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
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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
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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 1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=41b39c79e42e75d2da05648d1b7a4eb0&application_id=864639&site_id=vwd&application_name=news 2: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=fa8a145b5e79bdbafced7a6b7737b2d5&application_id=864639&site_id=vwd&application_name=news 3: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=443ca16678306c21ad7d78a6b83a5230&application_id=864639&site_id=vwd&application_name=news
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