Today, Acron (Moscow Exchange and LSE: AKRN) released its IFRS consolidated condensed interim financial statements for 9M 2012.
Financial Highlights
• Revenue increased to RUB 53.47 billion (USD 1.72 billion), up 16% year-on-year (9M 2011: RUB 46.22 billion)
• EBITDA* was RUB 15.22 billion (USD 490 million), up 7% year-on-year (9M 2011: RUB 14.23 billion)
• EBITDA margin was 28% against 31% in 9M 2011.
• Net profit was up 13% to RUB 11.72 billion (USD 377 million) against RUB 10.41 billion in 9M 2011.
• Net debt increased 27% to RUB 42.81 billion (USD 1.39 billion) against RUB 34.93 billion as is of the end of 2011.
• Net debt/LTM EBITDA** was 2.0 against 1.7 as of the end of 2011.
Chairman of the Board of Directors Alexander Popov comments on the results:
“The past nine months saw a number of important developments at Acron Group, including the start of commissioning operations at the Oleniy Ruchey mine. We have completed an important strategic task by ensuring vertical integration of the Group’s phosphate production chain. The first tonnes of Oleniy Ruchey apatite concentrate were produced in December 2012; by the middle of 2013 the project will reach capacity, which will secure our raw material independence, strengthen the competitive advantages of our products and increase the profitability of our whole business. Furthermore, at the end of 1Q 2012, a new urea unit with a capacity of 335,000 tonnes per annum started up at the Acron (Veliky Novgorod) site. Over the following months the unit reached its design capacity and continues in normal operations mode.
“In the reporting period, the Group produced 4.43 million tonnes of commercial products, up 2% year-on-year. Ammonia production increased 3% to 1.34 million tonnes; nitrogen fertiliser production was up 11% to 1.99 million tonnes. At the same time, complex fertiliser production was down 1% to 1.92 million tonnes. Industrial products output did not change significantly. We consider our production results as high taking into account that even the temporary suspension of operations at our Russian NPK units in June and July 2012 and the large-scale overhauls at our Acron and Dorogobuzh sites did not have a significant adverse effect on our final results.”
Notes on Key Items
Profit and Loss Statement
In the reporting period the Group’s revenue was RUB 53.47 billion, up 16% year-on-year. This increase in revenue was is due to the flexibility of its product portfolio, the Group’s focus on premium markets in Asia and Latin America, and a favourable pricing environment.
Global mineral fertiliser prices were versatile during the reporting period but remained comfortable for producers. Average 9M 2012 indicative prices for key products were as follows: NPK 16-16-16: USD 454 per tonne FOB, AN: USD 306 per tonne FOB, urea: USD 408 per tonne FOB, UAN: USD 285 per tonne FOB.
The 9M 2012 cost of sales was up 20% year-on-year to RUB 30.32 billion. This increase was caused mainly by higher prices and consumption of raw materials.
Transportation expenses were up 1% to RUB 4.16 billion in the reporting period. Selling, general and administrative expenses were RUB 4.45, up 33% year-on-year. The higher personnel costs and start-up and commissioning expenses at Oleniy Ruchey were the main factor causing this increase.
Fluctuation in the RUB/USD exchange rate during the reporting period affected the Group’s financial results. As of September 30, 2012, the RUB/USD exchange rate was RUB 30.92 to USD 1, down from RUB 32.20 on December 31, 2011. As a result, in the reporting period an foreign exchange gain from revaluation of the Group’s assets, loans and liabilities in the amount of RUB 659 million was posted to its financial activities; an foreign exchange gain of RUB 719 million was posted to operating activities.
Net profit in the reporting period totalled RUB 11.72 million, up 13% year-on-year. The Group’s net profit margin reached 22%, against 23% year-on-year.
Balance
In the reporting period, the value of the Group’s fixed assets was up 35% to RUB 45.30 billion. This considerable growth was provided through a wide-scale capital investment programme in 9M 2012 worth RUB 12.75 billion. More than half of this amount was allocated to implementing the Group’s priority project to produce its own raw phosphates. Modernisation and launching of new equipment at the Group’s Russian production facilities was another important part of the expenses. Engineering design work is proceeding for the potash project at the Talitsky area of the Verkhnekamsk potassium-magnesium salts deposit, as well as for construction of a new 700,000-tpa ammonia unit in Veliky Novgorod.
As of September 30, 2012, available-for-sale investments totalled RUB 25.68 billion, up 29% from the end of 2011. The Group’s interest in Uralkali and Azoty Tarnow, whose market price increased in the reporting period, is included in this item.
The Group’s inventory increased 27% to RUB 11.67 billion against RUB 9.18 billion at the end of 2011. The increase in inventory reflects increased volume and higher prices on the raw materials, work-in-progress and finished products inventory.
The Group continues to accumulate funds to implement its major investment programme while maintaining sufficient financial stability and liquidity. The Group’s total debt was RUB 60.42 billion, up 25% from the beginning of 2012. With a RUB 11.97 billion increase in debt, cash on the Group’s books was also up RUB 4.01 billion. As a result, net debt increased RUB 7.87 billion to RUB 42.81 billion, the Group’s debt burden remains at an acceptable level and allows the Group to continue implementing its investment programme at outpacing manner.
Market Trends
In 4Q 2012, there was slight dip in main fertiliser prices due to the off season period in most countries. The Group’s 1Q 2013 expectations are optimistic, since current prices on agricultural products are fairly high, stimulating growers in most parts of the world to use more fertilisers while prices remain acceptable.
* 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 –EBITDA calculated for the past 12 months.