Last checked at 13 Mar 2017 07:10
13 March 2017
ROS AGRO financial results for 12M 2016 and Q4 2016
13 March 2016 - 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 year ended 31 December 2016.
12M 2016 Highlights
- Sales amounted to RR 84,257 million (US$ 1,260 million1), an increase of RR 11,817 million compared to 12M 2015;
- Adjusted EBITDA2 amounted to RR 18,205 million (US$ 272 million), a decreaseof RR 6,218 million compared to 12M 2015;
- Adjusted EBITDA margin decreased from 34% in 12M 2015 to 22% in 12M 2016;
- Net profit for the period amounted to RR 13,675 million (US$ 205 million);
- Net debt position3 as of 31 December 2016 amounted to RR 4,342 million (US$ 72 million);
- Net Debt/ Adjusted EBITDA as of 31 December 2016 was 0.24x.
Commenting on the results, Maxim Basov, a member of the Board of Directors of ROS AGRO PLC and CEO of the Group, said:
"In 2016 we successfully integrated Razguliay assets and achieved record production results in sugar and agriculture. The Group faced margin pressure due to rouble appreciation. Compared to the prior year period, in Q4 2016 Russian rouble appreciated by 5%, which had a negative impact on profitability of all divisions. Additionally, profitability in agricultural and sugar divisions decreased due to the drop in sale prices. Grain sale prices decreased globally. Sugar price dropped as a result of a price equilibrium shift in Russia from an import alternative to an export alternative. There was an increase in sale prices in the meat division, which has not yet led to higher profitability due to the increase in taxes and other costs. In the Oil & Fat division the profitability decreased as a result of increased competition.
Net profit of the Company decreased due to the lower level of government grants for reimbursement of interest expenses on bank loans. Following the current foreign exchange rates and trends on the world food markets, the Company expects margin to continue to be challenged during 2017 due to the strong rouble, surplus of agricultural crops and sugar in Russia and weak consumer demand."
Key consolidated financial performance indicators
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales | 84,257 | 72,439 | 11,817 | 16 | 28,668 | 22,081 | 6,587 | 30 |
Gross profit | 25,725 | 31,433 | (5,707) | (18) | 6,711 | 8,330 | (1,619) | (19) |
Gross margin, % | 31% | 43% | -13% | 23% | 38% | -14% | ||
Adjusted EBITDA | 18,205 | 24,423 | (6,218) | (25) | 6,717 | 7,312 | (595) | (8) |
Adjusted EBITDA margin, % | 22% | 34% | -12% | 23% | 33% | -10% | ||
Net profit for the period | 13,675 | 23,690 | (10,015) | (42) | 2,472 | 5,603 | (3,131) | (56) |
Net profit margin % | 16% | 33% | -16% | 9% | 25% | -17% | ||
Key financial performance indicators by segments
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales, incl. | 84,257 | 72,439 | 11,817 | 16 | 28,668 | 22,081 | 6,587 | 30 |
Sugar | 37,240 | 32,853 | 4,386 | 13 | 13,634 | 9,931 | 3,703 | 37 |
Meat | 17,851 | 18,117 | (266) | (1) | 5,359 | 4,686 | 673 | 14 |
Agriculture | 21,155 | 14,211 | 6,944 | 49 | 12,976 | 9,012 | 3,965 | 44 |
Oil and Fat | 19,864 | 17,252 | 2,612 | 15 | 5,304 | 5,199 | 105 | 2 |
Other | 95 | 42 | 53 | 126 | 19 | 14 | 5 | 35 |
Eliminations | (11,948) | (10,036) | (1,912) | (19) | (8,623) | (6,759) | (1,864) | (28) |
Gross profit, incl. | 25,725 | 31,433 | (5,707) | (18) | 6,711 | 8,330 | (1,619) | (19) |
Sugar | 11,948 | 12,787 | (839) | (7) | 4,230 | 4,191 | 38 | 1 |
Meat | 3,175 | 6,085 | (2,910) | (48) | 1,330 | 645 | 685 | 106 |
Agriculture | 7,848 | 8,730 | (882) | (10) | 879 | 3,103 | (2,224) | (72) |
Oil and Fat | 3,370 | 4,588 | (1,218) | (27) | 940 | 1,147 | (207) | (18) |
Other | 95 | 42 | 53 | 126 | 19 | 14 | 5 | 35 |
Eliminations | (711) | (800) | 88 | 11 | (686) | (770) | 84 | 11 |
Adjusted EBITDA, incl. | 18,205 | 24,423 | (6,218) | (25) | 6,717 | 7,312 | (595) | (8) |
Sugar | 9,579 | 11,068 | (1,489) | (13) | 3,321 | 3,535 | (214) | (6) |
Meat | 4,013 | 7,672 | (3,659) | (48) | 1,413 | 1,231 | 183 | 15 |
Agriculture | 6,192 | 6,630 | (438) | (7) | 3,870 | 4,550 | (681) | (15) |
Oil and Fat | (420) | 1,662 | (2,082) | - | (271) | 227 | (498) | - |
Other | (1,828) | (1,504) | (324) | (22) | (406) | (371) | (35) | (9) |
Eliminations | 670 | (1,104) | 1,774 | - | (1,211) | (1,860) | 649 | 35 |
Adjusted EBITDA margin, % | 22% | 34% | -12% | 23% | 33% | -10% | ||
Sugar | 26% | 34% | -8% | 24% | 36% | -11% | ||
Meat | 22% | 42% | -20% | 26% | 26% | 0% | ||
Agriculture | 29% | 47% | -17% | 30% | 50% | -21% | ||
Oil and Fat | -2% | 10% | -12% | -5% | 4% | -9% | ||
Sugar Segment
The financial results of the sugar segment for 12M 2016 and Q4 2016 compared to 12M 2015and Q4 2015 respectively are presented in the table below:
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales | 37,240 | 32,853 | 4,386 | 13 | 13,634 | 9,931 | 3,703 | 37 |
Cost of sales | (25,627) | (20,290) | (5,337) | (26) | (9,407) | (5,739) | (3,669) | (64) |
Net gain/ (loss) from trading derivatives | 335 | 224 | 112 | 50 | 2 | (1) | 4 | - |
Gross profit | 11,948 | 12,787 | (839) | (7) | 4,230 | 4,191 | 38 | 1 |
Gross profit margin | 32% | 39% | -7% | 31% | 42% | -11% | ||
Distribution and selling expenses | (2,534) | (1,826) | (707) | (39) | (1,052) | (631) | (422) | (67) |
General and administrative expenses | (1,189) | (863) | (325) | (38) | (357) | (236) | (121) | (51) |
Other operating income/ (expenses), net | 60 | (63) | 123 | - | (82) | 33 | (115) | - |
Operating profit | 8,286 | 10,034 | (1,749) | (17) | 2,739 | 3,358 | (619) | (18) |
Adjusted EBITDA | 9,579 | 11,068 | (1,489) | (13) | 3,321 | 3,535 | (214) | (6) |
Adjusted EBITDA margin | 26% | 34% | -8% | 24% | 36% | -11% | ||
The main factor of Sales growth is an increase in sugar sales volume, by 11% in 12M 2016 and 47% in Q4 2016, compared to prior year periods. The sales volume of by-products, as beet pulp and molasses, are also increased. Revenue from beet pulp and molasses amounted to RR 1,972 million in 12M 2016 (12M 2015: RR 1,126 million) and RR 1,123 million in Q4 2016 (Q4 2015: RR 653 million).
Additional factor of sales growth in 2016 are trading operations with rice and the beginning of sales of buckwheat products. Sales of rice and buckwheat amounted to RR 888 million in 12M 2016 (12M 2015: RR 14 million) and RR 427 million in Q4 2016 (Q4 2015: RR 14 million).
Sugar sales, production volumes and average sales prices per kilogram (excl. VAT) wereas follows:
Year ended | Variance | Three months ended | Variance | |||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sugar production volume(in thousand tons), incl. | 810 | 766 | 44 | 6 | 572 | 408 | 164 | 40 |
beet sugar | 750 | 582 | 168 | 29 | 572 | 408 | 164 | 40 |
cane sugar | 59 | 183 | (124) | (68) | - | - | - | - |
Sales volume(in thousand tons) | 866 | 784 | 82 | 11 | 334 | 228 | 106 | 47 |
Average sales price(roubles per kg, excl. VAT) | 39.4 | 40.4 | (0.9) | (2) | 35.4 | 40.1 | (4.7) | (12) |
From January till August the sugar segment sells sugar produced from sugar beet of the prior year harvest and sugar from raw cane sugar. Higher sugar beet prices for harvest of 2015 compared to harvest of 2014 contributed to an increase in costs of sales in 12M 2016 compared to costs of sales of 2015.
An increase in general and administrative expenses in 12M 2016 include RR 125 million (Q4 2016: RR 61 million) attributed to newly acquired plants, whose financial results are included in the consolidated segment's results starting 1 June 2016.
Meat Segment
The financial results of the meat segment for 12M 2016 and Q4 2016 compared to 12M 2015and Q4 2015 respectively are presented in the table below:
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales | 17,851 | 18,117 | (266) | (1) | 5,359 | 4,686 | 673 | 14 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | 146 | (304) | 450 | - | 20 | (273) | 293 | - |
Cost of sales | (14,822) | (11,728) | (3,094) | (26) | (4,048) | (3,768) | (280) | (7) |
Gross profit | 3,175 | 6,085 | (2,910) | (48) | 1,330 | 645 | 685 | 106 |
Gross profit margin | 18% | 34% | -16% | 25% | 14% | 11% | ||
Gross profit excl. effect of biological assets revaluation | 3,029 | 6,389 | (3,360) | (53) | 1,310 | 918 | 393 | 43 |
Adjusted gross profit margin | 17% | 35% | -18% | 24% | 20% | 5% | ||
Distribution and selling expenses | (280) | (119) | (161) | (135) | (93) | (44) | (49) | (111) |
General and administrative expenses | (714) | (600) | (114) | (19) | (195) | (115) | (80) | (70) |
Other operating income/ (expenses), net | 332 | 852 | (520) | (61) | 60 | 185 | (125) | (68) |
incl. reimbursement of operating costs (government grants) | 108 | 682 | (575) | (84) | - | 88 | (88) | - |
Operating profit | 2,513 | 6,218 | (3,705) | (60) | 1,102 | 671 | 431 | 64 |
Adjusted EBITDA | 4,013 | 7,672 | (3,659) | (48) | 1,413 | 1,231 | 183 | 15 |
Adjusted EBITDA margin | 22% | 42% | -20% | 26% | 26% | 0% | ||
A slight decrease in Sales in 12M 2016 resulted from a decrease in pork sales prices. Comparison on a quarter-to-quarter basis show 14% increase in sales in 2016 mainly because of price growth. Additional factor is a shift to sales of more expensive processed pork, with the sales volume held nearly constant.
Pork sales volumes and the average pork sales prices per kilogram (excl. VAT) were as follows:
Year ended | Variance | Three months ended | Variance | |||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales volume (in thousand tonnes), incl. | 162 | 176 | (15) | (8) | 48 | 48 | (0) | (1) |
livestock pigs | 76 | 141 | (66) | (46) | 26 | 30 | (4) | (12) |
processed pork | 86 | 35 | 51 | 147 | 22 | 18 | 3 | 18 |
Average sale prices (roubles per kg, excl. VAT): | ||||||||
livestock pigs | 91.7 | 99.4 | (7.8) | (8) | 96.2 | 86.4 | 9.8 | 11 |
processed pork | 124.1 | 114.2 | 9.9 | 9 | 130.4 | 113.3 | 17.1 | 15 |
The decrease in sales volume in 12M 2016 compared to prior year is linked to change in product mix. In the middle of 2015 the Group launched the slaughter house, that led to movement from sales of livestock pigs to sales of processed pigs with related decrease in volumes due to wastage. Total sales volume on the quarter to quarter bases are nearly on the same level.
Higher grain prices for harvest 2015 compared to harvest 2014 led to an increase in feed costs. Increased feed costs and processing costs of slaughter house led to a significant increase in costs of sales in 2016 compared to 2015.
A drop in government grants for reimbursement of operating costs in 12M and Q4 2016, minus RR 575 million and RR 88 million respectively, also contributed to the negative dynamics in operating profit and Adjusted EBITDA figures.
Agricultural Segment
As at 31 December 2016 the segment's area of controlled land stands at 665 thousand hectares (31 December 2015: 504 thousand hectares), an increase of 161 thousand hectares or 32%. The financial results of the agricultural segment for 12M 2016 and Q4 2016 compared to 12M 2015 and Q4 2015 respectively are presented below:
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales | 21,155 | 14,211 | 6,944 | 49 | 12,976 | 9,012 | 3,965 | 44 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | 69 | 1,191 | (1,122) | (94) | (4,049) | (1,913) | (2,136) | (112) |
Cost of sales | (13,376) | (6,672) | (6,704) | (100) | (8,048) | (3,996) | (4,053) | (101) |
Net gain/ (loss) from trading derivatives | 1 | 0 | 0 | 215 | - | 0 | (0) | - |
Gross profit | 7,848 | 8,730 | (882) | (10) | 879 | 3,103 | (2,224) | (72) |
Gross profit margin | 37% | 61% | -24% | 7% | 34% | -28% | ||
Gross profit excl. effect of biological assets and agricultural produce revaluation | 7,780 | 7,539 | 240 | 3 | 4,928 | 5,016 | (88) | (2) |
Adjusted gross profit margin | 37% | 53% | -16% | 38% | 56% | -18% | ||
Distribution and selling expenses | (2,733) | (1,450) | (1,283) | (88) | (1,845) | (895) | (950) | (106) |
General and administrative expenses | (893) | (567) | (326) | (57) | (334) | (165) | (170) | (103) |
Other operating income/ (expenses), net | 275 | (229) | 503 | - | (3) | (172) | 169 | 98 |
incl. reimbursement of operating costs (government grants) | 337 | 218 | 119 | 55 | 40 | 41 | (1) | (2) |
Operating profit | 4,498 | 6,485 | (1,987) | (31) | (1,303) | 1,871 | (3,174) | - |
Adjusted EBITDA | 6,192 | 6,630 | (438) | (7) | 3,870 | 4,550 | (681) | (15) |
Adjusted EBITDA margin | 29% | 47% | -17% | 30% | 50% | -21% | ||
A significant increase in sales volumes was the main driver of an increase in sales in 12M 2016and Q4 2016 compared to 12M 2015 and Q4 2015. Increase in sales volume resulted from the increase in land bank cultivated and increase in yields.
Sales volumes by product were as follows:
Thousand tonnes | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
sugar beet | 3,798 | 2,538 | 1,260 | 50 | 2,889 | 1,742 | 1,147 | 66 |
wheat | 413 | 285 | 128 | 45 | 242 | 145 | 97 | 67 |
barley | 377 | 310 | 67 | 22 | 212 | 188 | 24 | 13 |
sunflower seeds | 50 | 22 | 28 | 132 | 17 | 20 | (3) | (16) |
corn | 91 | 77 | 15 | 19 | 41 | 53 | (12) | (23) |
soy | 182 | 12 | 170 | 1,474 | 101 | 9 | 92 | 1,021 |
All sugar beet are sold to the sugar segment. The sales volume of grain sold to the meat segment amounted to 129 thousand tonnes in 12M 2016 and 113 thousand tonnes in Q4 2016 (12M 2015 and Q4 2015: 172 and 128 thousand tonnes respectively). Sales volumes of grain include sales of wheat, barley, corn and peas.
The average sale prices per kilogram (excl. VAT) were as follows:
RR per kilogram, excl. VAT | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
sugar beet | 2.4 | 2.9 | (0.5) | (18) | 2.4 | 2.9 | (0.5) | (17) |
wheat | 7.4 | 8.7 | (1.3) | (15) | 6.4 | 9.1 | (2.7) | (30) |
barley | 7.2 | 8.6 | (1.4) | (16) | 7.1 | 8.0 | (0.9) | (11) |
sunflower seeds | 21.7 | 21.1 | 0.6 | 3 | 18.1 | 21.1 | (3.0) | (14) |
corn | 8.1 | 7.6 | 0.5 | 6 | 7.6 | 7.9 | (0.3) | (4) |
soy | 21.2 | 23.3 | (2.1) | (9) | 20.7 | 23.7 | (3.0) | (13) |
General and administrative expenses increased by RR 326 million in 12M 2016 (Q4 2016: RR 170 million) as number of new companies joined the agricultural segment and the Group during the current year. Additionally, the higher expenses are attributed to the implementation of SAP ERP and its integration with the existing financial reporting system, and related personnel expenses.
Other operating income, net includes income from reimbursement of operating expenses (government grants), which is higher by RR 119 million in 12M 2016 and basically on the same level in Q4 2016 compared to the prior year periods. Further, a gain from the partial releaseof lost-harvest provision was recognised in 12M 2016 in amount of RR 63 million comparedto RR 328 million of loss in 12M 2015 (RR 24 million of loss in Q4 2016 against RR 203 million of loss in Q4 2015).
Oil and Fat segment
The financial results of the oil and fat segment for 12M 2016 and Q4 2016 compared to 12M 2015 and Q4 2015 respectively are presented below:
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales | 19,864 | 17,252 | 2,612 | 15 | 5,304 | 5,199 | 105 | 2 |
Cost of sales | (16,494) | (12,664) | (3,830) | (30) | (4,364) | (4,052) | (312) | (8) |
Gross profit | 3,370 | 4,588 | (1,218) | (27) | 940 | 1,147 | (207) | (18) |
Gross profit margin | 17% | 27% | -10% | 18% | 22% | -4% | ||
Distribution and selling expenses | (3,554) | (2,750) | (804) | (29) | (1,249) | (883) | (366) | (42) |
General and administrative expenses | (720) | (527) | (193) | (37) | (169) | (126) | (44) | (35) |
Other operating income/ (expenses), net | 127 | 59 | 67 | 114 | (14) | (22) | 8 | 36 |
Operating profit/ (loss) | (778) | 1,369 | (2,147) | - | (492) | 117 | (609) | - |
Adjusted EBITDA | (420) | 1,662 | (2,082) | - | (271) | 227 | (498) | - |
Adjusted EBITDA margin | -2% | 10% | -12% | -5% | 4% | -9% | ||
The breakdown of Sales, Gross profit and Adjusted EBITDA between the Samara oil plant, the Ekaterinburg fat plant and Far East operations is as follows:
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Sales, incl. | 19,864 | 17,252 | 2,612 | 15 | 5,304 | 5,199 | 105 | 2 |
Samara oil plant | 10,879 | 9,880 | 1,000 | 10 | 2,548 | 3,204 | (657) | (20) |
Ekat. fat plant | 9,679 | 8,585 | 1,095 | 13 | 2,909 | 2,510 | 398 | 16 |
Far East | 2,952 | 1,981 | 971 | 49 | 923 | 646 | 277 | 43 |
Eliminations(*) | (3,647) | (3,194) | (454) | (14) | (1,076) | (1,162) | 87 | 7 |
Gross profit, incl. | 3,370 | 4,588 | (1,218) | (27) | 940 | 1,147 | (207) | (18) |
Samara oil plant | 1,158 | 1,899 | (741) | (39) | 463 | 389 | 74 | 19 |
Ekat. fat plant | 2,205 | 2,500 | (295) | (12) | 573 | 685 | (111) | (16) |
Far East | 272 | 341 | (69) | (20) | 81 | 118 | (36) | (31) |
Eliminations(*) | (266) | (153) | (113) | (74) | (178) | (44) | (133) | (301) |
Adjusted EBITDA, incl. | (420) | 1,662 | (2,082) | - | (271) | 227 | (498) | - |
Samara oil plant | 238 | 1,115 | (877) | (79) | 97 | 184 | (88) | (48) |
Ekat. fat plant | (770) | 374 | (1,144) | - | (458) | (11) | (447) | (4,035) |
Far East | 151 | 176 | (25) | (14) | 143 | 51 | 92 | 182 |
Eliminations(*) | (39) | (3) | (36) | (1,358) | (53) | 3 | (56) | - |
Adjusted EBITDA margin, % | -2% | 10% | -12% | -5% | 4% | -9% | ||
Samara oil plant | 2% | 11% | -9% | 4% | 6% | -2% | ||
Ekat. fat plant | -8% | 4% | -12% | -16% | 0% | -15% | ||
Far East | 5.1% | 9% | -4% | 15.5% | 8% | 8% | ||
Intra-segment sales include sales of raw oil from Samara oil plant to Ekaterinburg fat plant.
Far East operations in 12M and Q4 2016 include results of operations of LLC Primorskaya soya, fat plant, acquired in Q4 2015 and engaged in soya bean oil extraction and processing. Far East operations in 12M 2015 also included tolling operations with soya bean on the related party's production facilities.
Sales volumes by product were as follows:
thousand tons | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Ekaterinburg fat plant | ||||||||
mayonnaise | 77 | 66 | 11 | 17 | 25 | 21 | 3 | 15 |
margarine | 37 | 43 | (6) | (15) | 12 | 12 | (0.3) | (2) |
bottled oil | 15 | 8 | 7 | 86 | 5 | 3 | 2 | 81 |
Samara oil plant | ||||||||
bulk oil | 174 | 169 | 5 | 3 | 42 | 51 | (9) | (17) |
meal | 138 | 143 | (5) | (4) | 37 | 41 | (4) | (9) |
Far East | ||||||||
bottled oil | 11 | 6 | 5 | 88 | 4 | 3 | 2 | 61 |
bulk oil | 2 | 4 | (2) | (43) | 1 | - | 1 | - |
meal | 62 | 55 | 7 | 13 | 22 | 19 | 3 | 14 |
The average sale prices per kilogram (excl. VAT) for sales to third parties were as follows:
RR per kilogram, excl. VAT | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
mayonnaise | 76.7 | 72.7 | 4.0 | 5 | 76.2 | 74.4 | 1.8 | 2 |
margarine | 75.6 | 70.7 | 4.8 | 7 | 79.2 | 75.0 | 4.2 | 6 |
bottled oil | 71.9 | 62.6 | 9.3 | 15 | 65.3 | 67.9 | (2.6) | (4) |
bulk oil | 53.0 | 47.6 | 5.4 | 11 | 48.3 | 54.8 | (6.6) | (12) |
meal | 18.2 | 17.2 | 1.0 | 6 | 18.2 | 17.3 | 0.9 | 5 |
Increase in prices for sunflower seeds and sunflower raw oil that exceeded the growth of finished goods sale prices together with a continuing growth of advertising expenses in Ekaterinburg fat plant led to the decrease of profitability of the segment.
Key consolidated cash flow indicators (not IFRS presentation*)
The key consolidated cash flow indicators presented according to management accounts methodology were as follows:
in million Roubles | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Net cash from operating activities, incl. | 11,809 | 15,922 | (4,113) | (26) | 174 | 2,208 | (2,034) | (92) |
Operating cash flow before working capital changes | 18,066 | 22,973 | (4,907) | (21) | 7,000 | 6,947 | 53 | 1 |
Working capital changes | (5,140) | (4,683) | (458) | (10) | (6,390) | (3,928) | (2,462) | (63) |
Net cash from investing activities, incl. | (24,346) | (13,071) | (11,275) | (86) | (11,523) | (2,248) | (9,275) | (413) |
Purchases of property, plant and equipment and inventories intended for construction | (16,713) | (11,438) | (5,274) | (46) | (10,284) | (1,740) | (8,544) | (491) |
Net cash from financing activities | 15,040 | (7,736) | 22,776 | - | 4,628 | (1,633) | 6,262 | - |
Net effect of exchange rate changes on cash and cash equivalents | (152) | (1,030) | 877 | 85 | (97) | (67) | (30) | (44) |
Net increase/ (decrease) in cash and cash equivalents | 2,350 | (5,915) | 8,265 | - | (6,818) | (1,741) | (5,077) | (292) |
(*) See Appendix 4
The main investments in property, plant and equipment and inventories intended for construction in 12M 2016 were made in the meat segment in the amount of RR 8,066 million (12M 2015:RR 5,239 million), related to the new construction project in the Tambov region, and in the agriculture segment in the amount of RR 5,145 million (12M 2015: RR 2,625 million), related to purchases of machinery and equipment. Significant investments were also made in Sugar segment in the amount of RR 2,504 (12M 2015: RR 2,920 million). Investments the oil and fat segment amounted to RR 951 (12M 2015: RR 609 million).
Debt position and liquidity management
in RR million | 31 December 2016 | 31 December 2015 | Variance | |
Units | % | |||
Gross debt | 44,503 | 50,323 | (5,821) | (12) |
Short-term borrowings | 11,704 | 25,860 | (14,156) | (55) |
Long-term borrowings | 32,798 | 24,463 | 8,335 | 34 |
Cash and cash equivalents, bank deposits and bonds | (40,160) | (34,751) | (5,409) | (16) |
Short-term cash, deposits and bonds | (23,044) | (20,037) | (3,007) | (15) |
Long-term cash, deposits and bonds | (17,116) | (14,714) | (2,402) | (16) |
Net debt | 4,342 | 15,572 | (11,230) | (72) |
Short-term borrowings, net | (11,340) | 5,823 | (17,163) | - |
Long-term borrowings, net | 15,682 | 9,749 | 5,933 | 61 |
Adjusted EBITDA | 18,205 | 24,423 | (6,218) | (25) |
Net debt/ Adjusted EBITDA | 0.24 | 0.64 | (0.4) | |
Net finance income/ (expense)
in RR million | Year ended | Variance | Three months ended | Variance | ||||
31 December 2016 | 31 December 2015 | Units | % | 31 December 2016 | 31 December 2015 | Units | % | |
Net interest expense | (3,614) | (2,042) | (1,572) | (77) | (793) | (541) | (252) | (47) |
Gross interest expense | (4,810) | (3,857) | (953) | (25) | (1,051) | (1,288) | 237 | 18 |
Reimbursement of interest expense | 1,196 | 1,815 | (619) | (34) | 258 | 747 | (489) | (65) |
Interest income | 4,466 | 1,577 | 2,889 | 183 | 1,112 | 675 | 437 | 65 |
Net gain/ (loss) from bonds held for trading | (0) | 637 | (637) | - | (1) | - | (1) | - |
Other financial income, net | (1,135) | 3,080 | (4,215) | - | (113) | 580 | (693) | - |
Net foreign exchange gain/ (loss) | (1,107) | 3,129 | (4,236) | - | (105) | 592 | (697) | - |
Other financial income / (expenses), net | (28) | (49) | 21 | 44 | (8) | (12) | 4 | 32 |
Total net finance income/ (expenses) | (284) | 3,252 | (3,536) | - | 205 | 714 | (509) | (71) |
In 2016 the Group continued to enjoy benefits from the state agriculture subsidies programme.In 12M 2016 RR 1,196 million of subsidies received covered 25% of gross interest expense.
Other financial income, net relates mainly to net financial foreign exchange losses.
__________________________________
(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.
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, producing sugar on six production sites from both sugar beet and raw cane sugar. We produce white cube sugar and white packaged sugar sold under the brands Chaikofsky, Russkii Sakhar and Brauni. Our sugar segment is vertically integrated with sugar beet cultivation in our agriculture segment, through which we striveto ensure a consistent supply of sugar beets.
Meat:
According to the National Union of Pig Breeders, we are the second largest pork producer in Russia on the ground of relative production volumes for 2015. 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 665 thousand hectares of land under our control located in the highly fertile Black Earth region of Russia (in the Belgorod, Tambov and Voronezh 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. 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 Fat:
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).
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 about its 12M and Q4 2016 financial results for investors and analysts.
Details of call:
Date | 13 March 2017 |
Time | 4:00 PM (Moscow) /1:00 PM (London) |
Subject | ROS AGRO PLC 12M and Q4 2016 financial results |
UK Toll Free UK Local Line | 0800 358 6377 +44 330 336 910 |
USA Toll Free USA Local Line | 888 349 9618 +1 719 325 2385 |
Russia Toll Free | +7 495 213 1767 |
Conference ID | 1850048 |
Contacts:
Svetlana Kuznetsova Chief Investment Officer Phone: +7 495 363 1661 SKuznetsova@rusagrogroup.ru |
Appendix 1. Consolidated statement of comprehensive income for the year ended 31 December 2016 (in RR thousand)
Year ended 31 December | Three months ended 31 December | |||
2016 | 2015 | 2016 | 2015 | |
Sales | 84,256,585 | 72,439,164 | 28,668,346 | 22,081,354 |
Net gain on revaluation of biological assets and agricultural produce | 48,176 | 2,040,860 | (2,524,741) | (531,264) |
Cost of sales | (58,915,613) | (43,271,410) | (19,434,739) | (13,218,651) |
Net gain from trading derivatives | 335,997 | 223,948 | 2,440 | (1,023) |
Gross profit | 25,725,145 | 31,432,562 | 6,711,307 | 8,330,416 |
Distribution and selling expenses | (7,993,094) | (5,313,993) | (3,306,279) | (1,817,593) |
General and administrative expenses | (5,356,057) | (4,065,560) | (1,439,634) | (1,021,735) |
Other operating income/ (expenses), net | 1,830,088 | 184,968 | 430,340 | (154,396) |
Operating profit | 14,206,082 | 22,237,977 | 2,395,735 | 5,336,692 |
Interest expense | (3,614,107) | (2,041,743) | (792,895) | (540,813) |
Interest income | 4,465,667 | 1,576,601 | 1,111,526 | 675,491 |
Net gain/ (loss) from bonds | (422) | 636,601 | (556) | - |
Other financial income/ (expenses), net | (1,134,849) | 3,080,295 | (112,666) | 579,458 |
Share of results of associates | 20,831 | 23,997 | (5,575) | 3,493 |
Profit before income tax | 13,943,202 | 25,513,728 | 2,595,569 | 6,054,322 |
Income tax expense | (267,790) | (1,823,392) | (123,642) | (451,555) |
Profit for the year | 13,675,412 | 23,690,336 | 2,471,928 | 5,602,768 |
Other comprehensive income: | ||||
Items that may be subsequently reclassified to profit and loss: | ||||
Change in value of available-for-sale financial assets | (107,782) | (39,469) | 41,746 | (39,469) |
Income tax relating to other comprehensive income | 21,556 | 7,894 | (16,395) | 7,894 |
Total comprehensive income for the period | 13,589,186 | 23,658,761 | 2,497,279 | 5,571,192 |
Profit is attributable to: | ||||
Owners of ROS AGRO PLC | 13,684,192 | 23,482,192 | 2,480,192 | 5,446,505 |
Non-controlling interest | (8,780) | 208,144 | (8,264) | 156,263 |
Profit for the period | 13,675,412 | 23,690,336 | 2,471,928 | 5,602,768 |
Total comprehensive income is attributable to: | ||||
Owners of ROS AGRO PLC | 13,597,966 | 23,450,617 | 2,505,543 | 5,414,929 |
Non-controlling interest | (8,780) | 208,144 | (8,264) | 156,263 |
Total comprehensive income for the period | 13,589,186 | 23,658,761 | 2,497,279 | 5,571,192 |
Earnings per ordinary share for profit attributable to the owners of ROSAGRO PLC, basic and diluted(in RR per share) | 531.56 | 996.80 | 92.23 | 231.20 |
Appendix 2. Segment information for the year ended 31 December 2016 (in RR thousand)
12M 2016 | Sugar | Meat | Agriculture | Oil and Fat | Other | Eliminations | Total |
Sales | 37,239,582 | 17,851,245 | 21,154,816 | 19,863,843 | 94,919 | (11,947,821) | 84,256,584 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | 145,878 | 68,934 | - | - | (166,636) | 48,176 |
Cost of sales | (25,626,600) | (14,822,058) | (13,375,993) | (16,493,978) | - | 11,403,016 | (58,915,613) |
incl. Depreciation | (1,239,315) | (1,827,178) | (1,496,884) | (356,307) | - | (70,555) | (4,990,239) |
Net gain/ (loss) from trading derivatives | 335,277 | - | 720 | - | - | - | 335,997 |
Gross profit | 11,948,259 | 3,175,065 | 7,848,477 | 3,369,865 | 94,919 | (711,441) | 25,725,144 |
Distribution and Selling, General and administrative expenses | (3,722,493) | (993,890) | (3,625,504) | (4,274,300) | (1,945,389) | 1,212,426 | (13,349,150) |
incl. Depreciation | (113,749) | (42,811) | (203,840) | (127,743) | (22,231) | 68,561 | (441,813) |
Other operating income/(expenses), net | 59,966 | 331,569 | 274,594 | 126,562 | 18,124,997 | (17,087,599) | 1,830,088 |
incl. Reimbursement of operating costs (government grants) | - | 107,853 | 337,328 | - | - | - | 445,181 |
Operating profit | 8,285,732 | 2,512,744 | 4,497,567 | (777,873) | 16,274,527 | (16,586,614) | 14,206,082 |
Adjustments: | |||||||
Depreciation included in Operating Profit | 1,353,064 | 1,869,989 | 1,700,725 | 484,051 | 22,231 | 1,993 | 5,432,053 |
Other operating (income) /expenses, net | (59,966) | (331,569) | (274,594) | (126,562) | (18,124,997) | 17,087,599 | (1,830,089) |
Reimbursement of operating costs (government grants) | - | 107,853 | 337,328 | - | - | - | 445,181 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | (145,878) | (68,934) | - | - | 166,636 | (48,176) |
Adjusted EBITDA* | 9,578,830 | 4,013,139 | 6,192,092 | (420,384) | (1,828,239) | 669,614 | 18,205,051 |
* Non-IFRS measure
Appendix 2 (continued). Segment information for the year ended 31 December 2015 (in RR thousand)
12M 2015 | Sugar | Meat | Agriculture | Oil and Fat | Other | Eliminations | Total |
Sales | 32,853,298 | 18,117,255 | 14,210,787 | 17,252,029 | 41,924 | (10,036,129) | 72,439,164 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | (303,980) | 1,190,980 | - | - | 1,153,860 | 2,040,860 |
Cost of sales | (20,289,817) | (11,728,195) | (6,671,663) | (12,664,459) | - | 8,082,723 | (43,271,410) |
incl. Depreciation | (861,985) | (1,290,757) | (731,891) | (223,818) | - | 13,678 | (3,094,773) |
Net gain/ (loss) from trading derivatives | 223,719 | - | 229 | - | - | - | 223,948 |
Gross profit | 12,787,201 | 6,085,081 | 8,730,333 | 4,587,570 | 41,924 | (799,546) | 31,432,562 |
Distribution and Selling, General and administrative expenses | (2,689,652) | (719,221) | (2,017,232) | (3,277,525) | (1,570,593) | 894,671 | (9,379,553) |
incl. Depreciation | (108,308) | (28,880) | (157,811) | (128,106) | (24,677) | 31,563 | (416,219) |
Other operating income/(expenses), net | (63,221) | 851,773 | (228,584) | 59,222 | 16,176,588 | (16,610,810) | 184,968 |
incl. Reimbursement of operating costs (government grants) | - | 682,396 | 217,864 | - | - | - | 900,260 |
Operating profit | 10,034,327 | 6,217,632 | 6,484,518 | 1,369,267 | 14,647,919 | (16,515,686) | 22,237,977 |
Adjustments: | |||||||
Depreciation included in Operating Profit | 970,293 | 1,319,637 | 889,702 | 351,924 | 24,677 | (45,241) | 3,510,992 |
Other operating (income) /expenses, net | 63,221 | (851,773) | 228,584 | (59,222) | (16,176,588) | 16,610,810 | (184,968) |
Reimbursement of operating costs (government grants) | - | 682,396 | 217,864 | - | - | - | 900,260 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | 303,980 | (1,190,980) | - | - | (1,153,860) | (2,040,860) |
Adjusted EBITDA* | 11,067,841 | 7,671,873 | 6,629,687 | 1,661,969 | (1,503,992) | (1,103,977) | 24,423,401 |
* Non-IFRS measure
Appendix 3. Consolidated statement of financial position as at 31 December 2016 (in RR thousand)
31 December 2016 | 31 December 2015 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 6,751,712 | 4,401,703 |
Restricted cash | 39 | - |
Short-term investments | 17,230,012 | 29,981,025 |
Trade and other receivables | 4,607,634 | 3,504,497 |
Prepayments | 746,886 | 1,186,836 |
Current income tax receivable | 97,461 | 41,816 |
Other taxes receivable | 3,663,194 | 1,613,361 |
Inventories | 29,538,204 | 22,569,818 |
Short-term biological assets | 4,696,957 | 3,616,397 |
Total current assets | 67,332,099 | 66,915,455 |
Non-current assets | ||
Property, plant and equipment | 45,662,146 | 35,127,186 |
Inventories intended for construction | 38,963 | 26,851 |
Goodwill | 2,225,304 | 2,405,792 |
Advances paid for property, plant and equipment | 14,172,240 | 5,392,600 |
Long-term biological assets | 1,745,468 | 1,913,224 |
Long-term investments | 17,751,740 | 15,378,412 |
Investments in associates | 110,504 | 431,405 |
Deferred income tax assets | 1,935,298 | 1,490,657 |
Other intangible assets | 1,999,209 | 761,911 |
Long-term restricted cash | - | 71,142 |
Total non-current assets | 85,640,872 | 62,999,180 |
Total assets | 152,972,971 | 129,914,635 |
Liabilities and EQUITY | ||
Current liabilities | ||
Short-term borrowings | 11,704,276 | 25,860,464 |
Trade and other payables | 6,988,905 | 3,736,755 |
Current income tax payable | 99,450 | 383,535 |
Other taxes payable | 3,814,277 | 2,359,134 |
Total current liabilities | 22,606,908 | 32,339,888 |
Non-current liabilities | ||
Long-term borrowings | 32,798,240 | 24,462,877 |
Government grants | 3,712,593 | 2,043,667 |
Deferred income tax liability | 535,514 | 496,235 |
Total non-current liabilities | 37,046,347 | 27,002,780 |
Total liabilities | 59,653,255 | 59,342,668 |
Equity | ||
Share capital | 12,269 | 9,734 |
Treasury shares | (499,590) | (505,880) |
Share premium | 26,964,480 | 10,557,573 |
Share-based payment reserve | 1,181,438 | 1,263,637 |
Retained earnings | 65,420,977 | 59,219,626 |
Equity attributable to owners of ROS AGRO PLC | 93,079,574 | 70,544,691 |
Non-controlling interest | 240,141 | 27,276 |
Total equity | 93,319,715 | 70,571,967 |
Total liabilities and equity | 152,972,970 | 129,914,635 |
Appendix 4. Consolidated statement of cash flows for the year ended 31 December 2016 (in RR thousand) - NOT IFRS PRESENTATION (*)
Year ended | Year ended | |
31 December 2016 | 31 December 2015 | |
Cash flows from operating activities | ||
Profit before income tax | 13,943,202 | 25,513,729 |
Adjustments for: | ||
Depreciation and amortization | 5,819,850 | 3,510,992 |
Interest expense | 4,810,145 | 3,856,802 |
Government grants | (1,943,206) | (2,933,099) |
Interest income | (4,465,667) | (1,576,601) |
Loss/ (gain) on disposal of property, plant and equipment | 31,217 | 32,582 |
Net (gain) / loss on revaluation of biological assets and agricultural produce | (48,176) | (2,040,860) |
Change in provision for net realisable value of inventory | 92,961 | (173,998) |
Share of results of associates | (20,831) | (23,997) |
Change in provision for impairment of receivables and prepayments | (28,388) | 28,755 |
Foreign exchange (gain) / loss, net | 1,074,439 | (3,001,430) |
Share based remuneration | 4,026 | 4,015 |
Lost harvest write-off | - | 327,991 |
Reversal of harvest previously written-off | (63,450) | - |
Net (gain) / loss from bonds held for trading | 14,864 | (636,601) |
Settlement of loans and accounts receivable previously written-off | (937,545) | - |
Change in provision for impairment of other taxes receivables | (197,409) | - |
Change in provision for impairment of advances paid for property, plant and equipment | (7,405) | (9,432) |
Impairment of goodwill | 589,416 | - |
Excess of the Group's share of identifiable net assets acquired over consideration paid | (636,036) | - |
Loss on disposal of subsidiaries, net | - | 1,142 |
Other provisions | (15,454) | - |
Loss on other investments | 7,820 | 26,142 |
Other non-cash and non-operating expenses, net | 41,511 | 67,173 |
Operating cash flow before working capital changes | 18,065,884 | 22,973,305 |
Change in trade and other receivables and prepayments | 371,138 | (1,117,623) |
Change in other taxes receivable | (1,440,920) | (251,233) |
Change in inventories | (6,093,853) | (3,162,095) |
Change in biological assets | 842,463 | (896,493) |
Change in trade and other payables | 1,354,325 | 481,675 |
Change in other taxes payable | (173,631) | 262,793 |
Cash generated from operations | 12,925,406 | 18,290,329 |
Income tax paid | (1,116,502) | (2,368,293) |
Net cash from operating activities | 11,808,904 | 15,922,036 |
Cash flows from investing activities | ||
Purchases of property, plant and equipment | (16,642,716) | (11,423,459) |
Purchases of other intangible assets | (275,416) | (256,505) |
Proceeds from sales of property, plant and equipment | 71,637 | 46,529 |
Purchases of inventories intended for construction | (69,787) | (14,793) |
Purchases of other investments | - | (400,387) |
Investments in subsidiaries, net of cash acquired | (7,506,408) | (931,395) |
Movement in restricted cash | 64,117 | (90,993) |
Dividends received | 12,198 | - |
Proceeds from sale of subsidiaries, net of cash disposed | - | (46) |
Net cash from investing activities | (24,346,375) | (13,071,049) |
Cash flows from financing activities | ||
Proceeds from borrowings | 26,104,909 | 63,966,110 |
Repayment of borrowings | (33,949,009) | (16,657,102) |
Interest paid | (3,823,363) | (3,416,791) |
Proceeds from cash withdrawals from deposits* | 22,469,547 | 34,162,514 |
Deposits placed with banks* | (23,934,790) | (59,209,261) |
Purchases of bonds* | (2,566,211) | (3,433,426) |
Proceeds from sales of bonds* | 3,433,426 | 7,567,628 |
Proceeds from sales of rights of claim* | 124,405 | - |
Loans given* | (1,217,297) | (1,168,351) |
Loans repaid* | 11,261,011 | 1,106,602 |
Purchases of loans issued* | - | (30,080,733) |
Interest received* | 4,585,875 | 981,885 |
Proceeds from government grants | 3,487,866 | 3,014,204 |
Sale of non-controlling interest | - | 164,316 |
Purchases of non-controlling interest | (142,850) | (168,421) |
Proceeds from sales of treasury shares | 6,373 | - |
Proceeds from issue of own shares, net of transaction cost | 16,328,269 | - |
Dividends paid to owners Ros Agro PLC | (7,124,250) | (4,546,749) |
Other financial activities | (4,135) | (18,451) |
Net cash from financing activities | 15,039,776 | (7,736,026) |
Net effect of exchange rate changes on cash and cash equivalents | (152,296) | (1,029,571) |
Net increase/ (decrease) in cash and cash equivalents | 2,350,009 | (5,914,610) |
Cash and cash equivalents at the beginning of the year | 4,401,703 | 10,316,313 |
Cash and cash equivalents at the end of the year | 6,751,712 | 4,401,703 |
(*) 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.