Acron : Annual Report 2020 (Draft)

DRAFT

2020 Annual Report

Acron Group

SPRING IS ALWAYS

AROUND THE CORNER

About the Report

Acron Group is a leading vertically integrated mineral fertiliser producer in Russia and globally. Its wide range of products includes complex and nitrogen fertilisers and industrial products. In 2020, the Group sold 7.8 million tonnes of its key products.

'The COVID-19 pandemic has affected nearly everyone on our planet. As the situation unfolded, Acron Group established a coronavirus emergency centre. All of our employees were given personal protective equipment, and office staff started working remotely. Our production facilities continued operations with measures in place to protect against the virus. These timely

Contents

COMPANY OVERVIEW

Company Overview

2020 Highlights

Key Awards

Business Geography

Priority Business Areas and Business Model Letter from the Chairman of the Board of Directors Letter from the Chief Executive Officer and President

STRATEGIC REPORT

Mineral Fertiliser Market Overview

Development Strategy and Prospects

4 SUSTAINABILITY

4	Responsibility for Personnel
6	Occupational and Industrial Safety
8	Environmental Efforts
10	Social Involvement
12	Cooperation with Stakeholders
14
16		FINANCIAL STATEMENTS
	Responsibility Statement
18	IFRS Financial Statements

1. RAS Financial Statement

114

116

125

127

134

136

140

140

141

201

measures and our employees' strict compliance with them helped prevent the spread of infection at the Group's production facilities'.

Investment Programme

Sales Markets

28

30

APPENDICES

204

Vladimir Kunitsky, Chief Executive Officer

Acron Group's Market Position

Acron Group's Unique Competitive Advantages Board of Directors Report on Priority Operating Areas

1. Appendix 1. List of Major and Related-party
2. Transactions
3. Appendix 2. Group Structure

204

205

Information on approval of the Annual Report:

Preliminarily approved by PJSC Acron's Board Directors on 22 April 2021

Financial Overview

Risks and Risk Mitigation Strategy

55

63

Appendix 3. Report on Energy Consumption

Appendix 4. Acron Report on Compliance with Corporate Governance Code Principles and

206

Approved by Acron General Meeting on ___________

Chief Executive Officer

Vladimir Kunitsky

To read more about

Acron Group please visit

www.acron.ru/en/

Investor and Shareholder Information

CORPORATE GOVERNANCE

Statement by the Board of Directors on Compliance with the Principles of the Corporate Governance Code

Report on Corporate Governance

Corporate Governance System

Board of Directors

Managing Board

Remuneration and Reimbursement to the Members of the Board of Directors and Managing Board

Control System

Procurement

71 Recommendations (separate book)

Appendix 5. RAS Financial Statements and Audit Report (separate book)

78 Contacts

78

83

84

87

98

102

109

112

207

1

Company Overview

Strategic Report

Corporate Governance

Sustainability

Financial Statements

Appendices

Projects Completed in 2020

NITRIC ACID UNIT	AMMONIA-4 UPGRADES

Veliky Novgorod-based Acron commissioned a new 135,000-tpa nitric acid unit, the third new unit in two years. The first two units were launched at the Veliky Novgorod site in 2019. The total cost of all three units was USD 58 million. Acron Engineering Research and Design Centre

(a member of Acron Group) was the general designer for the units.

Nitric acid is used to produce AN and NPK. The launch of the new units will help Acron Group increase its AN output by 500,000 tpa.

Acron Group ramped up output at its Ammonia-4 unit to 2,550 tonnes per day, 24% above its design capacity, bringing the unit's capacity to 900,000 tonnes per annum and making it one of the largest ammonia plants in Europe. Investments in the project totalled USD 34 million. Critical work was supervised by experts from Haldor Topsoe (HTER), Mitsubishi, and Acron Engineering.

UREA GRANULATION UNIT

Acron Group commissioned a new 700-ktpa urea granulation unit at its Veliky Novgorod site, which previously only produced prilled urea. With the new unit on stream, the Group will supplement its product portfolio, improve production flexibility, and better meet the market's needs by switching to products with the greatest demand at any given moment. The project cost a total of USD 29 million. Acron Engineering Research and Design Centre (a member of Acron Group) was the general designer for the unit.

These projects increased the Group's

commercial output

7 %

in 2020 to

7,976,000

tonnes

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Company Overview

Strategic Report

Corporate Governance

Sustainability

Financial Statements

Appendices

Company Overview

Acron Group is a leading vertically integrated mineral fertiliser producer in Russia and globally. Its wide range of products includes complex and nitrogen fertilisers and industrial products. In 2020, it sold 7.8 million tonnes of its key products.

The Group continues to expand its production capacity, allowing it to develop distribution opportunities and diversify its product portfolio.

Sales of Key Products, '000 t

AMMONIA

					116
	2020												304
	2019
NITROGEN FERTILISERS
																				3,874
	2020
																		3,843
	2019
COMPLEX FERTILISERS
															2,271
	2020
											2,098
	2019
ORGANIC COMPOUNDS
												211
	2020												237
	2019
NON-ORGANIC COMPOUNDS
												1,048
	2020
									797
	2019
APATITE CONCENTRATE
																		287
	2020
																			290
	2019
TOTAL
2020																		7,807
2019																	7,569
2000	3000	4000	5000	6000	7000				80001000

ACRON GROUP

HIGHLIGHTS

• Leading producer of complex and nitrogen fertilisers
• Vertical integration in nitrogen and phosphate; implementation of potash project underway
• Extensive logistics and distribution network with sales in 74 countries
• Listed on Moscow Exchange and London Stock Exchange

119,864	RUB	8.0 mn t	11,429
	mn
2020 revenue		sales volume	employees

Acron Group's Financial Highlights

Financial performance (IFRS)	2020	2019
Revenue, RUB mn	119,864	114,835
Operating profit, RUB mn	26,029	23,401
Net profit, RUB mn	3,836	24,786
Earnings per share, RUB	87.71	619.83
EBITDA, RUB mn	35,311	35,749
EBITDA margin, %	29	31
Assets, RUB mn	220,089	200,355
Available-for-sale investments, RUB mn	11,264	9,784
Short-term borrowings, RUB mn	36,911	13,288
Long-term borrowings, RUB mn	78,205	73,253
Net debt, RUB mn	99,579	75,185
Cash flow from operating activities, RUB mn	26,190	28,278
Capital expenditures, RUB mn	17,946	19,030

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Company Overview

Strategic Report

Corporate Governance

Sustainability

Financial Statements

Appendices

2020 Highlights

OCTOBER

Acron (Veliky Novgorod) won the Project of the Year nomination at 5 Stars: Chemical Industry Leaders, a nationwide competition to recognise innovation in the industry. Acron's winning project involved construction of three UKL units for nitric acid production with a total capacity of 405,000 tonnes per annum.

Modern geriatric centre opened in Veliky Novgorod with Acron's support. The Company allocated a total of RUB 143 million for the project.

NOVEMBER

DECEMBER

Acron (Veliky Novgorod) completed a project to ramp up output at its Ammonia-4 unit to 2,550 tonnes per day.

Dorogobuzh celebrated its 55th anniversary.

AUGUST

JUNE

North-Western Phosphorous Company (NWPC) marked its 15th anniversary.

FEBRUARY

APRIL

Otkritie Bank acquired a stake in the Talitsky potash project from Verkhnekamsk Potash Company (VPC).

Acron Group supplied

Argentina with 96,000 tonnes

JANUARYof liquid fertilisers for the first time through its own local distribution company, Acron Argentina S.R.L.

A complex automation project at Plodorodie Agribusiness Holding (a member of Acron Group) won the 2019 Global CIO Project of the Year award for best IT project in the agricultural industry.

Acron Group commissioned a new 135,000-tpa nitric acid unit at its production site in Veliky Novgorod, the third new unit in two years.

Acron took the bronze medal at the Graduate Awards-2020, the fifth national contest for projects that benefit graduates and young specialists.

MAY

Acron Group commissioned a new 700-ktpa urea granulation unit at its Veliky Novgorod site.

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