12 Nov 2018 07:00
12 November 2018
ROS AGRO financial results for 9M 2018 and Q3 2018
12 November 2018 - Today ROS AGRO PLC (the "Company"), the holding companyof Rusagro Group (the "Group"), a leading Russian diversified food producer with vertically integrated operations, has announced the financial results for the Nine months ended 30 September 2018.
9M 2018 Highlights
- Sales amounted to RR 52,192 million (US$ 878 million1), a decrease of RR 2,636 million compared to 9M 2017;
- Adjusted EBITDA2 amounted to RR 10,185 million (US$ 171 million), an increase of RR 1,647 million compared to 9M 2017;
- Adjusted EBITDA margin increased from 16% in 9M 2017 to 20% in 9M 2018;
- Net profit for the period amounted to RR 8,633 million (US$ 145 million);
- Net debt position3 as of 30 September 2018 amounted to RR 15,102 million (US$ 241 million);
- Net Debt/ Adjusted EBITDA (LTM4) as of 30 September 2018 was 0.97x.
Commenting on the results, Maxim Basov, a member of the Board of Directors of ROS AGRO PLC and CEO of the Group, said:
"In the 3Q 2018 ROS AGRO revenue increased compared to the 3Q 2017 due to the rising prices of agriculture products in the world. EBITDA augmented in all business units due to the lower costs. Net income of the company increased as well as net debt and capital expenditures."
Key consolidated financial performance indicators
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales | 52,192 | 54,829 | (2,636) | (5) | 19,378 | 17,071 | 2,307 | 14 |
Gross profit | 18,961 | 10,769 | 8,192 | 76 | 10,881 | 5,341 | 5,540 | 104 |
Gross margin, % | 36% | 20% | 16% | 56% | 31% | 25% | ||
Adjusted EBITDA | 10,185 | 8,538 | 1,647 | 19 | 4,413 | 3,099 | 1,314 | 42 |
Adjusted EBITDA margin, % | 20% | 16% | 4% | 23% | 18% | 5% | ||
Net profit for the period | 8,633 | 3,089 | 5,543 | 179 | 6,269 | 2,863 | 3,406 | 119 |
Net profit margin % | 17% | 6% | 11% | 32% | 17% | 15% |
*Net profit for the period isaffected by non-cash loss on revaluation of biological assets and agricultural produce. See details in business-sections below.
Key financial performance indicators by segments
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales, incl. | 52,192 | 54,829 | (2,636) | (5) | 19,378 | 17,071 | 2,307 | 14 |
Sugar | 17,734 | 20,993 | (3,259) | (16) | 7,063 | 6,391 | 672 | 11 |
Meat | 15,375 | 15,191 | 184 | 1 | 5,958 | 5,154 | 804 | 16 |
Agriculture | 7,028 | 8,060 | (1,032) | (13) | 3,816 | 3,054 | 762 | 25 |
Oil and Fat | 14,667 | 14,217 | 450 | 3 | 4,638 | 4,596 | 42 | 1 |
Other | 825 | 51 | 774 | 1531 | 711 | 19 | 692 | 3624 |
Eliminations | (3,436) | (3,683) | 246 | 7 | (2,809) | (2,143) | (666) | (31) |
Gross profit, incl. | 18,961 | 10,769 | 8,192 | 76 | 10,881 | 5,341 | 5,540 | 104 |
Sugar | 4,784 | 4,609 | 175 | 4 | 1,674 | 1,622 | 52 | 3 |
Meat | 4,609 | 3,408 | 1,201 | 35 | 2,166 | 1,557 | 609 | 39 |
Agriculture | 6,696 | 1,283 | 5,413 | 422 | 6,186 | 1,451 | 4,735 | 326 |
Oil and Fat | 3,520 | 2,180 | 1,340 | 61 | 1,188 | 917 | 271 | 30 |
Other | 139 | 51 | 88 | 174 | 118 | 19 | 98 | 515 |
Eliminations | (787) | (761) | (25) | (3) | (449) | (224) | (225) | (100) |
Adjusted EBITDA, incl. | 10,185 | 8,538 | 1,647 | 19 | 4,413 | 3,099 | 1,314 | 42 |
Sugar | 3,654 | 2,910 | 744 | 26 | 1,334 | 1,047 | 287 | 27 |
Meat | 5,125 | 4,490 | 635 | 14 | 2,281 | 1,680 | 601 | 36 |
Agriculture | 981 | 55 | 926 | 1674 | 766 | (1) | 767 | - |
Oil and Fat | 1,764 | 47 | 1,718 | 3684 | 684 | 293 | 391 | 134 |
Other | (722) | (729) | 6 | 1 | (245) | (293) | 48 | 16 |
Eliminations | (617) | 1,764 | (2,382) | - | (407) | 373 | (780) | - |
Adjusted EBITDA margin, % | 20% | 16% | 4% | 23% | 18% | 5% | ||
Sugar | 21% | 14% | 7% | 19% | 16% | 3% | ||
Meat | 33% | 30% | 3% | 38% | 33% | 5% | ||
Agriculture | 14% | 1% | 13% | 20% | 0% | 20% | ||
Oil and Fat | 12% | 0% | 12% | 15% | 6% | 9% |
Sugar Segment
The financial results of the sugar segment for 9M 2018 and Q3 2018 compared to 9M 2017and Q3 2017 respectively are presented in the table below:
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales | 17,734 | 20,993 | (3,259) | (16) | 7,063 | 6,391 | 672 | 11 |
Cost of sales | (12,956) | (16,374) | 3,418 | 21 | (5,391) | (4,762) | (629) | (13) |
Net gain/ (loss) from trading derivatives | 6 | (10) | 16 | - | 2 | (7) | 9 | - |
Gross profit | 4,784 | 4,609 | 175 | 4 | 1,674 | 1,622 | 52 | 3 |
Gross profit margin | 27% | 22% | 5% | 0% | 0% | 0% | ||
Distribution and selling expenses | (1,538) | (1,860) | 323 | 17 | (447) | (548) | 100 | 18 |
General and administrative expenses | (1,204) | (1,133) | (71) | (6) | (397) | (389) | (8) | (2) |
Other operating income/ (expenses), net | 3,378 | (72) | 3,450 | - | 3,331 | (21) | 3,352 | - |
Operating profit | 5,421 | 1,543 | 3,878 | 251 | 4,160 | 664 | 3,496 | 527 |
Adjusted EBITDA | 3,654 | 2,910 | 744 | 26 | 1,334 | 1,047 | 287 | 27 |
Adjusted EBITDA margin |
Sales decreased in 9M 2018 compared to 9M 2017 mainly due to sugar sales price decreased by 13% and sales volume decreased by 4% (9M 2018: 562 ths tonnes, 9M 2017: 584 ths tonnes). Buckwheat sales prices decreased by 55%.
Sugar sales, production volumes and average sales prices per kilogram (excl. VAT) wereas follows:
Nine months ended | Variance | Three months ended | Variance | |||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sugar production volume(in thousand tonnes), incl. | 238 | 347 | (110) | (32) | 212 | 211 | 1 | 0 |
beet sugar | 238 | 347 | (110) | (32) | 212 | 211 | 1 | 0 |
cane sugar | - | 59 | (59) | (100) | - | 59 | (59) | (100) |
Sales volume(in thousand tonnes) | 562 | 584 | (22) | (4) | 235 | 193 | 42 | 22 |
Average sales price(roubles per kg, excl. VAT) | 28.9 | 33.1 | (4.2) | (13) | 28.2 | 31.4 | (3.3) | (10) |
Sales increased in 3Q 2018 compared to 3Q 2017 mainly due to sugar sales price decreased by 10% and sales volume increased by 22% (3Q 2018: 235 ths tonnes, 3Q 2017: 193 ths tonnes).
Cost of sales decreased in 9M 2018 compared to 9M 2017 by RR 3,762 million mainly due to sugar beet purchase prices of harvest 2017 decreased by 25%.
Distribution and selling expenses decreased by 323 million mainly due to payroll, provision for impairment of receivables and fuel and energy expenses.
The sales price decline was the main driver of a negative dynamics in profitability of the segment.
Meat Segment
The financial results of the meat segment for 9M 2018 and Q3 2018 compared to 9M 2017and Q3 2017 respectively are presented in the table below:
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales | 15,375 | 15,191 | 184 | 1 | 5,958 | 5,154 | 804 | 16 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | (53) | (372) | 319 | 86 | 35 | 39 | (5) | (12) |
Cost of sales | (10,713) | (11,411) | 699 | 6 | (3,827) | (3,636) | (191) | (5) |
Gross profit | 4,609 | 3,408 | 1,201 | 35 | 2,166 | 1,557 | 609 | 39 |
Gross profit margin | 30% | 22% | 8% | 36% | 30% | 6% | ||
Gross profit excl. effect of biological assets revaluation | 4,662 | 3,780 | 882 | 23 | 2,131 | 1,518 | 614 | 40 |
Adjusted gross profit margin | 30% | 25% | 5% | 36% | 29% | 6% | ||
Distribution and selling expenses | (476) | (301) | (175) | (58) | (200) | (117) | (83) | (71) |
General and administrative expenses | (697) | (454) | (243) | (53) | (227) | (197) | (30) | (15) |
Other operating income/ (expenses), net | 155 | 201 | (46) | (23) | 53 | 46 | 6 | 13 |
incl. reimbursement of operating costs (government grants) | 22 | 23 | (1) | (2) | 22 | - | 22 | - |
Operating profit | 3,591 | 2,854 | 737 | 26 | 1,791 | 1,290 | 502 | 39 |
Adjusted EBITDA | 5,125 | 4,490 | 635 | 14 | 2,281 | 1,680 | 601 | 36 |
Adjusted EBITDA margin | 33% | 30% | 4% | 38% | 33% | 6% |
Sales in the meat segment decreased by 1% in 9M 2018 and increased by 11% in Q3 2018 compared to the respective periods of prior year as a result of a decrease in sales volume of livestock and decrease of sale price of livestock, and increase in sale price of livestock pigs and processed pork and decrease in sales volume of livestock if we compare Q3 2018 to Q3 2017.
Pork sales volumes and the average pork sales prices per kilogram (excl. VAT) were as follows:
Nine months ended | Variance | Three months ended | Variance | |||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales volume (in thousand tonnes), incl. | 116 | 130 | (14) | (11) | 37 | 42 | (5) | (13) |
livestock pigs | 19 | 46 | (27) | (60) | 5 | 11 | (6) | (55) |
processed pork | 97 | 84 | 14 | 16 | 32 | 31 | 1 | 3 |
Average sale prices (roubles per kg, excl. VAT): | ||||||||
livestock pigs | 83.9 | 97.2 | (13.3) | (14) | 107.1 | 97.4 | 9.78 | 10 |
processed pork | 139.3 | 128.3 | 11.0 | 9 | 166.0 | 131.7 | 34.3 | 26 |
A decrease in Net loss on revaluation of biological assets and agricultural produce in 9M 2018 resulted mainly from an increase in market prices for live pigs during 9M 2018.
An increase in Distribution and selling expenses in 9M 2018 and Q3 2018 compared to prior year periods includes an increase in transportation costs as a result of higher sales volume of processed pork, an increase in payroll costs related to growth in staff of logistic department.
An increase in General and administrative expenses in 9M 2018 by RR 243 million includes RR 146 million of an increase in property tax expenses. In 9M 2017 the Group recognised gain from reverse of property tax for 2016 resulted from tax relief legally confirmed in 1H 2017. General and administrative expenses increased in Q3 2018 compared to Q3 2017 by 15% due to an increase in cost of professional services.
Other operating income, net includes income from reimbursement of operating expenses (government grants), which is lower by RR 1 million in 9M 2018 compared to the prior year period.
Agricultural Segment
As at 30 September 2018 the segment's area of controlled land stands at 686 thousand hectares (30 September 2017: 665 thousand hectares), an increase of 21 thousand hectares or 3%. The financial results of the agricultural segment for 9M 2018 and Q3 2018 compared to 9M 2017 and Q3 2017 respectively are presented below:
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales | 7,028 | 8,060 | (1,032) | (13) | 3,816 | 3,054 | 762 | 25 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | 4,236 | (231) | 4,467 | - | 4,854 | 1,263 | 3,592 | 284 |
Cost of sales | (4,568) | (6,546) | 1,978 | 30 | (2,485) | (2,865) | 381 | 13 |
Net gain/ (loss) from trading derivatives | - | - | - | - | - | (1) | 1 | - |
Gross profit | 6,696 | 1,283 | 5,413 | 422 | 6,186 | 1,451 | 4,735 | 326 |
Gross profit margin | 95% | 16% | 79% | 162% | 48% | 115% | ||
Gross profit excl. effect of biological assets and agricultural produce revaluation | 2,460 | 1,514 | 946 | 63 | 1,331 | 188 | 1,143 | 607 |
Adjusted gross profit margin | 35% | 19% | 16% | 35% | 6% | 29% | ||
Distribution and selling expenses | (1,281) | (1,642) | 361 | 22 | (638) | (322) | (316) | (98) |
General and administrative expenses | (918) | (719) | (199) | (28) | (307) | (274) | (33) | (12) |
Other operating income/ (expenses), net | (8) | 36 | (44) | - | 60 | (29) | 88 | - |
incl. reimbursement of operating costs (government grants) | 77 | 42 | 36 | 85 | 17 | 2 | 15 | 865 |
Operating profit | 4,489 | (1,042) | 5,532 | - | 5,300 | 826 | 4,474 | 542 |
Adjusted EBITDA | 981 | 55 | 926 | 1,674 | 766 | (1) | 767 | - |
Adjusted EBITDA margin | 14% | 1% | 13% | 20% | 0% | 20% |
An increase in sales prices of crops was the main driver of an increase in Sales in Q3 2018 compared to Q3 2017.
As for Sales in 9M 2018 compared to 2017, the drop was resulted by lower sales volumesof almost all crops compared to the prior year period.
Sales volumes by product were as follows:
Thousand tonnes | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
sugar beet | 980 | 1,486 | (506) | (34) | 978 | 1,033 | (55) | (5) |
wheat | 188 | 308 | (120) | (39) | 75 | 124 | (49) | (40) |
barley | 115 | 80 | 35 | 44 | 36 | 55 | (19) | (35) |
sunflower seeds | 4 | 49 | (45) | (92) | 1 | 0 | 1 | 678 |
corn | 80 | 74 | 5 | 7 | 3 | 3 | 0 | 14 |
soy | 34 | 50 | (16) | (33) | 3 | 5 | (1) | (30) |
The average sale prices per kilogram (excl. VAT) were as follows:
RR per kilogram, excl. VAT | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
sugar beet | 2.2 | 1.9 | 0.4 | 20 | 2.3 | 1.8 | 0.5 | 28 |
wheat | 8.2 | 6.5 | 1.7 | 27 | 9.8 | 5.4 | 4.4 | 81 |
barley | 9.1 | 6.3 | 2.8 | 44 | 13.1 | 6.1 | 7.0 | 115 |
sunflower seeds | 17.4 | 15.6 | 1.7 | 11 | 14.0 | 9.6 | 4.3 | 45 |
corn | 9.5 | 8.6 | 1.0 | 11 | 10.7 | 5.3 | 5.5 | 105 |
soy | 22.4 | 19.6 | 2.7 | 14 | 31.1 | 20.5 | 10.6 | 52 |
Net gain on revaluation of biological assets and agricultural produce in 9M 2018 represents the gain from revaluation of 2018 crops that was harvested in Q3 2018 and remained in stock as at 30 September 2018 due to the rising prices of agriculture products in the world. The gain on revaluation of crops and its subsequent realisation do not affect the Adjusted EBITDA figure.
Distribution and selling expenses decreased by RR 361 million in 9M 2018 as lower volumes of crops were sold in 2018 compared to 2017.
General and administrative expenses increased by RR 199 million in 9M 2018, which is attributed to the higher payroll costs as a result of higher number of employees in administrative function, an increase in property tax and higher amortisation as the result of an increase in balance of intangibles.
In 9M 2018 vs 2017 other operating income turned into expenses as a result of operating foreign exchange losses of RR 44 million compared to gains of RR 23 million in 2017, loss from sale of materials and other services of RR 28 million against RR 40 million of gain in 2017 and higher charity expenses by RR 13 million, which was partly compensated by higher amortization of deferred income by RR 28 million, higher reimbursement of operating expenses by RR 36 million and lower write-off of lost harvest by RR 46 million.
Oil and Fat segment
The financial results of the oil and fat segment for 9M 2018 and Q3 2018 compared to 9M 2017 and Q3 2017 respectively are presented below:
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales | 14,667 | 14,217 | 450 | 3 | 4,638 | 4,596 | 42 | 1 |
Cost of sales | (11,147) | (12,038) | 890 | 7 | (3,451) | (3,679) | 229 | 6 |
Gross profit | 3,520 | 2,180 | 1,340 | 61 | 1,188 | 917 | 271 | 30 |
Gross profit margin | 24% | 15% | 9% | 26% | 20% | 6% | ||
Distribution and selling expenses | (1,584) | (1,959) | 375 | 19 | (474) | (570) | 96 | 17 |
General and administrative expenses | (606) | (542) | (64) | (12) | (221) | (178) | (43) | (24) |
Other operating income/ (expenses), net | 49 | 92 | (43) | (47) | 75 | (23) | 99 | - |
Operating profit/ (loss) | 1,379 | (229) | 1,608 | - | 567 | 145 | 423 | 292 |
Adjusted EBITDA | 1,764 | 47 | 1,718 | 3684 | 684 | 293 | 391 | 134 |
Adjusted EBITDA margin | 12% | 0% | 12% | 15% | 6% | 9% |
The breakdown of Sales, Gross profit and Adjusted EBITDA between the Samara oil plant, the Ekaterinburg fat plant and Far East plant is as follows:
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Sales, incl. | 14,667 | 14,217 | 450 | 3 | 4,638 | 4,596 | 42 | 1 |
Samara oil plant | 7,948 | 7,571 | 378 | 5 | 2,634 | 2,556 | 78 | 3 |
Ekat. fat plant | 6,863 | 5,867 | 996 | 17 | 3,008 | 1,889 | 1,119 | 59 |
Far East | 2,506 | 2,353 | 153 | 6 | 444 | 573 | (129) | (22) |
Eliminations(*) | (2,650) | (1,573) | (1,077) | (68) | (1,448) | (423) | (1,025) | (243) |
Gross profit, incl. | 3,520 | 2,180 | 1,340 | 61 | 1,188 | 917 | 271 | 30 |
Samara oil plant | 1,467 | 463 | 1,004 | 217 | 444 | 263 | 181 | 69 |
Ekat. fat plant | 1,707 | 1,639 | 68 | 4 | 660 | 666 | (6) | (1) |
Far East | 465 | 109 | 356 | 326 | 119 | 15 | 104 | 694 |
Eliminations(*) | (120) | (31) | (89) | (284) | (35) | (27) | (8) | (29) |
Adjusted EBITDA, incl. | 1,764 | 47 | 1,718 | 3,684 | 684 | 293 | 391 | 134 |
Samara oil plant | 935 | (189) | 1,125 | - | 379 | 42 | 337 | 800 |
Ekat. fat plant | 602 | 209 | 393 | 189 | 251 | 272 | (21) | (8) |
Far East | 260 | (28) | 287 | - | 66 | (20) | 86 | - |
Eliminations(*) | (33) | 55 | (88) | - | (12) | (2) | (11) | (571) |
Adjusted EBITDA margin, % | 12% | 0% | 12% | 15% | 6% | 8% | ||
Samara oil plant | 12% | -3% | 14% | 14% | 2% | 13% | ||
Ekat. fat plant | 9% | 4% | 5% | 8% | 14% | -6% | ||
Far East | 10% | -12% | 12% | 15% | -3% | 18% |
Intra-segment sales include sales of bulk oil from Samara oil plant and bulk and bottled oil from Far East to Ekaterinburg fat plant.
Sales volumes to third parties by product were as follows:
thousand tonnes | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
mayonnaise | 33 | 44 | (11) | (25) | 12 | 13 | (1) | (7) |
margarine | 20 | 24 | (4) | (16) | 7 | 8 | (1) | (17) |
bottled oil | 52 | 11 | 41 | 361 | 27 | 4 | 23 | 573 |
bulk oil | 85 | 120 | (34) | (29) | 11 | 41 | (29) | (72) |
meal | 174 | 183 | (9) | (5) | 41 | 46 | (5) | (11) |
The average sale prices per kilogram (excl. VAT) for sales to third parties were as follows:
RR per kilogram, excl. VAT | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
mayonnaise | 81.4 | 79.6 | 1.8 | 2 | 82.6 | 82.3 | 0.3 | 0 |
margarine | 81.8 | 77.8 | 4.0 | 5 | 86.4 | 77.5 | 8.9 | 12 |
bottled oil | 54.9 | 58.8 | (3.9) | (7) | 55.8 | 56.3 | (0.5) | (1) |
bulk oil | 43.7 | 42.5 | 1.2 | 3 | 46.4 | 43.6 | 2.8 | 6 |
meal | 18.4 | 16.2 | 2.2 | 14 | 19.2 | 15.6 | 3.6 | 23 |
Decrease in Distribution and selling expenses by RR 375 million in 9M 2018 (Q3 2018: RR 96 million) compared to the respective periods of previous year is attributed to the limitationof marketing and brand promotion, decrease in payroll expenses as a result of a significant dropin personnel employed in sales and marketing, and lower transportation and loading services expenses related to the lower sales volume of mayonnaise and margarine and optimizationof the logistics process with cancellation of distribution to unprofitable locations at Ekaterinburg fat plant.
An increase in Adjusted EBITDA of Samara oil plant and Far East in 9M 2018 relates to a decrease in raw materials costs (sunflower seeds and soybeans), an increase in sales volume of all products in Far East and start production of bottled oil on Samara oil plant.
Key consolidated cash flow indicators (not IFRS presentation*)
The key consolidated cash flow indicators presented according to management accounts methodology were as follows:
in mln Roubles | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Net cash from operating activities, incl. | 12,994 | 17,512 | (4,517) | (26) | 9,080 | 10,398 | (1,318) | (13) |
Operating cash flow before working capital changes | 9,393 | 9,638 | (245) | (3) | 7,272 | 6,600 | 672 | 10 |
Working capital changes | 4,213 | 8,233 | (4,020) | (49) | 2,326 | 4,000 | (1,675) | (42) |
Net cash from investing activities, incl. | (14,402) | (11,629) | (2,773) | (24) | (11,273) | (8,779) | (2,494) | (28) |
Purchases of property, plant and equipment and inventories intended for construction | (12,097) | (11,512) | (585) | (5) | (8,998) | (8,612) | (387) | (4) |
Net cash from financing activities | 3,586 | 10,216 | (6,631) | (65) | 7,753 | 3,727 | 4,026 | 108 |
Net effect of exchange rate changes on cash and cash equivalents | 143 | (192) | 335 | - | 144 | (96) | 240 | - |
Net (decrease) / increase in cash and cash equivalents | 2,368 | 15,907 | (13,538) | (85) | 5,752 | 5,251 | 501 | 10 |
(*) See Appendix 4
The main investments in property, plant and equipment and inventories intended for construction in 9M 2018 were made in the Meat segment in the amount of RR 8,957 million, related to the construction projects in the Tambov and Far East regions and in Oil and Fat segment in the amount of RR 595. Significant investments were also made in the Sugar segment in the amount of RR 586 million, related to purchases of machinery and equipment.
Debt position and liquidity management
in RR million | 30 September 2018 | 31 December 2017 | Variance | |
Units | % | |||
Gross debt | 51,422 | 46,651 | 4,771 | 10 |
Short-term borrowings | 8,000 | 8,864 | (863) | (10) |
Long-term borrowings | 43,422 | 37,788 | 5,634 | 15 |
Cash and cash equivalents, bank deposits and bonds | (36,320) | (40,048) | 3,727 | 9 |
Short-term cash, deposits and bonds | (19,203) | (22,901) | 3,698 | 16 |
Long-term cash, deposits and bonds | (17,117) | (17,146) | 29 | 0 |
Net debt | 15,102 | 6,604 | 8,498 | 129 |
Short-term borrowings, net | (11,203) | (14,038) | 2,835 | 20 |
Long-term borrowings, net | 26,305 | 20,642 | 5,663 | 27 |
Adjusted EBITDA (LTM4) | 15,603 | 13,955 | 1,647 | 12 |
Net debt/ Adjusted EBITDA (LTM) | 0.97 | 0.47 | 0.5 |
Net finance income/ (expense)
in RR million | Nine months ended | Variance | Three months ended | Variance | ||||
30 September 2018 | 30 September 2017 | Units | % | 30 September 2018 | 30 September 2017 | Units | % | |
Net interest expense | (1,737) | (1,862) | 125 | 7 | (658) | (538) | (120) | (22) |
Gross interest expense | (2,395) | (2,383) | (12) | (1) | (806) | (784) | (22) | (3) |
Reimbursement of interest expense | 658 | 522 | 137 | 26 | 148 | 246 | (98) | (40) |
Interest income | 2,708 | 3,198 | (490) | (15) | 893 | 1,093 | (199) | (18) |
Net gain/ (loss) from bonds held for trading | (29) | 9 | (38) | - | (21) | 2 | (23) | - |
Other financial income, net | (36) | 12 | (48) | - | 45 | -50 | 95 | - |
Net foreign exchange gain/ (loss) | (56) | 26 | (82) | - | 47 | (45) | 92 | - |
Other financial income / (expenses), net | 19 | (15) | 34 | - | (2) | (4) | 3 | 62 |
Total net finance income/ (expenses) | 906 | 1,357 | (451) | (33) | 259 | 506 | (247) | (49) |
In Q3 2018 the Group continued to enjoy benefits from the state agriculture subsidies programme.In addition, in 2018 the Group continued the receiving bank loans with decreased preferential interest rates under the new 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 Q3 2018 IFRS accounts these credits are accounted for according to its face value with no adjustments to prevailing market rates. The differences between nominal and market interest rate is recognized as interest expenses and government grants in a statement of comprehensive income or in a statement of financial position.
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(1) The exchange rates used for translation of RR 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) other operating income/ (expenses), net (other than reimbursement of operating costs (government grants)), (iii) net gain/ (loss) on revaluation of biological assets and agricultural produce, (iv) provision/ (reversal of provision) for net realizable value of agricultural products in stock, (v) share-based remuneration (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 Group 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: AGRO) - a holding company of Rusagro Group, a leading Russian diversified food producer with vertically integrated operations in the following branches:
Sugar:
We are a leading Russian sugar producer, operating nine production sites from both sugar beet and raw cane sugar. We produce white and brown cube sugar and packaged sugar sold under the brands Chaikofsky, Russkii Sakhar, Mon Cafe and Brauni. Our sugar segment is vertically integrated with sugar beet cultivation in our agriculture segment, through which we strive to ensure a consistent supply of sugar beets. We also operate a cereal plant and sell buckwheat and rice under the brand Tyoplye Traditsii.Meat:
According to the National Union of Pig Breeders, we are the third largest pork producer in Russia on the ground of relative production volumes for 2018. We have implemented best practices in biosecurity at our pig farms.
Agricultural:
The Group currently controls what it believes to be one of the largest land banks among Russian agriculture producers, with 687 thousand hectares of land under our control located in the highly fertile Black Earth region of Central Russia and in the Far East Primorie region. Land and production sites are strategically located withinthe same regions to optimize efficiency and minimize logistical costs. We believe we are oneof the major sugar beet producers in Russia, and our agricultural segment also produces winter wheat and barley, sunflower products and soybeans. These products are partially consumedby the meat segment, supporting a synergistic effect and lowering price change risk.
Oil and Fats:
We are a leading producer of mayonnaise and consumer margarine in Russia, such as "Provansal EZhK" and "Schedroe Leto". In January 2013 the Company has begun production of mayonnaise under brand "Mechta Khozyayki". Our oil extraction plant located in Samara (Samara oil plant) enables us to control the source of 100% of the vegetable oil required by our oil and fats production plant in Ekaterinburg (Ekaterinburg fat plant). The Oil and Fats division also operates soybean extraction plant in the Russian Far East producing oil, meal and a range of consumer products.
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.
Rusagro management is organizing a conference call on its 9M and Q3 2018 financial results for investors and analysts.
Date |
12 November 2018 |
Time | 4:00 PM (Moscow) / 1:00 PM (London) |
Subject | ROS AGRO PLC 3Q and 9M 2018 Financial results |
UK Toll Free UK Local Line | 0800 279 7204 +44 330 336 9411 |
USA Toll Free USA Local Line | 888-224-1121 +1 929-477-0402 |
Russia Toll Free | +7 495 646 9190 |
Conference ID | 8958951 |
Contacts:
Svetlana Kuznetsova Chief Investment Officer Phone: +7 495 363 1661 SKuznetsova@rusagrogroup.ru
|
Appendix 1. Unaudited consolidated statement of comprehensive income for the Six months ended 30 September 2018 (in RR thousand)
Nine months ended 30 September | Three months ended 30 September | |||
2018 | 2017 | 2018 | 2017 | |
Sales | 52,192,289 | 54,828,710 | 19,377,719 | 17,070,905 |
Net gain on revaluation of biological assets and agricultural produce | 4,181,257 | (2,554,996) | 5,081,696 | 838,032 |
Cost of sales | (37,419,087) | (41,494,480) | (13,580,259) | (12,560,263) |
Net gain from trading derivatives | 6,363 | (9,937) | 1,803 | (7,290) |
Gross profit | 18,960,822 | 10,769,297 | 10,880,959 | 5,341,384 |
Distribution and selling expenses | (4,955,998) | (5,309,795) | (1,627,097) | (1,464,111) |
General and administrative expenses | (4,060,760) | (3,547,458) | (1,418,959) | (1,323,370) |
Other operating income/ (expenses), net | (1,776,132) | (212,331) | (1,752,906) | (95,487) |
Operating profit / (loss) | 8,167,932 | 1,699,713 | 6,081,997 | 2,458,416 |
Interest expense | (1,737,182) | (1,861,694) | (658,172) | (538,092) |
Interest income | 2,708,368 | 3,197,973 | 893,250 | 1,092,620 |
Net gain/ (loss) from bonds | (29,270) | 8,800 | (21,311) | 1,529 |
Other financial income/ (expenses), net | (36,085) | 11,599 | 45,291 | (45,671) |
Profit before income tax | 9,073,763 | 3,067,451 | 6,341,055 | 2,968,802 |
Income tax expense | (441,148) | 21,790 | (71,708) | (97,115) |
Profit for the year | 8,632,615 | 3,089,241 | 6,269,347 | 2,871,687 |
Other comprehensive income: | ||||
Items that may be subsequently reclassified to profit and loss: | ||||
Change in value of available-for-sale financial assets | - | (154,082) | - | - |
Net change in fair value of available-for-sale financial assets transferred to profit or loss | - | 301,334 | - | - |
Income tax relating to other comprehensive income | - | 30,816 | - | - |
Income tax relating to other comprehensive income transferred to profit or loss | - | (60,267) | - | - |
Total comprehensive income for the period | 8,632,615 | 3,207,042 | 6,269,347 | 2,871,687 |
Profit is attributable to: | ||||
Owners of ROS AGRO PLC | 8,612,304 | 3,178,483 | 6,269,347 | 2,879,542 |
Non-controlling interest | 20,311 | (89,242) | - | (7,855) |
Profit for the period | 8,632,615 | 3,089,241 | 6,269,347 | 2,871,687 |
Total comprehensive income is attributable to: | ||||
Owners of ROS AGRO PLC | 8,612,304 | 3,178,483 | 6,269,347 | 2,879,542 |
Non-controlling interest | 20,311 | (89,242) | - | (7,855) |
Total comprehensive income for the period | 8,632,615 | 3,089,241 | 6,269,347 | 2,871,687 |
Earnings per ordinary share for profit attributable to the owners of ROSAGRO PLC, basic and diluted(in RR per share) | 320.18 | 123.47 | 123.47 | 111.86 |
Appendix 2. Unaudited segment information for the Nine months ended 30 September 2018 (in RR thousand)
9M 2018 | Sugar | Meat | Agriculture | Oil and Fat | Other | Eliminations | Total |
Sales | 17,733,579 | 15,375,088 | 7,028,008 | 14,666,970 | 825,008 | (3,436,363) | 52,192,290 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | (52,887) | 4,236,118 | - | - | (1,974) | 4,181,257 |
Cost of sales | (12,956,143) | (10,712,773) | (4,568,112) | (11,147,212) | (686,318) | 2,651,471 | (37,419,087) |
incl. Depreciation | (1,546,829) | (1,578,281) | (507,045) | (264,475) | (1,968) | (9,113) | (3,907,711) |
Net gain/ (loss) from trading derivatives | 6,363 | - | - | - | - | - | 6,363 |
Gross profit / (loss) | 4,783,799 | 4,609,428 | 6,696,014 | 3,519,758 | 138,690 | (786,866) | 18,960,823 |
Distribution and Selling, General and administrative expenses | (2,741,268) | (1,173,126) | (2,198,585) | (2,189,935) | (881,238) | 167,394 | (9,016,758) |
incl. Depreciation | (64,696) | (35,393) | (135,905) | (98,339) | (18,163) | 9,113 | (343,383) |
Other operating income/(expenses), net | 3,378,032 | 154,981 | (8,170) | 49,016 | 13,967,469 | (19,317,460) | (1,776,132) |
incl. Reimbursement of operating costs (government grants) | - | 22,384 | 77,206 | 71,592 | - | - | 171,182 |
Operating profit / (loss) | 5,420,563 | 3,591,283 | 4,489,259 | 1,378,839 | 13,224,921 | (19,936,932) | 8,167,933 |
Adjustments: | |||||||
Depreciation included in Operating Profit | 1,611,526 | 1,613,675 | 642,950 | 362,815 | 20,131 | - | 4,251,097 |
Other operating (income) /expenses, net | (3,378,032) | (154,981) | 8,170 | (49,016) | (13,967,469) | 19,317,460 | 1,776,132 |
Reimbursement of operating costs (government grants) | - | 22,384 | 77,206 | 71,592 | - | - | 171,182 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | 52,887 | (4,236,118) | - | - | 1,974 | (4,181,257) |
Adjusted EBITDA* | 3,654,057 | 5,125,248 | 981,467 | 1,764,230 | (722,417) | (617,498) | 10,185,087 |
* Non-IFRS measure
Appendix 2 (continued). Unaudited segment information for the Nine months ended 30 September 2017 (in RR thousand)
9M 2017 | Sugar | Meat | Agriculture | Oil and Fat | Other | Eliminations | Total |
Sales | 20,992,538 | 15,191,254 | 8,059,770 | 14,217,345 | 50,576 | (3,682,775) | 54,828,708 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | (371,701) | (230,509) | - | - | (1,952,785) | (2,554,995) |
Cost of sales | (16,373,808) | (11,411,417) | (6,546,027) | (12,037,540) | - | 4,874,311 | (41,494,481) |
incl. Depreciation | (1,202,659) | (1,410,101) | (769,711) | (269,859) | - | (7,015) | (3,659,345) |
Net gain/ (loss) from trading derivatives | (9,937) | - | - | - | - | - | (9,937) |
Gross profit | 4,608,793 | 3,408,136 | 1,283,234 | 2,179,805 | 50,576 | (761,249) | 10,769,295 |
Distribution and Selling, General and administrative expenses | (2,993,607) | (754,886) | (2,361,122) | (2,500,367) | (817,509) | 570,238 | (8,857,253) |
incl. Depreciation | (92,199) | (32,209) | (91,329) | (97,324) | (38,292) | 4,382 | (346,971) |
Other operating income/(expenses), net | (72,329) | 200,760 | 35,607 | 91,785 | 7,164,791 | (7,632,947) | (212,331) |
incl. Reimbursement of operating costs (government grants) | - | 22,957 | 41,658 | - | - | - | 64,615 |
Operating profit / (loss) | 1,542,857 | 2,854,010 | (1,042,281) | (228,777) | 6,397,858 | (7,823,958) | 1,699,711 |
Adjustments: | |||||||
Depreciation included in Operating Profit | 1,294,858 | 1,442,310 | 861,040 | 367,183 | 38,292 | 2,633 | 4,006,316 |
Other operating (income) /expenses, net | 72,329 | (200,760) | (35,607) | (91,785) | (7,164,791) | 7,632,947 | 212,333 |
Reimbursement of operating costs (government grants) | - | 22,957 | 41,658 | - | - | - | 64,615 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | 371,701 | 230,509 | - | - | 1,952,785 | 2,554,995 |
Adjusted EBITDA* | 2,910,044 | 4,490,218 | 55,319 | 46,621 | (728,641) | 1,764,407 | 8,537,970 |
* Non-IFRS measure
Appendix 3. Unaudited consolidated statement of financial position as at 30 September 2018(in RR thousand)
30 September 2018 | 31 December 2017 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 7,228,632 | 4,860,335 |
Restricted cash | 47 | 42 |
Short-term investments | 14,284,367 | 18,457,778 |
Trade and other receivables | 1,305,303 | 3,196,315 |
Prepayments | 1,159,138 | 1,201,479 |
Current income tax receivable | 338,741 | 212,026 |
Other taxes receivable | 3,040,669 | 3,352,606 |
Inventories and short-term biological assets | 37,200,426 | 29,675,851 |
Total current assets | 64,557,323 | 60,956,432 |
- | ||
Non-current assets | ||
Property, plant and equipment | 66,026,049 | 56,390,084 |
Inventories intended for construction | 2,612,548 | 795,314 |
Goodwill | 2,504,857 | 1,826,258 |
Advances paid for non-current assets | 11,592,723 | 13,841,743 |
Long-term biological assets | 2,375,962 | 1,719,784 |
Long-term investments and receivables | 18,094,014 | 17,594,030 |
Investments in associates | 7,320 | 7,320 |
Deferred income tax assets | 2,266,294 | 1,992,839 |
Other intangible assets | 2,278,862 | 2,286,181 |
Total non-current assets | 107,758,629 | 96,453,553 |
Total assets | 172,315,952 | 157,409,985 |
Liabilities and EQUITY | ||
Current liabilities | ||
Short-term borrowings | 8,000,202 | 8,863,525 |
Trade and other payables | 11,686,837 | 6,773,069 |
Current income tax payable | 74,536 | 63,727 |
Other taxes payable | 3,712,751 | 4,072,364 |
Total current liabilities | 23,474,326 | 19,772,685 |
Non-current liabilities | ||
Long-term borrowings | 43,422,004 | 37,787,777 |
Government grants | 6,310,091 | 6,377,469 |
Deferred income tax liability | 957,386 | 744,113 |
Total non-current liabilities | 50,689,481 | 44,909,359 |
Total liabilities | 74,163,807 | 64,682,044 |
Equity | ||
Share capital | 12,269 | 12,269 |
Treasury shares | (491,978) | (491,978) |
Additional paid-in capital | 26,964,496 | 26,964,480 |
Other reserves | 1,308,188 | 1,308,188 |
Retained earnings | 70,227,417 | 64,758,966 |
Equity attributable to owners of ROS AGRO PLC | 98,020,392 | 92,551,925 |
Non-controlling interest | 131,753 | 176,016 |
Total equity | 98,152,145 | 92,727,941 |
Total liabilities and equity | 172,315,952 | 157,409,985 |
Appendix 4. Unaudited consolidated statement of cash flows for the Nine months ended 30 September 2018 (in RR thousand) - NOT IFRS PRESENTATION (*)
Nine months ended | |||
30 September 2018 | 30 September 2017 | ||
Cash flows from operating activities | |||
Profit before income tax | 9,073,795 | 3,067,452 | |
Adjustments for: | - | - | |
Depreciation and amortization | 5,778,084 | 5,277,968 | |
Interest expense | 2,395,316 | 2,383,242 | |
Government grants | (1,139,681) | (863,544) | |
Interest income | (2,708,368) | (3,197,973) | |
Loss/ (gain) on disposal of property, plant and equipment | 23,249 | 98,259 | |
Net (gain) / loss on revaluation of biological assets and agricultural produce | (4,181,257) | 2,554,996 | |
Change in provision for net realisable value of inventory | (23,412) | (42,479) | |
Share of results of associates | - | - | |
Change in provision for impairment of receivables and prepayments | 20,744 | 64,174 | |
Foreign exchange (gain) / loss, net | 109,484 | (33,470) | |
Lost / (reversal of) harvest write-off | 12,600 | 58,423 | |
Net (gain) / loss from bonds held for trading | 29,265 | (8,800) | |
Settlement of loans and accounts receivable previously written-off | (130) | (105,235) | |
Change in provision for impairment of advances paid for property, plant and equipment | (38,787) | (3,513) | |
Loss on other investments | 117 | 400,414 | |
Other non-cash and non-operating expenses, net | (6,393) | (12,192) | |
Operating cash flow before working capital changes | 9,393,189 | 9,637,722 | |
Change in trade and other receivables and prepayments | 2,090,194 | 969,093 | |
Change in other taxes receivable | 329,274 | 1,616,303 | |
Change in inventories and biological assets | (2,437,111) | 3,231,463 | |
Change in trade and other payables | 4,223,634 | 2,550,461 | |
Change in other taxes payable | 6,513 | (134,755) | |
Cash generated from operations | 13,605,693 | 17,870,286 | |
Income tax paid | (611,486) | (358,739) | |
Net cash from operating activities | 12,994,207 | 17,511,548 | |
Cash flows from investing activities | - | - | |
Purchases of property, plant and equipment | (10,992,570) | (11,113,845) | |
Purchases of other intangible assets | (264,820) | (237,500) | |
Proceeds from sales of property, plant and equipment | 57,668 | 23,464 | |
Purchases of inventories intended for construction | (1,104,550) | (398,609) | |
Investments in subsidiaries, net of cash acquired | (2,098,209) | 79,426 | |
Movement in restricted cash | 658 | (1,470) | |
Other investing activities | - | - | |
Net cash from investing activities | (14,401,823) | (11,628,976) | |
Cash flows from financing activities | - | - | |
Proceeds from borrowings | 8,931,960 | 17,373,560 | |
Repayment of borrowings | (7,226,657) | (15,241,711) | |
Interest paid | (2,412,223) | (2,090,668) | |
Change in cash on bank deposits* | 6,159,309 | 11,396,262 | |
Loans given* | (1,497,872) | (7) | |
Loans repaid* | 3,643 | 412,916 | |
Interest received* | 2,430,449 | 2,992,790 | |
Proceeds from government grants | 733,373 | 1,598,826 | |
Purchases of non-controlling interest | (59,316) | (81,218) | |
Proceeds from sales of treasury shares | - | 6,664 | |
Dividends paid to owners Ros Agro PLC | (3,485,666) | (6,146,486) | |
Lease payments | 8,713 | - | |
Other financial activities | - | (4,625) | |
Net cash fromfinancing activities | 3,585,730 | 10,216,302 | |
Net effect of exchange rate changes on cash and cash equivalents | 143,055 | (192,310) | |
Net increase/ (decrease) in cash and cash equivalents | 2,368,297 | 15,906,564 | |
Cash and cash equivalents at the beginning of the period | 4,860,335 | 6,751,712 | |
Cash and cash equivalents at the end of the period | 7,228,632 | 22,658,275 | |
(*) 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.