Last checked at 18 Jun 2012 09:15
For Immediate Release 18 June 2012
PhosAgro Q1 2012 IFRS Net Profit up 29% to USD 266 Mln
Moscow - PhosAgro ("PhosAgro" or "the Company") , aleading global vertically integrated phosphate-based fertiliser producer,today announces its reviewed interim condensed consolidated IFRS financialstatements for the three months ended 31 March 2012. PhosAgro earned a profitof RUB 8.0 billion (USD 266 million) in Q1 2012, up 29% year-on-year (y-o-y)from RUB 6.2 billion (USD 213 million) in Q1 2011. Basic and diluted earningsper share grew 21% y-o-y to RUB 52 (USD 1.7).
Financial and Operational Highlights:
Result Q1 2012 Q1 2011 y-o-y Change (RUB vs. RUB) % USD RUB USD RUBRevenue 856m 25,918m 837m 24,486m 6%EBITDA* 301m 9,099m 311m 9,109m -Adjusted EBITDA* 313m 9,481m 311m 9,109m 4%Net Income 266m 8,047m 213m 6,235m 29%Earnings per share 1.7 52 1.5 43 21% Sales volumes kmt kmtPhosphate-based fertilisers 1,067.3 975.2 9%(MAP/DAP/NPK/NPS)Nitrogen-based fertilisers 240.2 268.4 (11%)Apatit mine and 1,153.1 1,082.8 6%beneficiation plantOther products 84.2 102.9 (18%)
RUB/USD Rates: average Q1 2012: 30.2642; Q1 2011: 29.2698
As of 31 March 2012: 29.3282; as of 31 December 2011: 32.1961
*EBITDA is calculated as operating profit adjusted for depreciation and amortisation. Adjusted EBITDA is defined as EBITDA adjusted to exclude items in the reporting period that the Company views as exceptional and non-recurring.
Other Highlights
- Record NPK production during Q1 2012, up 63% year-on-year from 256 kmt in Q1 2011 to 416 kmt in Q1 2012 as a result of organic growth strategy focused on full production flexibility;
- Merger of Cherepovetsky Azot and Ammophos intoPhosAgro-Cherepovets approved by EGMs on 27 February 2012;
- Supply contract for 600 thousand tonnes of phosphate-based fertilisers with India's Nagarjuna signed 12 April 2012;
- PhosAgro share split completed 24 February 2012;
- Urea capacity increase at Cherepovetsky Azot on track for launch end of June - beginning July 2012.
PhosAgro today reports its Q1 2012 net profit of RUB 8.0 billion (USD 266million), an increase of 29% y-o-y from RUB 6.2 billion (USD 213 million) inQ1 2011. Revenue for the period was 6% higher y-o-y at RUB 25.9 billion (USD856 million) compared to RUB 24.5 billion (USD 837 million) for Q1 2011.
Operating profit for Q1 2012 was RUB 7.5 billion (USD 249 million), a 1.7% decrease from Q1 2011. EBITDA margin remained at a comfortable 35%, the same level as for the full year 2011.
Cash flow from operating activities amounted to RUB 9.9 billion (USD 328 million) in Q1 2012, compared to RUB 11.9 billion (USD 408 million) in Q1 2011. The company's capital expenditure (capex) in cash terms during the first three months of 2012 was RUB 3.5 billion (USD 116 million), compared to RUB 3.0 billion (USD 103 million) in Q1 2011.
Net debt at 31 March 2012 stood at RUB 9.2 billion (USD 312 million), down from RUB 15.2 billion (USD 472 million) on 31 December 2011. This puts PhosAgro's net debt to EBITDA at a very comfortable level of 0.25x.
Commenting on the Q1 2012 IFRS results PhosAgro CEO Maxim Volkov said: "We aredelighted to have achieved growth in revenue and net profit despitechallenging market conditions in the first quarter. I am equally pleased toannounce that with today's disclosure we are furthering our commitment totransparency: PhosAgro from now on will disclose its consolidated IFRS resultson a quarterly basis."PhosAgro's Q1 2012 results were driven by our production flexibility inphosphate-based fertilisers, which enabled us to adapt quickly to changes inthe structure of demand that began in late 2011. NPK sales in Q1 2012increased by almost 72% y-o-y, fully compensating for the 16% decrease inDAP/MAP sales. As a result of our strategy of strengthening sales andproduction flexibility we increased overall phosphate-based fertiliser salesby more than 9%, despite the market instability."During Q1 2012 and following the reporting date there were several otherdevelopments I would underscore that are likely to have important impacts onour performance going forward. First, we have increased sales flexibility byintroducing container sales from January 2012, enabling us to enter newmarkets by shipping smaller volumes when needed. Second is the contract forthe supply of 600 thousand tonnes of phosphate-based fertilisers throughFebruary 2013 with India's Nagarjuna announced on 12 April 2012. Finally,Russia's antimonopoly service on 29 May 2012 announced rules that indicate thegovernment's desire to liberalise the domestic phosphate rock market, whichshould have a significant positive effect on Apatit's performance after 2013."Looking forward, we believe the market will remain stable, especiallyconsidering recent developments with Indian contracts. By mid-July we plan toselect two finalists from the four remaining candidates in the tender forcontractors for our new 760 ktpa capacity ammonia plant, and we aim tofinalize contract negotiations by the end of this year. We also intend tofocus our efforts on continuing the consolidation of our key subsidiaries, andon other developing projects that will help us take advantage of our uniqueresource base. PhosAgro continues to focus on its growth strategy ofincreasing sales and production flexibility, while also benefitting from highlevels of vertical integration and operational efficiency."
Market Conditions
Q1 2012
- Russia, Europe, US and Brazil showed very strong demand during the period; - The Indian market was challenging in Q1 2012, as the DAP subsidy was reduced by almost 30% to Rs 14,350/tonne from Rs 19,763/tonne; resulting in almost no DAP supply to India in Q1 2012.
Current trends and expectations
- DAP prices recovered by more than 17% from their lowest level of
USD 495/tonne (FOB Tampa) at the end of March 2012, and are currently at
USD 580/tonne; - Demand from Brazil/Latin America, Asia (excl. India) and Russia remains strong; - Indian demand is recovering, with a one million tonne contract signed at the price of USD 580/tonne CFR at the beginning of June. Contracts for over two million tonnes have been signed since then; - US and Europe demand is expected to pick up soon with the next planting season due to start.Phosphate segment Result Q1 2012 RUB Q1 2011 RUB Year-on-year mln mln change %Revenue 23,013 21,105 9%Cost of goods sold (13,469) (11,750) 15%Gross profit 9,544 9,355 2%Phosphate segment revenue increased by 9% y-o-y and totalled RUB 23,013million (USD 760 million) in Q1 2012. The Company increased production ofphosphate-based fertilisers and MCP by 5% year-on-year, while sales volumeswere up 9% year-on-year. Production and sales volumes for phosphate rock andnepheline concentrate increased in Q1 2012 compared to Q1 2011 by 1% and 7%,respectively.Revenue from NPK fertiliser export sales increased 160% y-o-y in Q1 2012 fromRUB 1,676 million to RUB 4,358 million as a result of a 10% increase inrevenue per tonne from export sales of NPK and a 137% increase in NPK exportsales volume. The record levels of NPK production and sales contributed to a15% decline in export sales revenue for DAP/MAP, from RUB 10,384 million forQ1 2011 to RUB 8,885 million in the three months ended 31 March 2012. However,the 16% reduction in sales volumes was partially compensated by 3% increase inDAP revenue per tonne. Domestic sales revenue from phosphate rock increased32% y-o-y in the first quarter of 2012, reaching RUB 3,100 million on higherrevenue per tonne (up 26% y-o-y) and higher sales volumes (up 4% y-o-y).Revenue from export sales of MCP increased 73% to RUB 670 million in Q1 2012.
The phosphate segment's gross profit for Q1 2012 increased 2% y-o-y to RUB 9,544 million (USD 315 million), resulting in a gross profit margin of 41%, compared to 44% in Q1 2011, mainly as a result of a 15% y-o-y increase in cost of sales, from RUB 11,750 million (USD 401 million) to RUB 13, 469 million (USD 445 million) in the first quarters of 2011 and 2012, respectively.
PhosAgro is largely self-sufficient in key raw materials forphosphate fertiliser production, and therefore is not subject to priceinflation for phosphate rock. However, expenditure on sulphur and sulphuricacid, used primarily in the production of phosphate fertilisers, amounted toRUB 982 million (USD 32 million) in Q1 2012, a 17% increase from RUB 838million (USD 29 million) in the first three months of 2011 as result of a 20%increase in the average price of sulphur from RUB 2,196 (USD 75) to RUB 2,646(USD 87) per tonne. Expenditure on potash, a key raw material for NPKfertilisers, increased 112% y-o-y in the first quarter of 2012, reaching RUB1,177 million, as result of record NPK production volumes.Revenue per tonne for the principal phosphate-based fertiliser and feedphosphate Product Q1 2012 RUB Q1 2011 RUB Year-on-year change %Domestic:MAP 18,070 15,018 20%DAP 17,978 17,321 4%NPK 14,365 14,575 (1%)MCP 19,355 20,114 (4%) Export:MAP 15,479 15,871 (2%)DAP 16,471 15,916 3%NPK 14,069 12,803 10%MCP 16,754 15,527 8%Nitrogen segment Result Q1 2012 RUB Q1 2011 RUB Year-on-year mln mln change %Revenue 2,679 3,175 (16%)Inter-segment revenues 1,585 861 84%Cost of goods sold (2,187) (1,927) 13%Gross profit 2,077 2,109 (2%)Revenue in the nitrogen segment was RUB 2,679 million (USD 89 million) in Q12012, a decrease of 16% year-on-year, compared to RUB 3,175 million (USD 108million) the first three months of 2011. Production of nitrogen-basedfertilisers declined 12% year-on-year, while sales volumes were 11% lowery-o-y in Q1 2012, mainly as a result of work on ammonia plant modernisations,which was completed in February 2012.The 11% decline in nitrogen-based fertiliser sales volumes was balanced by a21% rise in revenue per tonne from AN export sales. Urea export sales revenueincreased RUB 253 million, or 21%, y-o-y from RUB 1,198 million in Q1 2011 toRUB 1,451 million in Q1 2012. Urea export revenue was higher as a result of a14% increase in revenue per tonne and 29% growth in sales volumes.
As a result, nitrogen segment gross profit decreased by 2% y-o-y to RUB 2,077 million (USD 69 million) in Q1 2012, with a gross profit margin of 49%.
Revenue per tonne for the principal nitrogen-based fertilisers
Product Q1 2012 RUB Q1 2011 RUB Year-on-year change %Domestic:Ammonium nitrate 8,471 7,599 11%Urea 9,779 10,100 (3%) Export:Ammonium nitrate 9,907 8,169 21%Urea 11,908 10,438 14%Cost of sales
PhosAgro's cost of sales increased by 7% y-o-y in Q1 2012 to RUB 14,509 million (USD 479 million). This was in line with the 5% increase in overall fertiliser sales volumes and Russian PPI of 2.9% in Q1 2012. The increase in cost of sales was primarily due to the following changes from Q1 2011 to Q1 2012:
- A 5% increase in salaries and social contributions to RUB 2,823 million due to higher labour rates;
- A 112% increase in expenditure on potash due to substantially higher NPK production and sales (up 63% and 71% y-o-y, respectively) as well as a 45% increase in potash prices, from RUB 5,977/tonne in Q1 2011 to RUB 8,659/tonne in Q1 2012.
- An 8% decrease in expenditure on natural gas, from RUB 1,430million to RUB 1,310 million. This was primarily due to a 6% decrease inconsumption of natural gas from 475,736 thousand cubic meters in Q1 2011 to445,057 thousand cubic meters in the period ended 31 March 2012. The decreasein consumption was due to a 14% reduction in production volumes of ammonia, aswell as modernization of ammonia production lines at Cherepovetsky Azot thatcontributed to lower per-unit gas consumption. Item Q1 2012 Q1 2011
Change y-o-y
RUB mln USD mln % of cost RUB mln USD mln % of cost RUB mln % of sales of salesMaterials and 4,710 156 33% 5,039 172 37% (329) (7%)servicesSalaries and 2,823 93 19% 2,680 92 20% 143 5%socialcontributionsPotash 1,177 39 8% 555 19 4% 622 112%Natural gas 1,310 43 9% 1,430 49 11% (120) (8%)Depreciation 1,447 48 10% 1,332 46 10% 115 9%andamortisationFuel 1,343 44 9% 1,301 44 10% 42 3%Sulphur and 982 32 7% 838 29 6% 144 17%sulphuric acidElectricity 858 28 6% 956 33 7% (98) (10%)Other items 9 0 0% 12 0 0% (3) (25%)Change in stock (150) (5) (1%) (600) (20) (5%) 450 75%of WIP andfinished goodsTotal 14,509 479 100% 13,543 464 100% 998 7%Administrative expenses rose by 33% to RUB 1,480 million (USD 49 million) inthe three months ended 31 March 2012, mainly due to an increase in salariesand social contributions of RUB 166 million, or 26%, which is mostly due to alump sum severance payout associated with staff redundancy.Selling expenses rose by 20% y-o-y, from RUB 1,538 million (USD 53 million) inQ1 2011 to RUB 1,849 million (USD 61 million) in Q1 2012. This was primarilydue to increased sales volumes as well as an increase in port and stevedoringexpenses and Russian Railway infrastructure tariff and operators' fees.Salaries and social contributions decreased owing to a reduction in headcount,while an increase in materials and services reflected general price inflation.PhosAgro's capital expenditure, which consists of all additions to property,plant and equipment, amounted to RUB 3,360 million (USD 111 million) for Q12012 and RUB 2,168 million (USD 74 million) Q1 2011. Capital expenditurefocused on construction of the main ore shaft â„- 2 at the Kirovskyunderground mine (expected to enable the mine to increase production to 14mtpa in 2-3 years), as well as construction of new 500 kmt p.a. urea capacityand a 32 MW gas-powered electricity generation facility at Cherepovetsky Azot.Total debt at 31 March 2012 amounted to RUB 31,851 million (USD 1,086million), versus RUB 32,153 million (USD 999 million) at the end of 2011. Theincrease in total debt in US dollar terms was due to new short-term debtfacilities obtained during the period, denominated primarily in USD and EUR.Total debt decreased in rouble terms due to a decline in the RUB/USD andRUB/EUR rates from 31 December 2011 to 31 March 2012 (from RUB/USD 32.1961 to29.3282 and RUB/EUR 41.6714 to 39.1707, respectively).
Outlook
Market:
- With recent developments in demand from India, PhosAgro does not expect any serious slow-downs; - Record planting acreage and historically high prices for key grains will drive demand for fertilisers.
Company:
- New urea plant is due to come online in summer 2012 with a capacity of 500 kmt per year; - Selection of contractors for new 760 ktpa capacity ammonia plant progressing, with two final candidates due to be selected in July 2012, and aim to complete contract negotiations by the end of 2012; - PhosAgro remains on track for overall increase in fertiliser production and sales in 2012 vs. 2011, with a greater share of NPKs.
Conference Call and Webcast
On Monday, 18 June 2012 at 13:00 London time (16:00 Moscow; 08:00 New York), PhosAgro will host a conference call and webcast to discuss its reviewed interim condensed consolidated IFRS financial results for Q1 2012.
PhosAgro CEO Maxim Volkov will present the results and answer questions from conference call and webcast participants.
The call will be held in English, with simultaneous translation into Russianon a separate line. Participants will be required to tell the operator whichlanguage to connect to when dialling in.
Webcast links:
English: http://www.media-server.com/m/p/yg5d9cba/lan/en
Russian: http://www.media-server.com/m/p/yg5d9cba/lan/ru
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:CommunicationsSam VanDerlipvanderlip@mcomgroup.com+7 495 363 2845Notes to EditorsPhosAgro is a leading global vertically integrated phosphate-based fertiliserproducer. The Group focuses on the production of phosphate-based fertilisers,feed phosphate and high-grade phosphate rock (P2O5 content of not less than35.7 percent), as well as ammonia and nitrogen-based fertilisers. The Group isthe largest phosphate-based fertiliser producer in Europe, the largestproducer of high-grade phosphate rock worldwide and the third largest MAP/DAPproducer in the world (excluding China), according to Fertecon. PhosAgro isalso a leading producer of MCP feed phosphates in Europe, and the onlyproducer in Russia.PhosAgro has 2.1 billion tonnes of resources (according to JORC) of highquality apatite-nepheline ore, representing over 75 years of production. TheGroup also controls substantial Al2O3 resources, and has 41% of Russia's rareearth oxides resources.The Group's mines and phosphate rock production facilities are located in themountainous areas of the Kola Peninsula in the Murmansk region of northwestRussia, whereas its fertiliser and feed phosphate production assets arelocated near the city of Cherepovets in the Vologda region and near the cityof Balakovo in the Saratov region of southwest part of European Russia. TheGroup is the only global vertically integrated fertiliser producer thatderives approximately 90% of its consolidated gross profit from the phosphatessegment. PhosAgro's 2011 IFRS revenue was USD 3.4 bln and EBITDA was USD 1.2bln. 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 three months ended 31 March 2012
Three months ended 31 March 2012 2011 RUB Million RUB MillionRevenues 25,918 24,486Cost of sales (14,509) (13,543)Gross profit 11,409 10,943
Administrative expenses (1,480) (1,109)Selling expenses (1,849) (1,538)Taxes, other than income tax
(406) (322)Other expenses, net (145) (316)Operating profit 7,529 7,658 Finance income 799 168Finance costs (322) (85)
Foreign exchange gain 1,771 61Share of (loss)/profit of associates
(42) 60Profit before taxation 9,735 7,862 Income tax expense (1,688) (1,627)Profit for the period 8,047 6,235 Attributable to:Non-controlling interests 1,521 900Equity holders of the Parent 6,526 5,335 Other comprehensive income:Revaluation of available-for-sale securities 17 261
Recycling of revaluation loss on available-for-sale securities to profit and loss 369
-Actuarial gains and losses (28) (21)Foreign currency translation difference (204) (551)Other comprehensive income for the period 154 (311)Total comprehensive income for the period 8,201 5,924Attributable to:Non-controlling interests 1,511 894Equity holders of the Parent 6,690 5,030Basic and diluted earnings per share (in RUB) 52 43
Consolidated Statement of Financial Position as at 31 March 2012
31 March 2012 31 December 2011 RUB Million RUB MillionASSETSNon-current assetsProperty, plant and equipment 58,887 57,116Intangible assets 611 640Investments in associates 8,450 7,910Other non-current assets 2,952 3,556 70,900 69,222Current assetsOther current investments 1,668 2,123Derivative financial assets 59 -Inventories 10,441 10,096Current income tax receivable 201 166Trade and other receivables 8,996 10,734Cash and cash equivalents
22,690 16,946 44,055 40,065Total assets 114,955 109,287 EQUITY AND LIABILITIESEquityShare capital 360 360Share premium 1,099 1,099Retained earnings 48,720 42,265Other reserves 225 61
Equity attributable to Equity holders of the Parent 50,404 43,785Equity attributable to non-controlling interests
18,406 16,923 68,810 60,708 Non-current liabilitiesLoans and borrowings 14,455 16,592Defined benefit obligations 997 922Deferred tax liabilities 2,624 2,850 18,076 20,364 Current liabilitiesTrade and other payables 9,499 11,407Current income tax payable 1,174 801Loans and borrowings 17,396 15,561
Derivative financial liabilities - 446 28,069 28,215Total equity and liabilities 114,955 109,287 Consolidated Statement of Cash Flows for the three months ended 31 March 2012 Three months ended 31 March 2012 2011 RUB Million RUB MillionOPERATING ACTIVITIESProfit before taxation 9,735 7,862Adjustments for:
Depreciation, amortisation and impairment 1,570 1,451(Gain)/loss from disposal of fixed assets
(85) 61Interest expense 322 85Interest income (295) (168)
Share of loss/(profit) of associates 42 (60)Foreign exchange gain (2,189) -Gain on revaluation of derivative financial instruments (504) -Operating profit before changes in working capital and provisions 8,596 9,231Increase in inventories (345) (987)Decrease in trade and other receivables 1,801 3,968Increase in trade and other payables 1,721 824Cash flows used in operations before income taxes and interest paid
11,773 13,036Income tax paid (1,570) (1,052)Interest paid (265) (48)
Cash flows from operating activities 9,938 11,936INVESTING ACTIVITIESLoans repaid/(issued) 467 (1,518)Acquisition of intangible assets (25) (50)Acquisition of property, plant and equipment (3,507) (3,021)Proceeds from disposal of property, plant and equipment 104 121Acquisition of investments (34) (18)Additional equity contribution in associates (400) -Interest received 295 168Cash flows used in investing activities
(3,100) (4,318)FINANCING ACTIVITIESProceeds from borrowings 3,688 3,185Repayment of borrowings (955) (3,512)
Proceeds from disposal of treasury shares - 8,460Acquisition of non-controlling interests (99) (9,177)Dividends paid to non-controlling interests (3) (159)Dividends paid to shareholders of the Parent (2,913) (2,419)Finance leases paid (75) (51)Cash flows used in financing activities (357) (3,673)Net increase in cash and cash equivalents 6,481 3,945Cash and cash equivalents at beginning of the period 16,946 5,261Effect of changes in exchange rates (737) -Cash and cash equivalents at end of the period 22,690 9,206