PhosAgro 3Q18 EBITDA Surges 72% YoY to RUB 23.4 bn

Mittwoch, 21.11.2018 10:35

OJSC PhosAgro (PHOR) PhosAgro 3Q18 EBITDA Surges 72% YoY to RUB 23.4 bn 21-Nov-2018 / 10:30 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

21 November 2018

 

 

PhosAgro 3Q18 EBITDA Surges 72% YoY to RUB 23.4 bn

 

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 (3Q) and nine months (9M) ended 30 September 2018.

 

Revenue in 3Q 2018 rose by 35% year-on-year to RUB 62.8 billion (USD 958 million), while EBITDA grew by 72% year-on-year to RUB 23.4 billion (USD 357 million). PhosAgro's third-quarter EBITDA margin increased to 37% in 2018 from 29% in 2017. PhosAgro's 3Q 2018 net income (adjusted for non-cash FX items) more than doubled year-on-year to RUB 12.9 billion (USD 197 million), bringing 9M 2018 adjusted net income to RUB 30.8 billion (USD 502 million), which is 76% higher year-on-year.

 

3Q 2018 financial and operational highlights

RUB million or %

3Q 2018

3Q 2017

Chng, % YoY

9M 2018

9M 2017

Chng, % YoY

Revenue

62,778

46,452

35%

174,026

135,573

28%

EBITDA*

23,385

13,624

72%

56,352

38,511

46%

EBITDA margin

37%

29%

8pp

32%

28%

4pp

Net income

7,798

7,343

6%

17,631

21,075

-16%

Adjusted net income**

12,879

5,771

123%

30,849

17,490

76%

 

30.09.2018

31.12.2017

 

 

 

 

Net debt

120,827

119,985

 

 

 

 

ND/LTM EBITDA

1.7x

2.3x

 

 

 

 

Sales, 000' mt

3Q 2018

3Q 2017

Chng, % YoY

9M 2018

9M 2017

Chng, % YoY

Phosphate-based

1,744

1,716

2%

5,143

4,886

5%

Nitrogen-based

458

309

48%

1,725

1,205

43%

Phosphate rock

695

654

6%

2,119

1,998

6%

RUB/USD rates: average 3Q 2018: 65.5; average 3Q 2017: 59.0; as of 30 September 2018: 65.6; as of 31 December 2017: 57.6 *EBITDA is calculated as operating profit adjusted for depreciation and amortisation. ** Adjusted Net Income calculated as Net Income adjusted for Foreign exchange loss  

PhosAgro CEO Andrey Guryev said: "While 2018 has seen market turbulence throughout the year and significant uncertainties and risks still exist, PhosAgro is finishing the year in good shape with robust and sustainable growth in EBITDA, record-high quarterly Free Cash Flow generation, recovery in margins above the mid-cycle levels and a decrease in leverage. These factors clearly indicate that the successful implementation of our long-term strategy, which focuses on organic production growth, vertical integration and purity of the product produced, has enabled PhosAgro to fully monetise its cost leadership in the upward macro environment.

 

"Since our IPO in 2011, PhosAgro has always sought to be consistent and predictable with its capital allocation policy in order to maximise both production growth rates and returns for shareholders while minimising risks to credit quality. As part of our long-term strategy, PhosAgro has spent up to 50-60% of EBITDA on investments into its Russian assets over the past five years. Today we can see a material positive impact on our earnings from these large-scale investments, and the Company can take a slightly modified approach to its dividend policy by paying out up to 75% of free cash flow as dividends, which represents a double-digit annualised dividend yield (based on 3Q numbers). On top of the attractive dividend yield, this cash flow distribution leaves room for the comfortable repayment of RUB-denominated debt in December 2018 and to reduce further PhosAgro's leverage by the year-end.     

 

"In terms of the short-term outlook, while we see some signs of the seasonal price correction that is regularly seen in November-January, this is likely to be limited given the rising cash costs in the industry. For PhosAgro, we believe that the profitability metrics we achieved in 3Q 2018 are sustainable, with further potential upside from projects that are currently under construction. This will enable us to balance the volume of new investments to ensure stable high growth rates while offering existing and new shareholders profitability on par with our top peers in Russia and abroad."

 

3Q 2018 market conditions

 

In 3Q 2018, DAP (FOB Tampa) prices averaged USD 434 per tonne, up by 22% (USD 94) year-on-year. The key drivers of the recovery in phosphate prices were:

 

  • Idling of Plant City by Mosaic, resulting in a deficit on the North American market and higher import volumes;
  • Slower than expected ramp up of new units in Saudi Arabia and Morocco; 
  • Healthy import demand in India due to loss-making domestic production of DAP, which was partially offset by the ongoing Rupee depreciation;
  • Solid growth of DAP imports to Pakistan in August 2018 by 27% year-on-year to 1.3 mln tonnes, according to NFDC;
  • Seasonal recovery of fertilizer demand in Brazil, driven by favourable market conditions for soybeans.

 

In 3Q 2018 Urea (FOB Baltic) averaged USD 260 per tonne vs. USD 205 per tonne in 3Q 2017. This price increase was driven by:

 

  • Further cuts in urea exports from China due to environmental reforms, and from Iran due to recent US sanctions;
  • Early start of seasonal demand from India and Brazil driven by low urea inventory levels.

 

Financial performance

 

In 3Q 2018, headline revenue increased by 35% year-on-year to RUB 62.8 billion (USD 958 million) on solid sales in the nitrogen segment (up by 48% year-on-year to 458 kt) and meaningful increases in average prices per tonne in both the phosphate (up by 18% year-on-year to USD 390 per tonne) and nitrogen (up by 30% year-on-year to USD 283 per tonne) segments.

 

The Company increased export revenue by 45% year-on-year to RUB 36.8 billion (USD 561 million), backed by robust demand for phosphate-based and nitrogen-based products in North and Latin America. Revenue from domestic sales grew by 23% year-on-year to RUB 26 billion (USD 397 million).

 

A detailed revenue breakdown by key products is presented below:

 

Revenue by key products

RUB million

3Q 2018

3Q 2017

Chng, % YoY

9M 2018

9M 2017

Chng, % YoY

DAP/MAP

20,946

16,198

29%

58,461

47,232

24%

NPK(S)

18,029

13,712

31%

45,793

34,928

31%

PhosRock

5,435

5,006

9%

15,789

15,801

0%

Nitrogen-based products

8,492

3,984

113%

26,681

15,404

73%

 

In 3Q 2018, gross profit was RUB 30.2 billion (USD 461 million), with gross profit margin expanding to 48% from 42% in 3Q 2017. Gross profit and margin performance for the phosphate and nitrogen segments were as follows:

 

  • The phosphate segment saw a 45% year-on-year increase in gross profit to RUB 25.0 billion (USD 382 million), with a gross margin of 49%, compared to 43% in 3Q 2017.
  • Gross profit for the nitrogen segment increased by 2.6 times year-on-year to RUB 5.0 billion (USD 76.5 million). Gross margin for the segment jumped by 12 p.p. year-on-year to 57%.

 

EBITDA in 3Q 2018 amounted to RUB 23.4 billion (USD 357 million), up by 72% year-on-year, while EBITDA margin nearly reached a three-year high at 37%. Net profit adjusted for non-cash FX items amounted to RUB 12.9 billion (USD 197 million) in 3Q 2018, more than doubling year-on-year.

 

The RUB depreciated by 11% year-on-year against the USD during the quarter (the average RUB/USD exchange rates for 3Q 2018 and 3Q 2017 were RUB 65.5 and RUB 59.0 respectively), which had a net positive impact, as prices for most of the Company's products are denominated in USD, while costs are primarily RUB-based. The depreciation of the RUB as of 30 September 2018 (RUB 65.6 per USD) compared to 30 June 2018 (RUB 62.8 per USD) resulted in an FX loss of RUB 5.1 billion (vs. a RUB 1.6 billion gain in 3Q 2017).

 

Net operating cash flow in 3Q 2018 increased by 125% year-on-year to RUB 22.9 billion (USD 350 million) primarily driven by profitability growth coupled with working capital release. The growth in net operating cash flow resulted in free cash flow (net operating cash flow minus cash flows used in investing activities) for the quarter of RUB 12.4 billion (USD 189 million) which represents a quarterly record since the Company became publicly-listed.

 

Capital expenditure in 3Q 2018 totalled around RUB 10.0 billion (USD 152 million). The main capex spending was on scheduled maintenance and development of the upstream business, as well as on construction of new sulphuric and nitric acid plants.

 

As of the end of September 2018, net debt totalled RUB 120.8 billion (USD 1.8 billion), bringing the net debt/LTM EBITDA ratio to a two-year low of 1.7x, thanks to positive dynamics in EBITDA performance and repayments of some short-term commitments.

 

Cost of Sales

RUB million

3Q 2018

3Q 2017

Chng, % YoY

9M 2018

9M 2017

Chng, % YoY

 

Materials and services

10,353

8,569

21%

28,268

23,589

20%

 

D&A

5,354

3,673

46%

14,990

9,546

57%

 

Natural gas

2,685

2,520

7%

9,403

6,424

46%

 

Salaries and social contributions

3,165

2,674

18%

9,540

8,250

16%

 

Sulphur and sulph. acid

2,561

1,619

58%

7,735

4,391

76%

 

Potash

3,162

2,775

14%

7,718

6,514

18%

 

Chemical fertilisers and other products for resale

1,641

1,414

16%

4,672

4,092

14%

 

Electricity

1,327

1,387

-4%

4,195

4,112

2%

 

Ammonium sulphate

506

308

64%

2,105

1,328

59%

 

Ammonia

914

1,273

-28%

2,720

5,637

-52%

 

Fuel

876

738

19%

2,764

2,494

11%

 

Heating energy

70

66

6%

402

484

-17%

 

Total

32,614

27,016

21%

94,512

76,861

32%

                   

 

Cost of sales rose by 21% year-on-year in 3Q 2018 to RUB 32.6 billion (USD 498 million). The key factors behind the changes are:

 

  • Materials and services were up 21% year-on-year to RUB 10.4 billion (USD 159 million) mainly driven by a 15.4% year-on-year increase in PPI and 2.2% growth in overall fertilizer production;
  • Depreciation rose by 46% year-on-year to RUB 5.4 billion (USD 82 million) due to the commissioning of new ammonia and urea facilities in 3Q 2017 and modernisation of ANOF-3;
  • Costs for natural gas were up by 7% year-on-year to RUB 2.7 billion (USD 41 million) due to a 13% year-on-year growth in ammonia production, offset by better production efficiency.
  • Salaries and social contributions increased by 18% year-on-year to RUB 3.2 billion (USD 48 million), due to an increase in headcount and growth in average salary;
  • Sulphur and sulphuric acid costs increased by 58% year-on-year to RUB 2.6 billion (USD 40 million), mainly driven by a 77% year-on-year increase in the average purchase price for sulphur and sulphuric acid, which was partially offset by an 11% decrease in volumes;
  • Ammonium sulphate costs were up by 64% to RUB 0.5 billion (USD 8 million) due to increased production of certain grades of NPK and NPS where ammonium sulphate is used as the feedstock.
  • Costs for ammonia declined by 28% year-on-year to RUB 0.9 billion (USD 14 million) thanks to the ramp up of PhosAgro's new ammonia line and the ensuing substantial decrease in purchased volumes.

 

Administrative expenses for 3Q 2018 were up by 11% year-on-year to RUB 3.9 billion (USD 60 million), mainly due to a 9% growth in personnel costs to RUB 2.2 billion (USD 34 million).

 

In 3Q 2018, selling expenses increased by 36% year-on-year to RUB 7.4 billion (USD 113 million). The main factors behind this growth were: 1) freight, port and stevedoring expenses rose by 62% year-on-year to RUB 3.6 billion (USD 55 million) primarily due to 13% growth in shipping rates combined with the RUB devaluation (the majority of freight and stevedoring tariffs are denominated in USD), almost  30% year-on-year increase in export sales of fertilizers shipped by sea, as well as focus on long haul CFR destinations; 2) spending on transportation grew by 7.4% year-on-year to RUB 2.5 billion (USD 38 million), driven by a 7% year-on-year growth in overall sales.

 

Outlook

 

Market outlook

 

In the short term, demand is expected to remain firm with limited risk of price corrections, based on the following:

 

Upward factors:

  • The start of the high season in China in November-December, when local producers will turn their focus to the domestic market;
  • Seasonal recovery of demand for DAP/NPK in Europe in 1Q 2019;
  • Healthy seasonal imports of phosphates to India and Brazil in 1H 2019 due to low inventories and more restocking.

 

Downward factors:

  • In 4Q 2018, PhosAgro expects a seasonal slowdown in core markets (USA, India, Brazil);
  • Rising competition and the ramping-up of new capacities from Maaden 2 are still the main factors that could limit a further upward trend in phosphate prices. 

 

Conference call and webcast PhosAgro will hold a conference call and webcast today at 13:30 London time (16:30 Moscow; 08:30 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/1880869-1/158FBA0940F08FCDFDC84DC3594EFFA8 Russian: http://event.onlineseminarsolutions.com/wcc/r/1880875-1/18B7C10BC348EBE494C270C8E76A27BB 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: 34265611# Russian call: 41167413# For further information please contact: PJSC PhosAgro Alexander Seleznev, 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 Notes to Editors

 

PhosAgro is one of the leading global vertically integrated phosphate-based fertilizer producers. The Company focuses on the production of phosphate-based fertilizers, feed phosphate and high-grade phosphate rock (P2O5 content of not less than 39%).

 

The Company is the largest phosphate-based fertilizer producer in Europe, the largest producer of high-grade phosphate rock worldwide and the third largest MAP/DAP producer in the world (excluding China), according to Fertecon. PhosAgro is also one of the leading producers of feed phosphates (MCP) in Europe, and the only producer in Russia. It is Russia's only producer of nepheline concentrate.

 

PhosAgro's main products include phosphate rock, 33 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.

   

PJSC "PhosAgro" Consolidated Interim Condensed Statements of Profit or Loss and Other Comprehensive Income for the nine months ended 30 September 2018 (unaudited)

 

Nine months ended

30 September

 

Three months ended

30 September

 

2018

 

2017

 

2018

 

2017

 

RUB million

 

RUB million

 

RUB million

 

RUB million

Revenues

174,026

 

135,573

 

62,778

 

46,452

Cost of sales

(94,512)

 

(76,861)

 

(32,614)

 

(27,016)

Gross profit

79,514

 

58,712

 

30,164

 

19,436

 

 

 

 

 

 

 

 

Administrative expenses

(10,924)

 

(10,531)

 

(3,913)

 

(3,526)

Selling expenses

(24,263)

 

(17,065)

 

(7,353)

 

(5,398)

Taxes, other than income tax

(2,676)

 

(1,869)

 

(871)

 

(639)

Other expenses, net

(1,707)

 

(1,383)

 

(453)

 

(325)

Operating profit

39,944

 

27,864

 

17,574

 

9,548

 

 

 

 

 

 

 

 

Finance income

257

 

399

 

134

 

178

Finance costs

(4,436)

 

(4,230)

 

(1,991)

 

(2,046)

Foreign exchange (loss)/gain, net

(13,218)

 

3,585

 

(5,081)

 

1,572

Share of profit/(loss) of associates, net of provision

(640)

 

251

 

(724)

 

100

Profit before tax

21,907

 

27,869

 

9,912

 

9,352

 

 

 

 

 

 

 

 

Income tax expense

(4,276)

 

(6,794)

 

(2,114)

 

(2,009)

Profit for the period

17,631

 

21,075

 

7,798

 

7,343

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

      Non-controlling interests ^

55

 

(3)

 

30

 

(1)

      Shareholders of the Parent

17,576

 

21,078

 

7,768

 

7,344

 

 

 

 

 

 

 

 

Other comprehensive income/(loss)

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

 

 

Foreign currency translation difference

2,345

 

(600)

 

907

 

(171)

Other comprehensive income/(loss) for the period

2,345

 

(600)

 

907

 

(171)

Total comprehensive income for the period

19,976

 

20,475

 

8,705

 

7,172

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

      Non-controlling interests ^

55

 

(3)

 

30

 

(1)

      Shareholders of the Parent

19,921

 

20,478

 

8,675

 

7,173

Basic and diluted earnings per share (in RUB)

136

 

163

 

60

 

57

  PJSC "PhosAgro" Consolidated Interim Condensed Statement of Financial Position as at 30 September 2018 (unaudited)

 

30 September 2018

 

31 December 2017

 

RUB million

 

RUB million

Assets

 

 

 

Property, plant and equipment

181,553

 

175,113

Catalysts

1,900

 

1,900

Advances issued for property, plant and equipment

5,108

 

2,334

Intangible assets

1,830

 

1,773

Investments in associates

490

 

969

Deferred tax assets

7,820

 

5,371

Other non-current assets

1,879

 

1,955

Non-current assets

200,580

 

189,415

 

 

 

 

Other current investments

341

 

352

Inventories

26,083

 

25,445

Trade and other receivables

31,496

 

33,727

Cash and cash equivalents

11,956

 

2,691

Current assets

69,876

 

62,215

Total assets

270,456

 

251,630

 

 

 

 

Equity

 

 

 

Share capital

372

 

372

Share premium

7,494

 

7,494

Retained earnings

95,286

 

85,480

Other reserves

7,112

 

4,767

Equity attributable to shareholders of the Parent

110,264

 

98,113

Equity attributable to non-controlling interests

184

 

129

Total equity

110,448

 

98,242

 

 

 

 

Liabilities

 

 

 

Loans and borrowings

110,409

 

76,530

Finance lease liabilities

468

 

1,004

Defined benefit obligations

951

 

950

Deferred tax liabilities

8,563

 

7,914

Non-current liabilities

120,391

 

86,398

 

 

 

 

Loans and borrowings

21,051

 

44,025

Finance lease liabilities

855

 

1,117

Trade and other payables

17,520

 

21,848

Other current liabilities

191

 

-

Current liabilities

39,617

 

66,990

Total equity and liabilities

270,456

 

251,630

  PJSC "PhosAgro" Consolidated Interim Condensed Statement of Cash Flows for the nine months ended 30 September 2018 (unaudited)

 

 

 

Nine months ended 30 September

 

 

 

2018

 

2017

 

 

 

RUB million

 

RUB million

Cash flows from operating activities

 

 

 

 

 

Profit before tax

 

 

21,907

 

27,869

Adjustments for:

 

 

 

 

'

Depreciation and amortisation

 

 

16,408

 

10,647

Loss on disposal of property, plant and equipment and intangible assets

 

 

394

 

764

Finance income

 

 

(257)

 

(415)

Finance costs

 

 

4,436

 

4,246

Share of profit of associates, net of provision

 

 

640

 

(251)

Foreign exchange loss/(gain) net

 

 

13,213

 

(3,589)

Operating profit before changes in working capital and provisions

 

 

56,741

 

39,271

Increase in inventories

 

 

(206)

 

(4,339)

Decrease in trade and other receivables

 

 

2,672

 

5,621

Decrease in trade and other payables

 

 

(3,028)

 

(4,159)

Cash flows from operations before income taxes and interest paid

 

 

56,179

 

36,394

Income tax paid

 

 

(3,671)

 

(6,743)

Finance costs paid

 

 

(3,059)

 

(3,184)

Cash flows from operating activities

 

 

49,449

 

26,467

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Acquisition of property, plant and equipment and intangible assets

 

 

(26,578)

 

(23,294)

(Issue)/repayment of loans issued, net

 

 

(365)

 

414

Proceeds from disposal of property, plant and equipment

 

 

14

 

193

Finance income received

 

 

148

 

228

(Acquisition)/disposal of investments, net

 

 

(8)

 

381

Other payments

 

 

(599)

 

-

Cash flows used in investing activities

 

 

(27,388)

 

(22,078)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from borrowings

 

 

69,146

 

76,254

Repayment of borrowings

 

 

(74,248)

 

(69,215)

Dividends paid to shareholders of the Parent

 

 

(7,770)

 

(11,655)

Dividends paid to non-controlling interests

 

 

-

 

(5)

Finance leases paid

 

 

(994)

 

(1,012)

Payments for settlement of derivatives, net

 

 

97

 

-

Cash flows used in financing activities

 

 

(13,769)

 

(5,633)

Net increase/(decrease) in cash and cash equivalents

 

 

8,292

 

(1,244)

Cash and cash equivalents at 1 January

 

 

2,691

 

7,261

Effect of exchange rates fluctuations

 

 

973

 

111

Cash and cash equivalents at 30 September

 

 

11,956

 

6,128

 


ISIN: US71922G2093
Category Code: QRT
TIDM: PHOR
LEI Code: 635400F8A3KGJIIBIK95
OAM Categories: 2.2. Inside information
Sequence No.: 6621
EQS News ID: 749363
 
End of Announcement EQS News Service

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