PhosAgro 2014 IFRS Results

Transcription

1 PhosAgro 2014 IFRS Results 1

2 1. Market Context

3 Market context The average price for DAP in 2014 was USD 472/tonne FOB Tampa, and the average price for MAP was USD 469/tonne FOB Baltics/Black Sea. This compares favourably to average prices of USD 442 and USD 453, respectively, in was marked by supply constraints from the very beginning: Morocco, the United States, Saudi Arabia and Russia decreased spot supplies of DAP/MAP by ths tonnes in 1Q Combined with early demand from Latin America and Europe following very weak volumes in 4Q 2013, this led to a sharp recovery in DAP/MAP prices in January 2014, followed by a further seasonal recovery up to USD 500 per tonne (FOB Tampa) in February-March 2014 Prices softened back to USD per tonne FOB Tampa in April-May as a result of the increased supply of lower-grade phosphate-based fertilizers from China and softer-than-expected demand from India Seasonal demand in Brazil, in conjunction with summer purchases in the US market, contributed to higher prices for DAP/MAP in July and August, topping out at over USD 500 per tonne (FOB Tampa), despite continued weakness in the Indian market and increased Chinese exports From September, the combination of the seasonal slowdown and dramatically increased ammonia prices led to production curtailments; as a result, low-season prices came down to an average of USD 459 per tonne FOB Tampa in 4Q 2014, significantly better than the average USD 362 per tonne FOB Tampa in 4Q 2013 Overall P 2 O 5 consumption in 2014 can be characterised by two significant factors: another year of very low P 2 O 5 consumption in India, where DAP imports were around 3.6 million tons; and another record year for P 2 O 5 consumption in Brazil, driven by increased soybean production, with total imports of phosphate-based fertilizers increasing by over 11% Phosphoric acid prices for Indian DAP producers have increased three times in 2014, from USD 615 per tonne of P 2 O 5 at the end of 2013 to USD 681 per tonne of P 2 O 5 in 1Q 2014, then to USD 715 per tonne in 2Q and USD 765 per tonne of P 2 O 5, CFR, remaining at the same level in 4Q 2014 The increase in demand and prices for phosphoric acid and fertilizers pushed up the price of phosphate rock. Global trade in phosphate rock increased significantly in 2014, up 15% year-on-year to 30 million tonnes, primarily due to imports by the USA, Indonesia, Brazil and India. Positive pricing for phosphate-based fertilizers combined with increased import demand brought phosphate rock prices up from USD 106/tonne FOB Morocco (32% P 2 O 5 ) to USD 123/tonne at the end of 2014 Global urea trade for the second consecutive year was significantly influenced by much higher exports from China, which was partially balanced by lower urea exports from Egypt and Ukraine. While prices increased in 3Q 2014, downward pressure renewed in the fourth quarter as result of the seasonal slowdown. The average urea price in 2014 was USD 311 per tonne FOB Baltic, versus USD 327 per tonne FOB Baltic in

4 Fertilizer price developments 120 4Q Q Q 2014 Avg change, Q4-o-Q3 550 Uralkali split with BPC 110 DAP: -8% BRL/USD: -11% RUB/USD: -22% Potash: 4% Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Mar-15 Apr-15 Local currencies rebased to 100* INR/USD: -2% USD Urea:-1% INR/USD BRL/USD RUB/USD DAP, FOB Tampa Potash, FOB Vancouver Urea, FOB Yuzhny Source: Argus-FMB, Bloomberg, PhosAgro analysis Note:(*) rebased at 1 July

5 Market context supportive for fertilizer use DAP/cereal basket (1) ratio World grain stocks-to-use ratios, % > 1.57 High DAP Prices Average DAP/basket Ratio for 10 years = % 25% 20% 20 year average 20 year average 20 year average 20 year average < 1.57 High Cereal Prices Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Jan-14 Jun-14 Nov-14 Apr-15 - DAP/Cereals basket - 10 year average DAP/Cereals basket ratio 15% 10% 5% 0% 500 USD per tonne / / / / / / / / / / / / / / / / / / / /15 Wheat Corn Rice Soybean Crop prices Wheat Corn Soybean Rice Average Average 2014 Apr 2015 Source: Argus-FMB, USDA, FAO Note: (1) agricultural commodity prices are represented by a grain index calculated as follows: (wheat price*7+ corn price *8 rice price*4.5+soybeans price*2.5)/22 4

6 2. Financial Performance

7 FY 2014 highlights Revenue increased by 18% year-on-year to RUB 123,124 million, supported by a 3% increase in fertilizer sales volumes combined with year-on-year increases of over 27% and 17% in average realised prices for export DAP/MAP and NPK, respectively EBITDA was RUB 37,609 million for 2014, up 57% year-on-year EBITDA margin was 31% for 2014, vs 23% in 2013 Operating profit for the period was RUB 29,596 million, up 83% from RUB 16,142 million in 2013 The Company s 2014 net loss was RUB 13,395 million, compared to a net profit of RUB 8,576 million in 2013 Adjusted for the unrealised foreign exchange loss, profit for 2014 was RUB 18,114 million, an increase of 88% year-on-year Net debt at 31 December 2014 stood at RUB 93.1 billion, up from RUB 43.8 billion as of 31 December 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 Net debt to EBITDA ratio increased to 2.48 as of 31 December 2014, from 1.83 as of 31 December 2013 Capital expenditure in cash terms was RUB 20,847 million in Source: PhosAgro 6

8 4Q 2014 performance highlights Key financial highlights 4Q Q 2014 % change q-o-q 4Q 2013 % change y-o-y (RUB million, except EPS) Revenue 36,366 30,056 21% 23,290 56% Cost of sales (18,170) (17,118) 6% (16,391) 11% Gross profit 18,196 12,938 41% 6, % Gross profit margin 50% 43% 7 p.p. 30% 20 p.p. EBITDA 11,859 9,531 24% 3, % EBITDA margin 33% 32% 1 p.p. 14% 19 p.p. Net/(Loss) profit (19,668) (1,824) (978%) (518) (3,697%) Net profit margin (54%) (6%) (48 p.p.) (2%) (52 p.p.) (Loss)/earning per share, RUB (152) (14) (982%) (4) (3 428%) For the first nine months of 2014 PhosAgro paid interim dividends in the amount of RUB 5,828 million On 28 April 2015, the Board of Directors recommended shareholders approve a final dividend of RUB 1,943 million (RUB 15 per ordinary share) Pending AGM approval, total 2014 dividends will amount to RUB 7,771 million Source: PhosAgro 7

9 4Q 2014 revenue breakdowns Revenue by geography 4Q 2014 (%) Asia 3% CIS 4% India 5% Russia 18% Revenue by geography 3Q 2014 (%) Asia Africa 1% 1% CIS 8% India 1% Revenue by geography 4Q 2013 (%) Asia 6% CIS 6% India 2% Russia 27% Africa 17% Europe 18% Russia 41% Africa 10% Europe 24% North and South America 29% North and South America 30% Europe 31% North and South America 18% Revenue by segment 4Q 2014 (%) Revenue by segment 3Q 2014 (%) Revenue by segment 4Q 2013 (%) Other operations 0% Nitrogen fertilizers 13% Other operations 1% Nitrogen fertilizers 13% Nitrogen fertilizers 13% Other operations 1% Phosphate -based products 87% Phosphate -based products 86% Phosphate -based products 86% Source: PhosAgro 8

10 Revenue per tonne for key products (RUB) Average revenue per tonne - export Q '000 RUB/t Q Q Phosphate rock DAP MAP NPK NPS APP MCP PKS SOP Urea NP STPP Average revenue per tonne - domestic '000 RUB/t Q Q Q Source: PhosAgro Phosphate rock DAP MAP NPK NPS APP MCP PKS SOP AN Urea STPP 9

11 Revenue per tonne for key products (USD) Average revenue per tonne - export Q Q Q 2013 USD/t Phosphate rock DAP MAP NPK NPS APP MCP PKS SOP Urea NP STPP Average revenue per tonne - domestic USD/t Q Q Q Phosphate rock DAP MAP NPK NPS APP MCP PKS SOP AN Urea STPP Source: PhosAgro RUB/USD rates: 4Q 2014: ; 3Q 2014: ; 4Q 2013:

12 Sales volume developments for key products Sales volumes - export Q '000 tonnes Q Q 2013 '000 tonnes DAP MAP NPK NPS APP MCP PKS SOP Urea NP STPP Sales volumes - domestic 50 0 Phosphate rock '000 tonnes Q Q Q 2013 '000 tonnes Source: PhosAgro DAP MAP NPK APP MCP PKS AN Urea Other fertilizers 11 STPP Phosphate rock

13 Phosphate segment performance Key financial highlights (RUB million) 4Q Q 2014 % change q-o-q 4Q 2013 % change y-o-y Revenue 31,599 25,966 22% 20,139 57% Export 25,883 14,099 84% 14,593 77% Domestic 5,716 11,867 (52%) 5,546 3% CoGS (15,063) (15,084) - (13,276) 13% Gross profit 16,536 10,882 52% 6, % % margin 52% 42% 10 p.p. 34% 18 p.p. 1,200 1,222 1,220 1,226 Sales volumes (1) v 1,000 '000 tonnes Phosphate-based products 4Q Q Q 2013 Phosphate rock Source: PhosAgro (1) Phosphate-based products: Phosphate-based fertilizers, MCP and STPP 12

14 Nitrogen segment performance Key financial highlights (RUB million) 4Q Q 2014 % change q-o-q 4Q 2013 % change y-o-y External Revenue 4,608 3,925 17% 3,008 53% Export 3,822 3,801 1% 2,306 66% Domestic % % Inter-segment Revenue (100%) CoGS (2,883) (2,293) 26% (2,865) 1% Gross profit 1,725 1,632 6% 147 1,073% % margin 37% 42% (4p.p.) 5% 33p.p. Sales volumes '000 tonnes Q Q Q Nitrogen fertilisers Source: PhosAgro 13

15 4Q 2014 Cost of goods sold RUB 17,118 mln USD 473 mln 1% 1% 1% 8% 3% 5% 5% 6% 11% 11% 13% 36% Cost of Goods Sold Am. Sulphate Heating energy Sulphur and sulphuric acid Fuel Ammonia Electricity Potash Natural Gas Depreciation Salaries and social contributions Materials and services RUB 18,170 mln USD 383 mln 8% 3% 7% 5% 5% 11% 10% 14% 42% 2% 1% RUB 16,391 mln USD 504 mln 4% 5% 6% 5% 4% 12% 11% 17% 36% 2% 2% 3Q 2014 Changes in stock of WIP and 4Q % 4Q % finished goods CoGS drivers Cost of goods sold increased by 6% to RUB 18,170 million in 4Q 2014 from RUB 17,118 million in 3Q 2014, due to the following factors: An increase of RUB 1,340 million, or 22%, q-o-q in the cost of materials and services due to increase of production volumes. Adjusted for change in stock of WIP and finished goods, materials and services costs remained unchanged q-o-q Personnel costs increased to RUB 2,490 million in 4Q 2014 from RUB 2,288 million in 3Q 2014 mainly due to annual bonus accrual in 4Q Sulphur costs increased by 13% as a result of purchase price increase by 6% and an increase of volumes purchased by 6% Heating energy increased by 110%, from RUB 115 million in 3Q 2014 to RUB 242 million in 4Q 2014 mainly due to a 115% increase in volumes consumed as a result of seasonal changes Fuel costs have increased by 14%, primarily due to seasonal factors Natural gas costs increased by 6% to RUB 1,960 million in 4Q 2014, from RUB 1,851 million in 3Q 2014, due to an increase in natural gas consumption by 6% An increase in expenditure on purchased ammonia of RUB 604 million, or 99%, from RUB 610 million in 3Q 2014 to RUB 1,214 million in 4Q This was due to a q-o-q increase in purchase volumes by 32% as a result of increased nitrogen-based fertilizers production volumes and a price increase of 51% A decrease in expenditure on potash by 19%, or RUB 200 million, to RUB 879 million in 4Q 2014, was mainly due to a 23% decrease in potash purchase volumes as a result of a 25% q-o-q decrease in NPK/PKS production Source: PhosAgro RUB/USD rates: 4Q 2014: ; 3Q 2014: ; 4Q 2013: (1) Phosphate-based fertilizers, MCP, STPP and nitrogen fertilizers 14

16 Capital expenditure Capex / EBITDA Comment RUB mln Capex is defined as all additions to PP&E additions to PP&E do not necessarily match cash flow in the same period Main projects: Construction of ore shaft 2 at Kirovsky underground mine Commencement of construction of new 760 kt per annum ammonia plant Construction of liquid ammonia storage facilities in Balakovo 20,464 13,040 10,614 35,371 12,905 16,801 34,695 13,370 14,881 23,934 17,795 17,662 37,609 20,549 18, EBITDA CAPEX as cash flows CAPEX as additions to PP&E Capex by segment (RUB m) 4Q Q Q 2013 Phosphate mining and beneficiation 1,803 1,893 2,110 Phosphate-based products - downstream 1,632 1,562 2,244 Nitrogen fertilizers 2,017 1, Other Total capital expenditures 6,443 5,528 5,512 Source: PhosAgro 15

17 Overview of debt 3.5х 2.5х 1.5х 0.5х - 0.5х Total debt and net debt / annualised EBITDA 3.29х 2.48х 2.20х 2.45х 2.29х 0.91х 1.83х 1.05х 1.39х 1.64х 1.45х 0.13х 0.44х 0.32х 0.77х 0.45х 0.43х 0.18х х х Comment PhosAgro carefully manages its balance sheet and cost of financing for all current initiatives, including both the consolidation of subsidiaries and growth projects The Company s net debt to annualised EBITDA ratio increased to 2.48 x as of 31 December 2014, from 1.83x as of 31 December Excluding the effect of the PhosAgro-Cherepovets buyout (assuming normal course of business), net debt/ebitda would be 2.29x. Excluding both the effect of the PhosAgro- Cherepovets buyout and the unrealised exchange loss, net debt/ebitda would be 1.45x Dividends Public debt Eurobonds issued on February 2013 (LPN) Issue size Ba1 Corporate ratings Moody s Tenor Coupon frequency Spread $US 500 mln BBB- BB+ S&P Fitch 5 years Semi annually mid swaps+ 320 bps; UST bps Coupon rate 4.204% Maturity Date 02/13/2018 Net debt at 31 December 2014 stood at RUB 93.1 billion, up from RUB 43.8 billion at 31 December Most of the Company s debt is denominated in USD as a natural hedge against primarily USDdenominated 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 Fitch Ratings has affirmed the Company s long-term foreign currency Issuer Default Rating (IDR) of BB+ with a Stable outlook. Standard & Poor s left PhosAgro s BBB- credit rating with a Negative outlook unchanged after that agency s downgrade of the Russian sovereign rating in January 2015, while Moody s Investor Service adjusted the Company s long-term Issuer Rating to Ba1/Negative on 25 February 2015, following the Russian Federation sovereign ceiling downgrade by that agency Source: PhosAgro 16

18 3. Conclusion

19 Market outlook DAP prices have recovered by more than USD 20 in 1Q 2015 to an average of USD 483 per tonne (FOB Tampa), compared to an average of USD 459 in 4Q 2014, thanks to healthy demand from developed agricultural markets At the same time, the decline in feedstock prices has helped to reduce average industry cash costs: ammonia CFR prices in the US and Morocco have come down below USD 500 per tonne from peak levels of USD 655 per tonne in autumn of last year Low imports by India in 2014 have depleted local fertilizer stocks, which, combined with a decision by the Indian Government to increase the P&K subsidy in its 2015/2016 budget, should lead to much better local consumption and imports of phosphate-based fertilizers in 2015 PhosAgro has seen increased market activity from Indian buyers already at the end of last year, well ahead of the budget announcement in the end of February. Increased demand from India, combined with healthy demand from the rest of the world, should support DAP pricing throughout the year The new Indian phosphoric acid price was settled recently, at USD 805 per tonne of P 2 O 5 CFR India for January-June 2015, representing a further USD 40 increase over the 4Q 2014 price Agricultural commodities performance continues to be a limiting factor for significant fertilizer price increases. At the same time, farmer incentive to maintain high yields on cereals, especially soybeans, with minimum growth in planted acres should support phosphate application 11 18

20 Company outlook PhosAgro s substantially improved low cash cost position combined with the Rouble depreciation has further enhanced our competitive advantage, which together with our flexible production makes the Company well placed to respond to any changes in global demand for concentrated or complex fertilizers and NPS. The Company intends to invest further into both increasing capacity and expanding the number of NPK grades it produces The dramatic Rouble depreciation has worsened the economic situation for Russian farmers and for 2015 spring planting season we are offering discounts to local farmers in the range of 15-20% on various fertilizers compared to netback export prices All major development projects are on track, including the new ammonia plant designed to increase cost efficiency and support further expansion of PhosAgro s complex fertilizer production capacity PhosAgro continued its restructuring process in 1Q 2015 with the launch of a merger of Agro-Cherepovets, PhosAgro AG and Nordic Rus Holding into PhosAgro-Cherepovets. This is aimed at further enhancing cost efficiency and simplifying the corporate structure New trade offices are due to start operations in 1H 2015 in Geneva, Switzerland and Sao Paolo, Brazil The Company plans to decrease leverage ratios in 2015, aiming to end the year closer to the target of 1x net debt/ebitda The Board of Directors, at its meeting on 28 April 2015, changed PhosAgro s dividend policy to increase net profit available for distribution as dividends to a range of 30%-50%, from the previous range of 20%-40% 11 19

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