Phosagro S Regulatory News (PHOR)

PhosAgro 4Q18 EBITDA grows 51% YoY to RUB 18.6 bln

Moscow - PhosAgro ("PhosAgro" or "the Company") (Moscow Exchange, LSE: PHOR), one of the world's leading vertically integrated phosphate-based fertilizer producers, today announces its consolidated IFRS financial results for the three months (4Q) and 12 months (FY) ended 31 December 2018.

Revenue in 4Q 2018 rose by 30% year-on-year to RUB 59.4 billion (USD 893 million), while EBITDA grew by 51% year-on-year to RUB 18.6 billion (USD 279 million). PhosAgro's EBITDA margin increased to 31% in 4Q 2018 from 27% in 4Q 2017. Net income (adjusted for non-cash FX items) almost trippled year-on-year to RUB 10.9 billion (USD 164 million) in 4Q 2018, bringing PhosAgro's FY 2018 adjusted net income to RUB 41.7 billion (USD 666 million).

4Q 2018 financial and operational highlights

RUB/USD rates: average 4Q 2018: 66.5; average 4Q 2017: 58.4; as of 31 December 2018: 69.5; as of 31 December 2017: 57.6** EBITDA is calculated as operating profit adjusted for depreciation and amortisation.* adjusted for non-cash FX items (Net profit as reported minus FX gain or loss) 

Commenting on the results for 2018, PhosAgro CEO Andrey Guryev said:

"Despite disruption in various markets, PhosAgro finished 2018 in good shape, achieving the ambitious milestones set out in our growth strategy for the period through 2020. Thanks to the professionalism of our team, the Company was able to respond quickly to new opportunities as well as to challenges arising in key agricultural markets. PhosAgro's sales geography has partially modified as a result of political turmoil in some countries of the CIS, weather conditions affecting agricultural producers in Europe and strong competition in Latin America. Despite these challenges, we were able to increase EBITDA by more than 47% in 2018 while net profit almost doubled year-on-year, pushing down the overall company's leverage.

"Our strategy of moving closer to our end customers has proved to be timely and effective. We were swift in shipping products to our priority markets and spot markets in North America and Asia. Even as the industry stockpiled fertilizers in Europe at the end of 4Q 2018 as a result of the ongoing anomalous weather conditions, we were redirecting our products to Russia, the USA and Latin America in order to achieve the best netback prices.

"This would not have been possible without timely upgrades to our mid-stream capacity. The modernisation of benefication plant #3 helped us achieve an unprecedented 92% phosphorous recovery rate from our apatite-nepheline ore, while the new ammonia plant enabled us to boost the self-sufficiency in the crucial feedstock to 90%. As a result, in FY 2018 we increased production of our fertilizers, which are naturally low in potentially harmful impurities, by 8% year-on-year to 9.0 million tonnes. We expect to see further growth of up to 5% year-on-year in 2019.

"PhosAgro's industry-leading EBITDA margin of 32% for FY 2018 and record high free cash flow of RUB 21 billion are additional milestones. All investment projects remain on track, which meant that we kept our capex to EBITDA ratio for FY 2018 at close to 50%, in line with our guidance. All of this meant that in 2018 PhosAgro was able to cut its net debt to LTM EBITDA ratio to a comfortable level of 1.8x and deliver an attractive 50%+ dividend payout ratio.

"In terms of the market environment, DAP prices peaked for a second straight year in September at USD 439 per tonne (FOB Tampa), growing by 39% from the beginning of 2017 and average at USD 419 per tonne as a result of tighter than expected supply. In the medium term, we expect the market to balance at around USD 390-400 per tonne, as new capacity from North Africa and the Middle East ramps up. The closure of inefficient Chinese production lines, which are on the upper end of the cash cost curve, should counterbalance this supply growth.

"Looking ahead, we have approved a new strategy for the period to 2025. Our main focus during the years ahead will be strengthening our commitment to best ESG practices. We also plan to further strengthen our presence in key markets and solidify our cash cost advantage. All of these initiatives will further improve PhosAgro's financial and operational results and generate optimal returns for all of our shareholders."

4Q 2018 market conditions

Financial performance

In 4Q 2018, revenue rose by 30% year-on-year to RUB 59.4 billion (USD 893 million) mainly driven

by 18% growth year-on-year in the average realised price (in USD terms) for phosphate-based and nitrogen-based products and by 14% year-on-year RUB depreciation against USD. However, a 2% decrease in fertilizer sales to 1,962 kt partially offset this growth. The decrease was due primarily to persistent anomalous weather conditions in Europe, which hurt farmers and water levels in river systems, leading to stockpiling of fertilizers at European ports and holding back seaborne shipments to Europe.

Revenue by key products

In 4Q 2018, gross profit was RUB 29.9 billion (USD 450 million). The gross profit margin expanded to 50% from 45% in 4Q 2017. Gross profit and margin performance for the phosphate and nitrogen segments were as follows:

EBITDA in 4Q 2018 amounted to RUB 18.6 billion (USD 279 million), up by 51% year-on-year, while the EBITDA margin expanded by 4 p.p. year-on-year to 31%. Net profit adjusted for non-cash FX items amounted to RUB 10.9 billion (USD 164 million) in 4Q 2018, tripling year-on-year.

The RUB depreciated by 14% year-on-year against the USD during the quarter (the average RUB/USD exchange rates for 4Q 2018 and 4Q 2017 were RUB 66.5 and RUB 58.4, respectively), which had a net positive impact, as prices for most of the Company's products are denominated in USD, while costs are primarily RUB-based. The depreciation of the RUB as of 31 December 2018 (RUB 69.5 per USD) compared to 30 September 2018 (RUB 65.6 per USD) resulted in an FX loss of RUB 6.4 billion (compared to a RUB 0.6 billion gain in 4Q 2017).

Net operating cash flow in 4Q 2018 almost trippled year-on-year to RUB 10.2 billion (USD 154 million) driven by improved profitability, but restrained by a build-up of working capital. PhosAgro had to postpone export shipments in November-December due to unfavourable weather conditions in Europe. The Company also decided to accumulate stocks for the next application season in priority markets.

4Q 2018 capex totalled around RUB 11.8 billion (USD 178 million), down by 6% compared to 4Q 2017. Full year capex represented almost 51% of EBITDA for 2018, in line with our guidance. The main capex item was scheduled maintenance and development of the upstream business, as well as construction of new sulphuric and nitric acid plants.

As of the end of December 2018, net debt totalled RUB 135.3 billion (USD 2.0 billion), representing a net debt/LTM EBITDA ratio of 1.8x against 2.4x as of end of 2017, thanks to positive dynamics in EBITDA.

Cost of Sales

Cost of sales increased by 18% year-on-year in 4Q 2018 to RUB 29.5 billion (USD 443 million). The key factors behind the growth were:

Administrative expenses for 4Q 2018 rose by 13% year-on-year to RUB 3.9 billion (USD 59 million) due to:

In 4Q 2018, selling expenses increased by 25% year-on-year to RUB 10.0 billion (USD 153 million). The main factors behind this increase were:

Market Outlook

In the first two months of 2019, DAP prices (FOB Tampa) decreased to USD 405 per tonne from USD 427 per tonne in 4Q 2018 (down by 5% quarter-on-quarter), but remained flat year-on-year. Prices for phosphate-based fertilizers are expected to remain under pressure throughout 1Q 2019, due to the slow recovery of seasonal demand in the USA. However, prices in March should be supported by usual levels of activity in Europe and the start of DAP/MAP imports to Latin America.

We expect to see a recovery in prices for phosphate-based fertilizers in 2Q 2019, driven by the beginning of the application season in major agricultural regions (i.e., Latin America, North America and India). However, growth is likely to be limited at up to USD 390-400 per tonne of DAP FOB Tampa, mitigated by the gradual introduction of new capacities from Morocco and Saudi Arabia.

Conference call and webcastPhosAgro will hold a conference call and webcast today at 13:30 London time (16:30 Moscow; 09:30 New York).The call will be held in English, with simultaneous translation into Russian on a separate line. Webcast links:English: http://event.onlineseminarsolutions.com/wcc/r/1960056-1/B9BEB325817AB397A8A1B9B257A4663F?partnerref=rss-events Russian: http://event.onlineseminarsolutions.com/wcc/r/1960124-1/026D299E4E72A614E68D231B7D67B641?partnerref=rss-events Participant dial-in numbers:Russian Federation Toll  +7 495 646 9315Russian Federation Toll-Free  8 800 500 9863United Kingdom Toll  +44 207 194 3759United Kingdom Toll-Free 0800 376 6183United States Toll-Free  1 844 286 0643United States Toll  +1 646 722 4916Conference ID numbers:English call: 63777144#

Russian call: 74957756#For further information please contact: PJSC PhosAgro Alexander Seleznev, Head of Investor Relations Department+7 495 232 9689 ext 2187ir@phosagro.ru Timur Belov, Press Officer +7 495 232 9689 EM Sam VanDerlip vanderlip@em-comms.com+44 7554 993 032 +7 499 918 3134

Dmitriy Zhadan

zhadan@em-comms.com

+7 916 770-89-09Notes to Editors

PhosAgro is one of the leading global vertically integrated phosphate-based fertilizer producers. The Company focuses on the production of phosphate-based fertilizers, feed phosphate and high-grade phosphate rock (P2O5 content of not less than 39%).

The Company is the largest phosphate-based fertilizer 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 one of the leading producers of feed phosphates (MCP) in Europe, and the only producer in Russia. It is Russia's only producer of nepheline concentrate.

PhosAgro's main products include phosphate rock, 33 grades of fertilizers, feed phosphates, ammonia, and sodium tripolyphosphate, which are used by customers in 100 countries spanning all of the world's inhabited continents. The Company's priority markets outside of Russia and the CIS are Latin America, Europe and Asia.

PhosAgro's shares are traded on the Moscow Exchange, and global depositary receipts ("GDRs") for shares trade on the London Stock Exchange (under the ticker PHOR). Since 1 June 2016, the Company's GDRs have been included in the MSCI Russia and MSCI Emerging Markets indexes.