Subscribe via e-mail
 
RSS
 

Share link
 

PhosAgro 2Q 2019 FCF up 22% to RUB 10.2 bln

28.08.2019
Moscow – PhosAgro (“PhosAgro” or “the Company”) (Moscow Exchange, LSE: PHOR), one of the world’s leading vertically integrated phosphate-based fertilizer producers, today announces its interim condensed consolidated IFRS financial results for the three months (2Q) and six months (1H) ended 30 June 2019. 

Revenue for 2Q 2019 rose by 3% year-on-year to RUB 58.1 billion (USD 901 million). EBITDA remained almost flat year-on-year at RUB 18.3 billion (USD 284 million) in the period, with 2Q 2019 EBITDA margin at 32%. 

2Q 2019 financial and operational highlights

RUB million or %

2Q 2019

2Q 2018

Chng, % YoY

1H 2019

1H 2018

Chng, % YoY

Revenue

58,146

56,626

3%

130,433

111,248

17%

EBITDA**

18,317

18,674

-2%

43,095

32,967

31%

EBITDA margin

32%

33%

-1pp

33%

30%

3pp

Net income

11,785

2,955

299%

32,945

9,833

235%

Net income adj*

9,197

11,687

-21%

22,737

17,989

26%

FCF

10,284

8,369

123%

29,059

9,697

200%

 

31.06.2019

31.12.2018

 

 

 

 

Net debt

109,686

135,330

 

 

 

 

ND/LTM EBITDA

1.3

1.8

 

 

 

 

Sales, 000' mt

2Q 2019

2Q 2018

Chng, % YoY

1H 2019

1H 2018

Chng, % YoY

Phosphate-based & MCP

1,628

1,647

-1%

3,557

3,400

5%

Nitrogen-based

531

601

-12%

1,148

1,268

-9%

Phosphate rock & nepheline

1,142

968

18%

2,264

1,924

18%


RUB/USD rates: average 2Q 2019: 64.6; average 2Q 2018: 61.8; as of 30 June 2019: 63.1; as of 31 December 2018: 69.5
** EBITDA is calculated as operating profit adjusted for depreciation and amortisation.
* adjusted for non-cash FX items (Net profit as reported minus FX gain or loss)

Commenting on the 2Q 2019 financial results, PhosAgro CEO Andrey Guryev said: 

“While 2019 has seen market turbulence on unfavourable weather conditions in the USA and Europe and high export activity in China and the Middle East, PhosAgro has shown its resilience with an industry-leading EBITDA margin, impressive free cash flow generation and decreasing leverage. This performance is driven by the successful completion of our five-year strategy, which was focused on vertical integration and flexibility in distribution. This has enabled us to maximise value for a wide range of stakeholders. Consistent strong free cash flow performance and stable dividend distributions over the last four quarters shows we achieved these goals.

“Equally important, by delivering double-digit growth in production over the last 5 years PhosAgro has enhanced its ability to produce and sell products with exceptional environmental characteristics that can set the global standard. As one of the world’s largest fertilizer producers, with products used in 100 countries globally, we are conscious of our role in supporting food security, protecting soil resources and producing clean and healthy agricultural products on a global scale. In the long term, we aim to further leverage the unique apatite-nepheline ore that PhosAgro mines in Khibiny and implement best available technologies to achieve our strategic goals that will strengthen our position as a producer of environmentally safe phosphate-based fertilizers while also further enhancing the Company’s cash cost advantage. The Board of Directors and I have full confidence that this approach will make PhosAgro an even more sustainable producer of mineral fertilizers and unlock additional value for the Company and its products. 

“Looking ahead at the short-term outlook, we believe that our 2Q 2019 EBITDA margin will be sustainable through the year end, driven by a recovery in seasonal demand from Europe and Latin America, a correction in feedstock prices, as well as a recovery in the premium NPK market and a stable nitrogen market. Our domestic market, which is a strategic priority for us, is also expected to support sales, driven by high farmer purchasing power. We are therefore comfortable to once again reiterate our full-year production guidance of around 9.4-9.5 million tonnes of fertilizers.”

2Q 2019 market conditions

- Average prices for MAP (FOB Baltics) were down by 12% year-on-year to USD 357 per tonne due to the following factors:
  • Significant declines in consumption in the USA due to poor spring weather conditions;
  • Higher export volumes from China on slow domestic demand;
  • Faster-than-expected ramp up of new capacities at OCP and Ma’aden sites;
  • Lower prices for feedstocks, which pushed down the cash cost curve across the industry.

- Prices for urea (FOB Baltic) increased by 11% year-on-year to USD 247 per tonne, driven by stable import demand from India and Latin America, combined with sanctions-related limitations on Iranian urea, lower domestic production levels in a number of Latin American countries and the absence of significant export volumes from China.
- Ammonia prices (FOB Baltic) declined by 4% year-on-year to average USD 222 per tonne as a result of the ramp up of new capacities at Eurochem and relatively low prices for natural gas.

2Q 2019 Financial performance 

In 2Q 2019, PhosAgro’s revenue rose by 3% year-on-year to RUB 58.1 billion (USD 901 million), mainly driven by meaningful growth in domestic sales of 37% year-on-year, to 0.8 million tonnes, due to an early start of the high season. However, this growth was largely offset by a decline in export sales volumes of 18% year-on-year to 1.4 million tonnes. 

Revenue by key products

RUB million or %

2Q 2019

2Q 2018

Chng, % YoY

1H 2019

1H 2018

Chng, % YoY

DAP/MAP

16,824

18,884

-11%

42,935

37,514

14%

NPK(S)

17,756

15,041

18%

35,263

28,544

24%

PhosRock

6,448

5,492

17%

13,100

10,354

27%

MCP

2,895

2,662

9%

5,732

4,928

16%

Other phosphate-based products

2,310

2,152

7%

5,307

4,229

25%

Urea/AN

8,731

8,891

-2%

19,796

18,194

9%

Other sales & services

3,184

3,503

-9%

8,300

7,485

11%

Total revenue

58,146

56,626

3%

130,433

111,248

17%


In 2Q 2019, PhosAgro’s gross profit was RUB 26.4 billion (USD 411 million) with the gross profit margin at 45%, compared to 47% in 2Q 2018. Gross profit and margin performance for the phosphate and nitrogen segments were as follows: 

  • Phosphate segment gross profit declined by 3% year-on-year to RUB 21.4 billion (USD 332 million), with a gross margin of 45%, due to a global price correction;
  • Gross profit for the nitrogen segment increased by 5% year-on-year to RUB 4.9 billion (USD 76 million), with gross margin expanding to 56% from 52% in 2Q 2018. The main driver of this performance was high prices for nitrogen-based fertilizers.

Consolidated EBITDA decreased by 2% year-on-year to RUB 18.3 billion (USD 284 million), with an EBITDA margin of 32% for 2Q 2019, compared to 33% in 2Q 2018. Net profit adjusted for non-cash FX items was down 21% year-on-year to RUB 9.2 billion (USD 142 million) for 2Q 2019. 

In 2Q 2019, the RUB/USD exchange rate increased by 5% year-on-year to average RUB 64.6, from RUB 61.8 in 2Q 2018. This had a net positive impact, as prices for most of the Company’s products are denominated in USD, while costs are primarily rouble-based. The appreciation of the rouble as of 30 June 2019 (RUB 63.1 per USD) compared to 31 March 2019 (RUB 64.7 per USD) resulted in an FX gain of RUB 2.6 billion (compared to a RUB 8.7 billion FX loss in 2Q 2018).

Net operating cash flow increased by 20% year-on-year to RUB 19.4 billion (USD 300 million) on working capital release, primarily driven by the launch of a factoring programme and an increased focus on the domestic market. In 2Q 2019, domestic sales of fertilizers accounted for 36% of total fertilizer sales volumes, compared to 27% in 1Q 2019.

PhosAgro’s capital expenditure for 2Q 2019 totalled RUB 9.1 billion (USD 141 million), up by 19% year-on-year and representing 50% of the Company’s EBITDA for the same period. The main capex items were scheduled maintenance and development of the upstream business, as well as finishing construction of new mid-stream capacities at Cherepovets (nitric acid, sulphuric acid and ammonium sulphate lines).

Net debt/LTM EBITDA as of 30 June 2019 declined to 1.3x from 1.8x as of 31 December 2018, reflecting solid EBITDA performance and the gradual rouble appreciation against the US dollar throughout 1H 2019. Net debt totalled RUB 109.7 billion (USD 1.7 billion) as of 30 June 2019.

Cost of Sales

RUB million or %

2Q 2019

2Q 2018

Chng, % YoY

1H 2019

1H 2018

Chng, % YoY

Materials and services

7,072

7,159

-1%

15,383

14,053

9%

D&A

4,960

4,882

2%

10,669

9,636

11%

Potash

3,806

2,377

60%

6,522

4,649

40%

Salaries and social contributions

3,056

2,948

4%

6,307

6,114

3%

Natural gas

2,927

3,221

-9%

6,576

6,718

-2%

Repair expenses

2,348

2,138

10%

4,747

4,269

11%

Sulphur and sulph. acid

2,289

2,405

-5%

5,635

5,283

7%

Electricity

1,583

1,441

10%

3,270

2,868

14%

Chemical fertilisers and other products for resale

1,253

1,169

7%

3,865

3,031

28%

Fuel

1,162

889

31%

2,654

1,888

41%

Ammonium sulphate

591

500

18%

1,798

1,599

12%

Ammonia

667

715

-7%

2,024

1,806

12%

Total

31,714

29,844

6%

69,450

61,914

12%


Cost of sales increased by 6% year-on-year in 2Q 2019 to RUB 31.7 billion (USD 491 million). The key factors behind this growth were:

  • Costs for potash rose by 60% year-on-year to RUB 3.8 billion (USD 59 million), due to a 41% year-on-year increase in purchase prices and a 14% year-on-year increase in sales of NPK grades with greater potash content.
  • Costs for natural gas, which is used in ammonia production, were down by 9% year-on-year to RUB 2.9 billion (USD 45 million) on lower sales of DAP (down 20% year-on-year to 306 kt) and urea (down 10% year-on-year to 427 kt), while purchase prices increased slightly by 3% year-on-year.
  • Repair expenses were up 10% year-on-year to RUB 2.3 billion (USD 36 million), driven by scheduled maintenance of mid-stream capacities, mainly at Cherepovets and at Apatit’s beneficiation plants. 
  • Costs for sulphur and sulphuric acid, which is used in phosphoric acid production, decreased by 5% year-on-year to RUB 2.3 billion (USD 35 million) driven by a decline in purchase prices for sulphuric acid by 30% year-on-year and a marginal decline in prices for sulphur by 1% year-on-year.
  • Electricity costs increased by 10% year-on-year to RUB 1.6 billion (USD 25 million), mainly due to growth in the purchase price by 23% year-on-year after the new DPM programme was approved by the Government in early 2019. This growth was mitigated by lower consumption levels as a result of successful energy saving initiatives at upstream assets.
  • Expenses for fuel rose by 31% year-on-year to RUB 1.2 billion (USD 18 million) in response to higher purchase prices (up 18% year-on-year) and higher consumption levels (up 11% year-on-year), due to an increase in sales of phosphate rock.

Administrative expenses for 2Q 2019 rose by 13% year-on-year to RUB 4.1 billion (USD 64 million), primarily due to 14% year-on-year growth in salaries and social contributions.

In 2Q 2019, selling expenses remained flat year-on-year around RUB 8.4 billion (USD 130 million). This performance was primarily due to: 

  • Freight, port and stevedoring expenses decreased by 21% year-on-year to RUB 3.5 billion (USD 54 million), due to lower export sales and shipping rates. This decline was mitigated by rouble devaluation, as freight and stevedoring tariffs are denominated in US dollars;
  • Growth in costs for Russian Railways tariffs and operators’ fees by 18% year-on-year to RUB 3.0 billion (USD 47 million) was driven by a change in shipment structures and indexation of railway tariffs; 
  • Spending on customs duties grew by 74% year-on-year to RUB 312 million (USD 5 million), triggered by changes in delivery terms and rouble depreciation against the US dollar.

Market outlook

Phosphate-based fertilizer prices are expected to stabilise in the medium term, followed by a gradual recovery driven by the following factors:

  • Higher prices for agricultural products, particularly corn and soy, which will improve the affordability of fertilizers for farmers;
  • Forecasted higher demand in autumn from North America and Europe;
  • Indian nutrient subsidies being maintained at last year’s level and the high margin for DAP importers will help to support seasonal demand, despite high inventory levels; Indian DAP imports are expected to reach 5.5-6.0 million tonnes;
  • The intention of major Chinese producers to decrease DAP production by 0.8-1.0 million tonnes per quarter in the coming periods in order to support prices. 

Other factors that are expected to influence the market in 2H 2019 include the launch of new phosphate-based fertilizers production capacities at OCP and Ma’aden.
Information on cookies

This website is using cookies and other web-technologies to help provide you with the best browsing experience that would suit your preferences. Cookies also help us gather statistics that show how the website is being used and how it can be improved in terms of content and structure.
By continuing to browse www.phosagro.com,

you are agreeing to our use of cookies in accordance with the terms of the «Cookie Policy», including the transfer of information to third parties mentioned in the “Cookie Policy” (online statistical services).