28.08.2017, 19:02
Uralkali Announces IFRS 1H 2017 Financial Results
Source: Uralkali
OREANDA-NEWS. Uralkali ("the Company", Moscow Exchange: URKA), one of the world’s largest potash producers, announces its financial results for the six months ended 30 June 2017 prepared in accordance with IFRS1
1H 2017 FINANCIAL HIGHLIGHTS:
Revenue up 29% y-o-y to US$ 1,388 million
Net revenue2 up 23% y-o-y to US$ 1,095 million
EBITDA3 up 10% y-o-y to US$ 673 million
EBITDA margin4 is 61%
Cash COGS is US$ 39.7 per tonne
Average FCA export price down 11% y-o-y to US$ 167 per tonne of KCl
1H 2017 OPERATIONAL HIGHLIGHTS:
Production volume up 18% y-o-y to 6.0 million tonnes of potassium chloride (KCl)Sales volume up 35% y-o-y to 6.6 million tonnes of KCl 1H 2017 CORPORATE HIGHLIGHTS:
In April the Company signed a revolving credit line in the amount of up to US$750 million with Sberbank of Russia, Sberbank AG (Switzerland) and SIB (CYPRUS) LIMITED. The availability period of the credit line is 3 years, during which Uralkali can borrow funds in tranches with different maturities within the limit and availability period. The raised funds can be used for Company’s general corporate purposes, including refinancing of its current debt obligations.
In May, Uralkali announced the book closing for RUB 15 billion exchange bond issue (series PBO-03-P), under its exchange bond programme. The overall demand by diversified investor pool consisting of banks, asset managers, insurance and investment companies as well as retail investors, exceeded RUB 38 billion.
SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD:
In August, Uralkali signed a pre-export finance facility agreement in the amount of US$850 million with 11 international banks. The interest rate is LIBOR plus 220 bps margin with a facility maturity of 5 years. The loan will be used for refinancing of Uralkali’s existing debt obligations and general corporate purposes.
Dmitry Osipov, Uralkali CEO, commented:
The market environment began to recover gradually. As a consequence, the Company has managed to increase the production and sales volume of the main product. We expect this market trend to continue until late 2017 and therefore revise our forecast regarding 2017 global potash consumption to 63-64 million tonnes.
Financial review
In the 1H 2017 the Company’s revenue increased by one third mainly due to the growth in sales volumes, and net profit decreased by half due to the lower gains from foreign exchange differences and fair value revaluation of financial derivatives.
Cash COGS increased from US$ 32 to US$ 39.7 per tonne mainly due to strengthening of Russian rouble by 17%; in rouble equivalent growth was only 3%.
As of the end of June 2017, the Company’s net debt amounted to US$ 5,512 million.
The ratio of net debt/EBITDA for the last 12 months amounted to 4.43x, while Uralkali’s average interest rate for its loan portfolio for first six months of 2017 was 4.4%.
Market Review5
Potash market demonstrated an upward trend throughout 1H 2017. Strong potash demand accompanied by rising prices led to robust buying activity. Global potash shipments are estimated to have reached about 33 million tonnes in 1H 2017 compared to 28 million tonnes in the corresponding period of last year.
Potash demand has expanded in all regions. In Brazil, potash imports continued to grow at record pace in the first half of 2017, with demand supported by increased soybean acreage and improved farmer economics. In North America and Europe, spring season demand was strong, supported by favourable weather conditions and restocking needs. In China and India, 1H 2017 potash imports have been more robust than previously anticipated. In Southeast Asia, import volumes were higher y-o-y, driven by profitable palm oil economics and more favorable planting conditions compared to the previous year.
Global demand prospects for the remainder of the year remain positive. Customer commitments for the second half deliveries demonstrate their confidence in positive market environment.
In July 2017, Uralkali Trading (a wholly-owned subsidiary of Uralkali) settled first this year’s annual seaborne potash contract with Chinese buying consortium and contract with Indian Potash Ltd (IPL) on potash supply in FY 2017/2018. The contract delivery price in both markets have been set at as per the market level. The conclusion of contracts with China and India is very positive sign for global potash market in terms of pricing. Clarity regarding China and India contracts has established a price benchmark for the global market at the start of the third quarter and encouraged customers to step into the market more actively.
In China, Potash demand is expected to increase in the fall season. We anticipate China deliveries will be in the range of 15.5 - 15.7 million tonnes in 2017.
In India, recently settled contracts, good monsoon season and strengthening of rupee against USD are anticipated to support demand in the second half of the year. India is expected to import 4.0-4.1 million tonnes in current calendar year.
In Southeast Asia, more favorable planting conditions on the palm oil plantations and gains in local currencies against USD support potash demand this year. Full-year potash imports are expected in a range of 9.5-9.6 million tonnes.
In Latin America, we expect favourable farm economics to continue supporting demand in the region. Potash imports to Brazil might surpass the previous record year of 2014 (9.1 million tonnes). Full-year potash demand in Latin America is expected to reach 12.4-12.6 million tonnes.
In EMEA & FSU markets, demand is expected to remain good in the second half of the year, with Central & Eastern European and African markets demonstrating the strongest demand growth. Full-year demand is expected to increase by 2% y-o-y to 12.2-12.3 million tonnes.
In North America, potash demand for summer fill product was strong. Potash deliveries to the North American market are expected to remain stable. Full-year demand is expected to be flat or slightly lower compared to the previous year level (9.5 million tonnes) given reduction in corn acreage this year.
With a strong first half 2017 and an improved outlook for shipments to the remaining quarters, we have raised our global potash demand estimate for 2017 to 63-64 million tonnes.
Uralkali is one of the world’s largest potash producers and exporters. The Company’s assets consist of 5 mines and 7 ore-treatment mills situated in the towns of Berezniki and Solikamsk (Perm Territory, Russia). Uralkali employs ca.11,000 people (in the main production unit). Uralkali’s shares are traded on the Moscow Exchange.
Considering the delisting of the Company’s GDRs from the London Stock Exchange in December 2015, and in view of the fact that in June 2017 the Moscow Exchange downgraded the shares of the Company from the first to the third level on the grounds of insufficient free float, which, at present, represents 5.6% of the Company’s share capital, there will be no investor call on IFRS 1H 2017 results.
1H 2017 FINANCIAL HIGHLIGHTS:
Revenue up 29% y-o-y to US$ 1,388 million
Net revenue2 up 23% y-o-y to US$ 1,095 million
EBITDA3 up 10% y-o-y to US$ 673 million
EBITDA margin4 is 61%
Cash COGS is US$ 39.7 per tonne
Average FCA export price down 11% y-o-y to US$ 167 per tonne of KCl
1H 2017 OPERATIONAL HIGHLIGHTS:
Production volume up 18% y-o-y to 6.0 million tonnes of potassium chloride (KCl)Sales volume up 35% y-o-y to 6.6 million tonnes of KCl 1H 2017 CORPORATE HIGHLIGHTS:
In April the Company signed a revolving credit line in the amount of up to US$750 million with Sberbank of Russia, Sberbank AG (Switzerland) and SIB (CYPRUS) LIMITED. The availability period of the credit line is 3 years, during which Uralkali can borrow funds in tranches with different maturities within the limit and availability period. The raised funds can be used for Company’s general corporate purposes, including refinancing of its current debt obligations.
In May, Uralkali announced the book closing for RUB 15 billion exchange bond issue (series PBO-03-P), under its exchange bond programme. The overall demand by diversified investor pool consisting of banks, asset managers, insurance and investment companies as well as retail investors, exceeded RUB 38 billion.
SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD:
In August, Uralkali signed a pre-export finance facility agreement in the amount of US$850 million with 11 international banks. The interest rate is LIBOR plus 220 bps margin with a facility maturity of 5 years. The loan will be used for refinancing of Uralkali’s existing debt obligations and general corporate purposes.
Dmitry Osipov, Uralkali CEO, commented:
The market environment began to recover gradually. As a consequence, the Company has managed to increase the production and sales volume of the main product. We expect this market trend to continue until late 2017 and therefore revise our forecast regarding 2017 global potash consumption to 63-64 million tonnes.
Financial review
In the 1H 2017 the Company’s revenue increased by one third mainly due to the growth in sales volumes, and net profit decreased by half due to the lower gains from foreign exchange differences and fair value revaluation of financial derivatives.
Cash COGS increased from US$ 32 to US$ 39.7 per tonne mainly due to strengthening of Russian rouble by 17%; in rouble equivalent growth was only 3%.
As of the end of June 2017, the Company’s net debt amounted to US$ 5,512 million.
The ratio of net debt/EBITDA for the last 12 months amounted to 4.43x, while Uralkali’s average interest rate for its loan portfolio for first six months of 2017 was 4.4%.
Market Review5
Potash market demonstrated an upward trend throughout 1H 2017. Strong potash demand accompanied by rising prices led to robust buying activity. Global potash shipments are estimated to have reached about 33 million tonnes in 1H 2017 compared to 28 million tonnes in the corresponding period of last year.
Potash demand has expanded in all regions. In Brazil, potash imports continued to grow at record pace in the first half of 2017, with demand supported by increased soybean acreage and improved farmer economics. In North America and Europe, spring season demand was strong, supported by favourable weather conditions and restocking needs. In China and India, 1H 2017 potash imports have been more robust than previously anticipated. In Southeast Asia, import volumes were higher y-o-y, driven by profitable palm oil economics and more favorable planting conditions compared to the previous year.
Global demand prospects for the remainder of the year remain positive. Customer commitments for the second half deliveries demonstrate their confidence in positive market environment.
In July 2017, Uralkali Trading (a wholly-owned subsidiary of Uralkali) settled first this year’s annual seaborne potash contract with Chinese buying consortium and contract with Indian Potash Ltd (IPL) on potash supply in FY 2017/2018. The contract delivery price in both markets have been set at as per the market level. The conclusion of contracts with China and India is very positive sign for global potash market in terms of pricing. Clarity regarding China and India contracts has established a price benchmark for the global market at the start of the third quarter and encouraged customers to step into the market more actively.
In China, Potash demand is expected to increase in the fall season. We anticipate China deliveries will be in the range of 15.5 - 15.7 million tonnes in 2017.
In India, recently settled contracts, good monsoon season and strengthening of rupee against USD are anticipated to support demand in the second half of the year. India is expected to import 4.0-4.1 million tonnes in current calendar year.
In Southeast Asia, more favorable planting conditions on the palm oil plantations and gains in local currencies against USD support potash demand this year. Full-year potash imports are expected in a range of 9.5-9.6 million tonnes.
In Latin America, we expect favourable farm economics to continue supporting demand in the region. Potash imports to Brazil might surpass the previous record year of 2014 (9.1 million tonnes). Full-year potash demand in Latin America is expected to reach 12.4-12.6 million tonnes.
In EMEA & FSU markets, demand is expected to remain good in the second half of the year, with Central & Eastern European and African markets demonstrating the strongest demand growth. Full-year demand is expected to increase by 2% y-o-y to 12.2-12.3 million tonnes.
In North America, potash demand for summer fill product was strong. Potash deliveries to the North American market are expected to remain stable. Full-year demand is expected to be flat or slightly lower compared to the previous year level (9.5 million tonnes) given reduction in corn acreage this year.
With a strong first half 2017 and an improved outlook for shipments to the remaining quarters, we have raised our global potash demand estimate for 2017 to 63-64 million tonnes.
Uralkali is one of the world’s largest potash producers and exporters. The Company’s assets consist of 5 mines and 7 ore-treatment mills situated in the towns of Berezniki and Solikamsk (Perm Territory, Russia). Uralkali employs ca.11,000 people (in the main production unit). Uralkali’s shares are traded on the Moscow Exchange.
Considering the delisting of the Company’s GDRs from the London Stock Exchange in December 2015, and in view of the fact that in June 2017 the Moscow Exchange downgraded the shares of the Company from the first to the third level on the grounds of insufficient free float, which, at present, represents 5.6% of the Company’s share capital, there will be no investor call on IFRS 1H 2017 results.
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