Last checked at 13 Aug 2018 09:15
13 August 2018
ROS AGRO financial results for 1H 2018 and Q2 2018
13 August 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 Six months ended 30 June 2018.
1H 2018 Highlights
- Sales amounted to RR 32,815 million (US$ 552 million1), a decrease of RR 4,943 million compared to 1H 2017;
- Adjusted EBITDA2 amounted to RR 5,772 million (US$ 97 million), an increase of RR 333 million compared to 1H 2017;
- Adjusted EBITDA margin increased from 14% in 1H 2017 to 18% in 1H 2018;
- Net profit for the period amounted to RR 2,338 million (US$ 39 million);
- Net debt position3 as of 30 June 2018 amounted to RR 11,331 million (US$ 181 million);
- Net Debt/ Adjusted EBITDA (LTM4) as of 30 June 2018 was 0.79x.
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 2Q 2018 Rosagro's revenue decreased compared to the 2Q 2017 due to the lower prices of sugar and meat, but EBITDA increased in all business units due to the lower costs. Net income of the Company increased but net debt augmented too as well as the capital expenditures."
Key consolidated financial performance indicators
in RR million | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales | 32,815 | 37,758 | (4,943) | (13) | 17,547 | 18,978 | (1,431) | (8) |
Gross profit | 8,080 | 5,428 | 2,652 | 49 | 5,125 | 3,018 | 2,107 | 70 |
Gross margin, % | 25% | 14% | 11% | 29% | 16% | 13% | ||
Adjusted EBITDA | 5,772 | 5,439 | 333 | 6 | 4,057 | 2,714 | 1,343 | 50 |
Adjusted EBITDA margin, % | 18% | 14% | 4% | 23% | 14% | 9% | ||
Net profit for the period | 2,338 | 226 | 2,111 | 934 | 2,129 | 570 | 1,559 | 274 |
Net profit margin % | 7% | 1% | 6% | 12% | 3% | 9% | ||
*Net profit for the period is affected 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 | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales, incl. | 32,815 | 37,758 | (4,943) | (13) | 17,547 | 18,978 | (1,431) | (8) |
Sugar | 10,671 | 14,601 | (3,931) | (27) | 5,458 | 7,192 | (1,734) | (24) |
Meat | 9,417 | 10,037 | (620) | (6) | 5,091 | 5,305 | (215) | (4) |
Agriculture | 3,212 | 5,006 | (1,794) | (36) | 1,745 | 1,336 | 409 | 31 |
Oil and Fat | 10,029 | 9,621 | 407 | 4 | 5,551 | 5,253 | 298 | 6 |
Other | 114 | 31 | 82 | 262 | 39 | 16 | 23 | 149 |
Eliminations | (628) | (1,540) | 912 | 59 | (336) | (124) | (212) | (17) |
Gross profit, incl. | 8,080 | 5,428 | 2,652 | 49 | 5,125 | 3,018 | 2,107 | 70 |
Sugar | 3,110 | 2,987 | 123 | 4 | 1,983 | 1,594 | 390 | 24 |
Meat | 2,444 | 1,851 | 592 | 32 | 1,478 | 1,230 | 248 | 20 |
Agriculture | 510 | (168) | 678 | - | 391 | (128) | 519 | - |
Oil and Fat | 2,332 | 1,263 | 1,069 | 85 | 1,312 | 595 | 718 | 121 |
Other | 21 | 31 | (10) | (33) | 13 | 16 | (3) | (18) |
Eliminations | (338) | (537) | 199 | 37 | (52) | (288) | 235 | 82 |
Adjusted EBITDA, incl. | 5,772 | 5,439 | 333 | 6 | 4,057 | 2,714 | 1,343 | 50 |
Sugar | 2,320 | 1,863 | 457 | 25 | 1,651 | 1,129 | 522 | 46 |
Meat | 2,844 | 2,810 | 34 | 1 | 1,702 | 1,479 | 224 | 15 |
Agriculture | 216 | 56 | 159 | 282 | 152 | (306) | 458 | - |
Oil and Fat | 1,080 | (246) | 1,326 | - | 687 | (187) | 874 | - |
Other | (477) | (436) | (42) | (10) | (234) | (300) | 66 | 22 |
Eliminations | (211) | 1,391 | (1,602) | - | 98 | 899 | (801) | (89) |
Adjusted EBITDA margin, % | 18% | 14% | 4% | 23% | 14% | 9% | 64 | |
Sugar | 22% | 13% | 9% | 30% | 16% | 14% | 88 | |
Meat | 30% | 28% | 2% | 33% | 28% | 5% | 18 | |
Agriculture | 7% | 1% | 6% | 9% | -23% | 32% | - | |
Oil and Fat | 11% | -3% | 14% | 12% | -4% | 16% | - | |
Sugar Segment
The financial results of the Sugar segment for 1H 2018 and Q2 2018 compared to 1H 2017and Q2 2017 respectively are presented in the table below:
in RR million | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales | 10,671 | 14,601 | (3,931) | (27) | 5,458 | 7,192 | (1,734) | (24) |
Cost of sales | (7,565) | (11,612) | 4,047 | 35 | (3,480) | (5,600) | 2,120 | 38 |
Net gain/ (loss) from trading derivatives | 5 | (3) | 7 | - | 6 | 2 | 4 | 193 |
Gross profit | 3,110 | 2,987 | 123 | 4 | 1,983 | 1,594 | 390 | 24 |
Gross profit margin | 29% | 20% | 9% | 36% | 22% | 14% | ||
Distribution and selling expenses | (1,090) | (1,313) | 223 | 17 | (433) | (588) | 155 | 26 |
General and administrative expenses | (806) | (744) | (63) | (8) | (387) | (363) | (25) | (7) |
Other operating income/ (expenses), net | 47 | (52) | 99 | - | 36 | 25 | 11 | 44 |
Operating profit | 1,261 | 879 | 382 | 43 | 1,198 | 668 | 531 | 79 |
Adjusted EBITDA | 2,320 | 1,863 | 457 | 25 | 1,651 | 1,129 | 522 | 46 |
Adjusted EBITDA margin | 22% | 13% | 9% | 30% | 16% | 14% | ||
Sales decreased in 1H 2018 compared to 1H 2017 mainly due to sugar sales price decreased by 13% and sales volume decreased by 16% (1H 2018: 326 ths tn, 1H 2017: 390 ths tn). Buckwheat sales prices decreased by 58%.
Sugar sales, production volumes and average sales prices per kilogram (excl. VAT) wereas follows:
Six months ended | Variance | Three months ended | Variance | |||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sugar production volume(in thousand tonnes), incl. | 26 | 137 | (110) | (81) | 17 | 15 | 3 | 18 |
beet sugar | 26 | 137 | (110) | (81) | 17 | 15 | 3 | 18 |
cane sugar | - | 59 | (59) | (100) | - | 59 | (59) | (10)0) |
Sales volume(in thousand tonnes) | 326 | 390 | (64) | (16) | 161 | 194 | (33) | (17) |
Average sales price(roubles per kg, excl. VAT) | 29.4 | 33.9 | (4.5) | (13) | 31.0 | 34.4 | (3.4) | (10) |
Sales decreased in 2Q 2018 compared to 2Q 2017 mainly due to sugar sales price decreased by 10% and sales volume decreased by 17% (2Q 2018: 161 ths tn, 2Q 2017: 194 ths tn).
Cost of sales decreased in 1H 2018 compared to 1H 2017 by RR 4,047 million mainly due to sugar beet purchase prices of harvest 2017 decreased by 25%.
Distribution and selling expenses decreased by 223 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 1H 2018 and Q2 2018 compared to 1H 2017and Q2 2017 respectively are presented in the table below:
in RR million | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales | 9,417 | 10,037 | (620) | (6) | 5,091 | 5,305 | (215) | (4) |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | (88) | (411) | 324 | 79 | (61) | (75) | 14 | 19 |
Cost of sales | (6,886) | (7,775) | 889 | 11 | (3,552) | (4,000) | 449 | 11 |
Gross profit | 2,444 | 1,851 | 592 | 32 | 1,478 | 1,230 | 248 | 20 |
Gross profit margin | 26% | 18% | 8% | 29% | 23% | 6% | ||
Gross profit excl. effect of biological assets revaluation | 2,531 | 2,262 | 269 | 12 | 1,539 | 1,305 | 234 | 18 |
Adjusted gross profit margin | 27% | 23% | 4% | 30% | 25% | 6% | ||
Distribution and selling expenses | (276) | (184) | (92) | (50) | (164) | (98) | (66) | (68) |
General and administrative expenses | (470) | (257) | (213) | (83) | (258) | (236) | (21) | (9) |
Other operating income/ (expenses), net | 102 | 154 | (52) | (34) | 69 | 84 | (15) | (18) |
incl. reimbursement of operating costs (government grants) | - | 23 | (23) | - | - | 23 | (23) | - |
Operating profit | 1,800 | 1,564 | 236 | 15 | 1,125 | 980 | 145 | 15 |
Adjusted EBITDA | 2,844 | 2,810 | 34 | 1 | 1,702 | 1,479 | 224 | 15 |
Adjusted EBITDA margin | 30% | 28% | 2% | 33% | 28% | 5% | ||
Sales in the meat segment decreased by 6% in 1H 2018 and by 4% in Q2 2018 compared to the respective periods of prior year as a result of a decrease in sales volume and price of livestock pigs that was partly compensated by an increase in sales volume and price of processed pork.
Pork sales volumes and the average pork sales prices per kilogram (excl. VAT) were as follows:
Six months ended | Variance | Three months ended | Variance | |||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales volume (in thousand tonnes), incl. | 79 | 88 | (8) | (10) | 40 | 44 | (4) | (8) |
livestock pigs | 14 | 35 | (22) | (61) | 7 | 14 | (7) | (49) |
processed pork | 66 | 52 | 13 | 25 | 33 | 30 | 3 | 10 |
Average sale prices (roubles per kg, excl. VAT): | ||||||||
livestock pigs | 82.9 | 97.2 | (14.2) | (15) | 86,0 | 102,1 | (16,1) | (16) |
processed pork | 126.4 | 126.3 | 0.1 | 0 | 136.3 | 130.7 | 5.7 | 4 |
Net loss on revaluation of biological assets and agricultural produce in 1H 2017 resulted mainly from a decrease in market prices for live pigs during 1H 2017. There was not significant change in market prices for live pigs in 1H 2018.
An increase in Distribution and selling expenses in 1H 2018 and Q2 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 1H 2018 by RR 213 million includes RR 146 million of an increase in property tax expenses (RR 106 million of expenses in 1H 2018 compared to RR 40 million of net gain in 1H 2017). In 1H 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 Q2 2018 compared to Q2 2017 by 9% 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 23 million in 1H 2018 and Q2 2018 compared to the prior year periods.
Agricultural Segment
As at 30 June 2018 the segment's area of controlled land stands at 687 thousand hectares (30 June 2017: 664 thousand hectares), an increase of 23 thousand hectares or 3%. The financial resultsof the Agricultural segment for 1H 2018 and Q2 2018 compared to 1H 2017 and Q2 2017 respectively are presented below:
in RR million | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales | 3,212 | 5,006 | (1,794) | (36) | 1,745 | 1,336 | 409 | 31 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | (618) | (1,493) | 875 | 59 | (337) | (347) | 10 | 3 |
Cost of sales | (2,083) | (3,681) | 1,597 | 43 | (1,016) | (1,117) | 101 | 9 |
Net gain/ (loss) from trading derivatives | - | - | - | - | - | (1) | 1 | - |
Gross profit | 510 | (168) | 678 | - | 391 | (128) | 519 | - |
Gross profit margin | 16% | -3% | 19% | 22% | -10% | 32% | ||
Gross profit excl. effect of biological assets and agricultural produce revaluation | 1,129 | 1,325 | (197) | (15) | 729 | 219 | 510 | 232 |
Adjusted gross profit margin | 35% | 26% | 9% | 42% | 16% | 25% | ||
Distribution and selling expenses | (643) | (1,321) | 678 | 51 | (434) | (494) | 61 | 12 |
General and administrative expenses | (611) | (445) | (166) | (37) | (319) | (192) | (127) | (66) |
Other operating income/ (expenses), net | (68) | 64 | (132) | - | (52) | 36 | (88) | - |
incl. reimbursement of operating costs (government grants) | 60 | 40 | 20 | 51 | 33 | 40 | (7) | (17) |
Operating profit | (811) | (1,868) | 1,057 | 57 | (414) | (779) | 364 | 47 |
Adjusted EBITDA | 216 | 56 | 159 | 282 | 152 | (306) | 458 | - |
Adjusted EBITDA margin | 7% | 1% | 6% | 9% | -23% | 32% | ||
An increase in sales volumes and sales prices was the main driver of an increase in Salesin Q2 2018 compared to Q2 2017.
As for Sales in 1H 2018 compared to 1H 2017, the drop was resulted by lower sales volumesof almost all crops and lower sales price of sugar beet in 1H 2018 compared to the prior year period.
Sales volumes by product were as follows:
Thousand tonnes | Year ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
sugar beet | 2 | 452 | (450) | (100) | - | - | - | - |
wheat | 113 | 183 | (70) | (38) | 74 | 16 | 59 | 375 |
barley | 79 | 25 | 54 | 217 | 47 | 13 | 35 | 275 |
sunflower seeds | 3 | 49 | (46) | (94) | 1 | 31 | (30) | (97) |
corn | 76 | 71 | 5 | 7 | 34 | 33 | 1 | 4 |
soy | 31 | 46 | (15) | (33) | 14 | 15 | (1) | (9) |
The average sale prices per kilogram (excl. VAT) were as follows:
RR per kilogram, excl. VAT | Year ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
sugar beet | 1.0 | 2.1 | (1.1) | (53) | 0.0 | 0.0 | - | - |
wheat | 7.2 | 7.2 | (0.0) | (1) | 7.6 | 6.8 | 0.8 | 12 |
barley | 7.3 | 6.8 | 0.5 | 7 | 7.8 | 6.6 | 1.3 | 19 |
sunflower seeds | 18.5 | 15.7 | 2.8 | 18 | 18.8 | 15.1 | 3.7 | 24 |
corn | 9.5 | 8.7 | 0.8 | 9 | 9.5 | 8.1 | 1.4 | 18 |
soy | 21.4 | 19.5 | 1.9 | 10 | 23.0 | 18.9 | 4.1 | 22 |
Net loss on revaluation of biological assets and agricultural produce in 1H 2018 representsthe realisation of gain from crops revaluation, recognised for harvest of 2017 in the financial statements of 2017 and remained unrealised as at 31 December 2017.
In IFRS financial statements of 2017 the Group recognised gain from all crops, harvested in 2017, including crops in stock at the year-end. Consequently, the crops in stock as at 31 December 2017 were measured at market prices prevailing at the time of harvest. In IFRS financial statementsfor 2018, as these crops are realised, the gain on revaluation is written off in the statementof comprehensive income decreasing the profit of the segment. The gain on revaluation of crops and its subsequent realisation do not affect the Adjusted EBITDA figure.
Distribution and selling expenses decreased by RR 678 million in 1H 2018 (Q2 2018:RR 61 million) as volumes of crops sold during 2018 compared to 2017 were significantly lower with the highest drop in volume of sugar beet sold, which also resulted in decrease of transportation and loading services expenses and fuel and energy expenses.
General and administrative expenses increased by RR 145 million in 1H 2018 (Q2 2018:RR 127 million), which is attributed to the higher payroll costs as a result of higher numberof employees in administrative function, an increase in property tax and higher amortisationas the result of an increase in balance of intangibles (acquisition and put in use of servers for SAP and surveillance system).
Oil and Fat segment
The financial results of the oil and fat segment for 1H 2018 and Q2 2018 compared to 1H 2017 and Q2 2017 respectively are presented below:
in RR million | Year ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales | 10,029 | 9,621 | 407 | 4 | 5,551 | 5,253 | 298 | 6 |
Cost of sales | (7,696) | (8,358) | 662 | 8 | (4,239) | (4,659) | 420 | 9 |
Gross profit | 2,332 | 1,263 | 1,069 | 85 | 1,312 | 595 | 718 | 121 |
Gross profit margin | 23% | 13% | 10% | 24% | 11% | 13% | ||
Distribution and selling expenses | (1,110) | (1,389) | 279 | 20 | (554) | (717) | 163 | 23 |
General and administrative expenses | (385) | (363) | (21) | (6) | (192) | (178) | (15) | (8) |
Other operating income/ (expenses), net | (26) | 115 | (141) | - | (41) | 82 | (123) | - |
Operating profit/ (loss) | 811 | (374) | 1,185 | - | 526 | (217) | 743 | - |
Adjusted EBITDA | 1,080 | (246) | 1,326 | - | 687 | (187) | 874 | - |
Adjusted EBITDA margin | 11% | -3% | 14% | 12% | -4% | 16% | ||
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 | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Sales, incl. | 10,029 | 9,621 | 407 | 4 | 5,551 | 5,253 | 298 | 6 |
Samara oil plant | 5,314 | 5,014 | 300 | 6 | 3,107 | 3,068 | 39 | 1 |
Ekat. fat plant | 3,855 | 3,977 | (122) | (3) | 2,170 | 1,880 | 290 | 15 |
Far East | 2,062 | 1,781 | 281 | 16 | 1,152 | 875 | 277 | 32 |
Eliminations(*) | (1,202) | (1,151) | (51) | (4) | (878) | (570) | (308) | (54) |
Gross profit, incl. | 2,332 | 1,263 | 1,069 | 85 | 1,312 | 595 | 718 | 121 |
Samara oil plant | 1,023 | 200 | 823 | 411 | 624 | 42 | 582 | 1,389 |
Ekat. fat plant | 1,047 | 973 | 75 | 8 | 537 | 547 | (10) | (2) |
Far East | 347 | 94 | 253 | 268 | 211 | 22 | 188 | 839 |
Eliminations(*) | (85) | (4) | (81) | (1,86)6) | (59) | (16) | (43) | (262) |
Adjusted EBITDA, incl. | 1,080 | (246) | 1,326 | - | 687 | (187) | 874 | - |
Samara oil plant | 556 | (231) | 788 | - | 390 | (172) | 562 | - |
Ekat. fat plant | 351 | (64) | 414 | - | 187 | 12 | 175 | 1,402 |
Far East | 193 | (8) | 201 | - | 133 | (44) | 178 | - |
Eliminations(*) | (20) | 57 | (77) | - | (24) | 17 | (41) | - |
Adjusted EBITDA margin, % | 11% | -3% | 14% | - | 12% | -4% | 16% | |
Samara oil plant | 10% | -5% | 15% | - | 13% | -6% | 18% | |
Ekat. fat plant | 9% | -2% | 11% | - | 9% | 1% | 8% | |
Far East | 9% | -0.4% | 10% | - | 12% | -5.1% | 17% | |
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 tons | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
mayonnaise | 20 | 31 | (10) | (33) | 11 | 15 | (4) | (28) |
margarine | 14 | 16 | (2) | (15) | 6 | 7 | (1) | (11) |
bottled oil | 25 | 7 | 18 | 243 | 16 | 3 | 13 | 486 |
bulk oil | 74 | 79 | (5) | (7) | 38 | 54 | (16) | (30) |
meal | 133 | 137 | (4) | (3) | 67 | 68 | (0) | (0) |
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 | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
mayonnaise | 80.6 | 79.6 | 1.0 | 1 | 81.5 | 82.3 | (0.8) | (1) |
margarine | 79.5 | 77.8 | 1.7 | 2 | 82.3 | 77.5 | 4.8 | 6 |
bottled oil | 53.9 | 60.3 | (6.3) | (10) | 54.0 | 57.3 | (3.3) | (6) |
bulk oil | 43.2 | 41.9 | 1.3 | 3 | 45.2 | 40.9 | 4.3 | 11 |
meal | 18.1 | 16.4 | 1.8 | 11 | 20.6 | 16.5 | 4.1 | 25 |
Decrease in Distribution and selling expenses by RR 279 million in 1H 2018 (Q2 2018: RR 163 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 1H 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 | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Net cash from operating activities, incl. | 7,306 | 12,940 | (5,634) | (44) | 3,392 | 5,827 | (2,435) | (42) |
Operating cash flow before working capital changes | 6,543 | 6,187 | 356 | 6 | 4,422 | 3,149 | 1,272 | 40 |
Working capital changes | 993 | 7,034 | (6,041) | (86) | (894) | 2,802 | (3,696) | - |
Net cash from investing activities, incl. | (7,939) | (7,362) | (577) | (8) | (4,809) | (4,511) | (298) | (7) |
Purchases of property, plant and equipment and inventories intended for construction | (7,882) | (7,347) | (535) | (7) | (4,783) | (4,446) | (337) | (8) |
Net cash from financing activities | (1,749) | 2,087 | (3,837) | - | 2,418 | (4,402) | 6,820 | - |
Net effect of exchange rate changes on cash and cash equivalents | 63 | (117) | 180 | - | 64 | (20) | 84 | - |
Net (decrease) / increase in cash and cash equivalents | (2,318) | 7,549 | (9,868) | - | 1,066 | (3,106) | 4,172 | - |
(*) See Appendix 4
The main investments in property, plant and equipment and inventories intended for construction in 1H 2018 were made in the Meat segment in the amount of RR 5,267 million (1H 2017: RR 1,708 million), related to the construction projects in the Tambov and Far East regions and in Sugar segment in the amount of RR 1,222 (1H 2017: RR 1,130 million). Significant investments were also made in the Agriculture segment in the amount of RR 750 million (1H 2017: RR 3,864 million), related to purchases of machinery and equipment. Investments in the Oil and Fat segment amounted to RR 623 (1H 2017: RR 636 million).
Debt position and liquidity management
in RR million | 30 June 2018 | 30 June 2017 | Variance | |
Units | % | |||
Gross debt | 47,128 | 46,651 | 477 | 1 |
Short-term borrowings | 6,314 | 8,864 | (2,549) | (29) |
Long-term borrowings | 40,814 | 37,788 | 3,026 | 8 |
Cash and cash equivalents, bank deposits and bonds | (35,797) | (40,048) | 4,251 | 11 |
Short-term cash, deposits and bonds | (18,659) | (22,901) | 4,243 | 19 |
Long-term cash, deposits and bonds | (17,138) | (17,146) | 8 | 0 |
Net debt | 11,331 | 6,604 | 4,728 | 72 |
Short-term borrowings, net | (12,344) | (14,038) | 1,693 | 12 |
Long-term borrowings, net | 23,676 | 20,642 | 3,034 | 15 |
Adjusted EBITDA (LTM4) | 14,289 | 13,955 | 333 | 2 |
Net debt/ Adjusted EBITDA (LTM) | 0.79 | 0.47 | 0.3 | |
Net finance income/ (expense)
in RR million | Six months ended | Variance | Three months ended | Variance | ||||
30 June 2018 | 30 June 2017 | Units | % | 30 June 2018 | 30 June 2017 | Units | % | |
Net interest expense | (1,079) | (1,324) | 245 | 18 | (397) | (483) | 86 | 18 |
Gross interest expense | (1,589) | (1,599) | 10 | 1 | (763) | (739) | (24) | (3) |
Reimbursement of interest expense | 510 | 275 | 235 | 85 | 366 | 256 | 110 | 43 |
Interest income | 1,815 | 2,105 | (290) | (14) | 873 | 971 | (98) | (10) |
Net gain/ (loss) from bonds held for trading | (8) | 7 | (15) | - | -39 | 15 | (54) | - |
Other financial income, net | (81) | 62 | (143) | - | -83 | 97 | (181) | - |
Net foreign exchange gain/ (loss) | (102) | 72 | (174) | - | (82) | 104 | (186) | - |
Other financial income / (expenses), net | 21 | (10) | 31 | - | (1) | (7) | 5 | 78 |
Total net finance income/ (expenses) | 647 | 851 | (204) | (24) | 353 | 601 | (247) | (41) |
In Q2 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 Q2 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.
__________________________________
(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:
Rusagro Group is a leading Russian sugar producer, producing beet sugar on nine production sites. The Company produces white and brown cube sugar and packaged sugar sold under the brands Chaikofsky, Russkii Sakhar, Mon Cafe and Brauni. The Sugar division is vertically integrated and it processes sugar beet cultivated by Rusagro's Agriculture division, through which we strive to ensure a consistent supply of sugar beets. The Sugar division also operates a cereal plant and sells buckwheat and rice under the brand Tyoplye Traditsii.
Meat:
According to the National Union of Pig Breeders, Rusagro Group is the third largest pork producer in Russia on the ground of production volumes of 2017. The Company has vertically integrated pork production with feed production plant, breeding centres, pig farms, a slaughterhouse and waste utilization plants. The Meat division has implemented best practices in biosecurity at the pig complexes It produces a wide range of B2B and B2C products sold under the brand Slovo Myasnika launched in 2016.
Agricultural:
The Group currently controls one of the largest land banks among Russian agriculture producers, with 687 thousand hectares of land under control located in the highly fertile Black Earth region of Russia and in the Far East Primorie region. Land and production sites are strategically located within the same regions to optimize efficiency and minimize logistical costs. Rusagro is one of the major sugar beet and grains producers in Russia and it also produces sunflower seeds and soybeans. These products are partially consumed by the Meat division, supporting a synergistic effect and lowering price change risk.
Oil and Fat:
Rusagro is a leading producer of mayonnaise and consumer margarine in Russia, such as "Provansal EZhK", "Schedroe Leto", "Mechta Khozyayki". The oil extraction plant located in Samara enables to control the source of 100% of the sunflower oil required by our oil and fats production plant in Ekaterinburg. The Oil and Fats division also operates soybean extraction plant with a range of consumer products located in the Russian Far East.
Details of call:
Date | 13 August 2018 |
Time | 4:00 PM (Moscow) /2:00 PM (London) |
Subject | ROS AGRO PLC 1H and Q2 2018 Financial results |
UK Toll Free UK Local Line | 0800 358 6377 +44 330 336 9125 |
USA Toll Free USA Local Line | 888-204-4368 +1 323-794-2423 |
Russia Toll Free | +7 495 213 1767
|
Conference ID | 7938391 |
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 June 2018 (in RR thousand)
Six months ended 30 June | Three months ended 30 June | |||
2018 | 2017 | 2018 | 2017 | |
Sales | 32,814,570 | 37,757,805 | 17,547,016 | 18,978,297 |
Net gain on revaluation of biological assets and agricultural produce | (900,439) | (3,393,028) | (541,715) | (1,424,719) |
Cost of sales | (23,838,828) | (28,934,217) | (11,885,498) | (14,537,495) |
Net gain from trading derivatives | 4,560 | (2,647) | 5,542 | 1,893 |
Gross profit | 8,079,863 | 5,427,913 | 5,125,345 | 3,017,976 |
Distribution and selling expenses | (3,328,901) | (3,845,683) | (1,669,414) | (1,752,878) |
General and administrative expenses | (2,641,801) | (2,224,088) | (1,318,112) | (1,258,738) |
Other operating income/ (expenses), net | (23,146) | (116,845) | 8,977 | (191,345) |
Operating profit / (loss) | 2,086,015 | (758,703) | 2,146,796 | (184,985) |
Interest expense | (1,079,010) | (1,323,602) | (397,075) | (483,262) |
Interest income | 1,815,118 | 2,105,354 | 873,156 | 971,296 |
Net gain/ (loss) from bonds | (7,959) | 7,271 | (39,318) | 15,113 |
Other financial income/ (expenses), net | (81,376) | 61,532 | (83,461) | 97,457 |
Profit before income tax | 2,732,788 | 107,173 | 2,500,098 | 427,533 |
Income tax expense | (395,288) | 118,905 | (371,153) | 142,227 |
Profit for the year | 2,337,500 | 226,078 | 2,128,945 | 569,760 |
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 | - | 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) | - | (60,267) |
Total comprehensive income for the period | 2,337,500 | 343,879 | 2,128,945 | 810,827 |
Profit is attributable to: | ||||
Owners of ROS AGRO PLC | 2,317,189 | 307,465 | 2,113,255 | 585,049 |
Non-controlling interest | 20,311 | (81,387) | 15,690 | (15,289) |
Profit for the period | 2,337,500 | 226,078 | 2,128,945 | 569,760 |
Total comprehensive income is attributable to: | ||||
Owners of ROS AGRO PLC | 2,317,189 | 307,465 | 2,113,255 | 585,049 |
Non-controlling interest | 20,311 | (81,387) | 15,690 | (15,289) |
Total comprehensive income for the period | 2,337,500 | 226,078 | 2,128,945 | 569,760 |
Earnings per ordinary share for profit attributable to the owners of ROSAGRO PLC, basic and diluted(in RR per share) | 86.14 | 11.94 | 78.56 | 22.73 |
Appendix 2. Unaudited segment information for the Six months ended 30 June 2018 (in RR thousand)
1H 2018 | Sugar | Meat | Agriculture | Oil and Fat | Other | Eliminations | Total |
Sales | 10,670,515 | 9,416,924 | 3,212,126 | 10,028,581 | 113,960 | (627,537) | 32,814,569 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | (87,502) | (618,239) | - | - | (194,698) | (900,439) |
Cost of sales | (7,564,829) | (6,885,919) | (2,083,484) | (7,696,415) | (92,775) | 484,594 | (23,838,828) |
incl. Depreciation | (1,057,184) | (1,035,071) | (203,648) | (176,330) | (492) | (6,990) | (2,479,715) |
Net gain/ (loss) from trading derivatives | 4,560 | - | - | - | - | - | 4,560 |
Gross profit / (loss) | 3,110,246 | 2,443,503 | 510,403 | 2,332,166 | 21,185 | (337,641) | 8,079,863 |
Distribution and Selling, General and administrative expenses | (1,896,708) | (746,003) | (1,253,626) | (1,494,715) | (511,967) | (67,682) | (5,970,701) |
incl. Depreciation | (49,418) | (23,816) | (76,830) | (66,382) | (12,967) | 6,990 | (222,423) |
Other operating income/(expenses), net | 46,978 | 102,417 | (67,816) | (26,008) | 10,840,370 | (10,919,086) | (23,145) |
incl. Reimbursement of operating costs (government grants) | - | - | 60,277 | - | - | - | 60,277 |
Operating profit / (loss) | 1,260,516 | 1,799,917 | (811,039) | 811,443 | 10,349,588 | (11,324,409) | 2,086,015 |
Adjustments: | |||||||
Depreciation included in Operating Profit | 1,106,601 | 1,058,886 | 280,478 | 242,712 | 13,459 | - | 2,702,136 |
Other operating (income) /expenses, net | (46,978) | (102,417) | 67,816 | 26,008 | (10,840,370) | 10,919,086 | 23,145 |
Reimbursement of operating costs (government grants) | - | - | 60,277 | - | - | - | 60,277 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | 87,502 | 618,239 | - | - | 194,698 | 900,439 |
Adjusted EBITDA* | 2,320,139 | 2,843,888 | 215,771 | 1,080,163 | (477,323) | (210,744) | 5,771,894 |
* Non-IFRS measure
Appendix 2 (continued). Unaudited segment information for the Six months ended 30 June 2017 (in RR thousand)
1H 2017 | Sugar | Meat | Agriculture | Oil and Fat | Other | Eliminations | Total |
Sales | 14,601,491 | 10,037,183 | 5,005,911 | 9,621,299 | 31,482 | (1,539,561) | 37,757,805 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | (411,093) | (1,493,100) | - | - | (1,488,834) | (3,393,027) |
Cost of sales | (11,611,604) | (7,775,083) | (3,680,574) | (8,358,195) | - | 2,491,238 | (28,934,218) |
incl. Depreciation | (877,385) | (940,719) | (400,330) | (184,298) | - | (5,329) | (2,408,061) |
Net gain/ (loss) from trading derivatives | (2,647) | - | - | - | - | - | (2,647) |
Gross profit | 2,987,240 | 1,851,007 | (167,763) | 1,263,104 | 31,482 | (537,157) | 5,427,913 |
Distribution and Selling, General and administrative expenses | (2,056,601) | (441,096) | (1,765,098) | (1,752,066) | (492,424) | 437,515 | (6,069,770) |
incl. Depreciation | (55,257) | (25,129) | (56,007) | (58,524) | (25,175) | 3,426 | (216,666) |
Other operating income/(expenses), net | (51,778) | 154,314 | 64,406 | 115,279 | 6,071,927 | (6,470,993) | (116,845) |
incl. Reimbursement of operating costs (government grants) | - | 22,957 | 39,903 | - | - | - | 62,860 |
Operating profit / (loss) | 878,861 | 1,564,225 | (1,868,455) | (373,683) | 5,610,985 | (6,570,635) | (758,702) |
Adjustments: | |||||||
Depreciation included in Operating Profit | 932,642 | 965,848 | 456,337 | 242,822 | 25,175 | 1,903 | 2,624,727 |
Other operating (income) /expenses, net | 51,778 | (154,314) | (64,406) | (115,279) | (6,071,927) | 6,470,993 | 116,845 |
Reimbursement of operating costs (government grants) | - | 22,957 | 39,903 | - | - | - | 62,860 |
Net gain/ (loss) on revaluation of biological assets and agricultural produce | - | 411,093 | 1,493,100 | - | - | 1,488,834 | 3,393,027 |
Adjusted EBITDA* | 1,863,281 | 2,809,809 | 56,479 | (246,140) | (435,767) | 1,391,095 | 5,438,757 |
* Non-IFRS measure
Appendix 3. Unaudited consolidated statement of financial position as at 30 June 2018(in RR thousand)
30 June 2018 | 31 December 2017 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 2,541,947 | 4,860,335 |
Restricted cash | 45 | 42 |
Short-term investments | 18,230,000 | 18,457,778 |
Trade and other receivables | 3,278,950 | 3,196,315 |
Prepayments | 1,286,852 | 1,201,479 |
Current income tax receivable | 133,097 | 212,026 |
Other taxes receivable | 3,459,392 | 3,352,606 |
Inventories and short-term biological assets | 29,160,961 | 29,675,851 |
Total current assets | 58,091,244 | 60,956,432 |
Non-current assets | ||
Property, plant and equipment | 59,463,487 | 56,390,084 |
Inventories intended for construction | 2,125,259 | 795,314 |
Goodwill | 1,826,258 | 1,826,258 |
Advances paid for non-current assets | 14,140,345 | 13,841,743 |
Long-term biological assets | 1,905,138 | 1,719,784 |
Long-term investments and receivables | 17,758,147 | 17,594,030 |
Investments in associates | 7,320 | 7,320 |
Deferred income tax assets | 2,148,919 | 1,992,839 |
Other intangible assets | 2,179,078 | 2,286,181 |
Total non-current assets | 101,553,951 | 96,453,553 |
Total assets | 159,645,195 | 157,409,985 |
Liabilities and EQUITY | ||
Current liabilities | ||
Short-term borrowings | 6,314,378 | 8,863,525 |
Trade and other payables | 8,016,583 | 6,773,069 |
Current income tax payable | 137,567 | 63,727 |
Other taxes payable | 4,170,525 | 4,072,364 |
Total current liabilities | 18,639,053 | 19,772,685 |
Non-current liabilities | ||
Long-term borrowings | 40,814,071 | 37,787,777 |
Government grants | 6,514,588 | 6,377,469 |
Deferred income tax liability | 886,924 | 744,113 |
Total non-current liabilities | 48,214,552 | 44,909,359 |
Total liabilities | 66,853,605 | 64,682,044 |
Equity | ||
Share capital | 12,269 | 12,269 |
Treasury shares | (491,978) | (491,978) |
Additional paid-in capital | 26,964,480 | 26,964,480 |
Other reserves | 1,308,189 | 1,308,188 |
Retained earnings | 64,866,877 | 64,758,966 |
Equity attributable to owners of ROS AGRO PLC | 92,659,837 | 92,551,925 |
Non-controlling interest | 131,753 | 176,016 |
Total equity | 92,791,590 | 92,727,941 |
Total liabilities and equity | 159,645,195 | 157,409,985 |
Appendix 4. Unaudited consolidated statement of cash flows for the Six months ended 30 June 2018 (in RR thousand) - NOT IFRS PRESENTATION (*)
Six months ended | ||
30 June 2018 | 30 June 2017 | |
Cash flows from operating activities | ||
Profit before income tax | 2,732,758 | 107,172 |
Adjustments for: | ||
Depreciation and amortization | 3,813,700 | 3,478,520 |
Interest expense | 1,588,837 | 1,598,758 |
Government grants | (754,454) | (525,113) |
Interest income | (1,815,118) | (2,105,354) |
Loss/ (gain) on disposal of property, plant and equipment | 14,767 | 44,053 |
Net (gain) / loss on revaluation of biological assets and agricultural produce | 900,439 | 3,393,028 |
Change in provision for net realisable value of inventory | (66,378) | (24,876) |
Share of results of associates | - | (15,321) |
Change in provision for impairment of receivables and prepayments | 7,562 | 37,402 |
Foreign exchange (gain) / loss, net | 154,766 | (116,587) |
Lost / (reversal of) harvest write-off | 2,224 | - |
Net (gain) / loss from bonds held for trading | 7,954 | (7,271) |
Settlement of loans and accounts receivable previously written-off | (130) | (99,915) |
Change in provision for impairment of advances paid for property, plant and equipment | (35,039) | 24,908 |
Loss on other investments | - | 400,400 |
Other non-cash and non-operating expenses, net | (9,360) | (3,080) |
Operating cash flow before working capital changes | 6,542,529 | 6,186,725 |
Change in trade and other receivables and prepayments | (106,072) | 1,161,934 |
Change in other taxes receivable | (106,784) | 1,288,221 |
Change in inventories and biological assets | 245,011 | 3,604,179 |
Change in trade and other payables | 896,768 | 1,077,577 |
Change in other taxes payable | 63,868 | (98,023) |
Cash generated from operations | 7,535,319 | 13,220,613 |
Income tax paid | (229,035) | (280,383) |
Net cash from operating activities | 7,306,285 | 12,940,230 |
Cash flows from investing activities | ||
Purchases of property, plant and equipment | (7,083,672) | (7,188,112) |
Purchases of other intangible assets | (93,666) | (109,919) |
Proceeds from sales of property, plant and equipment | 35,919 | 19,268 |
Purchases of inventories intended for construction | (797,854) | (158,867) |
Investments in subsidiaries, net of cash acquired | 80 | 79,426 |
Movement in restricted cash | 658 | (3,432) |
Other investing activities | - | 36 |
Net cash from investing activities | (7,938,535) | (7,361,600) |
Cash flows from financing activities | - | - |
Proceeds from borrowings | 5,975,114 | 9,322,128 |
Repayment of borrowings | (6,390,966) | (12,194,414) |
Interest paid | (1,299,958) | (1,507,944) |
Change in cash on bank deposits* | 1,947,002 | 7,143,400 |
Loans given* | (1,404,808) | (7) |
Loans repaid* | 3,378 | 407,522 |
Interest received* | 1,288,976 | 2,393,054 |
Proceeds from government grants | 591,516 | 969,623 |
Purchases of non-controlling interest | (56,816) | (81,218) |
Proceeds from sales of treasury shares | - | 6,664 |
Dividends paid to owners Ros Agro PLC | (2,384,983) | (4,366,760) |
Lease payments | (17,605) | - |
Other financial activities | - | (4,625) |
Net cash fromfinancing activities | (1,749,149) | 2,087,423 |
Net effect of exchange rate changes on cash and cash equivalents | 63,011 | (116,762) |
Net increase/ (decrease) in cash and cash equivalents | (2,318,389) | 7,549,291 |
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 | 2,541,947 | 14,301,003 |
Net decrease in cash and cash equivalents, adjusted for: | (2,318,389) | |
Non-cash adjustments affecting Net Debt | (1,007,327) | |
Change in financial instruments not included in Net debt | (1,401,430) | |
Change in Net debt | (4,727,146) |
(*) 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.