Ros Agro S Regulatory News (AGRO)

17 May 2021

ROS AGRO financial results for 1Q 2021

17 May 2021 - Today ROS AGRO PLC (the "Company"), the holding companyof Rusagro Group (the "Rusagro"), a leading Russian diversified food producer with vertically integrated operations, has announced the financial results for the three months ended 31 March 2021.

1Q 2021 HIGHLIGHTS

- Sales amounted to RUB 49,933 million (US$ 671 million1), an increase of RUB 17,000 million (+52%) compared to 1Q 2020;

- Adjusted EBITDA2 amounted to RUB 11,169 million (US$ 150 million), an increase of RUB 6,164 million (+123%) compared to 1Q 2020;

- Adjusted EBITDA margin rose from 15% in 1Q 2020 to 22% in 1Q 2021;

- Net profit for the period amounted to RUB 6,526 million (US$ 88 million), an increase of RUB 3,486 million (+115%);

- Net debt position3 as of 31 March 2021 amounted to RUB 61,927 million (US$ 818 million);

- Net Debt/Adjusted EBITDA (LTM4) as of 31 March 2021 was 1.62x.

Commenting on the results, Maxim Basov, a member of the Board of Directors of ROS AGRO PLC and CEO of the Rusagro, said:

"In 1Q 2021 Rusagro showed growth of adjusted EBITDA backed by revenue increase across all key business segments. Revenue growth was triggered by positive trends in sales volume (except oil and fat products) and sales prices. Adhering to its mission of making people's lives longer and better, Rusagro joined market initiative to provide Russians with affordable food supplies and limited its sales price of sugar and bottled sunflower oil to retail, while maintaining sales volumes of these products at the level not lower than in 1Q 2020. Thus, sales price of white sugar to retail chains in Russia in bags of 50 kg on the basis of the plant didn't exceed 36 roubles/kg including VAT and sales price of bottled sunflower oil at the plant didn't exceed 95 roubles/litre including VAT.

In 1Q 2021 Rusagro improved adjusted EBITDA margin of Agriculture, Sugar and Meat segments, despite negative influence of higher sugar beet price on Sugar segment and higher costs of feed and animal health protection on Meat segment. Margin of Oil and Fat segment dropped by 1 p.p. due to increase of cost of goods triggered by higher prices of sunflower seeds and palm oil and due to the consolidation of low-margin Dairy products segment."

Key consolidated financial performance indicators

1 Adjusted EBITDA for 1Q20 was decreased by RUB 157 million due to revaluation procedure, performed at the year end.

2 Net profit for the period is affected by non-cash income/(loss) on revaluation of biological assets and agricultural produce. See details in business-sections below.

Key financial performance indicators by segments

SUGAR SEGMENT

In 1Q21 Sugar segment earned RUB 2,245 million of adjusted EBITDA (+120% y-o-y) with 26% margin (+7 pp y-o-y). The financial results of the Sugar segment for 1Q21 compared to 1Q20 are presented in the table below.

Sugar segment 1Q 2021 Financial Results

In 1Q21 in comparison to 1Q20 Sales of Sugar segment improved by 65% - to RUB 8,641 million. Rusagro increased sugar sales volume by 19% y-o-y to 202 thousand tonnes, including thanks to the growth of sugar volumes supply to retail chains in Russia. Average sugar sales price showed positive trend in comparison to 1Q20, when market sugar prices in Russia reached minimum level for 1Q of 2010-2021. Meanwhile, Rusagro's sugar sales price to retail chains in Russia did not exceed 36 RUB/kg incl. VAT for white sugar in 50 kg bags at the plant.

Sugar revenue growth was partially offset by the decrease in sales of beet pulp and buckwheat by RUB 305 million and RUB 177 million respectively.

Production, sales volume and sales price of sugar in 1Q 2021

Cost of sales in 1Q21 showed a lower increase than Sales y-o-y mainly because sugar beet purchase price in season 2020/2021 in comparison to season 2019/2020 grew less than sugar sales price y-o-y.

MEAT SEGMENT

In 1Q21 Meat segment earned RUB 1,745 million of adjusted EBITDA (+73% y-o-y) with 20% margin (+5 pp y-o-y). The financial results of the Meat segment for 1Q21 compared to 1Q20 are presented in the table below.

Meat segment 1Q 2021 Financial Results

In 1Q21 in comparison to 1Q20 Sales of the Meat segment increased by 26% to RUB 8,561 million due to the growth of average sales price of meat products by 22% and growth of total sales volume by 2% triggered by 4% pigs production increase achieved as new pig farms in Tambov Region reached full capacity.

Production, sales volume and sales price of pork products in 1Q 2021

Cost of sales increased by 22% in 1Q21 mainly due to higher costs of feed and animals health protection.

Net gain on revaluation of biological assets and agricultural produce in 1Q21 resulted mainly from an increase in market prices for livestock pigs during the reporting period compared to market prices at the end 2020 and respective increase in fair value of livestock in the closing balance.

An increase in Distribution and selling expenses in 1Q21 in comparison to 1Q20 is mainly due to the rise in the costs of marketing activities.

General and administrative expenses in 1Q21 in comparison to 1Q20 increased mainly due realization of pork production cluster project in the Primorie Territory.

An increase in Other operating income in 1Q21 in comparison to 1Q20 is due to storage services provided on the grain elevator in Primorie and partial reimbursement of feed purchase costs.

AGRICULTURAL SEGMENT

As at 31 March 2021 Rusagro's area of controlled land stands at 635 thousand hectares (31 March 2020: 643 thousand hectares). In 1Q21 Agriculture segment earned RUB 3,026 million of adjusted EBITDA (+129 % y-o-y) with 51% margin (+21 pp y-o-y). The financial results of the Agricultural segment for 1Q21 compared to 1Q20 are presented in the table below.

Agriculture segment 1Q 2021 Financial Results

In 1Q21 in comparison to 1Q20 Sales of the Agriculture segment increased by 35% to RUB 5,960 million thanks to higher sales price of all crops except corn, which was partially offset by sales volume decrease of soybean, barley and sunflower seeds.

Sales volume of crops in 1Q 2021

Sales price of crops in 1Q 2021

Net loss on revaluation of biological assets and agricultural produce in 1Q21 and 1Q20 represents the realisation of gain from crops revaluation, recognised in the previous year financial statements and remained unrealised as at the year-end. Net gain/(loss) on revaluation of crops and its subsequent realisation do not affect the Adjusted EBITDA figure.

Other net operating income/(expenses) increased as a result of higher gain from Property, plant and equipment disposal by RUB 16 million compared to the prior year, foreign exchange gain of RUB 2 million in 1Q21 against RUB 55 million loss in 1Q20 and gain of RUB 15 million from release of provision for legal claims in 1Q21.

OIL AND FAT SEGMENT

In 1Q21 Oil and Fat segment earned RUB 3,114 million of adjusted EBITDA (+55 % y-o-y) with 11% margin (-1 pp y-o-y). The financial results of the Oil and Fat segment for 1Q21 compared to 1Q20 are presented in the table below.

Oil and Fat segment 1Q 2021 Financial Results

In 1Q21 results of Dairy Products segment are included in Oil and Fat segment due to consolidation of these two businesses. For comparison purpose financial results of the previous years were corrected accordingly. 

Sales volumes to third parties in 1Q 2021

 Sales price to third parties in 1Q 2021

In 1Q21 in comparison to 1Q20 Sales of the Oil and Fat segment grew thanks to higher sales prices for all product categories. Sales price of bottled sunflower oil to retail in Russia did not exceed 95 RUB/l incl. VAT at the plant.

Cost of sales in 1Q21 in comparison to 1Q20 increased due to higher prices of raw materials, including sunflower seeds, bulk and tropical oil.

Decrease in General and administrative expenses in comparison to the prior period is attributed to reversal of provision for unused vacation.

Other net operating income/(expenses) decreased by RUB 51 million as a result of foreign exchange gain of RUB 64 million in 1Q21 against RUB 159 million gain in 1Q20 and gain of RUB 45 million from release of provision for legal claims in 1Q21. 

KEY CONSOLIDATED CASH FLOW INDICATORS (NOT IFRS PRESENTATION*)

The key consolidated cash flow indicators presented according to management accounts methodology

(*) See Appendix 4

The key investments in property, plant and equipment and inventories intended for construction during 1Q21 were made in the Meat segment in the amount of RUB 1,251 million (1Q20: RUB 1,039 million) due to the purchases related to the construction project in the Russian Far East. Investments in the Sugar segment in the amount of RUB 126 million (1Q20: RUB 495 million), Agriculture segment in the amount of RUB 258 million (1Q20: RUB 404 million), Oil and Fat segment in the amount of RUB 405 million (1Q20: RUB 212 million) mainly relate to purchases of machinery and equipment for production facilities renewal and maintenance.

Debt position and liquidity management

Net finance income/ (expense)

Net debt decreased at 31 March 2021 compared at 31 December 2020 as a result of a decrease in short-term borrowings.

In 1Q21 Rusagro continued to enjoy benefits from the state agriculture subsidies programme. The Rusagro continued to receive bank loans with decreased preferential interest rates under the programme of government support. Under this programme, the government provides subsidies to the banks to compensate the loss of income on credits with decreased interest rates, given by the banks to agricultural producers. In 1Q21 IFRS accounts these credits are accounted according to its face value with no adjustments to prevailing market rates. The differences between nominal and market interest rate is recognized as either government grants in a statement of financial position for borrowings received with the purpose to finance investment projects or interest expenses in a statement of comprehensive income for general purpose borrowings.

Net finance expenses of 1Q20 in the sum of RUB 718 million changed to net finance income in the amount of RUB 505 million in 1Q21 as the result of negative dynamics in forex losses in 1Q20 and decrease in interest expense as a result of savings in net interest expense due to higher volume of government grants.

________________________________

(1) The exchange rates used for translation of RUB amounts into USD represent average Central Bank official exchange rate for the respective reporting period for income, expenses and profits and the Central Bank official exchange rate as at the reporting date for balance figures.

(2) Adjusted EBITDA is defined as operating profit before taking into account (i) depreciation included in operating profit, (ii) net gain/ (loss) on revaluation of biological assets and agricultural produce, (iii) non-recurring components of other operating income/ (expenses), net, (iv) share-based remuneration, (v) provision for impairment of loans issued (see Appendix 2 for the detailed calculation of Adjusted EBITDA). Adjusted EBITDA is not a measure of financial performance under IFRS. It should not be considered as an alternative to profit for the period as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and therefore comparability may be limited. We believe that Adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of subsidiaries and other investments and our ability to incur and service debt.

(3) The Rusagro determines the net debt as short-term borrowings and long-term borrowings less cash and cash equivalents, bank deposits, bank promissory notes and bonds held for trading.

(4) LTM - The abbreviation for the "Last twelve months".

NOTE

ROS AGRO PLC (LSE, MOEX: AGRO) - a holding company of Rusagro Group, a leading Russian diversified food producer with vertically integrated operations in the following branches:

Sugar:

Rusagro is one of the leading Russian sugar producers (№2 with 13% share in sugar production in Russia and №1 with 46% share of cube white sugar market), producing sugar from sugar beet at nine production sites in four regions. Group produces white and brown cube sugar and packaged sugar sold under the brands Russkii Sakhar, Chaikofsky, Mon Cafe, Horoshiy and Brauni. Sugar segment is vertically integrated and sugar beet is supplied by Rusagro's Agriculture segment, which ensures a consistent supply of raw material. Sugar segment also operates a cereal plant and sell buckwheat and rice under the brand Tyoplye Traditsii.

Meat:

Rusagro is the third largest pork producer in Russia with 6% share of pork produced in Russia. It operates 18 commercial pork complexes with correspondence to high biosecurity standards, has own compound feed production, slaughterhouses and meat processing plants in Tambov and Belgorod Regions. Since 2016 Rusagro sells retail products under its own brand Slovo Myasnika (Butcher's word).

Agricultural:

Rusagro currently controls one of the largest land banks among Russian agriculture producers, with 635 thousand hectares of land under control located in the highly fertile Black Earth region of Russia (in the Belgorod, Tambov, Voronezh, Kursk and Orel regions)and in the Far East Primorie Region. Land and production sites are strategically located withinthe same regions to optimize efficiency and minimize logistical costs. Rusagro is oneof the major sugar beet producers in Russia, but it also produces wheat and barley, sunflower seeds and soybeans. These products are partially consumed by the Meat segment, supporting a synergistic effect and lowering price change risk.

Oil and Fat:

Rusagro is the leading crude sunflower oil and consumer margarine producer, second largest industrial fats and mayonnaise producer in Russia with products sold under eight key brands, such as EZhK, Schedroye Leto, Mechta Khozyaiki, Moskovskiy Provansal, Novosibirskiy Provansal, Saratovskiy Provansal, Rossiyanka and Saratovskiy Slivochniy. Rusagro operates (including through ownership and the lease) five crushing and three oil and fats plants. Own sunflower and soy oil production allows to control the source of the vegetable oil required to produce oil and fats products. Since 1Q 2021 Oil and Fats segment also operates two milk processing plants in Samara and Ulyanovsk Regions, which produce dry industrial mixes, cheeses, butter and cream sold under three brands: Milie, Buterbrodnoe utro and Syrnaya Kultura.

FORWARD-LOOKING STATEMENTS

This announcement includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements do not relate to historical or current events,or to any future financial or operational activity of the Group.

By their nature, forward-looking statements involve risk and uncertainty because they relateto future events and circumstances, a number of which are beyond the Rusagro Group's control. As a result, actual future results may differ materially from the plans and expectations set outin these forward-looking statements.

The Group undertakes no obligation to release the results of any revisions to any forward-looking statements that may occur due to any change in its expectations or to reflect eventsor circumstances after the date of this document.

CONFERENCE CALL

On Monday, 17 May at 4:00 PM Moscow time (2:00 PM London time) Rusagro is hosting web-conference to present 1Q 2021 financial results. Participation will be available in both Russian and English - the presentation will be held in Russian with simultaneous translation. Record of the event will be available shortly after at Company's corporate website in both languages.

The call will be hosted by:

· Maxim Basov, CEO of Rusagro

· Boris Chernicher, CFO of Rusagro

· Svetlana Kuznetsova, IR & ESG Director of Rusagro

Please note, that we will use Zoom to hold the conference call. To ensure that the call is seamless, please make sure you have the latest version of the Zoom client installed on your computer, tablet or mobile device you intend to use to join the conference. Kindly note, that phone connections will not be available.

When join the event, please choose one of two available language channels (Russian or English). If you would like to ask questions, please make sure you use your full name and company name, so that the meeting host could easily identify you. You may send your questions in advance to ir@rusagrougroup.ru, send them via the Zoom chat during the event or ask them orally at the end of the presentation.

Connect to Zoom Conference:

https://ib-translations.zoom.us/j/94451644587?pwd=Rkc4S3ZYeVZkdmlYVEtoanlIa1Uwdz09

Password: 899632

 CONTACTS

Appendix 1. Consolidated statement of comprehensive income for the Three months ended 31 March 2021 (in RUB thousand)

Appendix 2. Segment information for the Three months ended 31 March 2021 (in RUB thousand)

* Non-IFRS measure

Appendix 2 (continued). Segment information for the Three months ended 31 March 2020 (in RUB thousand)

* Non-IFRS measure

Appendix 3. Consolidated statement of financial position as at 31 March 2021(in RUB thousand)

Appendix 4. Consolidated statement of cash flows for the Three months ended 31 March 2021 (in RUB thousand) - NOT IFRS PRESENTATION (*)

(*) For the purpose of conformity with the methodology of the Group's net debt calculation investments in financial assets related to financial activities are presented in Cash flows from financing activities in the Group's management accounts.