DJ PhosAgro 2Q 2019 FCF up 22% to RUB 10.2 bln
OJSC PhosAgro (PHOR)
PhosAgro 2Q 2019 FCF up 22% to RUB 10.2 bln
28-Aug-2019 / 13:00 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 28 August 2019
PhosAgro 2Q 2019 FCF up 22% to RUB 10.2 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 interim condensed consolidated
IFRS financial results for the three months (2Q) and six months (1H) ended
30 June 2019.
Revenue for 2Q 2019 rose by 3% year-on-year to RUB 58.1 billion (USD 901
million). EBITDA remained almost flat year-on-year at RUB 18.3 billion (USD
284 million) in the period, with 2Q 2019 EBITDA margin at 32%.
2Q 2019 financial and operational highlights
RUB million or 2Q 2019 2Q 2018 Chng 1H 2019 1H 2018 Chng
% , % , %
YoY YoY
Revenue 58,146 56,626 3% 130,433 111,248 17%
EBITDA** 18,317 18,674 -2% 43,095 32,967 31%
EBITDA margin 32% 33% -1pp 33% 30% 3pp
Net income 11,785 2,955 299% 32,945 9,833 235%
Net income adj* 9,197 11,687 -21% 22,737 17,989 26%
FCF 10,284 8,369 123% 29,059 9,697 200%
31.06.2019 31.12.2018
Net debt 109,686 135,330
ND/LTM EBITDA 1.3 1.8
Sales, 000' mt 2Q 2019 2Q 2018 Chng 1H 2019 1H 2018 Chng
, % , %
YoY YoY
Phosphate-based 1,628 1,647 -1% 3,557 3,400 5%
& MCP
Nitrogen-based 531 601 -12% 1,148 1,268 -9%
Phosphate rock 1,142 968 18% 2,264 1,924 18%
& nepheline
RUB/USD rates: average 2Q 2019: 64.6; average 2Q 2018: 61.8; as of 30 June
2019: 63.1; 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 2Q 2019 financial results, PhosAgro CEO Andrey Guryev
said:
"While 2019 has seen market turbulence on unfavourable weather conditions in
the USA and Europe and high export activity in China and the Middle East,
PhosAgro has shown its resilience with an industry-leading EBITDA margin,
impressive free cash flow generation and decreasing leverage. This
performance is driven by the successful completion of our five-year
strategy, which was focused on vertical integration and flexibility in
distribution. This has enabled us to maximise value for a wide range of
stakeholders. Consistent strong free cash flow performance and stable
dividend distributions over the last four quarters shows we achieved these
goals.
"Equally important, by delivering double-digit growth in production over the
last 5 years PhosAgro has enhanced its ability to produce and sell products
with exceptional environmental characteristics that can set the global
standard. As one of the world's largest fertilizer producers, with products
used in 100 countries globally, we are conscious of our role in supporting
food security, protecting soil resources and producing clean and healthy
agricultural products on a global scale. In the long term, we aim to further
leverage the unique apatite-nepheline ore that PhosAgro mines in Khibiny and
implement best available technologies to achieve our strategic goals that
will strengthen our position as a producer of environmentally safe
phosphate-based fertilizers while also further enhancing the Company's cash
cost advantage. The Board of Directors and I have full confidence that this
approach will make PhosAgro an even more sustainable producer of mineral
fertilizers and unlock additional value for the Company and its products.
"Looking ahead at the short-term outlook, we believe that our 2Q 2019 EBITDA
margin will be sustainable through the year end, driven by a recovery in
seasonal demand from Europe and Latin America, a correction in feedstock
prices, as well as a recovery in the premium NPK market and a stable
nitrogen market. Our domestic market, which is a strategic priority for us,
is also expected to support sales, driven by high farmer purchasing power.
We are therefore comfortable to once again reiterate our full-year
production guidance of around 9.4-9.5 million tonnes of fertilizers."
2Q 2019 market conditions
? Average prices for MAP (FOB Baltics) were down by 12% year-on-year to
USD 357 per tonne due to the following factors:
? Significant declines in consumption in the USA due to poor spring
weather conditions;
? Higher export volumes from China on slow domestic demand;
? Faster-than-expected ramp up of new capacities at OCP and Ma'aden
sites;
? Lower prices for feedstocks, which pushed down the cash cost curve
across the industry.
? Prices for urea (FOB Baltic) increased by 11% year-on-year to USD 247
per tonne, driven by stable import demand from India and Latin America,
combined with sanctions-related limitations on Iranian urea, lower
domestic production levels in a number of Latin American countries and the
absence of significant export volumes from China.
? Ammonia prices (FOB Baltic) declined by 4% year-on-year to average USD
222 per tonne as a result of the ramp up of new capacities at Eurochem and
relatively low prices for natural gas.
2Q 2019 Financial performance
In 2Q 2019, PhosAgro's revenue rose by 3% year-on-year to RUB 58.1 billion
(USD 901 million), mainly driven by meaningful growth in domestic sales of
37% year-on-year, to 0.8 million tonnes, due to an early start of the high
season. However, this growth was largely offset by a decline in export sales
volumes of 18% year-on-year to 1.4 million tonnes.
Revenue by key products
RUB million 2Q 2019 2Q 2018 Chng, % 1H 2019 1H 2018 Chng, %
or % YoY YoY
DAP/MAP 16,824 18,884 -11% 42,935 37,514 14%
NPK(S) 17,756 15,041 18% 35,263 28,544 24%
PhosRock 6,448 5,492 17% 13,100 10,354 27%
MCP 2,895 2,662 9% 5,732 4,928 16%
Other 2,310 2,152 7% 5,307 4,229 25%
phosphate-bas
ed products
Urea/AN 8,731 8,891 -2% 19,796 18,194 9%
Other sales & 3,184 3,503 -9% 8,300 7,485 11%
services
Total revenue 58,146 56,626 3% 130,433 111,248 17%
In 2Q 2019, PhosAgro's gross profit was RUB 26.4 billion (USD 411 million)
with the gross profit margin at 45%, compared to 47% in 2Q 2018. Gross
profit and margin performance for the phosphate and nitrogen segments were
as follows:
? Phosphate segment gross profit declined by 3% year-on-year to RUB 21.4
billion (USD 332 million), with a gross margin of 45%, due to a global
price correction;
? Gross profit for the nitrogen segment increased by 5% year-on-year to
RUB 4.9 billion (USD 76 million), with gross margin expanding to 56% from
52% in 2Q 2018. The main driver of this performance was high prices for
nitrogen-based fertilizers.
Consolidated EBITDA decreased by 2% year-on-year to RUB 18.3 billion (USD
284 million), with an EBITDA margin of 32% for 2Q 2019, compared to 33% in
2Q 2018. Net profit adjusted for non-cash FX items was down 21% year-on-year
to RUB 9.2 billion (USD 142 million) for 2Q 2019.
In 2Q 2019, the RUB/USD exchange rate increased by 5% year-on-year to
average RUB 64.6, from RUB 61.8 in 2Q 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 30
June 2019 (RUB 63.1 per USD) compared to 31 March 2019 (RUB 64.7 per USD)
resulted in an FX gain of RUB 2.6 billion (compared to a RUB 8.7 billion FX
loss in 2Q 2018).
Net operating cash flow increased by 20% year-on-year to RUB 19.4 billion
(USD 300 million) on working capital release, primarily driven by the launch
of a factoring programme and an increased focus on the domestic market. In
2Q 2019, domestic sales of fertilizers accounted for 36% of total fertilizer
sales volumes, compared to 27% in 1Q 2019.
PhosAgro's capital expenditure for 2Q 2019 totalled RUB 9.1 billion (USD 141
million), up by 19% year-on-year and representing 50% 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 finishing construction
of new mid-stream capacities at Cherepovets (nitric acid, sulphuric acid and
ammonium sulphate lines).
Net debt/LTM EBITDA as of 30 June 2019 declined to 1.3x from 1.8x as of 31
December 2018, reflecting solid EBITDA performance and the gradual rouble
appreciation against the US dollar throughout 1H 2019. Net debt totalled RUB
109.7 billion (USD 1.7 billion) as of 30 June 2019.
Cost of Sales
RUB million or 2Q 2019 2Q Chng, % 1H 2019 1H 2018 Chng, %
% 2018 YoY YoY
Materials and 7,072 7,159 -1% 15,383 14,053 9%
services
D&A 4,960 4,882 2% 10,669 9,636 11%
Potash 3,806 2,377 60% 6,522 4,649 40%
Salaries and 3,056 2,948 4% 6,307 6,114 3%
social
contributions
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2019 07:00 ET (11:00 GMT)
DJ PhosAgro 2Q 2019 FCF up 22% to RUB 10.2 bln -2-
Natural gas 2,927 3,221 -9% 6,576 6,718 -2%
Repair expenses 2,348 2,138 10% 4,747 4,269 11%
Sulphur and 2,289 2,405 -5% 5,635 5,283 7%
sulph. acid
Electricity 1,583 1,441 10% 3,270 2,868 14%
Chemical 1,253 1,169 7% 3,865 3,031 28%
fertilisers and
other products
for resale
Fuel 1,162 889 31% 2,654 1,888 41%
Ammonium 591 500 18% 1,798 1,599 12%
sulphate
Ammonia 667 715 -7% 2,024 1,806 12%
Total 31,714 29,844 6% 69,450 61,914 12%
Cost of sales increased by 6% year-on-year in 2Q 2019 to RUB 31.7 billion
(USD 491 million). The key factors behind this growth were:
? Costs for potash rose by 60% year-on-year to RUB 3.8 billion (USD 59
million), due to a 41% year-on-year increase in purchase prices and a 14%
year-on-year increase in sales of NPK grades with greater potash content.
? Costs for natural gas, which is used in ammonia production, were down by
9% year-on-year to RUB 2.9 billion (USD 45 million) on lower sales of DAP
(down 20% year-on-year to 306 kt) and urea (down 10% year-on-year to 427
kt), while purchase prices increased slightly by 3% year-on-year.
? Repair expenses were up 10% year-on-year to RUB 2.3 billion (USD 36
million), driven by scheduled maintenance of mid-stream capacities, mainly
at Cherepovets and at Apatit's beneficiation plants.
? Costs for sulphur and sulphuric acid, which is used in phosphoric acid
production, decreased by 5% year-on-year to RUB 2.3 billion (USD 35
million) driven by a decline in purchase prices for sulphuric acid by 30%
year-on-year and a marginal decline in prices for sulphur by 1%
year-on-year.
? Electricity costs increased by 10% year-on-year to RUB 1.6 billion (USD
25 million), mainly due to growth in the purchase price by 23%
year-on-year after the new DPM programme was approved by the Government in
early 2019. This growth was mitigated by lower consumption levels as a
result of successful energy saving initiatives at upstream assets.
? Expenses for fuel rose by 31% year-on-year to RUB 1.2 billion (USD 18
million) in response to higher purchase prices (up 18% year-on-year) and
higher consumption levels (up 11% year-on-year), due to an increase in
sales of phosphate rock.
Administrative expenses for 2Q 2019 rose by 13% year-on-year to RUB 4.1
billion (USD 64 million), primarily due to 14% year-on-year growth in
salaries and social contributions.
In 2Q 2019, selling expenses remained flat year-on-year around RUB 8.4
billion (USD 130 million). This performance was primarily due to:
? Freight, port and stevedoring expenses decreased by 21% year-on-year to
RUB 3.5 billion (USD 54 million), due to lower export sales and shipping
rates. This decline was mitigated by rouble devaluation, as freight and
stevedoring tariffs are denominated in US dollars;
? Growth in costs for Russian Railways tariffs and operators' fees by 18%
year-on-year to RUB 3.0 billion (USD 47 million) was driven by a change in
shipment structures and indexation of railway tariffs;
? Spending on customs duties grew by 74% year-on-year to RUB 312 million
(USD 5 million), triggered by changes in delivery terms and rouble
depreciation against the US dollar.
Market outlook
Phosphate-based fertilizer prices are expected to stabilise in the medium
term, followed by a gradual recovery driven by the following factors:
? Higher prices for agricultural products, particularly corn and soy,
which will improve the affordability of fertilizers for farmers;
? Forecasted higher demand in autumn from North America and Europe;
? Indian nutrient subsidies being maintained at last year's level and the
high margin for DAP importers will help to support seasonal demand,
despite high inventory levels; Indian DAP imports are expected to reach
5.5-6.0 million tonnes;
? The intention of major Chinese producers to decrease DAP production by
0.8-1.0 million tonnes per quarter in the coming periods in order to
support prices.
Other factors that are expected to influence the market in 2H 2019 include
the launch of new phosphate-based fertilizers production capacities at OCP
and Ma'aden.
Conference call and webcast:
PhosAgro will hold a conference call and webcast today at 14:30 London time
(16:30 Moscow; 09:30 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/wcc/r/2068718-1/D1B34BAEC8FE72AB5FBE
81D4207507AF?partnerref=rss-events [1]
Russian:
http://event.onlineseminarsolutions.com/wcc/r/2068723-1/770F2E4289A611196714
7443A49E74C6?partnerref=rss-events [2]
Participant dial-in numbers:
Russian Federation Toll +7 495 646 9315
Russian Federation Toll-Free 8 800 500 9863
United Kingdom Toll +44 207 194 3759
United Kingdom Toll-Free 0800 376 6183
United States Toll-Free 1 844 286 0643
United States Toll +1 646 722 4916
Conference ID numbers:
English call: 61550404#
Russian call: 50509429#
For further information please contact:
PJSC PhosAgro
Andrey Serov, Head of Investor Relations Department
+7 495 232 9689 ext 2187
ir@phosagro.ru
Timur Belov, Press Officer
+7 495 232 9689
EM
Sam VanDerlip
vanderlip@em-comms.com
+44 7554 993 032
+7 499 918 3134
Dmitriy Zhadan
zhadan@em-comms.com
+7 916 770 89 09
+7 495 363 28 49
About the Company
PhosAgro 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 39% and
higher.
The Company is the largest phosphate-based fertilizer producer in Europe (by
total combined capacity for DAP/MAP/NP/NPK/NPS), the largest producer of
high-grade phosphate rock with a P2O5 content of 39%, a top-three producer
of MAP/DAP globally, one of the leading producers of feed phosphates (MCP)
in Europe, and the only producer in Russia, and Russia's only producer of
nepheline concentrate (according to the RAFP).
PhosAgro's main products include phosphate rock, 39 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.
More information about PhosAgro can be found on the website: www.phosagro.ru
[3].
Six months ended Three months
30 June ended 30 June
2019 2018 2019 2018
RUB RUB RUB RUB
million million milli milli
on on
Revenues 130,433 111,248 58,14 56,62
6 6
Cost of sales (69,450) (61,914 (31,7 (29,8
) 14) 44)
Gross profit 60,983 49,334 26,43 26,78
2 2
Administrative (8,117) (6,960) (4,14 (3,65
expenses 5) 6)
Selling (18,646) (16,945 (8,37 (8,36
expenses ) 4) 2)
Taxes, other (867) (1,805) (137) (918)
than income
tax, net
Other expenses, (2,125) (1,254) (1,02 (562)
net 3)
Operating 31,228 22,370 12,75 13,28
profit 3 4
Finance income 1,165 226 284 70
Finance costs (2,287) (2,445) (1,08 (1,20
7) 5)
Foreign 10,208 (8,156) 2,588 (8,73
exchange 2)
gain/(loss),
net
Profit before 40,314 11,995 14,53 3,417
tax 8
Income tax (7,369) (2,162) (2,75 (462)
expense 3)
Profit for the 32,945 9,833 11,78 2,955
period 5
Attributable
to:
Non-controlling 18 25 10 9
interests ^
Shareholders of 32,927 9,808 11,77 2,946
the Parent 5
Other
comprehensive
(loss)/income
Items
that
may
be
recla
ssifi
ed
subse
quent
ly to
profi
t or
loss
Foreign (970) 1,438 (359) 1,096
currency
translation
difference
Other (970) 1,438 (359) 1,096
comprehensive
(loss)/income
for the period
Total 31,975 11,271 11,42 4,051
comprehensive 6
income for the
period
Attributable
to:
Non-controlling 18 25 10 9
interests ^
Shareholders of 31,957 11,246 11,41 4,042
the Parent 6
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2019 07:00 ET (11:00 GMT)
Basic and 254 76 91 23
diluted
earnings per
share (in RUB)
30 June 2019 31 December
2018
RUB million RUB million
Assets
Property, plant and 186,540 186,231
equipment
Advances issued for 11,285 6,759
property, plant and
equipment
Catalysts 2,536 2,574
Right-of-use assets 1,856 -
Intangible assets 1,658 1,786
Investments in 526 506
associates
Deferred tax assets 9,007 8,995
Other non-current assets 1,595 1,843
Non-current assets 215,003 208,694
Other current 277 313
investments
Inventories 29,189 31,710
Trade and other 26,621 36,186
receivables
Cash and cash 19,848 9,320
equivalents
Current assets 75,935 77,529
Total assets 290,938 286,223
Equity
Share capital 372 372
Share premium 7,494 7,494
Retained earnings 101,625 93,951
Foreign currency 7,395 8,365
translation reserve
Actuarial losses (556) (556)
Equity attributable to 116,330 109,626
shareholders of the
Parent
Equity attributable to 177 195
non-controlling
interests
Total equity 116,507 109,821
Liabilities
Loans and borrowings 109,040 122,877
Lease liabilities 1,288 376
Defined benefit 653 630
obligations
Deferred tax liabilities 9,315 9,023
Non-current liabilities 120,296 132,906
Loans and borrowings 18,718 20,679
Lease liabilities 488 718
Trade and other payables 34,929 21,473
Derivative financial - 626
liabilities
Current liabilities 54,135 43,496
Total equity and 290,938 286,223
liabilities
Six months ended 30 June
2019 2018
RUB million RUB million
Cash flows from
operating activities
Operating profit 31,228 22,370
Adjustments for:
Depreciation and 11,867 10,597
amortisation
Loss on disposal of 748 281
property, plant and
equipment and
intangible assets
Operating profit before 43,843 33,248
changes in working
capital and provisions
Decrease in 1,446 290
inventories&catalysts
Decrease/(increase) in 7,125 (1,859)
trade and other
receivables
Increase/(decrease) in 2,726 (434)
trade and other
payables
Cash flows from 55,140 31,245
operations before
income taxes and
interest paid
Income tax paid (6,254) (1,959)
Finance costs paid (2,000) (2,757)
Cash flows from 46,886 26,529
operating activities
Cash flows from
investing activities
Acquisition of (17,727) (16,596)
property, plant and
equipment and
intangible assets
Loans (issued)/repaid, (16) 90
net
Proceeds from disposal 47 13
of property, plant and
equipment
Finance income received 299 79
Other payments (530) (418)
Cash flows used in (17,927) (16,832)
investing activities
Cash flows from
financing activities
Proceeds from 17,195 61,618
borrowings
Repayment of borrowings (19,696) (67,163)
Dividends paid to (13,463) (3,836)
shareholders of the
Parent
Dividends paid to (36) -
non-controlling
interests
Leases paid (1,249) (496)
Proceeds from 112 -
settlement of
derivatives, net
Cash flows used in (17,137) (9,877)
financing activities
Net increase/(decrease) 11,822 (180)
in cash and cash
equivalents
Cash and cash 9,320 2,691
equivalents at 1
January
Effect of exchange (1,294) 949
rates fluctuations
Cash and cash 19,848 3,460
equivalents at 30 June
ISIN: US71922G2093
Category Code: IR
TIDM: PHOR
LEI Code: 635400F8A3KGJIIBIK95
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited
reviews
2.2. Inside information
Sequence No.: 18282
EQS News ID: 864639
End of Announcement EQS News Service
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