Today Acron (Moscow Exchange and LSE: AKRN) released its unaudited condensed consolidated IFRS financial statements for H1 2012.
• Revenue increased to RUB 35.27 billion (USD 1.15 billion), up 18% year-on-year (H1 2011: RUB 29.88 billion).
• EBITDA* reached RUB 9.95 billion (USD 325 million), up 12% year-on-year (H1 2011: RUB 8.92 billion).
• EBITDA margin was 28%, down fr om 30% in H1 2011.
• Net profit decreased 3% to RUB 6.59 billion (USD 215 million), against RUB 6.77 billion for the same period of 2011.
• Net debt increased 7% to RUB 36.09 billion (USD 1.1 billion) against RUB 33.81 billion at the end of 2011.
• Net debt/LTM EBITDA** was 1.7, against 1.6 at the end of 2011.
Alexander Popov, Acron’s Acting CEO, comments on the financial performance:
“The first half year was action-packed for the Group. A new 335-ktpa urea unit was commissioned at the Acron site on March 31. This had an immediate impact on the Group’s operating results: we increased urea and UAN production by 21% year-on-year for the reporting period. NPK production increased just 2% by volume due to the suspension of production in June and July caused by a raw phosphate supply shortage. The Group settled its dispute with the supplier in mid-July and production resumed.
“Because of our flexible product line and excellent performance in the nitrogen segment, the Group succeeded in posting a 7% increase in total commercial output in the reporting period. Together with favourable market movement, this contributed to revenue growth. EBITDA generated by the Group totalled RUB 10 billion, which is sufficient to maintain the scheduled timelines of capital expenditures and secure financial returns.
“We continue to invest in the Group’s development and long-term growth with a program of vertical integration. Capital expenditures for H1 2012 totalled RUB 6.7 billion. More than half of this amount went to our Oleniy Ruchey phosphate project, which will start producing apatite concentrate later this year. Two more projects are at the design stage: a potash project at the Talitsky area of the Verkhnekamsk potassium and magnesium salts deposit and construction of a new 700-ktpa ammonia unit at Acron’s production site in Veliky Novgorod.”
Comments on Key Items in the Financial Statements
Profit and Loss Statement
In the reporting period, revenue increased to RUB 35.27 billion, up 18% year-on-year (RUB 29.88 billion in 2011). This increase was due to higher commercial output, which was up 7% year-on-year (3,115 kt). This growth in production performance stems from stable and efficient ammonia production operations (ammonia output increased 5%), a new urea unit commissioned in late Q1 2012 and an increase in complex fertiliser production at Hongri Acron. As a result, even though NPK production was suspended at the Group’s Russian facilities, operating performance figures were positive.
In the reporting period, global prices for mineral fertilisers experienced considerable fluctuations yet remained at a comfort level for producers. The average indicative prices for H1 2012 were: NPK 16-16-16 – USD 455 per tonne FOB; ammonium nitrate – USD 321 per tonne FOB; urea – USD 423 per tonne FOB; UAN - USD 280 per tonne FOB.
The strengthening of the USD/RUR exchange rate in the reporting period also had a positive effect on the Group’s financial performance. The average exchange rate for H1 2012 was RUB 30.64 to USD 1.0, up 7% year-on-year.
The cost of the products sold in the reporting period totalled RUB 19.99 billion, up 22% year-on-year due to an increase in output and higher prices for certain raw materials. The gross profit margin was 57% of revenue, against 55% year-on-year.
Transportation expenses were up 4% to RUB 2.78 billion in the reporting period, against RUB 2.69 billion in H1 2011. Selling, general and administrative expenses in the reporting period increased 30% to RUB 3.05 billion, against RUB 2.35 billion in H1 2011, due to higher personnel costs.
Considerable fluctuations of the RUB/USD exchange rate in the reporting period resulted in sizeable currency exchange differences related to revaluation of the Group’s foreign currency assets and debts. However, because negative differences were completely offset by positive differences, these fluctuations had no material effect on H1 financial performance.
Net profit was down 3% to RUB 6.59 billion, against RUB 6.77 billion year-on-year. The net profit margin was 19%, down from 23% year-on-year.
The main material asset items as of June 30, 2012 were: fixed assets (26% of total assets), cash and equivalents (25%), exploration and evaluation licences and expenditure (17%), available-for-sale investments (11%).
In the reporting period, the value of fixed assets increased 17% to RUB 39.23 billion as of June 30, 2012 (RUB 33.47 billion as of December 31, 2011). This increase is due to the active implementation of investment projects; capital expenditures amounted to RUB 6.68 billion.
The item “Exploration and evaluation licences and expenditure” was RUB 25.1 billion as of June 30, 2012, up 3% from December 31, 2011 (RUB 24.35 billion).
Available-for-sale investments amounted to RUB 21.09 billion as of June 30, 2012, up 6% from the end of 2011. This item includes the Group’s interest in Uralkalii, whose market price increased during the repoting period.
The Group’s inventory increased 21% to RUB 11.1 billion, against RUB 9.18 billion at the end of 2011. The inventory increase reflects increased volume of unsold products, mainly in China, wh ere demand is low in the summer.
Short-term loan and credit liabilities more than doubled to RUB 36.81 billion. The Group’s consolidated debt totalled RUB 73.38 billion, up 51% from the beginning of 2012. The greater part of cash raised as loans remained in the Group’s books: the amount of cash on the reporting date was RUB 37.3 billion, which exceeds the amount of short-term debt. This money was accumulated during the reporting period to secure the debt refinancing and for eventual purchase of assets.
* EBITDA is calculated as operating profit plus depreciation and amortisation, profit (loss) from currency exchange and other non-cash and non-standard items.
** LTM EBITDA is EBITDA calculated for the past 12 months.