012)

(1,588)

Proceeds from settlement of derivatives

-

174

Other payments

-

(290)

Cash flows used in financing activities

(5,633)

(24,041)

Net decrease in cash and cash equivalents

(1,244)

(2,828)

Cash and cash equivalents at 1 January

7,261

29,347

Effect of exchange rates fluctuations

111

(3,325)

Cash and cash equivalents at 30 September

6,128

23,194