Phosagro S Regulatory News (PHOR)

For Immediate Release 22 August 2013 PhosAgro Reports 1H 2013 IFRS Net Profit of RUB 4.8 bln Moscow - PhosAgro ("PhosAgro" or "the Company") (Moscow Exchange, LSE: PHOR),a leading global vertically integrated phosphate-based fertilizer producer,today announces its reviewed consolidated interim condensed IFRS financialstatements for the six months ended 30 June 2013. PhosAgro earned a net profitfor the period of RUB 4.8 billion (USD 154 million), compared to RUB 10.8billion (USD 353 million) in 1H 2012. Basic and diluted earnings per sharecame to RUB 33 (USD 1) for 1H 2013 compared to RUB 68 (USD 2) in 1H 2012. 1H 2013 Financial and Operational Highlights: Result 1H 2013 1H 2012 year-on-year change (RUB vs. RUB), % USD RUB USD RUBRevenue 1,732m 53,715m 1,644 m 50,359m 7%EBITDA* 432m 13,407m 559 m 17,137m (22%)EBITDA margin 25% 25% 34% 34% (9 p.p.)Net Profit 154m 4,770m 353m 10,802m (56%)Earnings per share 1 33 2 68 (51%) Sales volumes Kmt KmtPhosphate-based 2,307.3 2,123.2 9%fertilizersNitrogen-based 659.6 479.6 38%fertilizersApatit mine and 1,957.2 2,187.7 (11%)beneficiation plantOther products 147.6 166.9 (12%) RUB/USD Rates: average 1H 2013: 31.0169; average 1H 2012: 30.6390As of 30 June 2013: 32.7090; as of 31 December 2012: 30.3727*EBITDA is calculated as operating profit adjusted for depreciation andamortisation. Other 1H 2013 Highlights - Production and sales flexibility: - In 1H 2013 PhosAgro's revenue and sales volumes benefited from the Company'sstrategy of enhancing production flexibility, with significant growth inMAP/DAP/NPS production in addition to a slight increase in NPK volumes.Production and sales volumes of MAP/DAP/NPK/NPS fertilizers increased by 4%and 7%, respectively, while revenue decreased by 2%, due to the 10% decline inDAP FOB Tampa prices. - Revenue grew 4% as a result of the consolidation of Metachem, which broughtsales of technical phosphates (STTP) and potassium sulphate (SOP) amounting toRUB 2,185 million (USD 70 million) in 1H 2013. - Organic growth through capacity expansion and greater operationalefficiency: - Urea production volumes increased by 83% from 251 kmt in 1H 2012to 460 kmt in 1H 2013. Export revenue per tonne for urea increased by 2% in 1H2013 compared to 1H 2012. - Consolidation of ownership in production facilities: - In January 2013, the holders of 10.95% of shares in Apatit acceptedPhosAgro's mandatory tender offer. The Company subsequently launched a squeezeout of the remaining shareholders of Apatit, which is due to be completed inAugust 2013; - In June 2013 the Company acquired 25.24% of Metachem, bringing its ownershipin the subsidiary to 100%. PhosAgro reported its 1H 2013 net profit of RUB 4.8 billion (USD 154 million),a decrease of 56% year-on-year from RUB 10.8 billion (USD 353 million) in 1H2012. Revenue for the period was up 7% year-on-year to RUB 53.7 billion (USD1,732 million), compared to RUB 50.4 billion (USD 1,644 million) for 1H 2012. Operating profit for 1H 2013 was RUB 9.6 billion (USD 310 million), a 31%decrease from RUB 13.9 billion (USD 455 million) in 1H 2012. EBITDA margindecreased year-on-year to 25% compared to 34% for 1H 2012. Cash flow from operating activities amounted to RUB 14.4 billion (USD 464million) in 1H 2013, compared to RUB 13.2 billion (USD 430 million) in 1H2012. The Company's capital expenditure (capex) in cash terms during the sixmonths ended 30 June 2013 was RUB 7.1 billion (USD 230 million) compared toRUB 6.7 billion (USD 218 million) in 1H 2012. Net debt at 30 June 2013 stood at RUB 29.4 billion (USD 900 million), up fromRUB 26.8 billion (USD 883 million) at 31 December 2012. Net debt increased dueto the significant cash outflow for the Apatit minority shareholder buy-out asa result of the mandatory tender offer, which was funded through PhosAgro'ssuccessful long-term USD 500 million debut Eurobond issue. The Company's netdebt to annualised EBITDA ratio temporarily increased to slightly above thetarget level of 1x as of 30 June 2013. Commenting on the 1H 2013 IFRS results, PhosAgro Management Board Chairman andCEO Andrey A. Guryev said: "In the first half of 2013 we increased revenue by 6.7% year-on-year as aresult of growth in fertilizer production and sales by 13% and 14%,respectively. We are in the third consecutive year of DAP prices being undersignificant pressure, with FOB Tampa prices dropping another 10% from anaverage of USD 539 in 1H 2012 to an average of just USD 486 in 1H 2013. As alow cost producer during a time when DAP prices are substantially below thecash cost of marginal producers PhosAgro managed to generate a 25% EBITDAmargin and to maintain almost 100% production capacity utilisation, which Ibelieve distinguishes us from our peers. "Despite challenging market conditions, which caused a significant decline inour financial results, the Company continues to have strong cash conversionresults, which enables us to generate free cash flow for dividenddistribution. We are committed to return profit to our shareholders, andcurrently we are working on increasing operational efficiency as well asreviewing our development programme to ensure that we continue to adhere toour financial policies. "We believe that fertilizer demand will strengthen and that DAP prices willstabilize closer to the levels of marginal phosphate producer cash costs.Although in the short term we might see additional price pressure, in thelonger term industry fundamentals remain strong, and we continue to be in thebest position to deliver any type of phosphate-based fertilizer to farmerseither in concentrated or in complex triple (NPK) and even quadruple (NPKS)nutrient form." 1H 2013 Market Conditions - Soft commodity prices remain above historical levels, despite expectationsof output growth for major agricultural products; - Low demand from India and significantly delayed domestic US demand drove afurther 10% drop in DAP prices; - Brazil continues to increase phosphate consumption: in 1H 2013 MAP importsincreased by 43%, while NP/NPS imports were up 66%; - Demand from the markets nearest to PhosAgro remained very strong: domesticsales volumes of phosphate-based products increased more than 40%year-on-year, in the CIS by 54% and in Western Europe volumes increased 35% in1H 2013; - Feed stock prices declined, supporting margins going forward: - ammonia has come down from above USD 600 in early January to around USD 480at the end of June, and is currently just slightly above USD 400 on allsignificant spot markets, with an overall drop of about 30%; - sulphur prices are down 40% to 50% across various regions; - phosphate rock spot prices FOB Casablanca have declined around 10% to datein 2013; - Despite the decline in feed stock prices, DAP spot prices remain below cashcost levels for marginal producers of concentrated phosphate fertilizers. Phosphate-based products segment Result 1H 2013 1H 2012 year-on-year RUB mln RUB mln change, %Revenue 46,120 44,024 5%Cost of goods sold (30,918) (27,216) 14%Gross profit 15,202 16,808 (10%) Phosphate-based products segment revenue increased by 5% year-on-year andtotalled RUB 46,120 million (USD 1,487 million) in 1H 2013. PhosAgro increasedproduction of phosphate-based fertilizers and MCP by 6% year-on-year in thefirst half of 2013, while sales volumes were up 9% year-on-year. Productionand sales volumes for phosphate rock and nepheline concentrate decreased in 1H2013 compared to 1H 2012 by 0.5% and 11%, respectively. Revenue growth for the phosphate-based products segment was largely due to theaddition of export sales of STTP (sodium tripolyphosphate) and SOP (potassiumsulphate) of RUB 1,599 million (USD 52 million) and RUB 491 million (USD 16million), respectively, in 1H 2013 as a result of the consolidation ofMetachem at the end of 2012. Revenue from NPK export sales decreased by 18%year-on-year, from RUB 9,041 million (USD 295 million) in 1H 2012 to RUB 7,424million (USD 239 million) in 1H 2013. This was mainly the result of a 13%decline in revenue per tonne from export sales of NPK. Revenue from DAP/MAPsales was nearly unchanged year-on-year, increasing from RUB 15,950 million(USD 521 million) in 1H 2012 to RUB 16,004 million (USD 516 million) in 1H2013. This small increase was due to lower market prices counterbalancing an8% increase in DAP/MAP sales volumes. Revenue from domestic sales of phosphaterock decreased by 16% to RUB 4,368 million (USD 141 million) in 1H 2013 due tolower sales to a significant Russian customer and higher internal usefollowing the consolidation of Metachem. The decrease in domestic sales ofphosphate rock also led to a 9% year-on-year increase in export sales of theproduct to RUB 4,239 million (USD 137 million). The phosphate segment's gross profit for 1H 2013 decreased by 10% year-on-yearto RUB 15,202 million (USD 490 million), resulting in a gross profit margin of33%, compared to 38% in 1H 2012. This was primarily a result of a decrease inprices for the Company's main phosphate-based products. PhosAgro is largely self-sufficient in key raw materials for phosphatefertilizer production, and therefore is not subject to price inflation forphosphate rock. However, higher production volumes and changes in theproduction mix in 1H 2013 meant the Company had to increase external purchasesof other inputs, which led to an increase in cost of sales (a more detaileddiscussion is provided in the CoGS analysis below). Revenue per tonne for the principal phosphate-based fertilizers and feedphosphate Product 1H 2013 1H 2012 year-on-year RUB RUB change, %Domestic:MAP 15,596 18,066 (14%)DAP 14,660 17,763 (17%)NPK 14,020 14,677 (4%)MCP 19,850 19,342 3%NPS 11,475 12,065 (5%) Export:MAP 15,417 15,936 (3%)DAP 15,073 16,485 (9%)NPK 12,054 13,809 (13%)MCP 17,115 16,864 1%NPS 10,499 11,025 (5%)Nitrogen segment Result 1H 2013 1H 2012 year-on-year RUB RUB change, %Revenue 7,155 5,829 23%Inter-segment revenues 1,114 2,826 (61%)Cost of goods sold (5,000) (4,091) 22%Gross profit 3,269 4,564 (28%) Nitrogen segment revenue was RUB 7,155 million (USD 231 million) in 1H 2013,an increase of 23% year-on-year from RUB 5,829 million (USD 190 million) in 1H2012. Production and sales volumes of nitrogen-based fertilizers increased by44% and 38% year-on-year, respectively, in 1H 2013. Urea sales volumes increased by 62% year-on-year following the launch of thenew urea plant at PhosAgro-Cherepovets in the second half of 2012. Exportrevenue from urea increased by 66% year-on-year from RUB 2,970 million (USD 97million) in 1H 2012 to RUB 4,919 million (USD 159 million) in 1H 2013 as aresult of higher export sales volumes (up 63%) and a 2% increase in exportrevenue per tonne. The structure of ammonium nitrate (AN) sales shifted fromexport to domestic in 1H 2013. Domestic AN sales increased by 75% to RUB 1,770million (USD 57 million) in 1H 2013 from RUB 1,014 million (USD 33 million) ayear earlier. Inter-segment revenues decreased by 61% year-on-year in the first six monthsof 2013, to RUB 1,114 million (USD 36 million). This was a result of themerger of Ammophos and Cherepovetskiy Azot, which represented thephosphate-based and nitrogen-based segments, respectively. As a result of higher expenses for purchased ammonia (a more detaileddiscussion is provided in the CoGS analysis below), nitrogen segment grossprofit decreased by 28% year-on-year to RUB 3,269 million (USD 105 million) in1H 2013, with a gross profit margin of 40%, compared to 53% in 1H 2012. Revenue per tonne for the principal nitrogen-based fertilizers Product 1H 2013 1H 2012 year-on-year RUB RUB change, %Domestic:Ammonium nitrate 9,857 8,383 18%Urea 13,022 12,515 4% Export:Ammonium nitrate 9,591 10,333 (7%)Urea 11,225 11,032 2%Cost of sales PhosAgro's cost of sales increased by 22% year-on-year in 1H 2013 to RUB34,672 million (USD 1,118 million), in line with the growth in fertilizersales volumes of 14%, PPI inflation of 3.5% year-on-year from 1H 2012 to 1H2013 in addition to the 4% increase as a result of the Metachem consolidation.This increase in cost of sales was primarily due to the following changes from1H 2012 to 1H 2013: - A RUB 1,961 million (USD 63 million) or 24% increase in the costof materials and services. Higher production of NPS/NPK, which have a highnitrogen content, led to an increase in purchases of ammonium sulphate of RUB485 million (USD 16 million). - The consolidation of Metachem into PhosAgro led to a 7% increasein materials and services expenses of RUB 596 million (USD 19 million). - A RUB 1,512 million (USD 49 million) or 109% increase in ammoniaexpenses. Higher production volumes of nitrogen-based fertilizers and changesin product mix meant that PhosAgro's third party ammonia purchases increasedto RUB 2,898 million (USD 93 million) in the six months ended 30 June 2013from RUB 1,386 million (USD 45 million) in the six months ended 30 June 2012. - An increase in expenditure on natural gas of RUB 468 million (USD15 million), or 18%, from RUB 2,537 million (USD 83 million) in the six monthsended 30 June 2012 to RUB 3,005 million (USD 97 million) in the six monthsended 30 June 2013. Natural gas is required primarily for the production ofammonia. The price per cubic meter of natural gas rose by 15%, while naturalgas consumption grew by 4% year-on-year. The price increase was due to anapproximately 15% tariff increase in the second half of 2012. The increase involume was due to the launch of a gas-powered electric generation facility inthe second half of 2012, and additional volumes consumed by Metachem, whichwas consolidated by PhosAgro from the end of 2012. - An increase in expenditure on electricity of RUB 97 million (USD3 million), or 6%, from RUB 1,638 million (USD 53 million) in 1H 2012 to RUB1,735 million (USD 56 million) in 1H 2013. This was mainly due to theconsolidation of Metachem. - Personnel costs increased 16% year-on-year, primarily due to thefollowing reasons: indexation of salaries in line with 7.2% CPI inflation, anapproximately 4% increase due to the consolidation of Metachem, as well as anincrease in Russian social payments and redundancy payments with respect tothe staff optimization programme. - The increase in cost of sales was partially offset by ayear-on-year decrease in expenditure on potash of 9%, or RUB 235 million, toRUB 2,296 million (USD 74 million) in the six months ended 30 June 2013. Thiswas due to a 13% decrease in potash purchase volumes. Although productionvolumes of NPK increased by 1%, the share of NPK brands with low potashcontent in the overall production mix increased. Item 1H 2013 1H 2012 Year-on-year change RUB USD % of RUB USD % of RUB % mln mln cost mln mln cost mln of sales of salesMaterials andservices 10,165 328 29% 8,204 268 29% 1,961 24%Salaries andsocial contributions 6,678 215 19% 5,738 187 20% 940 16%Ammonia 2,898 93 8% 1,386 45 5% 1,512 109%Potash 2,296 74 7% 2,531 83 9% (235) (9%)Natural gas 3,005 97 9% 2,537 83 9% 468 18%Depreciation 3,520 113 10% 2,966 97 10% 554 19%Fuel 2,450 79 7% 2,430 79 9% 20 1%Sulphur andsulphuric acid 1,879 61 6% 1,834 60 6% 45 2%Electricity 1,735 56 5% 1,638 53 6% 97 6%Other items 35 1 - 15 - - 20 133%Change instock of WIPand finishedgoods 11 - - (854) (28) (3%) 865 (101%)Total 34,672 1,117 100% 28,425 927 100% 6,247 22% Administrative expenses rose by 25% year-on-year to RUB 3,657 million (USD 118million) in the first half of 2013 as result of inflation and theconsolidation of Metachem and an increase in personnel costs for reasonssimilar to those discussed in cost of sales. Selling expenses rose by 3% year-on-year, from RUB 3,947 million (USD 129million) in the first half of 2012 to RUB 4,077 million (USD 131 million) inthe first half of 2013. This was primarily due to higher sales volumes, aswell as a 7% year-on-year increase in Russian Railways infrastructure tariffand operators' fees in 1H 2013. Cash spent on capex in 1H 2013 amounted to RUB 7,122 million (USD 230 million)compared to RUB 6,694 million (USD 218 million) in the first half of 2012.PhosAgro's capital expenditure, which consists of additions to property, plantand equipment, amounted to RUB 8,008 million (USD 258 million) for 1H 2013,compared to RUB 6,759 million (USD 221 million) in 1H 2012. Capitalexpenditure focused on construction of the main ore shaft № 2 at theKirovsky underground mine (expected to enable the mine to increase productionto 14 mtpa in 2-3 years), as well as the construction of new storagefacilities for liquid ammonia at Balakovo Mineral Fertilizers. Total debt at 30 June 2013 amounted to RUB 48,498 million (USD 1,483 million),compared to RUB 36,469 million (USD 1,201 million) at 31 December 2012. Netdebt at 30 June 2013 amounted to RUB 29,441 million (USD 900 million),compared to RUB 26,805 million (USD 883 million) at 31 December 2012. Outlook Market: - Expectations of improved crop yields have recently pushed corn and soybeanfutures down, however, soft commodities prices are expected to remain wellabove historical averages; - DAP prices relative to the soft commodities basket are at very low levels ,meaning almost record crop nutrient affordability; - Morocco continues to delay the launch of new capacities; - Global supply of phosphate-based fertilizers remains at very low levels dueto significant cash cost for most producers, and no significant new capacitiesare expected to be added in the near future, minimizing pricing pressures fromthe supply side; - On the demand side, India remains a question mark given the significantweakness of the local currency; at the same time, imbalanced fertilization forthe third consecutive year (over-application of nitrogen vs. phosphate) mayeventually force delayed purchases to be made; - The global economic slowdown is affecting not just the Indian market:currencies across emerging markets are weakening (the Brazilian Real forexample has depreciated against the USD by 15% from the beginning of 2013).While the long term effect for net exporters of soft commodities is notnecessarily negative, in the short term this causes customers to be cautiousabout importing fertilisers; - Recent potash market developments may have an impact on all fertilizers interms of cautious customer behaviour with respect to partial delay offertilizer purchases until the MOP price stabilises in the short term. Company: - While concentrated phosphate fertilizer demand remained under pressure in 1H2013, PhosAgro sees very high global demand for complex fertilizers and NPS;the Company intends to further invest into both increasing capacity andexpanding the number of NPK grades it produces; - All major development project are on track: new ammonia plant designed toincrease cost efficiency and support expansion of complex fertilizer capacity,as well as new NPK/NPKS project in Balakovo; - After completion of the squeeze out of remaining shareholders of Apatit,PhosAgro will fully consolidate Apatit in 3Q 2013; - Management focus on cost optimisation will help to reduce the Company'smaterial costs in addition to recent ammonia, sulphur and potash pricedevelopments; - The Management Board is revising the capital expenditure programme to complywith PhosAgro's financial policy with respect to capital spending andleverage. On 22 August 2013, PhosAgro will hold a conference call and webcast at 14:00London time (17:00 Moscow; 09:00 New York). Following a presentation of the results, PhosAgro CEO Andrey A. Guryev willanswer questions from conference call 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/mgf23bpx/lan/enRussian: http://www.media-server.com/m/p/mgf23bpx/lan/ru Conference call dial-ins: +7 499 272 4337 Moscow+1 212 999 6659 New York+44 (0) 20 3003 2666 London Toll Free: 0808 109 0700 UK1 866 966 5335 USA8 10 8002 490 2044 Russia (Moscow only) Conference call password: PhosAgro 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+7 916 306 6112 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 Companyis the largest phosphate-based fertilizer producer in Europe, the largestproducer of high-grade phosphate rock worldwide and the second largest MAP/DAPproducer in the world (excluding China), according to Fertecon. PhosAgro has 2.1 billion tonnes of resources (according to JORC as of 1 June2011) of high quality apatite-nepheline ore, representing over 75 years ofproduction (at current production levels). The Company also controlssubstantial Al2O3 resources, and has more than 41% of Russia's rare earthoxides resources. The Company's mines and phosphate rock production facilities are located inthe mountainous areas of the Kola Peninsula in the Murmansk region ofnorthwest Russia, whereas its fertilizer and feed phosphate production assetsare located near the city of Cherepovets in the Vologda region and near thecity of Balakovo in the Saratov region of southwest part of European Russia.PhosAgro's 2012 IFRS revenue was over USD 3.4 bln and EBITDA was USD 1.1 bln.The Сompany's net debt/EBITDA ratio was 0.77 at 31 December 2012. For further information on PhosAgro please visit: www.PhosAgro.com Consolidated Interim Condensed Statement of Profit or Loss and OtherComprehensive Income for the six-month period ended 30 June 2013 (unaudited) Six months ended Three Months 30 June ended 30 June 2013 2012 2013 2012 RUB RUB RUB RUB Million Million Million MillionContinuing operationsRevenues 53,715 50,359 24,813 24,441Cost of sales (34,672) (28,425) (16,023) (13,916)Gross profit 19,043 21,934 8,790 10,525 Administrative expenses (3,657) (2,933) (1,913) (1,453)Selling expenses (4,077) (3,947) (1,889) (2,098)Taxes, other than income tax (1,082) (767) (584) (361)Other expenses, net (623) (361) (468) (216)Operating profit 9,604 13,926 3,936 6,397 Finance income 533 1,257 329 458Finance costs (1,184) (711) (619) (389)Foreign exchange loss (2,759) (689) (1,730) (2,460)Share of profit of associates 182 89 - 131Profit before tax 6,376 13,872 1,916 4,137 Income tax expense (1,889) (3,070) (809) (1,382)Profit from continuing operations 4,487 10,802 1,107 2,755 Discontinued operationsProfit from discontinued operations, net oftax 283 - 372 -Profit for the period 4,770 10,802 1,479 2,755 Attributable to:Non-controlling interests 551 2,346 90 825Shareholders of the Parent 4,219 8,456 1,389 1,930 Other comprehensive incomeRevaluation of available-for-sale securities - 12 - (5)Recycling of revaluation loss onavailable-for-sale securities to profit and loss - 369 - -Actuarial gains and losses, net of tax (68) (63) (8) (35)Foreign currency translation difference 142 362 48 566Other comprehensive income for theperiod 74 680 40 526Total comprehensive income for theperiod 4,844 11,482 1,519 3,281 Attributable to:Non-controlling interests 545 2,325 91 814Shareholders of the Parent 4,299 9,157 1,428 2,467Basic and diluted earnings per share (inRUB) 33 68 11 16 Consolidated Interim Condensed Statement of Financial Position as at 30 June2013 (unaudited) 31 December 30 June 2013 2012 RUB million RUB millionAssetsProperty, plant and equipment 70,645 66,528Intangible assets 518 553Investments in associates 9,944 9,620Other non-current assets 3,337 3,071Non-current assets 84,444 79,772 Other current investments 200 833Derivative financial assets - 45Inventories 12,897 12,324Current income tax receivable 685 769Trade and other receivables 11,837 11,874Cash and cash equivalents 19,057 9,664Assets held for sale, net 616 346Current assets 45,292 35,855Total assets 129,736 115,627 EquityShare capital 372 360Share premium 7,494 1,099Retained earnings 47,655 48,294Other reserves (187) (267)Equity attributable to shareholders of the Parent 55,334 49,486Equity attributable to non-controlling interests 6,325 12,389Total equity 61,659 61,875 LiabilitiesLoans and borrowings 30,288 14,452Defined benefit obligations 1,300 1,257Deferred tax liabilities 3,042 2,973Non-current liabilities 34,630 18,682 Trade and other payables 14,515 12,377Current income tax payable 661 676Loans and borrowings 18,210 22,017Derivative financial liabilities 61 -Current liabilities 33,447 35,070Total equity and liabilities 129,736 115,627 Consolidated Interim Condensed Statement of Cash Flows for the six-monthperiod ended 30 June 2013 (unaudited) Six months ended 30 June 2013 2012 RUB million RUB millionCash flows from operating activitiesProfit before tax from continuing operations 6,376 13,872Adjustments for:Depreciation and amortisation 3,803 3,211Loss/(gain) on disposal of fixed assets 41 (114)Finance costs 1,184 711Finance income (533) (1,257)Share of profit of associates (182) (89)Foreign exchange loss 3,468 689Operating profit before changes in working capitaland provisions 14,157 17,023Increase in inventories (573) (777)(Increase)/decrease in trade and other receivables (97) 1,892Increase/(decrease) in trade and other payables 3,429 (554)Cash flows from operations before income taxesand interest paid 16,916 17,584Income tax paid (1,789) (3,876)Finance costs paid (734) (533)Cash flows from operating activities 14,393 13,175 Cash flows from investing activitiesLoans repaid, net 554 403Acquisition of intangible assets (55) (60)Acquisition of property, plant and equipment (7,122) (6,694)Proceeds from disposal of property, plant and equipment 137 215Acquisition of investments, net (55) (34)Additional equity contribution in associates - (400)Finance income received 619 650Cash flows used in investing activities (5,922) (5,920) Cash flows from financing activitiesProceeds from issuance of additional shares 6,407 -Proceeds from borrowings 24,395 15,185Repayment of borrowings (16,901) (10,441)Acquisition of non-controlling interests (7,876) (363)Dividends paid to non-controlling interests (4) (99)Dividends paid to shareholders of the Parent (4,439) (5,654)Finance leases paid (904) (178)Cash flows from/(used in) financing activities 678 (1,550)Net increase in cash and cash equivalents 9,149 5,705Cash and cash equivalents at 1 January 9,664 16,946Effect of exchange rates fluctuations 244 131Cash and cash equivalents at 30 June 19,057 22,782