Phosagro S Regulatory News (PHOR)

For Immediate Release 21 August 2014 PhosAgro 6M 2014 Net Profit up 70% to RUB 8.1 bln Moscow - PhosAgro ("PhosAgro" or "the Company") (Moscow Exchange, LSE: PHOR),one of the world's leading vertically integrated phosphate-based fertilizerproducers, today announces its reviewed condensed consolidated IFRS financialresults for the six months ended 30 June 2014. PhosAgro earned a net profitfor the period of RUB 8.1 billion (USD 231 million), compared to RUB 4.8billion (USD 154 million) in 6M 2013. Basic and diluted earnings per sharecame to RUB 60 (USD 1.72) for 6M 2014, compared to RUB 33 (USD 1.06) in 6M2013. 6M 2014 Financial and Operational Highlights: year-on-year Result 6M 2014 6M 2013 change (RUB vs. RUB), % RUB USD RUB USD million million Revenue 56,702 1,621 53,715 1,732 6% EBITDA* 16,219 464 13,849 446 17% EBITDA margin 29% 26% 3 p.p. Net profit 8,097 231 4,770 154 70% Earnings per share 60 1.72 33 1.06 82% Sales volumes Kmt Kmt Phosphate-based 2,394.0 2,364.6 1%products Nitrogen-based 749.2 659.6 14%fertilizers Apatit mine and 1,746.4 1,957.2 (11%)beneficiation plant Other products 114.1 90.3 26% RUB/USD rates: average 6M 2014: 34.9796; average 6M 2013: 31.0169 As of 30 June 2014: 33.6306; as of 31 December 2013: 32.7292*EBITDA is calculated as operating profit adjusted for depreciation andamortisation. Other 6M 2014 Highlights Production, sales and logistics flexibility: - During the first six months of 2014, PhosAgro's revenue and sales volumesbenefited from the Company's strategy of enhancing production flexibilitycombined with strong global demand: total fertilizer production and salesvolumes grew year-on-year by 3% and 4%, respectively. Revenue in 6M 2014 was6% higher year-on-year, supported by year-on-year increases of over 6% and 2%in average realised prices for export DAP/MAP and NPK, respectively. Strategic developments: - In January 2014, the Group signed a USD 440.6 million loanagreement with the Japan Bank for International Cooperation (JBIC) and a groupof banks consisting of Bank of Tokyo-Mitsubishi (BTMU), Citibank Japan andMizuho Bank. The proceeds from the loan are being used to fund construction ofa new 760 ths tonnes/year ammonia plant at PhosAgro-Cherepovets. Consolidation of ownership in production facilities and businessdevelopment: - In February 2014, PhosAgro launched a new subsidiary, LLC SmartBulk Terminal. The Company will organize the construction and subsequentoperation of the new terminal at the port of Ust-Luga that will handlefertilizers produced and sold by PhosAgro. PhosAgro owns 70% of LLC Smart BulkTerminal. - During the first six months of 2014, the holders of 10.39% of all issuedshares in OJSC PhosAgro-Cherepovets accepted PhosAgro's voluntary tenderoffer. PhosAgro completed the acquisition of these shares in 2Q 2014. PhosAgro's 6M 2014 net profit was RUB 8.1 billion (USD 231 million), anincrease of 70% year-on-year from RUB 4.8 billion (USD 154 million) in 6M2013. The growth in net profit was primarily due to favourable marketconditions and higher prices, in rouble terms, for the main fertilizersPhosAgro produces. Revenue for the period increased by 6% year-on-year to RUB56.7 billion (USD 1,621 million), compared to RUB 53.7 billion (USD 1,732million) for 6M 2013. Cost savings in cost of sales and a smaller foreignexchange loss (a more detailed discussion is provided in the analysis below)also contributed to PhosAgro's strong net profit result for 6M 2014. Operating profit for 6M 2014 was RUB 12.2 billion (USD 349 million), up 21%from RUB 10.0 billion (USD 324 million) in 6M 2013. EBITDA was RUB 16.2billion (USD 464 million) in 6M 2014, 17% higher year-on-year. EBITDA marginincreased to 29% for 6M 2014, compared to 26% in 6M 2013. Cash flows from operating activities decreased by 7% year-on-year and amountedto RUB 13.4 billion (USD 383 million) in 6M 2014, compared to RUB 14.4 billion(USD 464 million) in 6M 2013. The Company's capital expenditure (capex) incash terms during 6M 2014 was RUB 7.1 billion (USD 203 million), consistentwith RUB 7.1 billion (USD 230 million) in 6M 2013. Net debt at 30 June 2014 stood at RUB 45.6 billion (USD 1,357 million), upfrom RUB 43.8 billion (USD 1,339 million) at 31 December 2013. Most of theCompany's debt is denominated in USD as a natural hedge against primarilyUSD-denominated sales. The depreciation of the Russian rouble against the USdollar was the primary reason for the increase of PhosAgro's net debt in RUBterms. The Company's net debt to annualised EBITDA ratio decreased to 1.4 asof 30 June 2014, from 1.8 as of 31 December 2013. Commenting on the 6M 2014 results, PhosAgro Management Board Chairman and CEOAndrey Guryev said: "PhosAgro's earnings in the first half of 2014 grew very strongly on the backof a significantly improved operating environment combined with our successfulcost cutting initiatives. Healthy global demand for phosphate fertilizers haspushed prices up to USD 500 per tonne FOB Tampa, substantially higher than thecrisis levels seen in 2H 2013, when prices bottomed around USD 350 per tonneFOB Tampa in November. While average DAP prices in the first half of 2014remained below those recorded in 6M 2013, at USD 465 per tonne FOB Tampa vsUSD 486 per tonne in 6M 2013, PhosAgro's financial results improvedmaterially, with a gross profit margin increasing to 41% and a solid 29%EBITDA margin. These results are due to our favourable cost position andexcellent production capabilities, as we were able to meet higher globaldemand by increasing production and sales of our fertilizers. "In addition to delivering excellent financial results, I am pleased to reportthat we made significant progress on consolidating our ownership ofPhosAgro-Cherepovets with the buyout of more than 10% of minorityshareholders' shares in 2Q 2014, and we remain on track to achieve full 100%ownership of all our production subsidiaries by the end of this year." 6M 2014 Market Conditions - Supply constraints in Morocco, the United States, Saudi Arabia and Russiadecreased spot supplies of DAP/MAP by 600-700 ktonnes in 1Q 2014. Combinedwith early demand from Latin America and Europe following very weak volumes in4Q 2013, this led to a sharp recovery in DAP/MAP prices in January 2014,followed by a further seasonal recovery up to USD 500 per tonne (FOB Tampa) inFebruary-March 2014. - Prices softened back to USD 450-460 per tonne FOB Tampa in April-May as aresult of the increased supply of lower-quality phosphate-based fertilizersfrom China and softer-than-expected demand from India. - The early changes to fertilizer subsidies expected from the new IndianGovernment have not been introduced yet for P and K nutrients. This, combinedwith late and weaker than normal monsoon rains, has supressed Indian demand. - Despite continued weakness in the Indian market and increased Chineseexports, strong demand for phosphates elsewhere in the world has pushed DAPprices back to USD 500 per tonne from the beginning of July. - Phosphoric acid prices for Indian DAP producers have increased by 16% fromUSD 615 per tonne of P2O5 at the end of 2013 to USD 681 per tonne of P2O5 in1Q 2014, and to USD 715 per tonne in 2Q, thus increasing the cost of domesticproduction. - Urea prices have fallen from their January 2014 peak of USD 365 per tonneFOB Baltics to USD 300 by the end of 1Q, with a further slow-down to USD 280per tonne in 2Q 2014 as result of significant export supply from China. Phosphate-Based Products Segment Result 6M 2014 6M 2013 year-on-year change, % RUB mln RUB mln Revenue 48,267 46,120 5% Cost of goods sold (29,138) (29,896) (3%) Gross profit 19,129 16,224 18% Phosphate-based products segment revenue increased by 5% year-on-year andtotalled RUB 48,267 million (USD 1,380 million) in 6M 2014. PhosAgro increasedproduction of phosphate-based fertilizers and MCP by 3.2% year-on-year in 6M2014, while sales volumes increased by 1.1% year-on-year. Production and salesvolumes for phosphate rock and nepheline concentrate decreased in 6M 2014compared to 6M 2013 by 1.2% and 10.8%, respectively. The increase in sales volumes was primarily due to favourable marketconditions and higher demand, which enabled the Company to increasesubstantially the sales of both concentrated fertilizers and NPKs to LatinAmerica and Russia. - MAP/DAP fertilizers: MAP exports increased by 52% year-on-year,with price increases in RUB terms of 5%. This was offset by a 45% decrease inDAP exports. Domestic MAP sales increased by 12% year-on-year. Revenue fromDAP/MAP sales increased by 15% year-on-year, from RUB 16,004 million (USD 516million) in 6M 2013 to RUB 18,424 million (USD 527 million) in 6M 2014,representing an overall 9% year-on-year increase in sales volumes and 6%increase in DAP/MAP average revenue per tonne. - NPK fertilizers: Domestic NPK sales volumes increased by 49%year-on-year, which partially compensated for weaker domestic NPK pricesduring 6M 2014. As a result, revenue from domestic NPK sales increased by 37%year-on-year, from RUB 3,216 million (USD 104 million) in 6M 2013 to RUB 4,413million (USD 126 million) in 6M 2014. Revenue from NPK export sales decreasedby 9% year-on-year, from RUB 7,424 million (USD 239 million) in 6M 2013 to RUB6,758 million (USD 193 million) in 6M 2014, as the result of an 11%year-on-year decline in NPK export sales volumes, which was partiallycompensated for by a 2% increase in revenue per tonne. - Phosphate rock: Total sales of phosphate rock decreased by 11%year-on-year to RUB 7,629 million (USD 218 million) in 6M 2014 due to higherinternal consumption. The phosphate-based products segment's gross profit for 6M 2014 increased by18% year-on-year to RUB 19,129 million (USD 547 million), resulting in a grossprofit margin of 40%, compared to a 35% margin in 6M 2013, which was theresult of higher sales combined with cost savings (a more detailed discussionis provided in the CoGS analysis below). Revenue per tonne for the principal phosphate-based products Product 6M 2014 6M 2013 year-on-year change, % RUB RUBDomestic:MAP 16,072 15,596 3.1%DAP 15,431 14,660 5.3%NPK 12,891 14,020 (8.1%)MCP 20,120 19,850 1.4%NPS 10,603 11,475 (7.6%)SOP 24,144 19,862 21.6%STPP 31,132 30,235 3.0% Export:MAP 16,194 15,417 5.0%DAP 16,167 15,073 7.3%NPK 12,326 12,054 2.3%MCP 19,692 17,115 15.1%NPS 10,922 10,499 4.0%SOP 24,513 15,734 55.8%STPP 34,037 28,758 18.4% Nitrogen Segment Result 6M 2014 6M 2013 year-on-year change, % RUB mln RUB mln Revenue 8,093 7,155 13%Inter-segment transfers 8 92 (91%)Cost of goods sold (5,004) (5,000) -Gross profit 3,097 2,247 38% Nitrogen segment revenue increased by 13% year-on-year to RUB 8,093 million(USD 231 million) in 6M 2014 from RUB 7,155 million (USD 231 million) in 6M2013. Production and sales volumes of nitrogen-based fertilizers increased by4% and 14% year-on-year, respectively, in 6M 2014. Export revenue from urea increased by 14% year-on-year from RUB 4,919 million(USD 159 million) in 6M 2013 to RUB 5,589 million (USD 160 million) in 6M2014, in line with the 15% increase in sales volumes. Ammonium nitrate (AN)sales volumes decreased by 6% year-on-year, which, combined with a 2% decreasein revenue per tonne, was the major factor behind the 8% decline in revenuefrom AN sales from RUB 1,932 million (USD 62 million) in 6M 2013 to RUB 1,785million (USD 51 million) in 6M 2014. Nitrogen segment gross profit during 6M 2014 increased by 38% year-on-year toRUB 3,097 million (USD 89 million), in line with the segment's revenue growth,resulting in a gross profit margin of 38% compared to 31% in 6M 2013. Revenue per tonne for the principal nitrogen-based fertilizers Product 6M 2014 6M 2013 year-on-year change, % RUB RUBDomestic:Ammonium nitrate 9,610 9,857 (2.5%)Urea 11,822 13,022 (9.2%) Export:Ammonium nitrate - 9,591 -Urea 11,070 11,225 (1.4%)NP 10,094 8,961 12.6%Cost of Sales Item 6M 2014 6M 2013 Change y-on-y % of cost % of cost % RUB mln USD mln of sales RUB mln USD mln of sales RUB mln Materials andservices 10,778 308 32% 9,596 309 28% 1,182 12%Salaries andsocialcontributions 4,976 142 15% 6,108 197 18% (1,132) (19%)Natural gas 3,694 106 11% 3,005 97 9% 689 23%Depreciation 3,629 104 11% 3,518 113 10% 111 3%Potash 1,957 56 6% 2,296 74 7% (339) (15%)Electricity 1,782 51 5% 1,735 56 5% 47 3%Ammonia 1,599 46 5% 2,898 93 9% (1,299) (45%)Fuel 1,545 44 5% 2,450 79 7% (905) (37%)Sulphur andsulphuric acid 1,719 49 5% 1,879 61 5% (160) (9%)Heating energy 804 23 2% 237 8 1% 567 239%Ammoniumsulphate 354 10 1% 706 23 2% (352) (50%)Other items 15 1 - 32 1 0% (17) (53%)Change instock of WIPand finishedgoods 681 19 2% (243) (8) (1%) 924 (380%)Total 33,533 959 100% 34,217 1,103 100% (684) (2%) PhosAgro's cost of sales decreased by 2% year-on-year in 6M 2014, to RUB33,533 million (USD 959 million), while overall fertilizers sales volumesincreased by 4%. This decrease in cost of sales was primarily due to thefollowing factors: - An increase of RUB 1,182 million (USD 34 million), or 12%,year-on-year in the cost of materials and services due to price inflation of7% (PPI 6M 2014 vs 6M 2013) and outsourcing of certain functions, compensatedby a significant decrease in personnel costs. - A 19%, or RUB 1,132 million (USD 32 million), year-on-yeardecrease in personnel costs as a result of the staff optimisation programme. - A year-on-year decrease in expenditure on purchased ammonia ofRUB 1,299 million (USD 37 million), or 45%, from RUB 2,898 million (USD 93million) in 6M 2013 to RUB 1,599 million (USD 46 million) in 6M 2014. This wasdue to year-on-year declines in purchase volumes by 32% and prices by 19%.PhosAgro was able to decrease purchases from third parties after themodernisation of ammonia production facilities in Cherepovets, which helped toincrease production of ammonia by 54 ths tonnes per year, or by 10%. - A year-on-year increase in expenditure on natural gas of RUB 689million (USD 20 million), or 23%, to RUB 3,694 million (USD 106 million) in 6M2014. Natural gas is required primarily for the production of ammonia. Theprice per cubic metre of natural gas rose by 17%, while natural gasconsumption increased by 5% year-on-year. The price increase was due to a 15%tariff increase in the second half of 2013. The 5% growth in volumes of gaspurchased was due to a 10% year-on-year increase in ammonia production as aresult of higher production capacity following completion of modernisations in3Q 2013. - A year-on-year decrease in expenditure on potash by 15%, or RUB339 million (USD 10 million), to RUB 1,957 million (USD 56 million) in 6M2014. This was mainly due to a 31% decrease in potash purchase prices, whichwas partially balanced by a 24% increase in potash purchase volumes as aresult of a 10% year-on-year increase in NPK production. - A year-on-year decrease in expenditure on fuel by RUB 905 million(USD 26 million), or 37%, from RUB 2,450 million (USD 79 million) in 6M 2013to RUB 1,545 million (USD 44 million) in 6M 2014, which was in line with a 37%decrease in fuel consumption as a result of the replacement of heating oilpurchases with direct purchases of heating energy, as well as decreasedopen-pit mining. - Heating energy expenses increased by RUB 567 million (USD 16million) year-on-year, from RUB 237 million (USD 8 million) in 6M 2013 to RUB804 million (USD 23 million) in 6M 2014, as a result of the replacement ofheating oil, which is consumed in boilers generating heating energy at Apatit,with direct purchases of heating energy, providing significant savings onfuel. - A decrease in expenditure on sulphur and sulphuric acid by RUB160 million (USD 5 million), or 9%, year-on-year from RUB 1,879 million (USD61 million) in 6M 2013 to RUB 1,719 million (USD 49 million) in 6M 2014. Thiswas driven by a 14% decrease in purchase prices. The decrease in purchaseprices was partly offset by a 6% increase in purchase volumes due to higherproduction volumes of phosphate-based fertilizers and feed phosphates. - The decline in production of NPS/NPK, which have a high nitrogencontent, led to a decrease in purchases of ammonium sulphate by RUB 352million (USD 10 million), or 50%, year-on-year. Administrative expenses rose by 3% year-on-year to RUB 3,955 million (USD 113million) in 6M 2014 primarily as a result of an increase in professionalservices and expenses related to depreciation and amortisation. Selling expenses rose by 39% year-on-year, from RUB 3,908 million (USD 126million) in 6M 2013 to RUB 5,423 million (USD 155 million) in 6M 2014. Thiswas primarily due to the following changes from 6M 2013 to 6M 2014: - A 13% increase in the Russian Railways infrastructure tariff andoperators' fees from RUB 2,163 million (USD 70 million) to RUB 2,436 million(USD 70 million). An increase in container shipments, combined with a 23%increase in domestic fertiliser sales (largely shipped on a CPT basis) thatled to higher use of rail freight transport. - An 83% increase in port and stevedoring expenses due tosignificantly increased CFR sales vs. FOB in 6M 2014 compared to 6M 2013. - A 74%, or RUB 240 million (USD 7 million), increase in materialsand services was driven by the change in delivery terms for European customersto CPT following the consolidation of Phosint Trading in 4Q 2013. PhosAgro's foreign exchange loss decreased by 60%, from RUB 2,759 million (USD89 million) in 6M 2013 to RUB 1,090 million (USD 31 million) in 6M 2014. Thiswas the result of the higher Rouble depreciation during 6M 2013 by 8% (fromRUB 30.3727 at 31/12/2012 to RUB 32.7090 at 30/06/2013), compared to just 3%during 6M 2014 (from RUB 32.7292 at 31/12/2013 to RUB 33.6306 at 30/06/2014). Cash spent on capex in 6M 2014 amounted to RUB 7,117 million (USD 203million), in line with the RUB 7,122 million (USD 230 million) spent in 6M2013. PhosAgro's capital expenditure, which consists of additions to property,plant and equipment, amounted to RUB 6,604 million (USD 189 million) for 6M2014, compared to RUB 8,008 million (USD 258 million) in 6M 2013. Capitalexpenditure focused on construction of the main ore shaft № 2 at theKirovsky underground mine, as well as the construction of new storagefacilities for liquid ammonia at Balakovo. Gross debt at 30 June 2014 amounted to RUB 60,490 million (USD 1,799 million),compared to RUB 52,756 million (USD 1,612 million) at 31 December 2013. Netdebt at 30 June 2014 amounted to RUB 45,621 million (USD 1,357 million),compared to RUB 43,818 million (USD 1,339 million) at 31 December 2013. Outlook Market: - Economic reforms are a primary focus on the top of the agenda of the newIndian Government. - As monsoon rains recover, Indian demand is ramping up. - The price of phosphoric acid for 3Q 2014 in India has recently been agreedwith OCP at USD 765 per tonne of P2O5, up USD 50 per tonne of P2O5, thusdriving local production cash costs well above current DAP spot prices.Trading activity has also accelerated: current Chinese deliveries are reportedat USD 480 CFR, up 9% from the minimum April CFR prices for Chinese DAP of USD440. - In Brazil and Europe the phosphoric acid price for 3Q 2014 was increased by6-7%. Other feedstock prices remain at high levels, keeping the cash costs ofmost significant players up: sulphur CFR prices in most regions are above USD150 per tonne while ammonia CFR prices are above USD 500 per tonne. - Agricultural commodities performance could be a limiting factor for furtherfertilizer price increases: the basket price has decreased around 12% from thebeginning of the year following favourable crop prospects. Notwithstandingrecent soft commodities trends, DAP FOB prices remain around USD 500 in mostports, while urea is at USD 310-315 FOB Baltic. - Given expectations of a recovery in activity from Indian and Brazilianbuyers, combined with high season in Europe, North America and Russia-CIS,PhosAgro does not see any significant downside risk for phosphate fertilizerprices in the short term. The current IFA forecast for growth in phosphatefertilizers consumption in the 2014/2015 season is 1 mln tons of P2O5 or 2.4%,compared to 1.4% in 2013/2014 season. Company: - PhosAgro's low cash cost position and flexible production make the Companywell placed to respond to changes in global demand for concentrated or complexfertilizers and NPS. The Company intends to invest further into bothincreasing capacity and expanding the number of NPK grades it produces. - Following completion of the voluntary tender offer, PhosAgro sent acompulsory share purchase notification (squeeze out) to OJSCPhosAgro-Cherepovets for the buyout of the ordinary shares belonging to theremaining minority shareholders (2.01%) of OJSC PhosAgro-Cherepovets. PhosAgroplans to complete all procedures related to the squeeze out by the end of2014. - In line with its strategy to develop downstream production capacity andexpand its product portfolio, PhosAgro has signed an agreement for theconstruction of a new 500 ths tonne per year granulated urea plant atPhosAgro-Cherepovets, which is to be commissioned simultaneously with the newammonia plant in 1H 2017. - All major development projects are on track, including the newammonia plant designed to increase cost efficiency and support furtherexpansion of complex fertilizer production capacity. - PhosAgro continued its restructuring process in May with the merger of twoproduction subsidiaries, OJSC Apatit and CJSC Balakovo Mineral Fertilizers,which will enhance further cost efficiency. Conference call and webcast On 21 August 2014, PhosAgro will hold a conference call and webcast at 13.30London time (16:30 Moscow; 08:30 New York). Following a presentation of the results, PhosAgro CEO Andrey Guryev willanswer questions from conference call participants. The call will be held in English, with simultaneous translation into Russianon a separate line. Webcast links: English: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2364Russian: http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=2365 Participants Dial-in numbers: Russia+7 495 213 0982 UK+44(0)20 3427 1935 (Local access)0800 279 4835 (Toll free) USA+1646 254 3376 (Local access)1877 280 3488 (Toll free) Sweden+46(0)8 5065 3933 (Local access)0200 883 443 (Toll free) Conference ID numbers: English call: 8033378Russian call: 5679797 For further information please contact: OJSC PhosAgroIrina Evstigneeva, Head of Corporate Finance and Investor Relationsir@phosagro.ru+7 495 231 3115 Timur Belov, Press Officer+7 495 232 9689 EMSam VanDerlipvanderlip@em-comms.com+44 7554 993 032+7 499 918 3134 Notes to Editors PhosAgro is one of the leading global vertically integrated phosphate-basedfertilizer producers. The Company focuses on the production of phosphate-basedfertilizers, feed phosphate and high-grade phosphate rock (P2O5 content of notless than 39%), as well as ammonia and nitrogen-based fertilizers. The Company is the largest phosphate-based fertilizer producer in Europe, thelargest producer of high-grade phosphate rock worldwide and the second largestMAP/DAP producer in the world (excluding China), according to Fertecon.PhosAgro is also one of the leading producers of feed phosphates (MCP) inEurope, and the only producer in Russia. PhosAgro has 2.1 billion tonnes of resources (according to JORC) of highquality apatite-nepheline ore. The Company's mines and phosphate rockproduction facilities are located in the mountainous areas of the KolaPeninsula in the Murmansk region of northwest Russia, whereas its fertilizerand feed phosphate production assets are located near the city of Cherepovetsin the Vologda region and near the city of Balakovo in the Saratov region ofsouthwest part of European Russia. PhosAgro's 2013 IFRS revenue was over USD 3.3 bln and EBITDA was USD 752 mln.The Сompany's net debt/EBITDA ratio was 1.8 at 31 December 2013. For further information on PhosAgro please visit: www.PhosAgro.com Six months ended 30 Three months ended 30 June June 2014 2013* 2014 2013* RUB RUB RUB RUB Million Million Million MillionContinuing operationsRevenues 56,702 53,715 27,286 24,813Cost of sales (33,533) (34,217) (16,090) (15,599)Gross profit 23,169 19,498 11,196 9,214 Administrative expenses (3,955) (3,839) (1,982) (2,006)Selling expenses (5,423) (3,908) (2,693) (1,802)Taxes, other than income tax (996) (1,082) (511) (584)Other expenses, net (590) (623) (409) (468)Operating profit 12,205 10,046 5,601 4,354 Finance income 514 533 522 329Finance costs (1,269) (1,184) (718) (619)Foreign exchange (loss)/gain (1,090) (2,759) 2,682 (1,730)Share of profit of associates 71 182 67 -Restructuring costs (46) (442) (46) (418)Profit before tax 10,385 6,376 8,108 1,916 Income tax expense (2,288) (1,889) (1,920) (809)Profit from continuingoperations 8,097 4,487 6,188 1,107 Discontinued operationsProfit from discontinuedoperations, net of tax - 283 - 372Profit for the period 8,097 4,770 6,188 1,479 Attributable to:Non-controlling interests ^ 264 551 212 90Shareholders of the Parent 7,833 4,219 5,976 1,389 Other comprehensive incomeActuarial gains and losses, netof tax (76) (68) (11) (8)Foreign currency translationdifference 173 142 (467) 48Other comprehensive income forthe period 97 74 (478) 40Total comprehensive income forthe period 8,194 4,844 5,710 1,519 Attributable to:Non-controlling interests ^ 263 545 213 91Shareholders of the Parent 7,931 4,299 5,497 1,428Basic and diluted earnings pershare (in RUB) 60 33 46 11 30 June 2014 31 December 2013 RUB million RUB millionAssetsProperty, plant and equipment 78,391 75,928Intangible assets 515 623Investments in associates 8,754 8,485Deferred tax assets 1,715 1,806Other non-current assets 5,586 4,383Non-current assets 94,961 91,225 Other current investments 1,611 1,585Derivative financial assets 6 79Inventories 11,501 12,293Current income tax receivable 884 668Trade and other receivables 12,155 11,464Cash and cash equivalents 14,869 8,938Current assets 41,026 35,027Total assets 135,987 126,252 EquityShare capital 372 372Share premium 7,494 7,494Retained earnings 50,540 48,556Other reserves (18) (116)Equity attributable to shareholders of the Parent 58,388 56,306Equity attributable to non-controlling interests 612 3,020Total equity 59,000 59,326 LiabilitiesLoans and borrowings 48,743 39,550Defined benefit obligations 1,010 971Deferred tax liabilities 3,675 3,304Non-current liabilities 53,428 43,825 Trade and other payables 10,776 9,377Current income tax payable 768 518Loans and borrowings 11,747 13,206Derivative financial liabilities 2 -Other current liabilities 266 -Current liabilities 23,559 23,101Total equity and liabilities 135,987 126,252 Six months ended 30 June 2014 2013 RUB million RUB millionCash flows from operating activitiesProfit before tax from continuing operations 10,385 6,376Adjustments for:Depreciation and amortisation 4,014 3,803Loss on disposal of fixed assets 62 41Finance costs 1,269 1,184Finance income (514) (533)Share of profit of associates (71) (182)Foreign exchange loss 1,245 3,468Operating profit before changes in working capital and provisions 16,390 14,157Decrease/(increase) in inventories 926 (573)Increase in trade and other receivables (261) (97)(Decrease)/increase in trade and other payables (937) 3,429Cash flows from operations before income taxes and interest paid 16,118 16,916Income tax paid (1,786) (1,789)Finance costs paid (924) (734)Cash flows from operating activities 13,408 14,393 Cash flows from investing activitiesLoans (issued)/repaid, net (500) 554Acquisition of intangible assets (50) (55)Acquisition of property, plant and equipment (7,117) (7,122)Proceeds from disposal of property, plant and equipment 224 137Disposal/(acquisition) of investments, net 223 (55)Finance income received 390 619Cash flows used in investing activities (6,830) (5,922) Cash flows from financing activitiesProceeds from issuance of additional shares - 6,407Proceeds from borrowings 21,224 24,395Repayment of borrowings (14,324) (16,901)Acquisition of non-controlling interests (5,702) (7,876)Tax on intra-group dividends (247) -Dividends paid to non-controlling interests - (4)Dividends paid to shareholders of the Parent (461) (4,439)Finance leases paid (656) (904)Cash flows (used in)/from financing activities (166) 678Net increase in cash and cash equivalents 6,412 9,149Cash and cash equivalents at 1 January 8,938 9,664Effect of exchange rates fluctuations (481) 244Cash and cash equivalents at 30 June 14,869 19,057