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PhosAgro CEO reports to Board of Directors on results of first year in the post; Board recommends interim dividend

19 August 2014
Moscow – PhosAgro ("PhosAgro" or "the Company") (Moscow Exchange, LSE: PHOR), one of the world’s leading vertically integrated phosphate-based fertilizer producers, announces that its Board of Directors at its meeting today reviewed the Company’s interim consolidated IFRS financial statements for 6M 2014, and recommended an interim dividend for the period of RUB 3,237.5 mln, which represents RUB 25 per share (RUB 8.3 per global depositary receipt (“GDR”)).

The Board has called an EGM to vote on the dividend recommendation for 16 September 2014.  The recommended dividend record date is 29 September 2014.

Andrey Guryev, who reported to the Board on the results of his first year as the Company’s CEO, said: “We have successfully navigated a challenging period for the fertilizer market and achieved impressive results. Our share-price performance indicates that our investors approve. We have continued to pay dividends in line with the promises we have made to investors, while also implementing our strategic investment programme to further strengthen our position as a leading global producer of phosphate-based fertilizers with the lowest finished product cash costs in our industry.  We have also continued to expand our product line and geography of sales, including by increasing sales to premium markets.

“We are in the final stages of completing the consolidation of ownership of our production subsidiaries, and are working hard to become a leader in our environmental practices, which is a key to our long-term sustainable development.

“Over the last 12 months we have seen our GDRs increase by 26.6% despite the challenging market conditions. Year-to-date, PhosAgro’s GDRs have risen by 27.5% – outperforming nearly all Russian companies listed on the London Stock Exchange.

“I believe that this performance shows that investors endorse the strategy we are pursuing and believe in the management team, and I am confident that we will continue to build shareholder value in the future.  We plan to focus on further enhancements to efficiency and controlling costs.

“This Thursday, 21 August 2014, we will disclose PhosAgro’s 6M 2014 IFRS financial results, which I believe will further underscore our successful performance.”

Some of the highlights of Andrey Guryev’s report on the results of the last 12 months since his appointment as PhosAgro’s CEO included:

PhosAgro has developed a new strategy to 2020, which was approved by the Board and will be presented to investors in the near future.  In addition to strengthening the Company’s market position and increasing shareholder value, the strategy aims to achieve industry-leading efficiency levels in areas including labour productivity, production and sales, as well as sustainability.

As part of the Company’s strategy to modernize and expand its production capacity, PhosAgro has launched a comprehensive investment project to build a new high-tech ammonia plant with capacity of 760 thousand tonnes per year, as well as additional capacity to process ammonia into finished fertilizer products.  This is a high-priority project for PhosAgro, and the most capital-intensive of the Company’s projects currently underway. By 2017, it will allow the company to increase fertilizer production by a quarter. A major project to expand production capacity at the Kirov mine is also underway.

Another strategic priority for PhosAgro is to increase its production and sales flexibility.  In the last 12 months the Company has increased the fertilizer grades it produces by one third from 19 to 25, including grades containing microelements and niche grades of NPK fertilizers with colour and scent additives.  The number of NPK/NPKS/NPS/PKS grades offered has increased 1.5-fold to 18 during the past 12 months. The main focus has been on new grades to meet demand from Russia and developing markets in South-East Asia, Africa and Latin America, as well as the premium Western European market.  PhosAgro’s product portfolio now includes a full line of phosphate-based fertilizers, feed phosphates and technical phosphates.

The Company has increased its total production volume of fertilizers and feed phosphates to over 6 million tonnes per year.  Despite market volatility during the last 12 months, PhosAgro’s plants have operated at nearly 100% capacity.

The Company’s sales geography has expanded from 88 countries in August 2013 to 100 countries today, which helps PhosAgro to reduce the influence of seasonality, as well as to sell to those markets that offer the best netback price.

During the past 12 months, PhosAgro has strengthened its position on its domestic market, which is a priority for the Company.  PhosAgro has one of the largest retail distribution networks in Russia, and became the largest supplier of fertilizers to the domestic market in 6M 2014, producing one in every four tonnes of fertilizers used by Russian farmers.  Fertilizer sales to Russia and the CIS in 6M 2014 increased by 9% year-on-year.

Overall sales of fertilizers and other finished products increased by 4% year-on-year in 6M 2014.  The Company grew sales to premium markets like Russia, Europe and South America, which accounted for 79% of sales, while effectively halting sales to India, thereby reducing its dependency on the market that sets the price floor for the rest of the world.

In addition to delivering on its investment programme and executing other strategic initiatives to grow shareholder value, PhosAgro continued to maintain its approved dividend policy.  Shareholders of PhosAgro received interim and final dividends for 2013.  Since the Company’s IPO more than RUB 22.076 billion has been paid out as dividends, including over RUB 4.500 billion during 2013.

PhosAgro’s clearly defined development strategy, which is easy for investors and lenders to understand, enables the company to maintain a successful debt financing policy.  In early 2014, the Company signed a 13-year direct credit agreement with JBIC for a total amount of USD 440.6 million, with a guarantee from NEXI.  The average rate on the agreement was significantly lower than the Company’s Eurobonds issued in 2013.

“Our results, our plans and their implementation testify that we are continually moving and growing in the right direction,” Andrey Guryev said in conclusion.