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PhosAgro to Discuss Key Areas of Growth Strategy to 2025 and Present New Dividend Policy at Capital Markets Day

25 September 2019
Key Highlights of PhosAgro's strategy to 2020 adopted in 2013:

  • Production of fertilizers increased more than 50% from 5.9 million tonnes in 2013 to 9.0 million tonnes at the end of 2018, with expected production of 9.4–9.5 million tonnes in 2019;
  • Fertilizer sales volumes in the Company’s priority domestic market nearly doubled to 2.4 million tonnes (expected sales volume in 2019 is 2.5 million tonnes); 
  • Dividend payouts increased by more than 300% from the 2013 level; 
  • PhosAgro's EBITDA increased from RUB 23.9 billion in 2013 to RUB 74.9 billion in 2018; 
  • The EBITDA margin increased from 23% in 2013 to 32% in 2018;
  • The net debt / EBITDA ratio decreased from 1.8x in 2013 to 1.3x in H1 2019;
  • PhosAgro strengthened its position as one of the lowest-cost producers of phosphate-based fertilizers by investing in debottlenecking, optimising business processes and launching new high-tech facilities;
  • The number of fertilizer grades offered to farmers in more than 100 countries increased from 25 to 39;
  • PhosAgro is closer to consumers, with direct sales now accounting for more than 90% of the total, compared to 53% in 2013;
  • The majority of PhosAgro's Board of Directors are independent directors (7 out of 10), in line with best practice in corporate governance.

As part of its strategy to 2025, PhosAgro aims to accomplish the following:

  • Continue to expand production capacities: production of fertilizers and feed phosphates is projected to increase by approximately 25% by 2025 to 11.7 million tonnes;
  • Increase fertilizer sales in its priority domestic market to 3.7 million tonnes (including third-party products) and sales to European markets to 3.1 million tonnes by 2025 (up from 1.9 million tonnes in 2018). This will be achieved in part through the competitive advantages afforded by the environmental safety of PhosAgro products, in accordance with EU regulations limiting the cadmium contents of phosphate-based fertilizers;
  • Invest around USD 3 billion in growth and modernisation by 2025. Once completed, the investments are expected to provide an EBITDA uplift of USD 450 million, increase free cash flow, and further increase PhosAgro’s self-sufficiency in feedstocks; 
  • Maintain the net debt / EBITDA ratio at a comfortable level of 1.0x–1.5x;
  • Support attractive returns to shareholders: under the Company's new dividend policy, payouts may exceed 75% of free cash flow; 
  • Expand the range of fertilizer grades from 39 in 2018 to 50 by 2025, including new high-performance grades with bio-additives;
  • Prioritise long-term sustainable development goals.

London – 25 September 2019. At today's Capital Markets Day in London, the top management and independent members of the Board of Directors of PhosAgro ("the Company", "the Group", Moscow exchange, LSE: PHOR), one of the world's leading producers of phosphate-based fertilizers, will present the Company's new development strategy to 2025, including its key priorities and long-term goals, and will discuss the new dividend policy.

Andrey Guryev, PhosAgro’s CEO and a member of the Company’s Board of Directors, said: “The strategy to 2025 aims to further expand PhosAgro’s presence in its priority domestic market, as well as in premium export markets that offer the best netback prices. Compared to 2018 levels, we plan to grow the Company’s fertilizer sales volumes by 50% in Russia and by 60% in Europe by 2025. The share of direct export sales will be maintained at a level of at least 90% with the help of PhosAgro’s 10 existing foreign trading offices located in the Company’s key sales regions.

“An additional competitive advantage that will increase PhosAgro's share in priority markets along with its market premium will be the environmental safety of fertilizers to human and soil health. These safety standards are being implemented as part of new EU regulations on the sale of fertilizers with high amounts of cadmium and other heavy metals. Starting this year, in accordance with EU legislation, PhosAgro fertilizers will be sold with green labelling. In addition, PhosAgro’s fertilizers — along with agricultural products — will be included in Russia’s brand of products offering improved environmental performance.

“We also hope that foreign regulators will remove trade restrictions – import duties and customs ratios – for the cleanest fertilizers from Russia. Farmers will benefit from this in terms of both price and the absence of a risk of soil contamination, and the Company could potentially earn up to an additional USD 100 million depending on market conditions. The authorities in Argentina and Brazil recently abolished import duties on environmentally friendly phosphate-based fertilizers from Russia.

“An important component of the new strategy is the construction of a new plant in the Leningrad region with a capacity of 630 thousand tonnes, as well as the modernisation of production facilities in the Saratov region. These initiatives will make it possible to produce NPK(S) fertilizers with an expansion of total fertilizer production from an expected 2.2 million tonnes in 2019 to 3.3 million tonnes in 2022, in addition to increasing PhosAgro's share in the domestic market supply from 34% to 60%.

“It should be noted that PhosAgro already passed the peak of its investment cycle following completion of its key capital-intensive project under the strategy to 2020, namely the construction of high-tech ammonia and granulated urea facilities. Investments in the further development of efficient, flexible and high-tech production facilities at existing production sites using BATs — including cutting-edge technologies from one of the world’s leading R&D institutes for the fertilizer sector,  the Y. Samoilov Research Institute of Fertilizers and Insectofungicides — as well as the adoption of digital and innovative solutions, will be implemented only in projects for which the IRR exceeds the threshold of 20%. 

“The Company will focus on expanding the capacity of its own railway and port infrastructure, as well as increasing and upgrading its fleet of railcars to reduce transportation costs.   

“One of the key elements of the Company's new strategy is the commitment to the UN Sustainable Development Goals, the implementation of which is overseen by the Sustainability Committee of the PhosAgro Board of Directors, headed by former UNESCO Director-General Irina Bokova. 

“Along with the implementation of investment programmes to ensure a stable future cash flow, the Company will continue to pay competitive dividends in a balanced manner, as well as implement charitable and social programmes aimed at training highly professional engineering personnel and supporting education, corporate housing, healthcare, youth policy and athletic initiatives.”