Last checked at 23 Apr 2012 09:00
For Immediate Release 23 April 2012
PhosAgro2011 IFRS Net Profit Up 88% to USD 765 Million
Moscow - PhosAgro ("PhosAgro" or "the Company") , a leading global vertically integrated phosphate-based fertiliser producer, today announces its audited consolidated IFRS financial statements for the year ended 31 December 2011. PhosAgro earned a profit of RUB 22.5 billion (USD 765 million) for 2011, up 88% year-on-year (y-o-y) from RUB 12.0 billion (USD 395 million) in 2010. Basic and diluted earnings per share (with a nominal value of RUB 2.5) grew 89% y-o-y to RUB 161 (USD 5.48).
Financial and Operational Highlights:
2011 2010 y-o-y Change (RUB vs. Result RUB) USD RUB USD RUB % Revenue 3,420m 100,518m 2,534m 76,951m 31% EBITDA* 1,204m 35,371m 674m 20,464m 73% Net Income 765m 22,476m 395m 11,981m 88% Earnings per share 5.48 161 2.79 85 89% Sales volumes kmt kmt Phosphate-based fertilisers 4,061.7 3,841.5 5.7% sales Phosphate rock sales 4,149.3 4,732.5 (12.3)% Nitrogen fertilisers sales 889.4 850.4 4.6%
Rates: average 2010: 30.3692 RUB/USD; 2011: 29.3874 RUB/USD
As of 31 December 2010: 30.4769 RUB/USD; as of 31 December 2011:
32.1961 RUB/USD
*EBITDA is calculated as operating profit adjusted for depreciation and amortisation and other material non-cash items
Other Highlights
· Completed modernisation of the 4th production line at Ammophos, increasing NPK fertiliser capacity to 1.7 million tonnes per year;
· PhosAgro associate PhosInt Limited participated in a settlement agreement that ended the dispute between the owners of Nordic Rus Holding, which owns 7.73% of the share capital (10.3% of ordinary shares) of PhosAgro subsidiary Apatit. As a result of the settlement between Acron and Yara International, 51% of Nordic Rus Holding is now owned by Phosint Limited;
· Urea capacity increase at Cherepovetsky Azot on track for launch in May-June 2012.
PhosAgrotoday reports 2011 net profit of RUB 22.5 billion (USD 765 million), an increase of 88% y-o-y from RUB 12.0 billion (USD 395 million) in 2010. Revenue for the period was 31% higher y-o-y at RUB 100.5 billion (USD 3.4 billion) compared to RUB 77.0 billion (USD 2.5 billion) for 2010.
Operating profit for 2011 was RUB 29.3 billion (USD 998 million), a 100% increase from 2010. EBITDA increased 73% y-o-y to RUB 35.4 billion (USD 1.2 billion) in 2011, representing an EBITDA margin of 35%, compared to an EBITDA margin of 27% on a RUB 20.5 billion (USD 674 million) result in 2010. Financial performance in 2011 was influenced primarily by higher fertiliser prices compared to 2010.
Cash flow from operations amounted to RUB 32.4 billion (USD 1.1 billion) in 2011, compared to RUB 15.1 billion (USD 498 million) in 2010. The company's capital expenditure (capex) in cash during the same period was RUB 12.9 billion (USD 439 million), compared to RUB 13.0 billion (USD 429 million) in 2010. Investments in 2011 focused on expanding PhosAgro's capacities for key inputs and raw materials, which are discussed in more detail below.
Net debt at the end of 2011 stood at RUB 15.2 billion (USD 472 million), up from RUB 3.7 billion (USD 120 million) from 31 December 2010. This puts PhosAgro's Net debt to EBITDA at a very comfortable level of 0.43x.
CEO Maxim Volkov comments:
"I am pleased to say that in 2011 PhosAgro's revenue exceeded RUB 100 billion for the first time in our history, and this was the second-best year ever (after 2008) in terms of EBITDA and net profit - which reached USD 1.2 billion (up 73% y-o-y) and USD 765 million (up 88% y-o-y), respectively.
"In addition to exceptional financial results, we over-delivered on the promise we made to investors during the IPO to pay around 30% of net profit for the last 3 quarters of 2011 as dividends: the Board has recommended total dividend payments for the last nine months of 2011 of RUB 7.2 billion, or 49% of net profit attributable to the equity holders of the Parent for the same period.**
"PhosAgro made important progress on key strategic priorities during 2011. We increased vertical integration in key inputs like electricity and increased processing of our own raw materials. Modernisation of our ammonia production has resulted in reduced gas consumption, and therefore lower production costs, per tonne of product.
"One of our most important achievements in 2011 was the modernisation of the 4th production line at Ammophos, which further improved our product flexibility by increasing our NPK capacity to 1.7 mln tonnes per year. We produced a record-high 1.2 million tonnes of NPK in 2011, and expect to further increase this amount in 2012.
"PhosAgro has maintained capacity utilisation at near 100% as a result of this enhanced product flexibility, which allows us to switch between any type of phosphate-based fertiliser. While India, the primary global importer of DAP, has put downward pressure on markets since Q4 2011, demand for NPKs has remained strong throughout this period and we have adjusted our production lines accordingly.
"Other notable developments in 2011 were related to global supply: we saw China widen the group of phosphate-based fertiliser products covered by restrictive export duties to include NP and TSP. This, combined with a global market that has reached 21 million tonnes per year, makes the ramp-up of Ma'aden's DAP production a significantly less impactful event for the global supply/demand balance.
"Our 2011 financial results, combined with a generous dividend policy as well as continued successful development of more efficient and more flexible production capacity, underscore PhosAgro's unique position as the world's only publicly traded pure phosphates play."
** Dividend for April - September 2011: RUB 3,112 mln; recommended dividend for October - December 2011: RUB 4,046 mln. Net profit attributable to the equity holders of the parent company for April-December 2011: RUB 14,600 mln (unaudited).
Market Conditions
Although soft commodities prices succumbed to downward pressure in the last quarter of 2011, corn and soybean prices at the end of the year were 63% and 22% higher, respectively, than the historic average for 2006-2010. Farmers have responded to this by planting more corn: current USDA estimates are for 95.9 million acres of corn to be planted in 2012, the highest level since 1937.
In the phosphate sector, the impact of Ma'aden was muted due to ongoing growth in demand. The launch of production and sales were significantly delayed, the market had already priced in the introduction of this new supply, and it was balanced by an expansion of restrictive export duties for phosphate-based fertilisers in China. The rupee devaluation and lower demand from India, the world's largest importer of DAP, put downward pressure on DAP prices in the end of 2011. This was reflected in a 15% decline in DAP prices in the fourth quarter, although DAP prices in 2011 were still 31% higher on average y-o-y, at USD 633/tonne (FOB Baltic).
Nitrogen fertilisers also continue to perform well, with urea prices in 2011rising from USD 375/mt to a maximum level of USD 517/mt (FOB Baltic) in themiddle of the year, representing an average weekly price for the year of USD424/mt. Phosphate segment 2011 2010 Year-on-year Result RUB mln RUB mln change % Revenue 88,982 68,832 29% Cost of goods sold (50,631) (42,812) 18% Gross profit 38,351 26,020 47%
Phosphate segment revenue increased by 29% year-on-year and totalled RUB 88,982 million (USD 3.0 billion) in 2011. The Company increased output of phosphate-based fertilisers and MCP by 6% year-on-year, and sales were also up 6% year-on-year. This increase is a result of PhosAgro delivering on its strategy to grow organically through increased processing of its own phosphate rock for phosphate-based fertilisers such as MAP, DAP and NPK. In 2011, PhosAgro's flexible production capacity enabled the Company to switch from DAP/ MAP production to NPK in order to meet changing market demand as well as to receive higher margins. Production and sales volumes of NPK were therefore respectively up 29% year-on-year and 27% year-on-year.
The phosphate segment's gross profit for 2011 was up 47% year-on-year to RUB 38,351 million (USD 1.3 billion), resulting in a gross profit margin of 43%, compared to 38% in 2010, mainly as a result of an increase in prices for phosphate-based fertilisers.
Production and sales volumes of feed phosphate MCP decreased respectively by 7% year-on-year and by 8% year-on-year, largely due to unfavourable market conditions.
PhosAgro is largely self-sufficient in key raw materials for phosphate fertiliser production, and therefore is not subject to price inflation for phosphate rock. However, expenditure on sulphur and sulphuric acid, used primarily in the production of phosphate fertilisers, amounted to RUB 4,838 million (USD 164.6 million) in 2011, up 98% from RUB 2,447 million (USD 80.6 million) a year ago.
Revenue per tonne for the principal phosphate-based fertiliser products andfeed phosphate 2011 2010 Year-on-year Product RUB RUB change % Domestic: MAP 17,387 11,898 46% DAP 17,444 13,304 31% NPK 15,944 10,345 54% MCP 18,581 16,798 11% Export: MAP 17,032 14,135 20% DAP 17,150 11,871 44% NPK 14,917 10,650 40% MCP 17,780 12,334 44% Nitrogen segment 2011 2010 Year-on-year Result RUB mln RUB mln change % Revenue 10,727 7,012 53% Inter-segment revenues 3,629 2,154 68% Cost of goods sold (7,495) (6,253) 20% Gross profit 6,861 2,913 136%
Revenue in the nitrogen segment was RUB 10,727 million (USD 365million) in 2011, an increase of 53% year-on-year, compared to RUB 7,012 million (USD 231 million) in 2010. Production of nitrogen-based fertilisers was up 2% year-on-year, with sales rising 5% year-on-year in 2011, mainly as a result of global demand for nitrogen-based fertilisers and an increase in prices for these products.
Gross profit rose by 136% year-on-year to RUB 6,861 million (USD 233 million) in 2011, with a gross profit margin of 48%.
The price of natural gas, which is the key raw material for nitrogen fertilisers, continued to increase in Russia in 2011 as Gazprom continues its policy of moving towards liberalizing domestic gas prices. PhosAgro's average natural gas purchase price increased by 15% from RUB 2,633 per th. m3 (USD 2.41 per mmBtu) in 2010 to RUB 3,015 roubles per th. m3 (USD 2.85 per mmBtu) in 2011.
Revenue per tonne for the principal nitrogen-based fertilisers
2011 2010 Year-on-year Product RUB RUB change % Domestic: Ammonium nitrate 7,550 5,725 32% Urea 13,021 8,898 46% Export: Ammonium nitrate 8,954 6,030 48% Urea 11,301 7,838 44% Cost of sales
PhosAgro'scost of sales increased by 18% in 2011 to RUB 56,196 million (USD 1.9 billion), which was a slower rate of increase than revenue (up 31%) for the year. Excluding the effect of a 6% increase in sales volumes during 2011, PhosAgro's cost of sales would have increased in line with the Russian PPI inflation rate of 12%. The increase in cost of sales was primarily due to:
· A 26% increase in salaries and social contributions to RUB 11,078 million due to higher labour rates and increased social security contributions enacted in the Russian Federation in 2011. The maximum rate for social security contributions was set at 34% in 2011, which represents an 8% increase from the maximum rate of 26% in effect in 2010;
· A RUB 2,391 million y-o-y increase in expenditures on sulphur and sulphuric acid to RUB 4,838 million in 2011. From March 2011 a new pricing formula was negotiated with suppliers whereby the price is now linked to global sulphur and DAP prices, both of which rose during the year;
· An increase in cost of materials and services by RUB 2,019 million, or 10% y-o-y, mainly due to a rise in raw materials prices driven primarily by inflation in Russia and higher purchase volumes of raw materials as a result of increases in production volumes.
2011 2010 Item share of percen- share of percen- RUB USD total tage of RUB USD total tage of mln mln revenue cost of mln mln revenue cost of sales sales Materials and 23,032 784 23% 40% 21,013 692 27% 44% services Salaries and social 11,078 377 11% 20% 8,789 289 11% 18% contributions Depreciation and 5,486 187 5% 10% 4,774 157 6% 10% amortisation Natural gas 4,951 168 5% 9% 4,459 147 6% 9% Sulphur and 4,838 165 5% 9% 2,447 81 3% 5% sulphuric acid Fuel 4,207 143 4% 7% 3,674 121 5% 8% Electricity 3,290 112 3% 6% 3,152 104 4% 7% Other items 51 2 0% 0% 43 1 0% 0% Change in stock of WIP and (737) (25) (1%) (1%) (681) (22) (1%) (1%) finished goods Total 56,196 1,913 56% 100% 47,670 1,570 62% 100%
General and administrative expenses were up 10% in 2011 to RUB 5,758 million (USD 196 million), mainly due to an increase in salaries and social contributions by 19% to RUB 3,334 million (USD 113 million).
Selling expenses in 2011 equalled RUB 6,588 million (USD 224 million), up just 1% compared to 2010. This was primarily due to a 7% (RUB 216 million) increase in Russian Railways infrastructure tariff and operator's fees and a RUB 76 million, or 16%, increase in salaries and social contributions. These increases were partially offset by a RUB 500 million, or 36%, decrease in materials and services.
Capital investments in 2011 amounted to RUB 16,801 million (USD 572 million), 58% higher than the RUB 10,614 million (USD 349 million) in 2010. Cash used in capital expenditures during 2011 amounted to RUB 12,905 (USD 439 million), compared to RUB 13,040 million (USD 429 million) a year earlier. In 2011 capital expenditure focused on construction of the main ore shaft â„- 2 at the Kirovsky underground mine (expected to enable the mine to increase production to 14 mtpa in 2-3 years), as well as construction of new 500 kmt p.a. urea capacity and a 32 MW gas-powered electricity generation facility at Cherepovetsky Azot. All of these projects remain on track for completion within planned timelines.
Total debt at 31 December 2011 amounted to RUB 32,153 million (USD 999 million), versus RUB 8,932 million (USD 293 million) at the end of 2010. This increase was primarily due to new EUR- and USD-denominated long- and short-term debt facilities obtained in the first half of the year at very low interest rates.
Outlook
· PhosAgro has begun selection of a licensing and equipment supply partner for a new ammonia plant with an annual capacity of 760 kmt p.a., which is currently planned to come online in 2016, and would enable further expansion of PhosAgro's mineral fertiliser production capacities;
· The Company's strong financial position and cash flows mean PhosAgro is well positioned to continue investing in its planned development programme and the consolidation of minority stakes of subsidiaries;
· PhosAgro's new urea plant is due to come online in May-June 2012 with a capacity of 500 kmt per year;
· Ma'aden has come online, and other new capacity additions due in near future will not be sufficient to meet growing demand;
· Record planting acreage and historically high prices for key grains will drive demand for fertilisers;
· PhosAgro plans an overall increase in fertiliser production and sales in 2012 vs. 2011, with a greater share of NPKs.
Conference Call and Webcast
On Monday, 23 April 2012 at 14:00 London time (17:00 Moscow; 09:00 New York), PhosAgro will host a conference call and webcast to discuss its audited consolidated IFRS financial results for 2011.
PhosAgroCEO Maxim Volkov will present the 2011 results and answer questions from conference call and webcast participants.
Webcast link: http://www.media-server.com/m/p/57326v5t
Conference call dial-ins:
+7 499 272 4337 Moscow
+1 646 843 4608 New York
+44 (0) 20 3003 2666 LondonToll Free:0808 109 0700 UK1 866 966 5335 USA8 10 8002 1774011 Russia (Moscow only)
Conference call password: PhosAgro
For further information please contact:
OJSC PhosAgro
+7 495 231 2747Irina Evstigneeva, Head of Corporate Finance and Investor RelationsTimur Belov, Press OfficerM:CommunicationsUKStuart Leasorleasor@mcomgroup.com+ 44 20 7920 2317RussiaSam VanDerlipvanderlip@mcomgroup.com+7 495 363 2845Notes to Editors
PhosAgrois a leading global vertically integrated phosphate-based fertiliser producer. The Group focuses on the production of phosphate-based fertilisers, feed phosphate and high-grade phosphate rock (P2O5 content of not less than 35.7 percent), as well as ammonia and nitrogen-based fertilisers. The Group is the largest phosphate-based fertiliser producer in Europe, the largest producer of high-grade phosphate rock worldwide and the third largest MAP/DAP producer in the world (excluding China), according to Fertecon. PhosAgro is also a leading producer of MCP feed phosphates in Europe, and the only producer in Russia.
PhosAgrohas 2.1 billion tonnes of resources (according to JORC) of high quality apatite-nepheline ore, representing over 75 years of production. The Group also controls substantial Al2O3 resources, and has 41% of Russia's rare earth oxides resources.
The Group's mines and phosphate rock production facilities are located in the mountainous areas of the Kola Peninsula in the Murmansk region of northwest Russia, whereas its fertiliser and feed phosphate production assets are located near the city of Cherepovets in the Vologda region and near the city of Balakovo in the Saratov region of southwest part of European Russia. The Group is the only global vertically integrated fertilizer producer that derives approximately 90% of its consolidated gross profit from the phosphates segment. PhosAgro's 2011 IFRS revenue was USD 3.4 bln and EBITDA was USD 1.2 bln. The Сompany's net debt/EBITDA ratio was 0.43 at 31 December 2011.
For further information on PhosAgro please visit: www.PhosAgro.com
Consolidated Statement of Comprehensive Income for the year ended 31 December2011 2011 2010 RUB RUB Million Million Revenues 100,518 76,951 Cost of sales (56,196) (47,670) Gross profit 44,322 29,281 Administrative expenses (5,758) (5,247) Selling expenses (6,588) (6,515) Taxes, other than income tax (1,411) (999) Other expenses, net (1,246) (1,833) Operating profit 29,319 14,687 Finance income 824 1,512 Finance costs (1,329) (437) Foreign exchange loss (2,836) (132) Share of profit of associates 2,318 - Profit before taxation 28,296 15,630 Income tax expense (5,820) (3,649) Profit for the period 22,476 11,981 Attributable to: Non-controlling interests 2,541 1,403 Equity holders of the Parent 19,935 10,578 Other comprehensive income:
Revaluation of available-for-sale securities (361) 227
Recycling of revaluation gain on (2,076) -available-for-sale securities to profit and loss Actuarial gains and losses 17 (377) Foreign subsidiary translation difference 334 25
Other comprehensive income for the period (2,086) (125)
Total comprehensive income for the period 20,390 11,856
Attributable to: Non-controlling interests 2,514 1,305 Equity holders of the Parent 17,876 10,551
Basic and diluted earnings per share (in RUB) 161 85
Consolidated Statement of Financial Position as at 31 December 2011
2011 2010 RUB Million RUB Million ASSETS Non-current assets
Property, plant and equipment 57,116 46,480
Intangible assets 640 776 Investments in associates 7,910 9,365 Other non-current assets 3,556 7,147 69,222 63,768 Current assets Other current investments 2,123 3,300 Inventories 10,096 7,716
Current income tax receivable 166 379
Trade and other receivables 10,734 15,521 Cash and cash equivalents 16,946 5,261 40,065 32,177 Total assets 109,287 95,945 EQUITY AND LIABILITIES Equity Share capital 360 360 Share premium 1,099 496 Treasury shares - (37) Retained earnings 42,265 55,311 Other reserves 61 2,120
Equity attributable to Equity holders of the Parent 43,785 58,250 Equity attributable to non-controlling interests 16,923 15,079
60,708 73,329 Non-current liabilities Loans and borrowings 16,592 3,423 Defined benefit obligations 922 931 Deferred tax liabilities 2,850 2,700 20,364 7,054 Current liabilities Trade and other payables 11,407 9,461 Current income tax payable 801 592 Loans and borrowings 15,561 5,509
Derivative financial liabilities 446 -
28,215 15,562 Total equity and liabilities 109,287 95,945
Consolidated Statement of Cash Flows for the year ended 31 December 2011
2011 2010 RUB RUB Million Million OPERATING ACTIVITIES Profit before taxation 28,296 15,630 Adjustments for: Depreciation and amortisation 6,051 5,777 Reversal of impairment loss (190) - Loss on disposal of fixed assets 24 262 Interest expense 883 437 Interest income (819) (703) Dividend income (5) (78) Gain on revaluation of derivative financial assets - (731) Share of profit of associates (2,318) - Foreign exchange loss 2,967 - Loss from revaluation of derivatives 446 - Operating profit before changes in working capital and provisions 35,335 20,594 Increase in inventories (2,379) (869)
Decrease/(increase) in trade and other receivables 4,499 (1,953)
(Decrease)/increase in trade and other payables 1,184 594 Cash flows from operations before income taxes and interest paid 38,639 18,366 Income tax paid (5,399) (2,940) Interest paid (865) (293) Cash flows from operating activities 32,375 15,133 INVESTING ACTIVITIES Loans repaid/(issued) 3,125 (4,376) Acquisition of intangible assets (115) (191) Acquisition of property, plant and equipment (12,905) (13,040) Proceeds from disposal of property, plant and equipment 527 49 Proceeds from disposal of investments 1,391 2,359 Acquisition of investments in associates (471) - Acquisition of investments (950) (1,580) Interest received 819 703 Dividends received 1,840 78 Cash and cash equivalents included in investments in associates upon deconsolidation - (977) Cash flows used in investing activities (6,739) (16,975) FINANCING ACTIVITIES Proceeds from borrowings 38,967 21,182 Repayment of borrowings (19,999) (16,110) Acquisition of treasury shares - (75) Proceeds from disposal of treasury shares 791 - Acquisition of non-controlling interests (9,196) (3) Disposal of non-controlling interests 9,864 42 Dividends paid to non-controlling interests (1,676) (859) Dividends paid to shareholders of the Parent (32,253) (2,469) Finance leases paid (487) (227)
Cash flows (used in)/from financing activities (13,989) 1,481
Net increase/(decrease) in cash and cash equivalents 11,647 (361)
Cash and cash equivalents at beginning of period 5,261 5,622 Effect of change in exchange rates 38 - Cash and cash equivalents at end of period 16,946 5,261