Today Acron (Moscow Exchange and LSE: AKRN) released its unaudited consolidated condensed IFRS financial statements for 1Q 2013.
• Revenue was down 10% year-on-year to RUB 16.561 billion (USD 545 million) against RUB 18.422 billion.
• EBITDA* was down 9% year-on-year to RUB 4.461 billion (USD 147 million) against RUB 4.909 billion.
• EBITDA margin was 27%.
• Net profit was down 54% year-on-year to RUB 2.358 billion (USD 78 million) against RUB 5.123 billion in 1Q 2012.
• As of the reporting date, net debt was up 1% to RUB 33.002 billion (USD 1.062 billion) against as of December 31, 2012.
• Net debt/LTM EBITDA** was 1.7 against 1.6 as of the end of 2012.
* EBITDA is calculated as operating profit adjusted to reflect depreciation of fixed and intangible assets, Forex gains or losses, and other non-monetary and non-core items.
** LTM EBITDA is calculated for last 12 months.
Alexander Popov, Chair of Acron’s Board of Directors, comments on the performance:
The nitrogen fertiliser market environment was favourable in 1Q 2013, with the spring seeding season in the CIS and Europe acting as the major driver for higher demand. Prices for key nitrogen fertilisers (ammonium nitrate, urea and UAN) were comfortable for the Group. At the same time, unfavorable weather conditions in China and South-East Asia affected NPK prices and sales volume, causing a decline in the Group’s key financials in the reporting period. Prices for agricultural products remain high and are not preventing farmers from purchasing fertilisers.
The Group’s major achievement in the reporting period is the gradual expansion of apatite concentrate production at the Oleniy Ruchey deposit. In 1Q 2013, the Group produced 105,000 tonnes of apatite concentrate; by the end of May 2013 total output will exceed 200,000 tonnes. As planned, by the end of 2Q 2013 the Oleniy Ruchey mine will supply Acron (Veliky Novgorod) and Dorogobuzh with all phosphate inputs.
Acron Group’s debt burden remains at a comfortable level. The Group continues generating the cash flow required to support significant capital investments and dividend payments.
Notes on Key Items in the Financial Statements
The Group’s revenue in 1Q 2013 was down 10% year-on-year to RUB 16.561 billion. The major factor in the decrease was a drop in Hongri Acron’s sales, caused by lower complex fertiliser demand in China.
Average indicative prices for key products in 1Q 2013 were as follows: NPK 16-16-16 – USD 409 per tonne FOB; ammonium nitrate – USD 335 per tonne, FOB; urea – USD 383 per tonne FOB; UAN – USD 310 per tonne FOB.
As of 1Q 2013, production costs were down 13% year-on-year to RUB 9.437 billion due to a decrease of sales volumes and a decrease in raw material prices in China.
The volatile RUB/USD exchange rate significantly affected the Group’s financial performance. In the reporting period, the exchange loss on revaluation of the Group’s asset, loans and obligations was RUB 544 million (including a net loss in the amount of RUB 1.061 billion reflected in financial activity results, and a net profit in the amount of RUB 517 million reflected in operating activity results), against a profit of RUB 1.672 year-on-year.
Therefore, 1Q 2013 profit was RUB 2.358 billion, down 54% year-on-year. Most of this decrease was caused by the exchange loss.
In the reporting period the Group’s fixed assets were up 5% to RUB 50.402 billion due to aggressive investments in mining projects and construction of the new ammonia unit at Acron (Veliky Novgorod). In 1Q 2013, the Group’s CAPEX was RUB 2.847 billion.
As of March 31, 2013, the Group had investments available for sale worth RUB 23.704 billion, down 4% year-on-year. This item includes the value of the Group’s share in Uralkali and Azoty Tarnów. This decrease happened in the context of a decline in the price of Uralkali shares.
The Group’s inventory was down 3% to RUB 12.586 billion due to reduction in inventory of inputs, materials and spare parts. At the same time, final product stocks were up because of slower complex fertiliser sales.
The Group’s net debt showed negligible change, at RUB 33.002 billion (against RUB 32.671 as of December 31, 2012). The Group’s debt burden remains at an acceptable level. The Group generates sufficient cash to implement its large-scale investment programme while maintaining financial stability and liquidity. In the reporting period, Acron Group ensured the required funding for strategic investment projects and increased its share in Azoty Tarnów.
After completion of the spring seeding season 2013, market prices for nitrogen fertilisers naturally shrank. The Group expects a new market boost by the end of 2Q 2013, when buyers from Latin America enter the market. Complex fertiliser market conditions will improve with a new rally in the phosphate and potash segments.