DJ 9M 2019 Financial Results: PhosAgro Revenue Rises 12% year-on-year to Record RUB 195.0 Billion
OJSC PhosAgro (PHOR)
9M 2019 Financial Results: PhosAgro Revenue Rises 12% year-on-year to Record
RUB 195.0 Billion
25-Nov-2019 / 12:00 MSK
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 25 November 2019
9M 2019 Financial Results: PhosAgro Revenue Rises 12% year-on-year to Record
RUB 195.0 Billion
Moscow - PhosAgro ("the Company") (Moscow Exchange and LSE: PHOR), one of
the world's leading vertically integrated phosphate-based fertilizer
producers, today announces its interim consolidated IFRS financial results
for 3Q and 9M 2019.
Revenue in 3Q 2019 rose by 3% year-on-year to RUB 64.6 billion (USD 1.0
billion) mainly due to higher sales in priority markets. Revenue for 9M 2019
increased by 12% year-on-year to
RUB 195.0 billion (USD 3.0 billion).
EBITDA for 3Q 2019 decreased by 9% year-on-year to RUB 21.3 billion (USD 330
million) due to a correction in global fertilizer prices. EBITDA margin
remained at a comfortable level of 33% due to lower purchase prices for key
raw materials. EBITDA for 9M 2019 increased by 14% year-on-year to RUB 64.4
billion (USD 989 million), while EBITDA margin also remained at 33%.
Free cash flow in the third quarter decreased by 71% year-on-year to RUB 3.6
billion
(USD 56 million) as a result of a correction in global fertilizer prices and
seasonal outflows related to accumulation of working capital. Free cash flow
reached RUB 32.6 billion for 9M 2019, an increase of 48% year-on-year.
Net debt/EBITDA decreased to 1.5x as of 30 September 2019, from 1.8x as of
31 December 2018, reflecting strong EBITDA performance and the gradual
appreciation of the rouble against the
US dollar over 9M 2019. Net debt as of 30 September 2019 amounted to RUB
122.9 billion
(USD 1.9 billion).
Financial highlights
FINANCIAL HIGHLIGHTS
RUB 3Q 2019 3Q 2018 Chng, % 9M 2019 9M 2018 Chng, %
million YoY YoY
or %
Revenue 64,550 62,684 3.0% 194,983 173,761 12.2%
EBITDA* 21,302 23,385 (8.9%) 64,396 56,352 14.3%
EBITDA 33.0% 37.3% (4.3pp) 33.0% 32.4% 0.6pp
margin
Net 9,762 7,798 25.2% 42,707 17,631 142.2%
income
Net 11,797 12,855 (8.2%) 34,534 30,844 12.0%
income
adj**
FCF 3,605 12,364 (70.8%) 32,564 22,061 47.6%
30.09.2019 31.12.2018
Net debt 122,882 135,330
ND/LTM 1.5x 1.8x
EBITDA
RUB/USD rates: average 3Q 2019: 64.6; average 3Q 2018: 65.5; as of 30
September 2019: 64.4; as of 31 December 2018: 69.5.
*EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
**Net profit as reported minus FX gain or loss.
Commenting on the 3Q 2019 financial results, PhosAgro CEO Andrey Guryev
said:
"PhosAgro delivered a robust performance in the third quarter thanks to
ongoing efforts to improve efficiency. Exceptional flexibility in both
production and sales enabled the Company to increase revenue during the
quarter, while also achieving lower cash cost of production for DAP.
"Despite a decrease in average fertilizer prices in the third quarter, our
EBITDA margin of 33% was one of the highest in the sector. We were able to
achieve this thanks to the completion of upgrades to a number of production
facilities at the end of last year and higher levels of self-sufficiency in
key inputs. This has further strengthened the Company's global competitive
edge.
"Our decision to postpone a significant part of planned overhauls until the
fourth quarter also contributed to PhosAgro's excellent results in the third
quarter. This made it possible to take advantage of solid demand in our
priority markets and to significantly ramp up production. At the same time,
overhauls in the fourth quarter should not affect sales on account of the
traditional seasonal decrease in fertilizer demand.
"Our flexible sales policy and robust distribution network, in turn, enabled
us to increase sales to our priority markets of Russia and the CIS, Europe
and Latin America, where there was a favourable pricing environment.
"We believe current pricing environment continues to present challenges to
global markets. At the same time we also believe that demand in markets,
where company is positioned strongly, i.e. domestic Russian market, Eastern
Europe and Latin America will allow the Company to outperform global
markets."
3Q 2019 market conditions
? Prices for phosphate-based fertilizers continued to decrease in 3Q 2019,
reaching a low point by the end of the quarter. The average price for DAP
(FOB Tampa) was USD 327 per tonne, down by 10% from 2Q 2019 and 24%
year-on-year. The main factors negatively impacting prices were: 1) a
significant increase in fertilizer production this year amid stable
demand; 2) an increase in exports of phosphate-based fertilizers from
China as a result of a decrease in domestic consumption; 3) relatively
weak demand in the US market due to changes in the timing of the harvest
and delays in the application of phosphate-based fertilizers as a result
of adverse weather conditions; and 4) low prices for raw materials
(ammonia, sulphur, phosphate rock).
? The average price for urea (FOB Baltic) in 3Q 2019 was USD 248 per
tonne, down from
USD 260 per tonne in 3Q 2018. The main reasons for this decrease were: 1)
a considerable increase in exports from China due to relatively low energy
prices and weak domestic demand; 2) the continued export of nitrogen
fertilizers from Iran; and 3) relatively weak demand from the United
States and Europe due to bad weather conditions. High seasonal demand in
India and Brazil, however, supported the prices.
? The average price of ammonia (FOB Yuzhny) in 3Q 2019 was USD 216 per
tonne, down from USD 303 per tonne in 3Q 2018. Ammonia prices have
decreased this year due to an increase in the supply resulting from the
launch / ramp-up to nameplate capacity of new plants (in Russia and the
United States), as well as a reduction in production costs of marginal
producers thanks to low global prices for natural gas.
? The average price of sulphur (FOB Black Sea) in 3Q 2019 was USD 64 per
tonne, a decrease of nearly 50% year-on-year. The decrease in global
sulphur prices is the result of considerable stockpiles in China and
pressure from the market for phosphate-based fertilizers.
? The average price for potash (FOB Baltic) in 3Q 2019 was USD 250 per
tonne, up from
USD 224 per tonne in 3Q 2018. At the end of the quarter, however, there
were signs of weakness in potash prices as a result of a decrease in
demand in South-east Asia and the postponement of the date for concluding
annual contracts in China and India.
3Q 2019 financial performance
In 3Q 2019, PhosAgro's revenue rose by 3.0% year-on-year to RUB 64.6
billion, mainly driven by higher sales to Europe, Latin America and Asia.
Revenue growth was mitigated by a correction in global fertilizer prices and
the appreciation of the rouble.
Revenue from the sale of phosphate-based fertilizers in 3Q 2019 rose by 1.3%
year-on-year to RUB 44.2 billion, thanks to a faster rise in revenue from
the sale of NPK(S) grades (up by 7.6% year-on-year).
Revenue from the sale of nitrogen fertilizers rose by 6.6% year-on-year in
3Q to RUB 9.2 billion, primarily due to an increase in the sale of urea and
ammonium nitrate to Latin American markets, where the recovery in seasonal
demand began and was reinforced by expectations of a recovery in prices for
agricultural products (including soy and corn).
Revenue by product:
REVENUE BY KEY PRODUCTS
RUB 3Q 2019 3Q 2018 Chng, % 9M 2019 9M 2018 Chng, %
million YoY YoY
or %
DAP/MAP 21,174 21,046 0.6% 64,109 58,560 9.5%
NPK(S) 19,782 18,381 7.6% 55,044 46,926 17.3%
PhosRock 6,107 5,435 12.4% 19,207 15,789 21.6%
MCP 2,260 2,751 (17.8%) 7,993 7,678 4.1%
Other 1,388 1,792 (22.5%) 5,037 4,696 7.3%
phosphate
-based
products
Nitrogen 9,172 8,584 6.8% 28,968 26,777 8.2%
fertilize
rs
Other 4,667 4,695 (2.5%) 14,625 13,335 9.7%
sales &
services
Total 64,550 62,684 3.0% 194,983 173,761 12.2%
revenue
PhosAgro's gross profit in 3Q 2019 was RUB 29.4 billion (USD 454 million),
with gross profit margin at 45%, down from 48% in 3Q 2018. Gross profit and
gross profit margin in the phosphate-based and nitrogen fertilizer segments
saw the following changes:
? Gross profit for phosphate-based fertilizers decreased by 5%
year-on-year to
RUB 23.8 billion (USD 368 million), while gross profit margin was 45% due
to lower global prices;
? Gross profit for the nitrogen segment increased by 8% year-on-year to
RUB 5.4 billion
(USD 83 million), with gross profit margin expanding to 58% from 57% in 3Q
2018.
EBITDA for 3Q 2019 decreased by 8.9% year-on-year to RUB 21.3 billion (USD
330 million) due to a correction in global fertilizer prices. EBITDA margin
remained at a robust 33% due to lower purchase prices for key inputs.
EBITDA for 9M 2019 increased by 14% year-on-year to RUB 64.4 billion (USD
989 million). EBITDA margin for 9M rose to 33%, compared with 32% for the
same period the previous year.
Net profit adjusted for non-cash FX items decreased in 3Q 2019 by 8.2%
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DJ 9M 2019 Financial Results: PhosAgro Revenue Rises -2-
year-on-year to
RUB 11.8 billion (USD 183 million).
In 3Q 2019, the rouble appreciated 1.7% against the US dollar compared with
the previous year (the average RUB/USD exchange rate in 3Q 2019 was 64.4,
compared with 65.5 in 3Q 2018), which had a net negative impact on profit,
as prices for most of the Company's products in foreign markets are
denominated in USD, while costs are primarily rouble-based.
The weakening of the rouble in 3Q 2019 (from RUB 63.2 to RUB 64.6 per
dollar) resulted in an FX loss of RUB 2.0 billion (compared with an FX loss
of RUB 5.1 billion in 3Q 2018).
Net operating cash flow declined by 38% year-on-year to RUB 14.2 billion
(USD 220 million) due to an increase in working capital, driven mainly by
higher sales during the quarter.
Capital expenditure for 3Q 2019 amounted to RUB 10.6 billion (USD 164
million), representing 50% of EBITDA for the reporting period.
Net debt/EBITDA decreased to 1.5x from 1.8x as of 31 December 2018,
reflecting strong EBITDA performance and the gradual appreciation of the
rouble against the US dollar over 9M 2019. Net debt as of 30 September 2019
amounted to RUB 122.9 billion (USD 1.9 billion).
Cost of Sales
COST OF SALES
RUB million 3Q 2019 3Q 2018 Chng, % 9M 9M 2018 Chng, %
or % YoY YoY
2019
D&A (5,457) (5,354) 1.9% (16,126) (14,990) 7.6%
Material (11,127) (10,113) 10.0% (31,257) (28,328) 10.3%
and
services
PhosRock (2,399) (1,976) 21.4% (6,685) (5,870) 13.9%
transport
Repair (3,009) (2,667) 12.8% (7,756) (7,113) 9.0%
expenses
Drilling (650) (375) 73.3% (1,645) (1,362) 20.8%
and
blasting
Other (5,069) (5,095) (0.5%) (15,171) (13,983) 8.5%
materials
and
services
Raw (11,150) (10,023) 11.2% (33,705) (30,078) 12.1%
materials
Ammonia (898) (914) (1.8%) (2,922) (2,720) 7.4%
Sulphur and (2,217) (2,732) (18.9%) (7,852) (8,015) (2.0%)
sulph. acid
Potassium (4,205) (3,186) 32.0% (10,727) (7,835) 36.9%
Natural gas (3,079) (2,685) 14.7% (9,655) (9,403) 2.7%
Ammonium (751) (506) 48.4% (2,549) (2,105) 21.1%
sulphate
Salaries (3,289) (2,980) 10.4% (9,574) (9,078) 5.5%
and social
contributio
ns
Electricity (1,495) (1,327) 12.7% (4,765) (4,195) 13.6%
Fuel (1,076) (1,010) 6.5% (3,730) (2,898) 28.7%
Products (1,602) (1,641) (2.4%) (5,467) (4,672) 17.0%
for resale
Total (35,196) (32,448) 8.5% (104,624 (94 239) 11.0%
)
Cost of sales increased in 3Q 2019 by 8.5% year-on-year to RUB 35.2 billion
(USD 545 million) mainly due to an increase in expenses for raw and other
materials and services. Changes in salaries and energy costs had an
additional impact on the cost of sales.
? Costs for materials and services increased by 10.0% to RUB 11.1 billion
(USD 172 million) as a result of:
? A 21.4% year-on-year increase in the cost of transport of phosphate
rock to
RUB 2.4 billion (USD 37 million), which was driven by higher demand for
phosphate rock at fertilizer production sites and a 3.5% increase in
railway tariffs.
? Repair expenses were up 12.8% year-on-year to RUB 3.0 billion (USD 47
million), driven by scheduled maintenance of mid-stream capacities,
mainly due to cost inflation year-to-date and the higher number of
production lines following completion of the Company's investment cycle
at the end of last year.
? Drilling and blasting expenses increased by 73.3% year-on-year to RUB
650 million (USD 10 million) due to an increase in the share of open pit
mining and an increase in total ore production by 12% year-on-year to
10.3 million tonnes.
? Costs for raw materials increased by 11.2% to RUB 11.2 billion (USD 173
million) as a result of:
? A rise in potash costs of 32.0% year-on-year to RUB 4.2 billion (USD
65 million), where 30% of the increase was due to higher purchase prices
for potassium compared to the previous year.
? A 14.7% year-on-year increase in natural gas expenses to RUB 3.1
billion
(USD 48 million) as a result of 17.6% year-on-year growth in ammonia
production.
? A 48.4% year-on-year rise in costs for ammonium sulphate to RUB 751
million (USD 12 million) mainly due to an increase in the production of
fertilizer grades containing sulphate.
? A decrease in costs for sulphur and sulphuric acid limited the
increase in raw materials expenses. These costs decreased by 18.9%
year-on-year to
RUB 2.2 billion (USD 34 million) mainly due to lower prices for sulphur
and sulphuric acid.
? Electricity costs increased by 12.7% year-on-year to RUB 1.5 billion
(USD 23 million) mainly due to a 23.2% year-on-year rise in the purchase
price.
Administrative expenses for 3Q 2019 grew by 9.0% year-on-year to RUB 3.96
billion
(USD 61 million), driven mainly by a 15.2% increase in expenses for salaries
and social contributions to RUB 2.3 billion (USD 35 million).
Selling expenses increased by 15.1% year-on-year in 3Q 2019 to RUB 8.9
billion (USD 137 million). The main factors behind the increase were:
? A 9.8% year-on-year increase in freight, port and stevedoring expenses
to RUB 4.04 billion (USD 63 million), driven mainly by an increase in the
supply of fertilizers to export markets and an increase in freight
tariffs.
? A 10.6% year-on-year increase in costs for Russian Railways services and
operators' fees to RUB 2.7 billion (USD 42 million) due to an overall
increase in sales and an increase in railway tariffs.
? Spending on customs duties increased by 167.5% year-on-year to RUB 428
million
(USD 7 million) due to a change in the delivery terms to the European
market.
Market outlook
Continued pressure is expected on the price of phosphate-based fertilizers
in 4Q 2019 due to the off-season in key markets, combined with high
stockpiles in India and the United States. Thus, despite a decrease in
production in the United States and China, excess supply in the global
market may persist until next spring.
Slow resumption of seasonal demand in key urea markets coupled with
considerable supply of Chinese product may continue to curb prices.
However, upward trends in the markets for major crops and a record level of
affordability in recent years will support demand and prices as they
approach the main fertilizer application season in 1Q 2020.
Conference call and webcast:
PhosAgro will hold a conference call and webcast today at 13:00 London time
(16:00 Moscow; 08:00 New York).
The call will be held in English, with simultaneous translation into Russian
on a separate line.
Webcast links:
English: https://webcasts.eqs.com/phosagro20191125/en [1]
Russian: https://webcasts.eqs.com/phosagro20191125/ru [2]
Participant dial-in numbers:
Russian Federation Toll +7 495 646 9190
Russian Federation Toll-Free 8 10 8002 8675011
United Kingdom Toll +44 (0)330 336 9411
United Kingdom Toll-Free 0800 279 7204
United States Toll-Free +1 929-477-0448
United States Toll 866-575-6539
Conference ID numbers:
English conference ID: 6063774
Russian conference ID: 1126250
For further information please contact:
PJSC PhosAgro
Andrey Serov, Head of Investor Relations Department
+7 495 232 9689 ext 2183
ir@phosagro.ru
Timur Belov, Press Officer
+7 495 232 9689
EM
Sam VanDerlip
vanderlip@em-comms.com
+44 207 002 7859
Dmitry Zhadan
zhadan@em-comms.com
+7 916 770 8909
About PhosAgro
PhosAgro (www.phosagro.ru [3]) 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. PhosAgro's environmentally friendly
fertilizers stand out for their high efficiency, and they do no lead to the
contamination of soils with heavy metals.
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].
Nine months Three months ended
ended
30 September
30 September
2019 2018 2019 2018
RUB RUB RUB RUB
milli mill million millio
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November 25, 2019 04:00 ET (09:00 GMT)
on ion n
Revenues 194,9 173, 64,550 62,684
83 761
Cost of sales (104, (94, (35,196) (32,44
624) 239) 8)
Gross profit 90,35 79,5 29,354 30,236
9 22
Administrative (11,8 (10, (3,956) (3,629
expenses 18) 357) )
Selling (27,7 (24, (8,874) (7,709
expenses 97) 838) )
Taxes, other (1,61 (2,6 (744) (871)
than income 1) 76)
tax, net
Other (2,69 (1,7 (565) (453)
expenses, net 0) 07)
Operating 46,44 39,9 15,215 17,574
profit 3 44
Finance income 1,377 252 212 110
Finance costs (3,43 (5,0 (1,152) (2,715
9) 76) )
Foreign 8,173 (13, (2,035) (5,057
exchange 213) )
gain/(loss),
net
Profit before 52,55 21,9 12,240 9,912
tax 4 07
Income tax (9,84 (4,2 (2,478) (2,114
expense 7) 76) )
Profit for the 42,70 17,6 9,762 7,798
period 7 31
Attributable
to:
Non-controllin 37 55 19 30
g interests ^
Shareholders 42,67 17,5 9,743 7,768
of the Parent 0 76
Other
comprehensive
(loss)/income
Items that may
be
reclassified
subsequently
to profit or
loss
Foreign (617) 2,34 353 907
currency 5
translation
difference
Other (617) 2,34 353 907
comprehensive 5
(loss)/income
for the period
Total 42,09 19,9 10,115 8,705
comprehensive 0 76
income for the
period
Attributable
to:
Non-controllin 37 55 19 30
g interests ^
Shareholders 42,05 19,9 10,096 8,675
of the Parent 3 21
Basic and 329 136 75 60
diluted
earnings per
share (in RUB)
30 September 2019 31 December 2018
RUB million RUB million
Assets
Property, plant and 188,775 186,231
equipment
Advances issued for 13,862 6,759
property, plant and
equipment
Right-of-use assets 4,397 -
Catalysts 2,412 2,574
Intangible assets 1,606 1,786
Investments in 526 506
associates
Deferred tax assets 8,815 8,995
Other non-current 1,695 1,843
assets
Non-current assets 222,088 208,694
Other current 202 313
investments
Inventories 29,093 31,710
Trade and other 26,686 36,186
receivables
Cash and cash 7,869 9,320
equivalents
Current assets 63,850 77,529
Total assets 285,938 286,223
Equity
Share capital 372 372
Share premium 7,494 7,494
Retained earnings 111,368 93,951
Foreign currency 7,748 8,365
translation reserve
Actuarial losses (556) (556)
Equity attributable to 126,426 109,626
shareholders of the
Parent
Equity attributable to 196 195
non-controlling
interests
Total equity 126,622 109,821
Liabilities
Loans and borrowings 97,170 122,877
Lease liabilities 3,072 376
Defined benefit 661 630
obligations
Deferred tax 9,394 9,023
liabilities
Non-current liabilities 110,297 132,906
Loans and borrowings 29,560 20,679
Lease liabilities 949 718
Trade and other 18,510 21,473
payables
Derivative financial - 626
liabilities
Current liabilities 49,019 43,496
Total equity and 285,938 286,223
liabilities
Nine months ended 30 September
2019 2018
RUB RUB
million million
Cash flows from
operating activities
Operating profit 46,443 39,944
Adjustments for:
Depreciation and 17,953 16,408
amortisation
Loss on disposal of 705 389
property, plant and
equipment and
intangible assets
Operating profit 65,101 56,741
before changes in
working capital and
provisions
Decrease/(increase) 1,669 (206)
in inventories and
catalysts
Decrease in trade 6,670 2,672
and other
receivables
Decrease in trade (1,183) (3,028)
and other payables
Cash flows from 72,257 56,179
operations before
income taxes and
interest paid
Income tax paid (8,998) (3,671)
Finance costs paid (2,132) (3,059)
Cash flows from 61,127 49,449
operating activities
Cash flows from
investing activities
Acquisition of (28,336) (26,578)
property, plant and
equipment and
intangible assets
Loans issued, net (68) (365)
Proceeds from 64 14
disposal of
property, plant and
equipment
Finance income 575 148
received
Acquisition of - (8)
investments, net
Other payments (798) (599)
Cash flows used in (28,563) (27,388)
investing activities
Cash flows from
financing activities
Proceeds from 27,654 69,146
borrowings
Repayment of (33,992) (74,248)
borrowings
Dividends paid to (25,252) (7,770)
shareholders of the
Parent
Dividends paid to (36) -
non-controlling
interests
Leases paid (1,452) (994)
Proceeds from 112 97
settlement of
derivatives, net
Cash flows used in (32,966) (13,769)
financing activities
Net (402) 8,292
(decrease)/increase
in cash and cash
equivalents
Cash and cash 9,320 2,691
equivalents at 1
January
Effect of exchange (1,049) 973
rates fluctuations
Cash and cash 7,869 11,956
equivalents at 30
September
ISIN: US71922G2093
Category Code: QRT
TIDM: PHOR
LEI Code: 635400F8A3KGJIIBIK95
OAM Categories: 2.2. Inside information
Sequence No.: 31223
EQS News ID: 920591
End of Announcement EQS News Service
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