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Acron Releases IFRS H1 2015 Consolidated Statements

 Today Acron (Moscow Exchange and LSE: AKRN) released its consolidated IFRS financial statements for H1 2015.

Key Financials

• Revenue was up 46% year-on-year to RUB 52,077 million (USD 907 million) (H1 2014: RUB 35,746 million)
• EBITDA* more than doubled to RUB 20,261 million (USD 353 million) (H1 2014: RUB 8,586 million)
• EBITDA margin was 39%, up from 24% year-on-year
• Net profit was up 84% year-on-year to RUB 12,063 million (USD 210 million), (H1 2014: RUB 6 550 million)
• Net debt was down 8% to RUB 51,126 million (31 December 2014: RUB 55,788 million). In dollars, net debt was down 7% to USD 921 million from USD 992 million
• Net debt/LTM EBITDA** was 1.6, against 2.8 as of 31 December 2014. In dollar terms net debt/LTM EBITDA was down to 1.5.

Operating Results

• Key products output was 3.101 million tonnes, down 5.5% year-on-year
• Sales of key products totalled 3.062 million tonnes, down 6.4% year-on-year.

Chair of Acron’s Board of Directors Alexander Popov comments on the results:

“Acron Group achieved solid financial results in H1 2015. EBITDA increased by a factor of 2.4 and net profit increased 84% year-on-year. EBITDA margin over the period was 39%, up from 24%. The Group also decreased its debt burden in both absolute and relative terms.

“It is worth noting that these results were achieved despite lower sales of key products, which decreased 6% due to an equipment upgrade to increase environmental sustainability at Hongri Acron and the scheduled overhaul at Acron’s site in Veliky Novgorod. A weaker rouble and more efficient NWPC supported the financial results. In H1, EBITDA margin at NWPC was up to 51%, from 15% year-on-year, as the first stage of the mine reached design capacity and cost-cutting measures were introduced.

“The Ammonia-4 project is developing rapidly, and we expect to finish construction and start the test-run in Q4 2015. The launch of the new unit together with a smaller number of scheduled overhauls at the Group’s facilities will deliver considerable output growth in 2016 and sustain further improvement in financials.”


Notes on Key Items in the Financial Statements 

Financial Performance 

The Group’s revenue in H1 2015 was up 46% year-on-year to RUB 52,077 million. The major factor driving revenue was a weaker rouble, which reduced the effects of a 6.4% decrease in sales volume of key products due to an equipment upgrade at Hongri Acron and a scheduled overhaul at Acron’s site in Veliky Novgorod. The Group’s lower output was partially offset as the first stage of the Oleniy Ruchey mine reached design capacity in March 2015. In H1 2015, dollar-denominated prices were higher for complex fertilisers and lower for nitrogen fertilisers year-on-year.

Average global indicative prices for the Group’s main products in H1 2015 were: USD 361 per tonne FOB for NPK 16-16-16, USD 245 per tonne FOB for ammonium nitrate, USD 280 per tonne FOB for urea, and USD 224 per tonne FOB for urea-ammonium nitrate.

The cost of goods sold in the reporting period was RUB 25,705 million, up 19% year-on-year. The higher cost of goods was mainly driven by the higher price of potash, which is pegged to the dollar exchange rate.

Selling, general and administrative expenses were up 50% due to indexation of rouble-denominated wages at Russian facilities and foreign currency-denominated personnel expenses, including at the Group’s foreign facilities. Transportation expenses were up 25% due to higher railway tariffs and the weaker rouble, given that a considerable portion of expenses in this item are denominated in foreign currency.

In H1 2015, the Group’s share in Grupa Azoty S.A.’s profit calculated based on equity accounting was RUB 1,412 million.

In H1 2015, EBITDA increased by a factor of 2.4 year-on-year to RUB 20,261 million. EBITDA margin was 39%, up from 24% year-on-year. Novgorod-based Acron and Dorogobuzh facilities operated with 43% and 44% margin, respectively. NWPC’s margin reached 51% due to expanded operations and streamlined costs.

In H1, the Group posted a net exchange profit of RUB 776 million from revaluation of assets, loans and liabilities, against a loss of RUB 1,287 million for H1 2014.

In H1 2015, net profit increased 84% year-on-year to RUB 12,063 million.

Cash Flow

Net operating cash flow in the reporting period increased by a factor of 4.4 to RUB 11,027 million (in Q1 2014: RUB 2,534 million), mainly due to higher net profit.

Net cash spent on investment activity in the reporting period was RUB 5,654 million, against RUB 4,741 million in H1 2014. CAPEX was RUB 6,160 million (H1 2014: RUB 3,987 million). This growth was mainly due to intensified CAPEX on the Ammonia-4 project.

Net cash flow from financial activity in H1 2015 was RUB 2,666 million, against RUB 8,138 million in H1 2014.

Debt Burden

Net debt in rouble terms in the reporting period was down 8% to RUB 51,126 million. In dollar terms net debt was down 7% to USD 921 million. The relative debt burden also decreased: in rouble terms net debt/LTM EBITDA was 1.6, against 2.8 as of 1 January 2014. In dollar terms net debt/LTM EBITDA was down to 1.5.

Market Trends

Q2 saw a recovery in urea prices, which had fallen in Q1 and reached bottom in early April. Chinese exports continue to set the tone for the market. In Q2 China was restricted by strong domestic demand on the back of a longer spring sowing season and lower inventories in the Chinese distribution network. China’s excess supply was also partially absorbed by India, which boosted purchases over the year. Despite this factor, the pressure on prices resumed in early July as China’s domestic season ended. A new Indian tender failed to provide substantial support to the market, since the demand price was considerably lower than a month before.

Ammonia nitrate and UAN prices have been falling year to date, and their premiums over urea are down considerably. The reason is a higher supply in North America, new capacity commissioning, and weaker purchasing power in Brazil and Europe because of a stronger US dollar.

NPK prices, unlike those of basic products, demonstrate less volatility and remain almost unchanged year to date.

Market members expect urea prices to remain unchanged in September. However, new capacity commissioned in the North Africa and the Middle East may affect the prices in Q4.

In an environment of increasing supply and market imbalances, Acron Group retains its competitive position due to the impact of previously implemented projects and external macroeconomic factors.

The full version of Acron Group’s financial statements is available at 

Note: The exchange rate for currency conversion was RUB 55.5240 for USD 1 as of 30 June 2015 and RUB 56.2584 for USD 1 as of 31 December 2014. The average exchange rate in H1 2015 was RUB 57.3968 for USD 1 and in H1 2014 was RUB 34.9796 for USD 1.

*EBITDA is calculated as operating profit, including share of profit of equity accounted investees, adjusted for depreciation of fixed and intangible assets, Forex gains or losses, and other non-monetary and non-core items.

** LTM EBITDA is EBITDA calculated for last 12 months.

Download Financial Statements