23 Mar 2020 11:59
Acron Groupās 2019 IFRS Net Profit up 80% to USD 383 Million
23 March 2020
Acron Groupās 2019 IFRS Net Profit up 80% to USDĀ 383 Million
Today Acron (Moscow Exchange and LSE: AKRN) released its audited consolidated IFRS financial statements for 2019.
Key Financials
Revenue was RUBĀ 114,835Ā million, up 6% year-on-year, (2018: RUBĀ 108,062Ā million). In dollar equivalent, revenue was up 3% to USDĀ 1,774Ā million from USDĀ 1,723 million.EBITDA* was down 4% year-on-year to RUBĀ 35,749Ā million (2018: RUBĀ 37,053Ā million). In dollar equivalent, EBITDA was down 7% to USDĀ 552Ā million from USDĀ 591Ā million.EBITDA margin was 31%, against 34% a year before.Net profit was up 86% year-on-year to RUBĀ 24,786 million (2018: RUBĀ 13,318Ā million). In dollar equivalent, net profit increased 80% to USDĀ 383Ā million from USDĀ 212Ā million.Net debt was up 2% to RUBĀ 75,185Ā million, against RUBĀ 74,025 million as of 2018 year-end. In dollar equivalent, net debt was up 14% to USDĀ 1,215Ā million from USDĀ 1,066 million.Net debt/EBITDA was 2.1, up from 2.0 as of 2018 year-end. In dollar equivalent, the ratio was 2.2, against 1.8 as of 2018 year-end.Operating Results
Output of key products stood at 7,458,000 tonnes, down 1% year-on-year.Sales of key products totalled 7,569,000 tonnes, up 4% year-on-year.Alexander Popov, Chair of Acronās Board of Directors, commented on the results:
āIn 2019, Acron Groupās sales hit a record high of 7.6 million tonnes, and the sales geography expanded to cover 78 countries worldwide. Over the course of the year, the Group implemented several investment projects. The ammonia unit upgrades at Dorogobuzh and construction of the nitric acid unit in Veliky Novgorod were completed and operate efficiently. Another two major projects entered the active implementation stage: urea granulation will be commissioned in the second quarter of 2020, and the construction of the Urea-6+ unit will be completed in early 2021. In 2019, the Group made capital investments of USDĀ 294Ā million, its maximum amount for the last five years.
āThat said, declining global mineral fertiliser prices in the second half of the year affected the Groupās financial performance. To address this situation, we decided to slow down implementation of the investment programme and refrain from taking on any new projects until the market recovers. This step will help us temporarily minimise capex and prevent the debt burden from increasing, while meeting performance targets in terms of both operations and dividends. In 2019, the Group allocated USD 221 million in dividendsā.
APPENDIX
Notes on Key Items in the Financial Statements
Financial Performance
Acron Groupās 2019 revenue was RUBĀ 114,835Ā million, up 6% year-on-year due to a 4% increase in sales and a 3% increase in the average dollar to rouble exchange rate. Lower global dollar prices for most of the Groupās products prevented revenue from showing stronger growth.
Average Indicative Prices, FOB Baltics/Black Sea
| USD/t | 2019 | 2018 | Change |
| NPK 16-16-16 | 296 | 300 | -1.1% |
| Ammonium Nitrate | 189 | 188 | +0.3% |
| UAN | 149 | 179 | -16.7% |
| Urea | 240 | 251 | -4.4% |
| Ammonia | 235 | 288 | -18.3% |
In the reporting period, the cost of sales was up 10% year-on-year to RUBĀ 59,784Ā million, mainly due to higher sales, growing depreciation and amortisation, increased prices for energy and diesel fuel, and greater payroll costs.
Depreciation and amortisation increased following the launch of a new urea unit at the end of 2018 and two nitric acid units in 2019, as well as equipment upgrades at the existing production facilities. Higher payroll costs were due to a 5% increase in the number of Groupās employees required for the development of the Oleniy Ruchey underground mine, implementation of investment projects at Acron and Dorogobuzh, and construction of the Talitsky mine.
Selling, general and administrative expenses were up 15% to RUBĀ 9,332Ā million as the Groupās expanded international distribution drove an increase in sales, number of employees and leased warehouse capacity. The goal of this expansion is to increase sales to end users.
Transportation expenses were up 17% to RUBĀ 20,774Ā million, mainly due to increased freight costs amid growing sales to the United States and Latin America on terms that include transportation. In addition, the cost of logistics services outside of Russia increased as the rouble softened.
EBITDA decreased 4% year-on-year to RUBĀ 35,749Ā million. In the reporting period, EBITDA margin was 31%, against 34% in 2018. Veliky Novgorod-based Acron, Dorogobuzh, and NWPC operated at margins of 38%, 18%, and 23%, respectively. Dorogobuzhās lower margin in the reporting period was temporary and caused by a stoppage of the ammonia unit to perform upgrades.
In 2019, interest expense declined to RUBĀ 1,115Ā million from RUBĀ 1,607 million in 2018. Based on 2019 results, the Group posted a net exchange profit of RUBĀ 7,013Ā million, driven by the revaluation of assets, loans and liabilities, against a RUBĀ 7,043Ā million loss in 2018. In the reporting period, the gain from the change in the fair value of derivatives was RUBĀ 1,445Ā million, against a RUBĀ 896Ā million gain in 2018.In 2019, net profit increased 86% to RUBĀ 24,786Ā million, against RUBĀ 13,318Ā million year-on-year.
Cash Flow
In 2019, net operating cash flow was RUBĀ 28,278Ā million, almost unchanged year-on-year. In 2019, working capital decreased by RUBĀ 2,084Ā million, while in 2018, working capital was down RUB 1,025Ā million.
Net cash used in investing activities in 2019 came in at RUBĀ 19,054Ā million, against RUBĀ 14,439Ā million in 2018. Capital expenditures were up 31% to RUBĀ 19,030Ā million from RUBĀ 14,542Ā million in 2018. In dollar equivalent, capital expenditures increased 27% to USDĀ 294Ā million as the Group pursued its Development Strategy.
Net cash allocated to financial activities in 2019 was RUBĀ 7,328Ā million (2018: RUBĀ 19,643Ā million). The decline in cash outflow in the reporting period was caused by lower repayment of borrowings. In 2019, net borrowings raised amounted to RUBĀ 8,840Ā million, against RUBĀ 28Ā million of net borrowings repaid in 2018. In the reporting period, RUBĀ 14,313Ā million were paid in dividends (2018: RUBĀ 13,278Ā million). In dollar equivalent, dividend payments in 2019 stood at USDĀ 221Ā million against USDĀ 212Ā million in 2018.
Debt Burden
In 2019, total debt was up 2% to RUBĀ 86,541Ā million (USDĀ 1,398Ā million in dollar equivalent). In May 2019, the Group received a two-year extension on its five-year syndicated structured pre-export loan facility for up to USDĀ 750 million, increasing the share of long-term debt to 85% from 79% on 31 December 2018.
Net debt was up 2% from 31 December 2018 to RUBĀ 75,185Ā million. In dollar equivalent, it was up 14% to USDĀ 1,215Ā million due to a stronger rouble as of the end of the reporting period compared to 31 December 2018.
As of the end of the reporting period, net debt/LTM EBITDA was 2.1, against 2.0 on 31Ā DecemberĀ 2018. In dollar equivalent, the ratio increased to 2.2 from 1.8.
Market Trends
Throughout 2019, global mineral fertiliser prices declined. Urea prices were affected by several factors, including slower U.S. consumption amid adverse weather conditions, increased European output due to lower gas prices, and higher Chinese exports. In the fourth quarter, negative price trends encouraged potential buyers to postpone purchases in expectation of lower prices. As a result, by the beginning of 2020 inventories in the key markets had been depleted, which, coupled with seasonal demand in the United States and Europe, contributed to the recovery of prices in the first quarter of 2020. Prices may receive further support when India begins making active purchases amid lower Chinese exports.As urea prices decreased, AN and UAN prices slumped as well in 2019. NPK prices were under pressure due to lower prices for nitrogen, phosphate, and potash fertilisers. However, the drop in NPK prices was moderate compared to those products, which resulted in the NPK premium over the basic product basket over 20%. Global demand for NPK continues to grow. In particular, Brazil boosted NPK imports 27% to 1.5 million tonnes, of which 63% are supplied by Russian manufacturers. Other countries in the region are also increasing their NPK consumption.Average Indicative Prices, FOB Baltic Sea/Black Sea
| USD/t | Q4 2019 | Q3 2019 | Q4 2018 | Q4 2019/Q3 2019 change | Q4 2019/Q4 2018 change |
| NPK 16-16-16 | 270 | 295 | 316 | -8.3% | -14.4% |
| Ammonium nitrate | 179 | 196 | 186 | -8.7% | -4.1% |
| UAN | 137 | 142 | 229 | -3.1% | -40.0% |
| Urea | 216 | 247 | 293 | -12.6% | -26.2% |
| Ammonia | 225 | 216 | 336 | +4.3% | -33.0% |
The full version of Acron Groupās financial statements is available at www.acron.ru/en
Note: The exchange rate used for currency conversion was RUB 61.9057 to USD 1 as of 31Ā December 2019 and RUB 69.4706 to USD 1 as of 31 December 2018. The average exchange rate for 2019 was RUB 64.7361 to USD 1; the average exchange rate for 2018 was RUB 62.7078 to USD 1.
* EBITDA is calculated as operating profit adjusted for depreciation and amortisation, foreign exchange gain or loss on operating transactions, and other non-cash and extraordinary items.
Media Contacts:
Sergey DorofeevAnastasiya GromovaTatiana SmirnovaPublic RelationsPhone: +7 (495) 777-08-65 (ext. 5196)
Investor Contacts:
Ilya PopovInvestor RelationsPhone: +7 (495) 745-77-45 (ext. 5252)
Background Information
Acron Group is a leading vertically integrated mineral fertiliser producer in Russia and globally, with chemical production facilities in Veliky Novgorod (Acron) and the Smolensk region (Dorogobuzh). The Group owns and operates a phosphate mine in Murmansk region (North-Western Phosphorous Company, NWPC) and is implementing a potash development project in Perm Krai (Verkhnekamsk Potash Company, VPC). It owns transportation and logistics infrastructure, including three Baltic port terminals and distribution networks in Russia and China. Acronās subsidiary, North Atlantic Potash Inc. (NAP), holds mining licences for 11 parcels of the potassium salt deposit at Prairie Evaporite, Saskatchewan, Canada. Acron also holds a minority stake (19.8%) in Polish Grupa Azoty, one of the largest chemical producers in Europe.
In 2019, the Group sold 7.6 million tonnes of various products to 78 countries, with Russia, Brazil, Europe and the United States as key markets.
In 2019, the Group posted consolidated IFRS revenue of RUB 114,835 million (USD 1,774 million) and net profit of RUB 24,786 million (USD 383 million). Acronās shares are on the Level 1 quotation list of the Moscow Exchange and its global depositary receipts are traded at the London Stock Exchange (ticker AKRN). Acron employs over 11,000 people.
For more information about Acron Group, please visit www.acron.ru/en.