OREANDA-NEWS. Acron (Moscow Exchange and LSE: AKRN) released its audited consolidated IFRS financial statements for 2013.

Key Financials

• Revenue was down 5% year-on-year to RUR 67,904 million (USD 2,132 million), against RUR 71,112 million in 2012.

• EBITDA* was down 23% year-on-year to RUR 15,386 million (USD 483 million), against RUR 19,924 million in 2012.

• EBITDA margin was 23%, against 28% in 2012.

• Net profit was down 12% year-on-year to RUR 13,019 million (USD 409 million), against RUR 14,861 million in 2012.

• Net debt was RUR 36,633 million (USD 1,119 million), up 12% from RUR 32,671 million at the end of 2012.

• Net debt/EBITDA was 2.4, against 1.6 in 2012.

Operating Results

• Sales of the main products were 6,180 kt, up 6% year-on-year

Alexander Popov, Chairman of Acron's Board of Directors, comments on the performance:

In 2013, Acron Group achieved full phosphate vertical integration, satisfying all its internal demand for apatite concentrate. Our Russian chemical plants now run on our own apatite concentrate produced by NWPC at Oleniy Ruchey mine. Stable input supply ensured high production performance - in 2013, NPK output at the Group's Russian production facilities was up 8% to 1.8 million tonnes. The Group's total NPK output was 2.5 million tonnes. The nitrogen segment demonstrated record-high results as well. Ammonia output was 1.9 million tonnes and nitrogen fertiliser production was 3.0 million tonnes.

In the reporting year, Acron proceeded with construction of its new ammonia unit. In July 2013, the Group obtained state expert review approval and a construction permit for the new 700-ktpa Ammonia-4 unit. CAPEX on the project has already exceeded USD 150 million, or one-third of the total project budget.

In order to maintain a comfortable debt level at the peak of the investment stage, the decision was made to sell a part of the Group's stake in Uralkali. As a result, Acron's share in Uralkali's authorised capital decreased in the reporting period from 2.88% to 1.77%. Portfolio investments have always provided Acron Group with additional financial support and confidence during turbulent times.

In H1 2013, the demand on the global fertiliser market was strong, encouraging optimistic expectations among market players. High prices allowed Acron Group to make large financial investments and simultaneously implement major projects. However, the markets started to decline in H2 2013. The deceleration of the global economy adversely affected all commodity markets, including the fertiliser market. A significant slump in global fertiliser prices in H2 2013 adversely affected producers. As a result, in H2 2013 Acron Group placed a priority on optimising its capital investments and operating expenses. In order to decrease production costs, Acron Group is mobilising its internal resources, primarily by strengthening vertical integration and its cost saving programme.

The collapse of the Russian-Belorussian potash joint trader in the middle of 2013 had a major impact on the global potash market. Increasing risks forced all players to reconsider their development plans. On the other hand, by postponing deadlines under our licence agreement for development of the Talitsky area (Verkhnekamsk potassium-magnesium salts deposit), Acron Group managed to achieve greater flexibility in its major potash project, which helped us reconsider our investment programme priorities. In 2015, we plan to complete the ammonia unit and make significant progress in implementing the second stage of Oleniy Ruchey phosphate project. During this time we will develop more detailed design solutions and optimise the financing structure for potash project. In late 2013 - early 2014, the potash project's investor structure changed. Sberbank Investments replaced Raiffeisen Bank with more favourable financing terms and conditions.

Thus, in 2013 we found the optimal development option, maintaining all our key projects.

The market environment in early 2014 was calm and predictable. We believe that global fertiliser markets have reached the turning point in a 2-3-year cycle. There are currently no negative global factors that could cause fertiliser prices to deteriorate. Meanwhile, Acron Group's competitive position is improving due to vertical integration and capacity expansion. Additionally, a number of macro-economic factors (including the weaker rouble and a freeze on tariffs charged by Russia's natural monopolies) are favourably affecting the Group's financial performance.