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OJSC PhosAgro : PhosAgro Publishes 2Q and 1H 2021 Financial Results

08/06/2021 | 10:31am EST
OJSC PhosAgro (PHOR) 
OJSC PhosAgro: PhosAgro Publishes 2Q and 1H 2021 Financial Results 
06-Aug-2021 / 17:30 MSK 
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 
(MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
For Immediate Release  6 August 2021 

PhosAgro Publishes 2Q and 1H 2021 Financial Results

Moscow - PhosAgro ("the Company") (Moscow Exchange, LSE: PHOR), one of the world's leading vertically integrated phosphate-based fertilizer producers, today announced its consolidated IFRS financial results for the second quarter (2Q) and first half (1H) of 2021.

2Q and 1H 2021 highlights

Revenue for 2Q 2021 increased by 48.0% year-on-year to RUB 88.7 billion (USD 1.2 billion).

Revenue for 1H 2021 increased by 42.2% year-on-year to RUB 176.3 billion (USD 2.4 billion). The growth was largely a result of implementation of the Company's long-term development strategy, which has enabled the launch of new production capacities and improved the efficiency of existing facilities. The rise in revenue was also driven by an improvement in the Company's sales structure in favour of high-margin fertilizers at a time of higher average sales prices in global markets.

In 2Q 2021, EBITDA more than doubled year-on-year to RUB 38.8 billion (USD 523 million). Upgrades to production assets, improved efficiency of the main production lines and an increase self-sufficiency of key feedstocks enabled the Company to achieve an EBITDA margin for the quarter of 43.7%.

In 1H 2021, EBITDA increased by 83.4% year-on-year to RUB 73.1 billion (USD 984 million). EBITDA margin for the period rose to 41.5%.

In 2Q 2021, free cash flow amounted to RUB 19.0 billion (USD 256 million), a more than nine times higher year-on-year, driven by working capital optimisation.

In 1H 2021, free cash flow amounted to RUB 34.2 billion (USD 461 million), up 68.8% year-on-year.

In 2Q and 1H 2021, adjusted net profit amounted to RUB 24.1 billion (USD 325 million) and RUB 45.3 billion (USD 610 million), respectively. These results for 2Q and 1H 2021 are four times and two times higher year-on-year, respectively.

As of 30 June 2021, net debt had decreased by RUB 30.5 billion since the end of 2020, amounting to RUB 126.3 billion (USD 1.7 billion). The net debt/EBITDA ratio had dropped to 1.07x as of the end of 2Q 2021.

Financial and operational highlights

Financial highlights 
                   2Q         2Q         Chng    1H      1H      Chng 
RUB mln            2021       2020       %                       % 
                                                 2021    2020 
Revenue            88,682     59,938     48.0%   176,261 123,996 42.2% 
EBITDA*            38,785     19,126     102.8%  73,094  39,864  83.4% 
EBITDA margin      43.7%      31.9%      11.8 pp 41.5%   32.1%   9.3 pp 
Net profit         30,308     20,879     45.2%   48,652  5,291   819.5% 
Adj. net profit**  24,099     5,646      326.8%  45,328  22,237  103.8% 
Free cash flow     19,002     2,021      840.2%  34,217  20,274  68.8% 
                   30.06.2021 31.12.2021 
Net debt           126,343    156,875 
ND/LTM EBITDA      1.07x      1.86x 

RUB/USD rates: average 2Q 2021 rate: 74.2; average 2Q 2020 rate: 72.4; as of 30 June 2021: 72.4; as of 31 December 2020: 73.9.

* EBITDA is calculated as operating profit adjusted for depreciation and amortisation.

** Net profit as reported minus FX gain or loss.

Commenting on the Company's financial results, PhosAgro CEO Andrey Guryev said:

"The second quarter of 2021 was one of the most successful in the Company's history. Thanks to the modernisation of production units, we were able to increase production of phosphoric acid despite brining forward a portion of our planned maintenance from the third quarter. This growth enabled us to maintain a high level of production of phosphate-based fertilizers, thus satisfying demand in key markets.

"In the context of a favourable global market environment for agricultural products and fertilizers, this enabled us to increase profitability considerably. As a result, revenue for the quarter approached RUB 89 billion, an increase of 48%, and EBITDA more than doubled to RUB 38.8 billion, our best result since going public. At the same time, EBITDA margin was nearly 44%.

"High levels of efficiency, predictable capex and effective management of working capital enabled the Company to generate free cash flow in the second quarter of more than RUB 19 billion.

"As a result, the Group's net debt at the end of the quarter had decreased to RUB 126 billion, and the net debt/ EBITDA ratio had dropped to 1.07x, which is in line with the Company's financial policy and reflects a comfortable long-term position.

"To wrap up, I would like to emphasise once again that the Company's strong operating and financial performance and balanced long-term development programme have enabled us to maintain a low level of debt and protect the Group's long-term advantage in global markets."

2Q 2021 market conditions

Prices for phosphate-based fertilizers continued to rise in most markets in 2Q 2021, supported by high prices for agricultural products, continued demand in the US and European domestic markets, and the development of seasonal demand in Latin American markets - Brazil in particular.

Increased subsidies in India boosted import demand at the start of the quarter, which helped absorb the bulk of DAP exports from China. A sharp rise in global prices for potash as a result of production cuts in the United States and the introduction of sectoral sanctions on Belarusian products helped drive greater demand and higher prices for NPK fertilizers.

Prices for nitrogen-based fertilizers also trended upward on the back of strong demand from markets in Central and South America and the start of regular seasonal purchases of urea in India.

Global prices for commercial ammonia continued to rise, as demand outstripped supply in the wake of unplanned shutdowns in Central America and the Middle East. The average price for commercial ammonia in 2Q 2021 was USD 464 per tonne (FOB Yuzhny), up from USD 199 per tonne (FOB) in 2Q 2020.

Global sulphur prices remained high at USD 177 per tonne (FOB Black Sea) in 2Q 2021.

Prices for phosphate raw materials also continued to rise in line with prices for phosphate-based fertilizers. Contract prices for phosphoric acid supplies to India in 2Q 2021 were agreed at USD 998 per tonne of 100% P2O5 (CFR India), which was USD 203 per tonne higher than in 1Q 2021 and USD 391 per tonne higher than in 2Q 2020. Phosphate rock prices (68%-72% BPL) in 2Q 2021 were USD 85-155 per tonne (FOB Morocco), compared with USD 70-105 per tonne (FOB Morocco) in 2Q 2020.

2Q 2021 financial performance

In 2Q 2021, the Company's revenue increased by 48.0% year-on-year to RUB 88.7 billion (USD 1.2 billion). The main growth drivers were the rise in global prices for phosphate- and nitrogen-based fertilizers amid the depreciation of the rouble against the US dollar. At the same time, the sales volume of nitrogen-based fertilizers for the quarter increased by 3.3% year-on-year.

EBITDA for 2Q 2021 increased by 102.8% year-on-year to a record RUB 38.8 billion (USD 523 million). Despite the significant increase in prices for key feedstocks, EBITDA margin amounted to 43.7%. -- EBITDA in the phosphate-based fertilizers segment amounted to RUB 29.7 billion (USD 400 million), a nearly twofold

increase year-on-year. Higher profits were recorded for all key products, mainly due to farmers' record-high

purchasing power on the back of high prices for agricultural products. -- EBITDA in the nitrogen-based fertilizer segment amounted to RUB 9.1 billion (USD 122 million), was twice the result

for 2Q 2020.

Net profit (defined as net profit excluding non-cash FX gain/loss and other non-cash factors) for 2Q 2021 more than quadrupled year-on-year to RUB 24.1 billion (USD 325 million).

In 2Q 2021, the Company's free cash flow amounted to RUB 19.0 billion (USD 256 million). The main source of cash flow was an increase in sales income due to higher average global prices, an improvement in the structure of finished products and effective management of working capital, which balanced cash flows for capital expenditure.

Capex in 2Q 2021 amounted to RUB 11.2 billion (USD 150 million). The Company invested primarily in the construction of its large industrial complex at its Volkhov site, where the first production lines have already been launched with a design capacity of more than 800 thousand tonnes of MAP per year. Once the project is complete, the total capacity of the new complex will reach almost 900 thousand tonnes.

As of 30 June 2021, the net debt/EBITDA ratio was 1.07x. PhosAgro was able to decrease its debt burden thanks to higher profits along with effective cost controls. Net debt as of 30 June 2021 was RUB 126.3 billion (USD 1.7 billion).

Cost of sales 
RUB million or %                              2Q     2Q     Chng   1H 2021 1H 2020 Chng 
                                              2021   2020   %                      % 
Amortisation                                  5,578  5,997  -7.0%  12,338  12,223  0.9% 
Materials and services                        10,378 9,510  9.1%   22,522  20,320  10.8% 
Phosphate rock transport                      1,953  1,976  -1.2%  4,237   4,236   0.0% 
Repair expenses                               2,748  2,351  16.9%  5,637   4,767   18.3% 
Drilling and blasting costs                   822    720    14.2%  1,807   1,489   21.4% 
Other materials and services                  4,855  4,463  8.8%   10,841  9,828   10.3% 
Raw materials                                 12,946 8,267  56.6%  24,737  18,303  35.2% 
Ammonia                                       2,798  1,076  160.0% 4,879   2,267   115.2% 

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