ROS Agro : Financial results 3Q and 9M 2022

14 November 2022

ROS AGRO financial results for 9M 2022 and 3Q 2022

14 November 2022 - Today ROS AGRO PLC (the Company), the holding company of Rusagro Group (Rusagro), a leading Russian diversified food producer with vertically integrated operations, has announced the financial results for the nine months ended 30 September 2022.

9M 2022 HIGHLIGHTS

• Sales amounted to RUB 182,027 million (US$ 2,535 million1), an increase of RUB 24,451 million (+16%) compared to 9M 2021;
• Adjusted EBITDA2 amounted to RUB 35,371 million (US$ 493 million), an increase of RUB 4,649 million (+15%) compared to 9M 2021;
• Adjusted EBITDA margin remained on the same level of 19% in 9M 2022 and 9M 2021;
• Net profit for the period amounted to RUB 1,337 million (US$ 19 million), a decrease of RUB 34,085 million;
• Net debt position3 as of 30 September 2022 amounted to RUB 104,501 million (US$ 1,820 million);
• Net Debt/Adjusted EBITDA (LTM4) as of 30 September 2022 was 1.98.

Commenting on the results, Timur Lipatov, CEO of Rusagro, said:

"During the time of unstable economic environment Rusagro demonstrated its resilience. Its net revenue and adjusted EBITDA for 9M 2022 increased by 16% (+RUB 24,451 million) and 15% (+RUB 4,649 million) respectively with adjusted EBITDA margin remaining flat in time of increasing pressure from cost of sales growth. These results were driven by higher sales volumes of sugar, pork products, as well as sugar beet, corn, sunflower seeds and meal. Sales growth was possible due to the launch of vertically integrated pork production cluster in Primorsky Krai, start of the wheat export trading operations and positive market dynamics on the Russian sugar market. In comparison to 9M 2021 net profit decreased, as it was negatively influenced by forex losses and revaluation of biological assets on the back of dropping market prices and rising costs of sales.''

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Key consolidated financial performance indicators

	Nine months ended	Variance	Three months ended	Variance
in RUB million	30	30			30	30
September	September	Units	%	September	September	Units	%
	2022	2021			2022	2021
Sales	182,027	157,576	24,451	16	54,796	53,204	1,592	3
Gross profit	40,103	44,885	(4,782)	(11)	7,517	20,506	(12,989)	(63)
Gross margin, %	22%	28%	(6) pp		14%	39%	(25) pp
Adjusted EBITDA	35,371	30,722	4,649	15	5,211	8,603	(3,392)	(39)
Adjusted EBITDA	19%	19%	0 pp		10%	16%	(6) pp
margin, %
Net profit for the	1,337	35,422	(34,08	(96)	1,170	17,822	(16,652)	(93)
period 1	5)
Net profit margin %	0%	22%	(21) pp		2%	33%	(31) pp

Sales volume of Rusagro products in 9М and 3Q 2022

in	thousand	Nine months ended	Variance	Three months ended	Variance
tonnes			30	30			30	30
			September	September	Units	%	September	September	Units	%
			2022	2021			2022	2021
Sugar			636	541	95	18	199	179	19	11
Pork products		205	182	22	12	72	61	10	17
Agriculture		1,382	1,537	(155)	(10)	881	964	(83)	(9)
crops, incl.
Sugar beet		788	720	68	9	730	720	10	1
wheat			292	583	(291)	(50)	98	223	(125)	(56)
soybean		145	161	(17)	(10)	28	19	9	50
corn			135	58	77	134	25	-	25	0
sunflower seeds	21	8	13	169	1	0	0	0
barley			0	7	(6)	(95)	0	2	(2)	(92)
Oil	and	fat	1,199	1,257	(58)	(5)	407	423	(15)	(4)
products, incl.
meal			470	443	27	6	171	138	33	24
crude oil		284	319	(35)	(11)	84	121	(37)	(30)
industrial fats		213	239	(26)	(11)	72	83	(11)	(14)
dry whey mixes	13	11	2	14	4	4	0	7
consumer oil & fat	207	234	(27)	(11)	71	72	(1)	(1)
products
consumer dairy		11	10	1	10	4	4	0	6
products

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1 Net profit for the period is affected by non-cash income/(loss) on revaluation of biological assets and agricultural produce.

KEY CONSOLIDATED CASH FLOW INDICATORS (NOT IFRS PRESENTATION*)

The key consolidated cash flow indicators presented according to management accounts methodology

	Nine months ended	Variance	Three months ended	Variance
in RUB million	30	30			30	30
September	September	Units	%	September	September	Units	%
	2022	2021			2022	2021
Net cash from	7,918	32,255	(24,337)	(75)	8,625	10,907	(2,282)	(21)
operating
activities, incl.
Operating cash flow
before working	32,427	30,312	2,115	7	3,656	7,570	(3,914)	(52)
capital changes
Working capital	(22,995)	3,467	(26,463)	-	5,256	4,225	1,031	24
changes
Net cash from	(6,752)	(37,078)	30,326	82	(2,790)	(19,667)	16,877	86
investing activities,
incl.
Purchases of
property plant and	(7,642)	(8,816)	1,174	13	(3,015)	(2,594)	(422)	(16)
equipment and
inventories intended
for construction
Acquisition of	-	(28,735)	28,735	-	-	(17,046)	17,046	-
SolPro assets
Net cash from	28,748	50,108	(21,359)	(43)	(10,392)	13,735	(24,127)	-
financing activities
Net effect of
exchange rate	(17,177)	(187)	(16,990)	(9,103)	1,819	(85)	1,903	-
changes on cash
and cash
equivalents
Net increase /
(decrease) in cash	12,738	45,098	(32,360)	(72)	(2,738)	4,890	(7,628)	-
and cash

equivalents

(*) See Appendix 3

The key investments in property, plant and equipment and inventories intended for construction during 9M 2022 were made in the Meat segment in the amount of RUB 2,802 million (9M 2021: RUB 4,916 million) mainly due to the purchases related to the construction project in the Russian Far East. Investments in the Agriculture segment in the amount of RUB 2,255 million (9M 2021 : RUB 1,885 million), Oil and Fat segment in the amount of RUB 1,934 million (9M 2021 : RUB 1,266 million excluding acquisition of SolPro assets), and Sugar segment in the amount of RUB 651 million (9M 2021 : RUB 749 million) mainly relate to purchases of machinery and equipment for production facilities renewal and maintenance.

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Debt position and liquidity management

in RUB million	30 September 2022	31 December 2021	Variance
Units	%
Gross debt	246,256	172,724	73,532	43
Short-term borrowings	183,260	108,749	74,511	69
Long-term borrowings	62,996	63,975	(979)	(2)
Cash and cash equivalents, bank deposits and	(141,755)	(99,315)	(42,440)	(43)
bonds
Short-term cash, deposits and bonds	(107,334)	(65,344)	(41,990)	(64)
Long-term cash, deposits and bonds	(34,421)	(33,971)	(450)	(1)
Net debt	104,501	73,409	31,092	42
Short-term borrowings, net	75,926	43,405	32,521	75
Long-term borrowings, net	28,575	30,004	(1,429)	(5)
Adjusted EBITDA (LTM4)	52,709	48,060	4,649	10
Net debt/ Adjusted EBITDA (LTM)	1.98	1.53	0.5 pp

Net finance income/ (expense)

	Nine months ended	Variance	Three months ended	Variance
in RUB	30	30			30	30
million	September September	Units	%	September	September	Units	%
	2022	2021			2022	2021
Net interest	(3,317)	(2,507)	(810)	(32)	(1,803)	(1,213)	(590)	(49)
Gross	(8,428)	(3,774)	(4,654)	(123)	(3,873)	(1,989)	(1,884)	(95)
interest
Reimbursem
ent of	5,111	1,267	3,844	303	2,070	776	1,294	167
interest
expense
Interest	4,348	3,723	625	17	2,040	1,903	136	7
Net gain/
(loss) from	-	(1)	1	-	-	(1)	1	-
bonds held
for trading
Other
financial	(19,682)	(163)	(19,519)	(11,945)	(11,797)	(143)	(11,654)	(8,139)
expenses, net
Net foreign
exchange	(19,551)	28	(19,579)	-	(11,723)	60	(11,783)	-
gain/ (loss)
Other
financial
income /	(131)	(192)	60	32	(74)	(203)	129	63
(expenses),
net
Total net
finance	(18,651)	1,051	(19,702)	-	(11,560)	546	(12,106)	-
income/

(expenses)

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Net debt increased at 30 September 2022 compared at 31 December 2021 as a result of an increase in short-term borrowings.

In 9M 2022 Rusagro continued to enjoy benefits from the state agriculture subsidies programme. Rusagro continued to receive bank loans with decreased preferential interest rates under the programme of government support. Under this programme, the government provides subsidies to the banks to compensate the loss of income on borrowings with decreased interest rates, given by the banks to agricultural producers. In 9M 2022 IFRS accounts these borrowings are accounted according to its face value with no adjustments to prevailing market rates. The differences between nominal and market interest rate is recognized as either government grants in a statement of financial position for borrowings received with the purpose to finance investment projects or interest expenses in a statement of comprehensive income for general purpose borrowings.

Net finance income of 9M 2021 in the sum of RUB 1,813 million changed to net finance expense in the amount of RUB 17,379 million in 9M 2022 mainly as the result of negative dynamics in forex losses in 9M 2022.

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1. The exchange rates used for translation of RUB amounts into USD represent average Central Bank official exchange rate for the respective reporting period for income, expenses and profits and the Central Bank official exchange rate as at the reporting date for balance figures.
2. Adjusted EBITDA is defined as operating profit before taking into account (i) depreciation included in operating profit, (ii) net gain/ (loss) on revaluation of biological assets and agricultural produce, (iii) non-recurring components of other operating income/ (expenses), net, (iv) share-based remuneration, (v) provision for impairment of loans issued (see Appendix 2 for the detailed calculation of Adjusted EBITDA). Adjusted EBITDA is not a measure of financial performance under IFRS. It should not be considered as an alternative to profit for the period as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and therefore comparability may be limited. We believe that Adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions of subsidiaries and other investments and our ability to incur and service debt.
3. The Rusagro determines the net debt as short-term borrowings and long-term borrowings less cash and cash equivalents, bank deposits, bank promissory notes and bonds held for trading.
4. LTM - The abbreviation for the "Last twelve months".

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