PhosAgro Reports H1 2013 IFRS Net Profit of RUB 4.8 bln
OREANDA-NEWS. 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 financial statements for the six months ended 30 June 2013. PhosAgro earned a net profit for the period of RUB 4.8 billion (USD 154 million), compared to RUB 10.8 billion (USD 353 million) in 1H 2012. Basic and diluted earnings per share came to RUB 33 (USD 1) for 1H 2013 compared to RUB 68 (USD 2) in 1H 2012.
RUB/USD Rates: average 1H 2013: 31.0169; average 1H 2012: 30.6390
As of 30 June 2013: 32.7090; as of 31 December 2012: 30.3727
*EBITDA is calculated as operating profit adjusted for depreciation and amortisation.
Other 1H 2013 Highlights
• Production and sales flexibility:
In 1H 2013 PhosAgro's revenue and sales volumes benefited from the Company's strategy of enhancing production flexibility, with significant growth in MAP/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 in DAP FOB Tampa prices.
Revenue grew 4% as a result of the consolidation of Metachem, which brought sales of technical phosphates (STTP) and potassium sulphate (SOP) amounting to RUB 2,185 million (USD 70 million) in 1H 2013.
• Organic growth through capacity expansion and greater operational efficiency:
o Urea production volumes increased by 83% from 251 kmt in 1H 2012 to 460 kmt in 1H 2013. Export revenue per tonne for urea increased by 2% in 1H 2013 compared to 1H 2012.
• Consolidation of ownership in production facilities:
In January 2013, the holders of 10.95% of shares in Apatit accepted PhosAgro's mandatory tender offer. The Company subsequently launched a squeeze out of the remaining shareholders of Apatit, which is due to be completed in August 2013;
In June 2013 the Company acquired 25.24% of Metachem, bringing its ownership in 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 1H 2012. Revenue for the period was up 7% year-on-year to RUB 53.7 billion (USD 1,732 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 margin decreased year-on-year to 25% compared to 34% for 1H 2012.
Cash flow from operating activities amounted to RUB 14.4 billion (USD 464 million) in 1H 2013, compared to RUB 13.2 billion (USD 430 million) in 1H 2012. The Company's capital expenditure (capex) in cash terms during the six months ended 30 June 2013 was RUB 7.1 billion (USD 230 million) compared to RUB 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 from RUB 26.8 billion (USD 883 million) at 31 December 2012. Net debt increased due to the significant cash outflow for the Apatit minority shareholder buy-out as a result of the mandatory tender offer, which was funded through PhosAgro's successful long-term USD 500 million debut Eurobond issue. The Company's net debt to annualised EBITDA ratio temporarily increased to slightly above the target level of 1x as of 30 June 2013.
Commenting on the 1H 2013 IFRS results, PhosAgro Management Board Chairman and CEO Andrey A. Guryev said:
“In the first half of 2013 we increased revenue by 6.7% year-on-year as a result of growth in fertilizer production and sales by 13% and 14%, respectively. We are in the third consecutive year of DAP prices being under significant pressure, with FOB Tampa prices dropping another 10% from an average of USD 539 in 1H 2012 to an average of just USD 486 in 1H 2013. As a low cost producer during a time when DAP prices are substantially below the cash cost of marginal producers PhosAgro managed to generate a 25% EBITDA margin and to maintain almost 100% production capacity utilisation, which I believe distinguishes us from our peers.
“Despite challenging market conditions, which caused a significant decline in our financial results, the Company continues to have strong cash conversion results, which enables us to generate free cash flow for dividend distribution. We are committed to return profit to our shareholders, and currently we are working on increasing operational efficiency as well as reviewing our development programme to ensure that we continue to adhere to our financial policies.
“We believe that fertilizer demand will strengthen and that DAP prices will stabilize closer to the levels of marginal phosphate producer cash costs. Although in the short term we might see additional price pressure, in the longer term industry fundamentals remain strong, and we continue to be in the best position to deliver any type of phosphate-based fertilizer to farmers either 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 expectations of output growth for major agricultural products;
Low demand from India and significantly delayed domestic US demand drove a further 10% drop in DAP prices;
Brazil continues to increase phosphate consumption: in 1H 2013 MAP imports increased by 43%, while NP/NPS imports were up 66%;
• Demand from the markets nearest to PhosAgro remained very strong: domestic sales volumes of phosphate-based products increased more than 40% year-on-year, in the CIS by 54% and in Western Europe volumes increased 35% in 1H 2013;
• Feed stock prices declined, supporting margins going forward:
ammonia has come down from above USD 600 in early January to around USD 480 at the end of June, and is currently just slightly above USD 400 on all significant 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 date in 2013;
• Despite the decline in feed stock prices, DAP spot prices remain below cash cost levels for marginal producers of concentrated phosphate fertilizers.
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