Last checked at 29 Aug 2012 14:00
For Immediate Release 29 August 2012
PhosAgro Reports 6M 2012 IFRS Net Profit of RUB 10.8bn
Moscow - PhosAgro ("PhosAgro" or "the Company") , aleading global vertically integrated phosphate-based fertiliser producer,today announces its reviewed consolidated interim condensed IFRS financialstatements for the six months ended 30 June 2012. PhosAgro earned a profit ofRUB 10.8 billion (USD 353 million) in H1 2012, compared to RUB 12.3 billion(USD 429 million) in H1 2011. Basic and diluted earnings per share came to RUB68 (USD 2) for H1 2012.
6M 2012 Financial and Operational Highlights:
Result H1 2012 H1 2011 y-o-y change (RUB vs. RUB), % USD RUB USD RUBRevenue 1,644 m 50,359m 1,704m 48,764m 3%EBITDA* 559 m 17,137 m 620 m 17,752 m (3%)EBITDA margin 34% 34% 36% 36% (2%)Net Income 353m 10,802m 429m 12,291m (12%)Earnings per share 2 68 3 86 (21%) Sales volumes kmt
kmt
Phosphate-based fertilisers (MAP/DAP/NPK/NPS) 2,123.2 1,992.4 7%Nitrogen-based fertilisers 479.6 491.3 (2%)Apatit mine and beneficiation plant 2,187.7 2,074.3 5%Other products 166.9 203.0 (18%)
RUB/USD Rates: average H1 2012: 30.6390; average H1 2011: 28.6242
As of 30 June 2012: 32.8169; as of 31 December 2011: 32.1961 *EBITDA is calculated as operating profit adjusted for depreciation and amortisation.
Other H1 2012 Highlights
- PhosAgro revenue and sales volumes benefited from the Company's
strategy of enhancing production flexibility, with substantial growth in NPK
production, up 52% year-on-year from 563.6 kmt in H1 2011 to 856.8 kmt in H1
2012;
- The Board of Directors has recommended an interim dividend of RUB
4.7 billion (RUB 38 per share) for the first six months of 2012; - While an official announcement on the launch of new urea capacity
has yet to be made, the facility is currently running at more than 90%
capacity utilization in trial production mode;- PhosAgro and Acron settled all disputes with regards to the supply of
phosphate rock on terms that were satisfactory to both parties.
PhosAgro today reports its H1 2012 net profit of RUB 10.8 billion (USD 353million), a decrease of 12% y-o-y from RUB 12.3 billion (USD 429 million) inH1 2011. Revenue for the period was up 3% y-o-y at RUB 50.4 billion (USD 1.6billion) compared to RUB 48.8 billion (USD 1.7 billion) for H1 2011.
Operating profit for H1 2012 was RUB 13.9 billion (USD 455 million), a 6% decrease from H1 2011. EBITDA margin remained at a comfortable 34%, slightly decreasing from 36% for the first six months of 2011.
Cash flow from operating activities amounted to RUB 13.2 billion (USD 430million) in H1 2012, compared to RUB 17.9 billion (USD 627 million) in H12011. The company's capital expenditure (capex) in cash terms during the sixmonths ended 30 June 2012 was RUB 6.7 billion (USD 218 million), compared toRUB 5.5 billion (USD 191 million) in H1 2011.
Net debt at 30 June 2012 stood at RUB 14.8 billion (USD 450 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 0.43x.
Commenting on the H1 2012 IFRS results PhosAgro CEO Maxim Volkov said: "Wewere able to sustain a solid EBITDA and decent profit position despite thelower global phosphate pricing environment due to our flexible production andsales models, with almost 100% capacity utilisation during the period andcontinued increases in our production capacity. We are committed to continuereturning profits to our shareholders in the form of dividends when we do nothave any significant development cash requirements, and to that end the Boardhas recommended an interim dividend of RUB 4.7 billion or RUB 38/share, whichis 56% of the net profit attributable to the shareholders of PhosAgro for thefirst half of 2012.Looking forward we plan to continue taking steps towards investing in greaterproduction flexibility and additional capacity to further improve our resultsand shareholder returns."H1/Q2 2012 Market Conditions
- India, the largest consumer of phosphate fertilisers globally,
resumed imports in Q2 2012, which helped support demand toward the end of
the period;
- In all other geographies phosphate fertilizer stocks were
generally at very low levels; while demand remained strong in H1 2012,
farmers primarily in the US and Europe delayed purchases until the actual
application season started;
- Soft commodities prices have risen to near historic highs,
however, while this has in the past been supportive of fertiliser demand,
farmers remain cautious about the sustainability of prices; - China continued to implement restrictive export tariffs on phosphate fertilisers: from January 2012 the Chinese government has imposed an 82% export duty on NP/TSP; - DAP prices rose from their lowest levels in 2012 of around USD 500
per ton (FOB US Gulf) at the end of Q1 2012 to USD 560-575 per ton at the
end of the second quarter
Phosphate segment H1 2012 H1 2011 y-o-yResult RUB mln RUB mln change, %Revenue 44,024 42,508 4%Cost of goods sold (26,827) (24,086) 11%Gross profit 17,197 18,422 (7%)Phosphate segment revenue increased by 4% y-o-y and totalled RUB 44,024million (USD 1,437 million) in H1 2012. The Company increased production ofphosphate-based fertilisers and MCP by 6% year-on-year, while sales volumeswere up 7% year-on-year. Production and sales volumes for phosphate rock andnepheline concentrate increased in H1 2012 compared to H1 2011 by 1% and 5%,respectively.Revenue from NPK fertiliser export sales increased 120% y-o-y in H1 2012 fromRUB 4,114 million (USD 144 million) to RUB 9,041 million (USD 295 million) asa result of a 7% increase in revenue per tonne from export sales of NPK and a105% increase in NPK export sales volumes. The record levels of NPK productionand sales contributed to a 23% decline in export sales revenue for DAP/MAP,from RUB 19,486 million (USD 681 million) for H1 2011 to RUB 14,939 million(USD 488 million) in the six months ended 30 June 2012. Domestic sales revenuefrom phosphate rock increased 17% y-o-y in the first half of 2012, reachingRUB 5,197 million (USD 170 million) on higher revenue per tonne (up 14% y-o-y)and higher sales volumes (up 2% y-o-y). Revenue from export sales of MCPincreased 16% to RUB 1,290 million (USD 42 million) in H1 2012.The phosphate segment's gross profit for H1 2012 decreased 7% y-o-y to RUB17,197 million (USD 561 million), resulting in a gross profit margin of 39%,compared to 43% in H1 2011. This was primarily a result of higher potashpurchases in connection with the increase in NPK production, which drove costof sales up 11% y-o-y, from RUB 24,086 million (USD 841 million) to RUB 26,827million (USD 876 million) in the first six months 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. Expenditure on potash, a key raw material forNPK fertilisers, increased 94% y-o-y in the first half of 2012, reaching RUB2,531 million (USD 83 million), due to a 54% y-o-y increase in volumes ofpotash purchased and a 40% increase in cost per tonne. This was partiallycompensated by a 9% y-o-y decline in expenditures on sulphur and sulphuricacid, used primarily in the production of phosphate fertilisers, to RUB 1,834million (USD 60 million) in H1 2012 from RUB 2,007 million (USD 70 million) inthe first half of 2011, primarily due to a y-o-y decline in sulphur purchaseprices by 8%, while volumes purchased decreased slightly (less than 1% y-o-y)in 1H 2012.Revenue per tonne for the principal phosphate-based fertiliser and feed phosphateProduct H1 2012 H1 2011 y-o-y Q2 2012 Q2 2011 y-o-y RUB RUB change, % RUB RUB change, %Domestic:MAP 18,066 16,752 8% 18,065 17,161 5%DAP 17,763 17,288 3% 17,557 17,422 1%NPK 14,677 15,145 (3%) 15,004 16,033 (6%)MCP 19,342 18,658 4% 19,330 18,632 4% Export:MAP 15,936 16,039 (1%) 16,237 16,279 -DAP 16,485 15,842 4% 16,533 15,775 5%NPK 13,809 12,875 7% 13,575 12,925 5%MCP 16,864 16,399 3% 16,984 16,905 -Nitrogen segment H1 2012 H1 2011 y-o-yResult RUB mln RUB mln change, %Revenue 5,829 5,874 (1%)Inter-segment revenues 2,826 1,873 51%Cost of goods sold (4,091) (3,830) 7%Gross profit 4,564 3,917 17%
Revenue in the nitrogen segment was RUB 5,829 million (USD 190 million) in H12012, a decrease of 1% year-on-year, compared to RUB 5,874 million (USD 205million) the first half of 2011. Production of nitrogen-based fertilisersdeclined 5% year-on-year, while sales volumes were 2% lower y-o-y in H1 2012,mainly as a result of planned maintenance shutdowns at Cherepovetsky nitrogencomplex in the beginning of the year.
The 2% decline in nitrogen-based fertiliser sales volumes was balanced by a 30% rise in revenue per tonne from AN export sales, with total AN export sales reaching RUB 869 million (USD 28 million) in the first half of 2012, up 9%. Urea export sales revenue increased RUB 335 million, or 13% y-o-y from RUB 2,635 million (USD 92 million) in H1 2011 to RUB 2,970 million (USD 97 million) in H1 2012. Urea export revenue was higher as a result of a 13% increase in revenue per tonne.
Inter-segment sales increased 51% y-o-y in the first half of 2012 to RUB 2,826million (USD 92 million) as the Company used larger volumes of its own ammoniain the production of complex NPK fertilisers in the phosphate-basedfertilisers segment.
As a result, nitrogen segment gross profit increased by 17% y-o-y to RUB 4,564 million (USD 149 million) in H1 2012, with a gross profit margin of 53%.
Revenue per tonne for the principal nitrogen-based fertilisers
H1 2012 H1 2011 y-o-y Q2 2012 Q2 2011 y-o-yProduct RUB RUB change, % RUB RUB change, %
Domestic:
Ammonium nitrate 8,383 7,517 12% 8,243 7,395 11% Urea
12,515 10,100 24% 12,574 10,100 24%
Export:
Ammonium nitrate 10,333 7,927 30% 10,444 6,981 50% Urea
11,032 9,794 13% 12,582 9,315 35%
Cost of sales
PhosAgro's cost of sales increased by 6% y-o-y in H1 2012 to RUB 28,425 million (USD 928 million). This was in line with the 5% increase in overall fertiliser sales volumes and Russian PPI of 0.3% in H1 2012. The increase in cost of sales was primarily due to the following changes from H1 2011 to H1 2012:
- A 5% increase in salaries and social contributions to RUB 5,738
million (USD 187 million) due to higher labour rates; - A 94% increase in expenditure on potash due to substantially
higher NPK production and sales (up 52% and 58% y-o-y, respectively) as well
as a 40% increase in potash prices, from RUB 6,318/tonne in H1 2011 to RUB
8,816/tonne in H1 2012.- A 7% decrease in expenditure on natural gas, to RUB 2,537 million
from RUB 2,735 million. This was primarily due to a 7% decrease in consumption
of natural gas from 905,531 thousand cubic meters in the six months ended 30
June 2011 to 842,380 thousand cubic meters in the six months ended 30 June
2012. The decrease in consumption was due to a 9% reduction in production volumes of ammonia due to modernization of ammonia production lines at Cherepovetsky nitrogen complex finalised in February 2012 which also contributed to lower per-unit gas consumption. Item H1 2012 H1 2011 Change y-o-y RUB USD % of RUB USD % of cost RUB % mln mln cost of mln mln of sales mln salesMaterials and 9,590 313 34% 9,385 328 35% 205 2%servicesSalaries and 5,738 187 20% 5,445 190 20% 293 5%socialcontributionsPotash 2,531 83 9% 1,304 46 5% 1,227 94%Natural gas 2,537 83 9% 2,735 96 10% (198) (7%)Depreciation 2,966 97 10% 2,713 95 10% 253 9%andamortisationFuel 2,430 79 9% 2,270 79 8% 160 7%Sulphur and 1,834 60 6% 2,007 70 7% (173) (9%)sulphuric acidElectricity 1,638 53 6% 1,697 59 6% (59) (3%)Other items 15 0 0% 24 1 0% (9) (38%)Change in stock (854) (28) (3%) (646) (23) (2%) (208) 32%of WIP andfinished goodsTotal 28,425 928 100% 26,934 941 100% 1,491 6%
Administrative expenses rose by 13% y-o-y to RUB 2,933 million (USD 96 million) in the first half of 2012, mainly due to an increase in salaries and social contributions of RUB 105 million, or 7%, primarily as a result of a lump sum severance payout associated with staff redundancy in Q1 2012.
Selling expenses rose by 18% y-o-y, from RUB 3,331 million (USD 116 million)in H1 2011 to RUB 3,947 million (USD 129 million) in H1 2012. This wasprimarily due to increased sales volumes as well as increases in port andstevedoring expenses and Russian Railway infrastructure tariff and operators'fees by RUB 509 million and RUB 241 million y-o-y, respectively.PhosAgro's capital expenditure, which consists of all additions to property,plant and equipment, amounted to RUB 6,759 million (USD 221 million) for H12012, compared to RUB 5,857 million (USD 205 million) in H1 2011. Capitalexpenditure focused on construction of the main ore shaft â„- 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 500 kmt p.a. ureacapacity and a 32 MW gas-powered electricity generation facility at PhosAgro'sCherepovets site.Total debt at 30 June 2012 amounted to RUB 37,541 million (USD 1,144 million),versus RUB 32,153 million (USD 999 million) at the end of 2011. The increasein total debt was due to new short-term debt facilities obtained during theperiod, denominated in USD, EUR and RUB.
Outlook
Market:
- Soft commodities stocks-to-use ratios remain at very low levels compared to
historic averages; at the same time corn and soybean prices have surpassed
their previous historical peaks of 2008;- While farmers appear to remain cautious in the current environment given
continued expectations of a debt crises in Europe as well as different
perceptions of the consequences of the drought in the US, if the historically
high soft commodities prices remain in place for some time farmers are more
likely to start investing into maximising output, including through fertiliser
purchases;
- Phosphate fertiliser stocks are at very low levels globally; - The majority of farmers in most regions of the world are not currently
experiencing any liquidity constraints, unlike the situation in 2008; - PhosAgro sees very high global demand for complex fertilisers, and the
Company intends to further invest into both increasing capacity as well as
expanding the number of NPK grades it produces;- Longer term, the liberalisation of the phosphate rock market announced by
Russia's FAS is expected to start having a positive effect for producers
starting in 2013, although the final rules have not been determined yet.
Company:
- PhosAgro has currently taken the steps necessary to participate
in the Apatit privatisation planned for 4 September 2012; - The Company expects to increase urea production and sales volumes
following the launch of its brand new 500 k tonnes production line in
Cherepovets;
- PhosAgro has chosen the two final licensers for the construction
of a new ammonia plant with 760 k tonnes capacity, and expects to finalize the
tender by the end of 2012.
Conference Call and Webcast
On 30 August 2012 at 14:30 London time (17:30 Moscow; 09:30 New York), PhosAgro will host a conference call and webcast to discuss its reviewed consolidated interim condensed IFRS financial results for H1 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/4688576v/lan/en Russian: http://www.media-server.com/m/p/4688576v/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+7 916 306 6112Notes 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 39 percent andmore), as well as ammonia and nitrogen-based fertilisers. The Group is thelargest phosphate-based fertiliser producer in Europe, the largest producer ofhigh-grade phosphate rock worldwide and the second largest MAP/DAP producer inthe world (excluding China), according to Fertecon. PhosAgro is also a leadingproducer of MCP feed phosphates in Europe, and the only producer 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 six months ended 30 June 2012
Six months ended 30 June Three months ended 30 June 2012 2011 2012 2011 RUB Million RUB Million RUB Million RUB MillionRevenues 50,359 48,764 24,441 24,278Cost of sales (28,425) (26,934) (13,916) (13,391)Gross profit 21,934 21,830 10,525 10,887 Administrative expenses (2,933) (2,591) (1,453) (1,482)Selling expenses (3,947) (3,331) (2,098) (1,793)Taxes, other than income tax (767) (615) (361) (293)Other expenses, net (361) (415) (216) (99)Operating profit 13,926 14,878 6,397 7,220 Finance income 1,257 376 458 208Finance costs (711) (266) (389) (181)Foreign exchange (loss)/gain (689) 127 (2,460) 66Share of profit of associates 89 302 131 242Profit before taxation 13,872 15,417 4,137 7,555 Income tax expense (3,070) (3,126) (1,382) (1,499)Profit for the period 10,802 12,291 2,755 6,056 Attributable to:Non-controlling interests 2,346 1,620 825 720Shareholders of the Parent 8,456 10,671 1,930 5,336 Other comprehensive income:
Revaluation of available-for-sale securities 12 301 (5) 40Recycling of revaluation loss onavailable-for-sale securities to profit and loss 369 - - -Actuarial gains and losses (63) (42) (35) (21)Foreign currency translation difference 362 (633) 566 (82)Other comprehensive income for the period 680 (374) 526 (63)Total comprehensive income for the period 11,482 11,917 3,281 5,993Attributable to:Non-controlling interests 2,325 1,607 814 713Shareholders of the Parent 9,157 10,310 2,467 5,280
Basic and diluted earnings per share (in RUB) 68 86 16 43
Consolidated Statement of Financial Position as at 30 June 2012
30 June 2012 31 December 2011 RUB Million RUB MillionASSETSNon-current assetsProperty, plant and equipment 60,626 57,116Intangible assets 562 640Investments in associates 9,142 7,910Other non-current assets 3,305 3,556 73,635 69,222Current assetsOther current investments 1,572 2,123Derivative financial assets 161 -Inventories 10,873 10,096Current income tax receivable 808 166Trade and other receivables 9,029 10,734Cash and cash equivalents 22,782 16,946 45,225 40,065Total assets 118,860 109,287 EQUITY AND LIABILITIESEquityShare capital 360 360Share premium 1,099 1,099Retained earnings 46,346 42,265Other reserves 762 61
Equity attributable to shareholders of the Parent 48,567 43,785Equity attributable to non-controlling interests 18,833
16,923 67,400 60,708 Non-current liabilitiesLoans and borrowings 11,274 16,592Defined benefit obligations 960 922Deferred tax liabilities 2,823 2,850 15,057 20,364 Current liabilitiesTrade and other payables 9,472 11,407Current income tax payable 664 801Loans and borrowings 26,267 15,561
Derivative financial liabilities -
446 36,403 28,215Total equity and liabilities 118,860 109,287
Consolidated Statement of Cash Flows for the six months ended 30 June 2012
Six months ended 30 June 2012 2011 RUB Million RUB MillionOPERATING ACTIVITIESProfit before taxation 13,872 15,417Adjustments for:
Depreciation and amortisation 3,211 2,874(Gain)/loss from disposal of fixed assets
(114) 105Interest expense 711 266Interest income (643) (310)Gain on revaluation of derivativefinancial instruments (607) (63)Dividend income (7) (3)Share of profit of associates (89) (302)Foreign exchange loss 689 -Operating profit before changes inworking capital and provisions 17,023 17,984Increase in inventories (777) (2,144)Decrease in trade and other receivables 1,892 5,846Decrease in trade and other payables (554) (249)Cash flows used in operations beforeincome taxes and interest paid
17,584 21,437Income tax paid (3,876) (3,316)Interest paid (533) (180)
Cash flows from operating activities
13,175 17,941 INVESTING ACTIVITIESLoans repaid 403 2,064
Acquisition of intangible assets (60) (50)Acquisition of property, plantand equipment (6,694) (5,469)Proceeds from disposal of property,plant and equipment 215 275Proceeds from disposal of investments - 891Acquisition of investments (34) (945)Acquisition of investments in associates - (313)Additional equity contribution in associates
(400) -Interest received 643 310Dividends received 7 1,840Cash flows used in investing activities (5,920) (1,397) FINANCING ACTIVITIESProceeds from borrowings 15,185 26,012Repayment of borrowings (10,441) (8,456)Proceeds from disposal oftreasury shares - 791Proceeds from disposal ofnon-controlling interests - 9,864
Acquisition of non-controlling interests (363) (9,177)Dividends paid to non-controlling interests (99) (1,627)Dividends paid to shareholdersof the Parent (5,654) (32,054)Finance leases paid (178) (191)Cash flows used in financing activities (1,550) (14,838)Net increase in cash and cash equivalents 5,705 1,706Cash and cash equivalents atbeginning of the period 16,946 5,261Effect of changes in exchange rates 131 -Cash and cash equivalents at end of the period 22,782 6,967