OREANDA-NEWS. PhosAgro ("PhosAgro" or "the Company") (Moscow Exchange, LSE: PHOR), one of the world's leading vertically integrated phosphate-based fertilizer producers, today announces its reviewed condensed consolidated IFRS financial results for the nine months ended 30 September 2014. PhosAgro earned an EBITDA for the period of RUB 25.8 billion (USD 728 million), compared to RUB 20.8 billion (USD 657 million) in 9M 2013.

Interim dividend recommendation:

• At its meeting on 18 November 2014, PhosAgro's Board of Directors recommended that shareholders approve an interim dividend of RUB 2,590 million for the first nine months of 2014, which represents RUB 20 per share (RUB 6.7 per global depositary receipt). The Board has called an EGM to vote on the dividend recommendation for 31 December 2014.

Production, sales and logistics flexibility:

During the first nine months of 2014, PhosAgro's revenue and sales volumes benefited from the Company's strategy of enhancing production flexibility, combined with strong global demand: total fertilizer production and sales volumes grew year-on-year by 6% and 4%, respectively. Revenue in 9M 2014 was 7% higher year-on-year, supported by year-on-year increases of over 11% and 3% in average realised prices for export DAP/MAP and NPK, respectively.

Strategic developments:

In January 2014, the Group signed a USD 440.6 million loan agreement with the Japan Bank for International Cooperation (JBIC) and a group of banks consisting of Bank of Tokyo-Mitsubishi (BTMU), Citibank Japan and Mizuho Bank. The proceeds from the loan are being used to fund construction of a new 760 ths tonnes/year ammonia plant at PhosAgro-Cherepovets.

In line with its strategy to develop downstream production capacity and expand its product portfolio, in August PhosAgro signed a contract with Chemoproject Nitrogen a.s. for design engineering and procurement of equipment for the construction of a 500 ths tonnes/year granulated urea production unit at PhosAgro-Cherepovets. Total investments in the construction of the new urea unit and production infrastructure are estimated at RUB 7.8 billion.

Consolidation of ownership in production facilities and business development:

During the first nine months of 2014, the holders of 10.39% of all issued shares in OJSC PhosAgro-Cherepovets accepted PhosAgro's voluntary tender offer. PhosAgro completed the acquisition of these shares in 2Q 2014. Following completion of the voluntary tender offer, PhosAgro sent a compulsory share purchase notification (squeeze out) for the buyout of the ordinary shares belonging to the remaining minority shareholders (2.01%) of OJSC PhosAgro-Cherepovets.

Revenue for the period increased by 7% year-on-year to RUB 86.8 billion (USD 2,452 million), compared to RUB 81.3 billion (USD 2,571 million) for 9M 2013. Favourable market conditions led to higher prices year-on-year for most PhosAgro products. Cost savings in cost of sales (a more detailed discussion is provided in the analysis below) also contributed to PhosAgro's strong operating profit result for 9M 2014: operating profit for the period was RUB 19.7 billion (USD 558 million), up 32% from RUB 15.0 billion (USD 474 million) in 9M 2013. EBITDA was RUB 25.8 billion (USD 728 million) in 9M 2014, 24% higher year-on-year. EBITDA margin increased to 30% for 9M 2014 compared to 26% in 9M 2013.

Significant RUB depreciation resulted in a foreign exchange loss of RUB 9,471 million (USD 268 million), which impacted PhosAgro's bottom line in 9M 2014. The Company's 9M 2014 net profit was RUB 6.3 billion (USD 177 million), a decrease of 31% year-on-year from RUB 9.1 billion (USD 288 million) in 9M 2013. Basic and diluted earnings per share came to RUB 46 (USD 1.30) for 9M 2014, compared to RUB 64 (USD 2.02) in 9M 2013.

Cash flows from operating activities increased by 35% and amounted to RUB 21.5 billion (USD 606 million) in 9M 2014, compared to RUB 15.9 billion (USD 502 million) in 9M 2013.

Gross debt at 30 September 2014 amounted to RUB 73.3 billion (USD 1,861 million), compared to RUB 52.8 billion (USD 1,612 million) at 31 December 2013. Net debt at 30 September 2014 stood at RUB 52.7 billion (USD 1,339 million), up from RUB 43.8 billion (USD 1,339 million) at 31 December 2013. Most of the Company's debt is denominated in USD as a natural hedge against primarily USD-denominated sales. The depreciation of the Russian rouble against the US dollar was the primary reason for the increase of PhosAgro's net debt in RUB terms. The Company's net debt to annualised EBITDA ratio decreased to 1.5 as of 30 September 2014, from 1.8 as of 31 December 2013.

Commenting on the 9M 2014 results, PhosAgro Management Board Chairman and CEO Andrey Guryev said:

"The favourable market conditions, supported by supply-demand fundamentals and a strong pricing environment, have improved PhosAgro's margins back to what we consider to be normal levels, with gross profit margin close to 42% and a solid EBITDA margin of 30%. Healthy global demand for phosphate-based fertilizers has pushed DAP prices to USD 500 per tonne FOB Tampa and higher in 3Q 2014. The average DAP FOB Tampa price for the first nine months of 2014 was up 2% year-on-year to USD 475, compared to an average of USD 466 last year. While current DAP prices have softened to around USD 455 FOB Tampa as a result of the seasonal slowdown, they are still about USD 100 per tonne higher than they were at this time last year.

"Our cost-cutting initiatives also contributed to PhosAgro's improved financial results, and the recent substantial RUB devaluation has further strengthened our cost advantage. We also continued to operate at close to 100% utilization thanks to our excellent production flexibility.

"In addition to delivering strong financial results, I am pleased to report that we have completed the buyout of the remaining minority shareholders in PhosAgro-Cherepovets, with only minor technical procedures outstanding. This means we have successfully completed our three-year effort to consolidate 100% ownership in all of our main production subsidiaries."