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 reviewed condensed consolidated interim IFRS financial results for the three months ended 31 March 2015. PhosAgro’s revenue for the period increased by 71% to RUB 50.2 billion (USD 808 million), while EBITDA grew by 186% to RUB 24.6 billion (USD 395 million), compared to RUB 8.6 billion (USD 246 million) in 1Q 2014.
1Q 2015 financial and operational highlights:
Result |
1Q 2015 |
1Q 2014 |
year-on-year change (RUB vs. RUB), % |
||
---|---|---|---|---|---|
RUB |
USD |
RUB |
USD |
||
million |
million |
||||
Revenue |
50,224 |
808 |
29,416 |
841 |
71% |
EBITDA* |
24,590 |
395 |
8,587 |
246 |
186% |
EBITDA margin |
49% |
29% |
20 p.p. |
||
Net profit |
14,164 |
228 |
1,909 |
55 |
642% |
RUB |
USD |
RUB |
USD |
||
Earnings per share - RUB / USD |
109 |
1.75 |
14 |
0.40 |
679% |
Sales volumes |
|||||
Phosphate-based products |
1,304.8 |
1,252.4 |
4% |
||
Nitrogen-based fertilizers |
412.5 |
426.7 |
(3%) |
||
Apatit mine and beneficiation plant |
724.3 |
873 |
(17%) |
||
Other products |
32.3 |
57.6 |
(44%) |
RUB/USD rates: average 1Q 2015: 62.1919; average 1Q 2014: 34.9591
as of 31 March 2015: 58.4643; as of 31 December 2014: 56.2584
*EBITDA is calculated as operating profit adjusted for depreciation and amortisation.
Highlights
Interim dividend recommendation:
Production, sales and logistics flexibility:
Strategic developments:
An improved pricing environment, combined with significant rouble depreciation, supported revenue growth of 71% year-on-year in 1Q 2015, to RUB 50.2 billion (USD 808 million), compared to RUB 29.4 billion (USD 841 million) for 1Q 2014. Operating profit for the period was RUB 22.5 billion (USD 361 million), up 240% from RUB 6.6 billion (USD 189 million) in 1Q 2014. EBITDA was RUB 24.6 billion (USD 395 million) in 1Q 2015, 186% higher year-on-year. PhosAgro’s EBITDA margin increased to 49% for 1Q 2015, compared to 29% in 1Q 2014.
Net profit for 1Q 2015 amounted to RUB 14.2 billion (USD 228 million), compared to a net profit of RUB 1.9 billion (USD 55 million) in 1Q 2014. Basic and diluted earnings per share came to RUB 109 (USD 1.75) for 1Q 2015, compared to earnings of RUB 14 (USD 0.40) in 1Q 2014.
The Company significantly improved its financial position compared to year-end 2014, when the dramatic rouble depreciation resulted in a net loss from revaluation of USD- and EUR-denominated loans and operations with derivatives. The significant rouble depreciation in 1Q 2015 in comparison with 1Q 2014 (average USD fx rates for 1Q 2015 and 1Q 2014 were RUB 62.19 and RUB 34.96, respectively) had a positive impact on all of PhosAgro’s operating results in the first quarter of this year. A slight depreciation of the RUB vs USD as of 31 March 2015 (RUB 58.46 per USD) compared to 31 December 2014 (RUB 56.26) resulted in a foreign exchange loss of RUB 3,777 million in 1Q 2015, similar to 1Q 2014.
Cash flow from operating activities increased by 153% year-on-year to RUB 16.3 billion (USD 262 million) in 1Q 2015, compared to RUB 6.4 billion (USD 104 million) in 1Q 2014, driven by improved operating performance.
Gross debt at 31 March 2015 amounted to RUB 128.0 billion (USD 2,189 million), compared to RUB 123.8 billion (USD 2,201 million) at 31 December 2014. Net debt at 31 March 2015 stood at RUB 89.2 billion (USD 1,526 million), down from RUB 93.1 billion (USD 1,656 million) at 31 December 2014. Most of the Company’s debt is denominated in USD as a natural hedge against primarily USD-denominated sales. The Company’s net debt to EBITDA ratio decreased to 0.91 as of 31 March 2015, from 2.48 as of 31 December 2014.
Commenting on 1Q 2015 results, PhosAgro Management Board Chairman and CEO Andrey Guryev said:
“I am delighted to report the best quarterly results PhosAgro has achieved since my appointment as CEO. Supported by a strong phosphate pricing environment and our substantially increased cost advantage, we generated an EBITDA margin of nearly 50%.
“It is important to note that part of this improvement relates to the significant rouble depreciation, meaning that as and when the rouble recovers, our margins will normalise. However, we also continue to implement cost-cutting initiatives aimed at optimising our mining and logistics operations, and I am confident that our performance will remain among the best in the industry.
“Russia’s macroeconomic situation has also improved compared to the end of 2014. The rouble’s performance since January has had a positive impact on PhosAgro’s balance sheet. As of 31 March 2015, our net debt to EBITDA ratio came down to our target level of around 1x.
“Taken together, these factors enable us to increase our dividend payout ratio, providing additional benefits to investors and other stakeholders.
“Looking ahead, I believe supply-demand fundamentals will be supportive of DAP prices. We are seeing substantial improvements in India, one of the most important buyers on the spot market. Combined with our continuous cost optimisation efforts, I expect PhosAgro to show strong performance for the rest of 2015.”
1Q 2015 Market Conditions
Phosphate-Based Products Segment
Result |
1Q 2015 RUB mln |
1Q 2014 RUB mln |
year-on-year change, % |
---|---|---|---|
Revenue |
42,860 |
24,687 |
74% |
Cost of goods sold |
(16,712) |
(14,579) |
15% |
Gross profit |
26,148 |
10,108 |
159% |
Phosphate-based products segment revenue grew by 74% year-on-year and totalled RUB 42,860 million (USD 689 million) in 1Q 2015. PhosAgro increased production of phosphate-based fertilizers and MCP by 9.2% year-on-year in 1Q 2015, while sales volumes were up by 5.0% year-on-year. Production volumes for phosphate rock and nepheline concentrate decreased in 1Q 2015 by 2.5% compared to 1Q 2014, and sales volumes decreased by 17%.
The growth in fertilizer sales volumes was primarily due to favourable market conditions and higher demand, which enabled the Company to substantially increase sales of DAP and NPK to Europe, India, Latin America and Asia.
The phosphate-based products segment’s gross profit for 1Q 2015 increased by 159% year-on-year to RUB 26,148 million (USD 420 million), resulting in a gross profit margin of 61%, compared to 41% margin in 1Q 2014, which was the result of higher sales in rouble terms.
Revenue per tonne for the principal phosphate-based products
Product |
1Q 2015 RUB |
1Q 2014 RUB |
year-on-year change, % |
---|---|---|---|
Domestic: |
|||
MAP |
24,405 |
15,457 |
58% |
DAP |
26,935 |
15,190 |
77% |
NPK |
18,052 |
12,549 |
44% |
NPS |
16,395 |
10,592 |
55% |
MCP |
23,541 |
18,963 |
24% |
PKS |
12,972 |
- |
- |
SOP |
36,389 |
23,110 |
57% |
STPP |
48,062 |
30,396 |
58% |
Export: |
|||
MAP |
30,964 |
15,713 |
97% |
DAP |
30,518 |
15,507 |
97% |
NPK |
21,614 |
11,965 |
81% |
NPS |
27,592 |
9,666 |
185% |
MCP |
32,506 |
19,738 |
65% |
PKS |
17,785 |
- |
- |
SOP |
39,441 |
23,409 |
68% |
STPP |
57,181 |
34,449 |
66% |
Nitrogen Segment
Result |
1Q 2015 RUB mln |
1Q 2014 RUB mln |
year-on-year change, % |
---|---|---|---|
Revenue |
7,028 |
4,570 |
54% |
Inter-segment transfers |
- |
8 |
(100%) |
Cost of goods sold |
(2,730) |
(2,394) |
14% |
Gross profit |
4,298 |
2,184 |
97% |
Nitrogen segment revenue increased by 54% year-on-year to RUB 7,028 million (USD 113 million) in 1Q 2015, from RUB 4,570 million (USD 131 million) in 1Q 2014. Production volumes of nitrogen-based fertilizers grew by 5%, while sales volumes decreased by 3% year-on-year in 1Q 2015.
Export revenue from urea was 39% higher year-on-year, up from RUB 3,168 million (USD 91 million) in 1Q 2014 to RUB 4,416 million (USD 71 million) in 1Q 2015, due to a 71% increase in revenue per tonne, compensated by a decrease in sales volumes by 19%. Total revenue from ammonium nitrate (AN) rose by 88%, from RUB 1,335 million (USD 38 million) in 1Q 2014, to RUB 2,507 million (USD 40 million) in 1Q 2015, due to 49% growth in revenue per tonne and a 26% increase in sales volumes.
Nitrogen segment gross profit during 1Q 2015 increased by 97% year-on-year to RUB 4,298 million (USD 69 million), mainly as a result of significant revenue growth caused by the devaluation of the rouble against the US dollar, resulting in a gross profit margin of 61%, compared to 48% in 1Q 2014.
Revenue per tonne for the principal nitrogen-based fertilizers
Product |
1Q 2015 RUB |
1Q 2014 RUB |
year-on-year change, % |
---|---|---|---|
Domestic: |
|||
Ammonium nitrate |
12,881 |
9,392 |
37% |
Urea |
15,616 |
11,846 |
32% |
Export: |
|||
Ammonium nitrate |
17,433 |
- |
- |
Urea |
19,373 |
11,308 |
71% |
Cost of Sales
Item |
1Q 2015 |
1Q 2014 |
Change y-on-y |
|||||
---|---|---|---|---|---|---|---|---|
RUB mln |
USD mln |
% of cost sales |
RUB mln |
USD mln |
% of cost sales |
RUB mln |
% |
|
Materials and services |
5,061 |
82 |
26% |
4,685 |
134 |
27% |
376 |
8% |
Salaries and social contributions |
2,303 |
37 |
12% |
2,634 |
75 |
15% |
(331) |
(13%) |
Sulphur and sulphuric acid |
2,231 |
36 |
11% |
736 |
21 |
4% |
1,495 |
203% |
Ammonia |
2,136 |
34 |
11% |
823 |
24 |
5% |
1,313 |
160% |
Natural gas |
1,977 |
32 |
10% |
1,963 |
56 |
12% |
14 |
1% |
Depreciation |
1,884 |
30 |
9% |
1,779 |
51 |
11% |
105 |
6% |
Potash |
1,519 |
24 |
8% |
979 |
28 |
6% |
540 |
55% |
Electricity |
977 |
16 |
5% |
895 |
26 |
5% |
82 |
9% |
Ammonium sulphate |
821 |
13 |
4% |
237 |
7 |
1% |
584 |
246% |
Fuel |
641 |
10 |
3% |
818 |
23 |
5% |
(177) |
(22%) |
Heating energy |
241 |
4 |
1% |
507 |
14 |
3% |
(266) |
(52%) |
Other items |
3 |
- |
- |
10 |
- |
- |
(7) |
(70%) |
Change in stock of WIP and finished goods |
(50) |
(1) |
- |
1,042 |
30 |
6% |
(1,092) |
(105%) |
Total |
19,744 |
317 |
100% |
17,108 |
489 |
100% |
2,636 |
15% |
PhosAgro’s cost of sales increased by 15% year-on-year in 1Q 2015, to RUB 19,744 million (USD 317 million), while overall fertilizers sales volumes increased by 3%. This cost of sales performance was primarily due to the following factors:
Administrative expenses rose by 19% year-on-year to RUB 2,403 million (USD 39 million) in 1Q 2015, primarily due to:
Selling expenses rose by 61% year-on-year, from RUB 3,054 million (USD 87 million) in 1Q 2014 to RUB 4,920 million (USD 79 million) in 1Q 2015. This was primarily due to the following changes:
PhosAgro’s foreign exchange loss was nearly the same year-on-year: RUB 3,772 million (USD 108 million) in 1Q 2014 to RUB 3,777 million (USD 61 million) in 1Q 2015. The loss from operations with derivative financial instruments was RUB 147 million (USD 2 million) in 1Q 2015, compared to RUB 169 million (USD 5 million) a year earlier. This was the result of the rouble’s 4% depreciation against the US dollar during 1Q 2015 (from RUB 56.2584 at 31/12/2014 to RUB 58.4643 at 31/03/2015), compared to a decrease of 9% during 1Q 2014 (from RUB 32.7292 at 31/12/2013 to RUB 35.6871 at 31/03/2014).
Cash spent on capex in 1Q 2015 amounted to RUB 6,477 million (USD 104 million), an increase of 70% in comparison with RUB 3,810 million (USD 109 million) in 1Q 2014. PhosAgro’s capital expenditure, which consists of additions to property, plant and equipment, amounted to RUB 5,054 million (USD 81 million) for 1Q 2015, compared to RUB 3,245 million (USD 93 million) in 1Q 2014. Capital expenditure focused on ore extraction capacity development in Apatit, the new 760 ths tonnes/year ammonia plant at PhosAgro-Cherepovets, as well as the construction of new storage facilities for liquid ammonia at Balakovo.
Outlook
Market:
Company: