OJSC PhosAgro (PHOR)
4Q and FY 2019 Financial Results: Free Cash Flow for 2019 Increases by 38%
to RUB 28.3 billion; Revenue Grows by 6.3% to RUB 248.1 billion
21-Feb-2020 / 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 is solely responsible for the content of this announcement.
4Q and FY 2019 Financial Results: Free Cash Flow for 2019 Increases by 38%
to RUB 28.3 billion; Revenue Grows by 6.3% to RUB 248.1 billion
Moscow, 21 February 2020. PhosAgro ("the Company") (Moscow Exchange and LSE:
PHOR), one of the world's leading vertically integrated phosphate-based
fertilizer producers, today announces its consolidated IFRS financial
results for 4Q and FY 2019.
PhosAgro's revenue for FY 2019 increased by 6.3% year-on-year to RUB 248.1
billion (USD 3.8 billion), driven by higher sales volumes of end products.
Revenue in 4Q 2019 decreased by 10.8% year-on-year to RUB 53.1 billion (USD
0.8 billion).
EBITDA for FY 2019 increased by 0.9% to RUB 75.6 billion (USD 1.2 billion),
while the EBITDA margin remained at a robust 30.5%. EBITDA for 4Q 2019
decreased by 39.7% year-on-year to RUB 11.2 billion (USD 176 million).
Free cash flow for FY 2019 increased by 37.8% year-on-year to RUB 28.3
billion (USD 437 million), driven by a 7.0% year-on-year increase in sales
volumes and more efficient management of working capital. Free cash flow in
4Q 2019 was negative, in line with the seasonal nature of the business.
The net debt/EBITDA ratio improved to 1.7x as of year end (compared with
1.8x as of 31 December 2018), reflecting EBITDA performance and the
appreciation of the rouble against the US dollar during the year. Net debt
as of 31 December 2019 stood at RUB 131.6 billion (USD 2.1 billion).
Financial and operational highlights:
FINANCIAL HIGHLIGHTS
RUB million 4Q 4Q Chng FY FY Chng
2019 2018 % 2019 2018 %
Revenue 53,142 59,551 -10.8% 248,1 233,3 6.3%
25 12
EBITDA* 11,186 18,556 -39.7% 75,58 74,90 0.9%
2 8
EBITDA margin 21.0% 31.2% 30.5% 32.1%
Net income 6,701 4,504 48.8% 49,40 22,13 123.2%
8 5
Net income 2,528 10,904 -76.8% 37,06 41,74 -11.2%
adj** 2 8
FCF -4,292 -1,551 - 28,27 20,51 37.8%
2 0
31.12.2019 31.12.2018
Net debt 131,583 135,330
ND/LTM EBITDA 1.7x 1.8x
Sales, ths 4Q 4Q Chng FY FY Chng
tonnes
2019 2018 % 2019 2018 %
Phosphate-based 1,738 1,492 16.6% 7,255 6,635 9.4%
fertilizers
Nitrogen 537 469 14.5% 2,197 2,196 0.1%
fertilizers
Total sales 2,276 1,961 16.1% 9,452 8,830 7.0%
The average RUB/USD exchange rate in 4Q 2019 was 63.7 compared with 66.5 in
4Q 2018; the exchange rate was 61.9 as of 31 December 2019 compared with
69.5 as of 31 December 2018.
*EBITDA is calculated as operating profit adjusted for depreciation and
amortisation.
**Net profit as reported minus FX gain or loss.
Commenting on the Company's financial results, PhosAgro CEO Andrey Guryev
said:
"2019 was a challenging year for the fertilizer market. Prices for our
products came under pressure throughout the year due to adverse weather
conditions in key sales markets, as well as increased global supply amid
stable demand. As a result, prices for phosphate-based fertilizers reached
near-record lows at the end of the year.
"Despite the unfavourable pricing environment, 2019 became a record year for
us. PhosAgro, as one of the most efficient producers of phosphate-based
fertilizers in the world, was able to increase sales volumes to 9.5 mln
tonnes or by 7.0% year-on-year. As a result revenue grew by 6.3%
year-on-year. Our strong revenue growth was the result of a balanced
approach to investment and maintenance, high levels of self-sufficiency in
key inputs, a flexible sales policy and the exceptional quality of our raw
materials.
"As a result, the Company's EBITDA over the past year exceeded RUB 75
billion, with an EBITDA margin of 30.5%. Free cash flow increased by almost
40% from last year to more than RUB 28 billion.
"Our improved financial performance meant we were able not only to fully
self-finance our annual capex programme but also to improve debt ratios. As
of the end of the year, the net debt/EBITDA ratio improved to 1.7x (compared
with 1.8x at the end of 2018).
"Our excellent financial performance and comfortable debt level enabled us
to pay out respectable dividends. Based on 2019 results, we expect to pay
out dividends of RUB 24.9 billion, which corresponds to 88% of the Company's
free cash flow for the year.
"Looking ahead to the rest of 2020, since the beginning of the year we have
seen a considerable recovery in prices for phosphate-based fertilizers as a
result of the approaching spring season, production cutbacks announced by a
number of major players and the relative accessibility of fertilizers. There
is also a risk of reduced fertilizer supply from China.
"The recovery in prices, combined with an expected increase in demand in
markets where the Company has strong positions - our home market of Russia,
as well as Eastern Europe and Latin America - position us well to expect
increased sales volumes while maintaining high levels of profitability."
4Q 2019 market conditions
In 4Q 2019, the average price for DAP (FOB Tampa) reached USD 284 per tonne,
down 34% year-on-year. The main factor negatively impacting the market for
phosphate-based fertilizers was the addition of new capacities in Morocco
and Saudi Arabia.
The average price for urea (FOB Baltic) in 4Q 2019 was USD 219 per tonne,
down from USD 291 per tonne in 4Q 2018. The main reasons for this drop in
price were the increase in urea exports from China and adverse weather
conditions in the US, which had a negative impact on domestic demand.
The average price of ammonia (FOB Yuzhny) in 4Q 2019 was USD 226 per tonne,
down from USD 330 per tonne in 4Q 2018. Ammonia prices decreased during the
year following an increase in supply due to the launch and ramp-up to
nameplate capacity of new plants in Russia and the US, as well as a
reduction in production costs for marginal producers thanks to low global
prices for natural gas. A slight price increase in 4Q 2019 compared to the
previous quarter was due to the shutdown of a number of production
capacities for maintenance purposes, which helped improve market balance.
The average price of sulphur (FOB Black Sea) in 4Q 2019 was USD 38 per
tonne, down from USD 122 per tonne in 4Q 2018. The decrease in global
sulphur prices in 2019 was the result of considerable stockpiles in China
and the weak global market for phosphate-based fertilizers.
The average price for potash (FOB Baltic) in 4Q 2019 was USD 239 per tonne,
down from USD 256 per tonne in 4Q 2018. The price correction in global
potash markets was due to considerable stockpiles and a delay to the
conclusion of a long-term contract in China, increased competition between
suppliers in North and South America, as well as the expectation of
additional new capacities in the coming years.
4Q and FY 2019 financial performance
In 2019, PhosAgro's revenue increased by 6.3% year-on-year to RUB 248.1
billion, mainly driven by a 7.0% increase in fertilizer sales compared to
the previous year. However, revenue growth was slowed by a price correction
for phosphate-based fertilizers that continued throughout the year.
This correction had its biggest impact in 4Q 2019, when prices for
phosphate-based and nitrogen fertilizers decreased by 25% and 20%
year-on-year, respectively. As a result, PhosAgro's revenue for this period
decreased by 10.8% year-on-year to RUB 53.1 billion.
During the year, fertilizers were mainly exported to regions with the best
pricing environment relative to the North American market, where prolonged
adverse weather conditions led to an increase in fertilizer stockpiles. As
of the end of 2019, PhosAgro had increased deliveries to the Russian and CIS
markets (up 11% year-on-year), as well as the European market (up 28%
year-on-year). This growth was made possible on the back of a well-developed
distribution system and a favourable pricing balance between agricultural
products and fertilizers.
Gross profit in 2019 increased by 2.4% year-on-year to RUB 111.9 billion
(USD 1.7 billion), with a gross profit margin of 45%, down from 47% in 2018.
Gross profit and the gross profit margin in the phosphate-based and nitrogen
fertilizer segments changed as follows:
? Gross profit for phosphate-based fertilizers increased by 2.4% to RUB
90.2 billion (USD 1.4 billion), while the gross profit margin decreased to
45% (from 47% in 2018) as global prices reached minimum levels in 4Q 2019.
? Gross profit for the nitrogen segment increased by 3.4% to RUB 21.3
billion (USD 329 million), with a gross profit margin of 56%, unchanged
year-on-year.
EBITDA for FY 2019 increased by 0.9% year-on-year to RUB 75.6 billion (USD
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