Today, Acron (MICEX and LSE: AKRN) released its non-audited condensed consolidated IFRS financial statements for H1 2013.
• Revenue was RUB 34.251 billion (USD 1.104 billion), down 3% year-on-year (H1 2012: RUB 35.272 billion).
• EBITDA* was RUB 8.818 billion (USD 284 million), down 11% year-on-year (H1 2012: RUB 9.954 billion).
• EBITDA margin was 26%, against 28% in H1 2012.
• Net profit decreased 20% to RUB 5.236 billion (USD 169 million), against RUB 6.585 billion year-on-year.
• Net debt on the reporting date was RUB 34.496 billion (USD 1.055 billion), against RUB 32.671 billion (USD 1.076 billion) at the end of 2012.
• Net debt/LTM EBITDA** was 1.8, against 1.6 at the end of 2012.
* 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.
Alexander Popov, Acron’s Acting CEO, comments on the financial performance:
“Against a background of uncertainty on the global commodity markets, the Group’s financial and operational stability remains our priority. We maintain a high utilisation rate and focus on financial discipline and cost control. That said, Acron Group is also pursuing an ambitious investment programme aimed at vertical integration to further fuel our expansion and competitive growth. The Oleniy Ruchey mine has already achieved positive production results and is contributing substantially to the Group’s financial performance.
“The Group will manage further capital expenditures depending on its debt burden. In the reporting period, despite heavy investment we generated positive free cash flow helping decrease net debt to USD 1.055 billion, from USD 1.076 billion.
Comments on Key Items in the Financial Statements
In the reporting period, the Group’s revenue was RUB 34.251 billion, down 3% year-on-year due to a drop in nitrogen and complex fertiliser prices. The average indicative prices for H1 2013 were: NPK 16-16-16 – USD 407 per tonne FOB; AN – USD 307 per tonne FOB; urea – USD 359 per tonne FOB; UAN - USD 288 per tonne FOB.
The cost of sales in the reporting year was down 1% year-on-year to RUB 19.848 billion, largely due to improved vertical integration, higher phosphate output, and optimisation at Hongri Acron.
Transportation expenses were up 30% due to higher rates for sea and rail freight and increased sales by the Group’s Russian facilities.
Selling, general and administrative expenses decreased 7% due to the start of NWPC operations and the Group’s cost saving programme.
Fluctuations in the RUB/USD exchange rate in the reporting period had a material impact on the Group’s financial performance. At the end of the reporting period, the Group recorded a foreign exchange loss related to revaluation of the Group’s assets, debts and liabilities of RUB 1.601 billion (including a net loss of RUB 3.597 billion reflected in the financial performance results and a net gain of RUB 1.996 billion reflected in the operating performance results), against a loss of RUB 397 million the previous year.
These foreign exchange losses had a major impact on net profit, which was down 20% year-on-year to RUB 5.236 billion in the reporting period.
In the reporting period, the value of the Group’s fixed assets increased 14% to RUB 54.468 billion due to an active investment programme. RUB 6.64 billion were spent for capital expenditures in the reporting period.
Investments available for sale amounted to RUB 29.692 billion as of June 30, 2013, up 20% from the end of 2012. This item includes the value of the Group’s stakes in Uralkalii and Azoty Tarnów, This higher numbers was due to the Group’s increase of its stake in Azoty Tarnów and the company’s higher share price.
The Group’s inventory decreased 5% to RUB 12.27 billion due to decreased inventories of raw materials and components, while inventories of finished products and work in progress increased due to weaker sales of complex fertilisers.
The Group’s RUB-denominated net debt was RUB 34.496 billion, up 6% from the end of 2012. The Group has been generating sufficient cash flow to implement its large-scale investment programme while maintaining adequate financial stability and liquidity.
Global prices dipped with the end of high spring demand and the seasonal decrease in urea export duties in China, combined with the volatile situation in the potash and phosphate fertiliser segments and the launch of new production facilities in North Africa. The nitrogen market, however, remains highly liquid and products are in demand. A temporary oversupply is still holding back prices. The new round of market activity may be fueled after China’s closing of the export window in Q4 2013.
The NPK market is heavily dependent on stabilisation in the potash and phosphate segments, which may happen within the next three to six months. Until this happens, the market will remain uncertain and weak. At the same time, we expect a further decrease in NPK production costs due to lower global prices for potash and our own phosphate production at NWPC. While market conditions vary, Acron Group retains its leading position on the NPK market.