OJSC PhosAgro (PHOR)
PhosAgro 1Q 2019 EBITDA Grows 73% YoY to RUB 24.8 bln
16-May-2019 / 11:00 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer / publisher is solely responsible for the content of this
announcement.
For Immediate Release 16 May 2019
PhosAgro 1Q 2019 EBITDA Grows 73% YoY to RUB 24.8 bln
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 consolidated IFRS financial
results for the three months (1Q) ended 31 March 2019.
Revenue for 1Q 2019 rose by 32% year-on-year to RUB 72.3 billion (USD 1.1
billion). EBITDA increased by 73% year-on-year to RUB 24.8 billion (USD 375
million) in the same period, with PhosAgro's 1Q 2019 EBITDA margin expanding
to 34%, compared to 26% in 1Q 2018. Net income adjusted for non-cash FX
items increased more than twofold year-on-year to RUB 13.5 billion (USD 205
million).
1Q 2019 financial and operational highlights
RUB million or % 1Q 2019 1Q 2018 Chng, % YoY
Revenue 72,287 54,622 32%
EBITDA** 24,778 14,293 73%
EBITDA margin 34% 26% 8pp
Net income 21,160 6,878 208%
Net income adj* 13,540 6,302 115%
31.03.2019 31.12.2018
Net debt 118,891 135,330
ND/LTM EBITDA 1.4x 1.8x
Sales, 000' mt 1Q 2019 1Q 2018 Chng, % YoY
Phosphate-based & MCP 1,929 1,753 10%
Nitrogen-based 617 668 (8%)
Phosphate rock 826 691 19%
RUB/USD rates: average 1Q 2019: 66.1; average 1Q 2018: 56.9; as of 31 March
2019: 64.7; as of 31 December 2018: 69.5
** EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
* adjusted for non-cash FX items (Net profit as reported minus FX gain or
loss)
Commenting on the 1Q 2019 financial results, PhosAgro CEO Andrey Guryev
said:
"In 1Q 2019, PhosAgro demonstrated a solid set of results, with EBITDA
margin and FCF generation both growing, despite challenging macro
conditions. Recent weather conditions in the United States depressed
fertilizer demand in the first quarter of 2019, leading to higher inventory
levels, which resulted in a 6% quarter-on-quarter decrease in DAP prices.
Thanks to PhosAgro's operational excellence and global sales reach, our cash
cost of production remained low and we were able to sell our impurity-free
products at the best netback prices. I believe that this is a strong
endorsement of the success of PhosAgro's strategy.
"Our sales strategy proved effective even amid market headwinds and it will
remain a cornerstone of our organic growth in the future. In 1Q 2019, our
domestic fertilizer sales remained flat year-on-year, while sales in our
priority export markets advanced by 8% year-on-year. The strongest growth
was in North America, where phosphate sales increased by 25% year-on-year,
driven by the expectation of solid demand from agricultural producers.
"Additionally, I would underscore our excellent free cash flow generation in
the first quarter, which was the highest in 8 years and helped bring
PhosAgro's leverage to a two-year low, will enable the Company to continue
its generous dividend pay-outs while continuing to implement our investment
and social projects. The Board of Directors has recommended distribution in
the form of dividends almost 70% of adjusted net income in the amount of RUB
9.3 billion, or RUB 24 per GDR.
"Looking at global markets, we see key markets struggling to consume the
high levels of inventories in the United States, which is dragging prices
down. In response, several fertilizer exporters announced production cuts
for 1H 2019. The second quarter is a transitional period, where the high
season should start in the main agricultural markets, helping to absorb
inventories that remain due to slow demand in the first quarter from the
United States."
1Q 2019 market conditions
? Prices for DAP (FOB Tampa) gradually softened in the course of 1Q 2019
and averaged USD 400 per tonne, almost flat year-on-year:
? Usually active in the first quarter, European markets saw low demand
for fertilizers due to the weak euro and low farmer purchasing power due
to bad weather conditions in 2H 2018.
? The US market was the main driver of a fertilizer price correction.
Throughout the winter, the industry stockpiled fertilizers in
expectation of seasonal demand, but record flooding in the Midwest at
the end of 1Q 2019 caused farmers to delay purchases. In response,
Mosaic announced a 300 kt cut in its phosphate production in the United
States in order to balance the market.
? The price correction was slightly offset by the Indian market, where
distributors accelerated DAP imports on the back of a relatively strong
rupee against the US dollar, soft DAP prices and high maximum retail
price.
? Prices for urea (FOB Baltic) were on a downward trajectory and averaged
around USD 244 per tonne, but remained 8% higher year-on-year, primarily
driven by slow demand recovery in the United States and Europe.
? Ammonia FOB Baltic prices declined by 7% year-on-year to average USD 276
per tonne on slow demand for nitrogen-based fertilizers in Europe,
impacted by last summer's heatwave and an unusually warm winter. On top of
that, a price correction for natural gas in Europe since October 2018
continued to exert pressure on ammonia prices.
? Prices for sulphur CFR China contracted by 11% year-on-year to USD 126
per tonne, primarily driven by soft prices for phosphate-based
fertilizers. Changes in China's approach to purchasing sulphur also
affected prices. Environmental reform in the country triggered a
consolidation of sulphur consumers, which prefer to import sulphur on
quarterly contracts rather than buying from the spot market.
Financial performance
In 1Q 2019, PhosAgro's revenue was up 32% year-on-year to RUB 72.3 billion
(USD 1.1 billion) driven by 5% year-on-year growth in fertilizer volumes and
an 8% year-on-year increase in average realised prices (in USD terms), which
were supported by 16% year-on-year rouble depreciation against the US
dollar.
Overall, sales growth was due to the release of inventory accumulated in the
last months of 2018 and relatively strong demand in the first months of
2019. Revenue growth for 1Q 2019 was partially offset by a 32% year-on-year
decrease in AN sales due to the early start of the high season in Russia in
4Q 2018, which is PhosAgro's main market for this product.
Revenue by key products
RUB million or % 1Q 2019 1Q 2018 Chng, % YoY
DAP/MAP 26,112 18,630 40%
NPK(S) 17,321 13,111 32%
PhosRock 6,652 4,862 37%
MCP 2,837 2,266 25%
Other phosphate-based products 4,642 3,598 29%
Urea/AN 11,064 9,303 19%
Other sales & services 3,659 2,852 28%
Total revenue 72,287 54,622 32%
In 1Q 2019, PhosAgro's gross profit was RUB 34.6 billion (USD 522 million).
The gross profit margin expanded to 48% from 41% in 1Q 2018. Gross profit
and margin performance for the phosphate and nitrogen segments were as
follows:
? The phosphate segment saw a 61% year-on-year increase in gross profit to
RUB 27.7 billion (USD 419 million), with a gross margin of 48%, compared
to 41% in 1Q 2018.
? Gross profit for the nitrogen segment increased by 33% year-on-year to
RUB 6.6 billion (USD 100 million). Gross margin for the segment rose to
58% from 52% in 1Q 2018.
EBITDA increased by 73% year-on-year to RUB 24.8 billion (USD 375 million),
with an EBITDA margin of 34% for 1Q 2019, compared to 26% in 1Q 2018. Net
profit adjusted for non-cash FX items increased more than twofold
year-on-year to RUB 13.5 billion (USD 205 million) for 1Q 2019.
In 1Q 2019, the RUB/USD exchange rate increased by 16% year-on-year to
average RUB 66.1, from RUB 56.9 in 1Q 2018. This had a net positive impact,
as prices for most of the Company's products are denominated in USD, while
costs are primarily rouble-based. The appreciation of the rouble as of 31
March 2019 (RUB 64.7 per USD) compared to 31 December 2018 (RUB 69.5 per
USD) resulted in an FX gain of RUB 7.6 billion (compared to a RUB 0.6
billion gain in 1Q 2018).
Net operating cash flow almost tripled to RUB 27.5 billion (USD 416 million)
on solid EBITDA performance and working capital release.
PhosAgro's capital expenditure for 1Q 2019 totalled around RUB 8.6 billion
(USD 130 million), down by 4% year-on-year and representing 35% of the
Company's EBITDA for the same period. The main capex items were scheduled
maintenance and development of the upstream business, as well as
construction of new sulphuric and nitric acid plants.
Net debt/LTM EBITDA as of 31 March 2019 declined to 1.4x from 1.8x as of 31
December 2018, reflecting solid EBITDA performance and the gradual RUB
appreciation against the USD throughout 1Q 2019. Net debt totalled RUB 118.9
billion (USD 1.8 billion) as of 31 March 2019.
Cost of Sales
RUB million or % 1Q 2019 1Q 2018 Chng, % YoY
Materials and services (8,311) (6,894) 21%
D&A (5,709) (4,754) 20%
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