Today, Acron (MICEX and LSE: AKRN) released its non-audited condensed consolidated IFRS financial statements for 9M 2013.
• Revenue decreased to RUB 51,697 million (USD 1,635 million), down 3% year-on-year (9M 2013: RUB 53,469 million).
• EBITDA* was RUB 12,380 million (USD 392 million), down 19% year-on-year (M9 2012: RUB 15,224 million).
• EBITDA margin was 24%, against 28% for 9M 2012.
• Net profit decreased 32% to RUB 8,010 million (USD 253 million), against RUB 11,717 million year-on-year.
• Net debt as of the reporting date was RUB 36,689 million (USD 1,134 million), against RUB 32,671 million (USD 1,076 million) at the end of 2012.
• Net debt/LTM EBITDA** ratio was 2.1x, up from a 1.6x level 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, Chair of Acron’s Board of Directors, comments on the performance:
In Q3 2013, Acron Group faced deteriorating market and took measures to adjust its development strategy and review plans. Acron Group is maintaining its vertical integration strategy and continues to implement its extensive investment programme, but due to volatility on the global fertiliser market, Acron Group is primarily focused on managing its financial liquidity and minimising costs. To increase financial flexibility, the Group partially monetised its portfolio investments and obtained approval to extend the licence deadline for implementation of its potash project, the largest for the Group. In addition, the Group is continuing to reduce the cost of debt and improve the structure of its loan portfolio. Because of these efforts, along with stable operation of the Group’s companies, Acron Group is able to face a variety of scenarios and mitigate risks for the company, its shareholders and creditors.
Notes on Key Items in the Financial Statements
The Group’s revenue for 9M 2013 was RUB 51,697 million, down 3% year-on-year. The major factor in the decrease was a drop in nitrogen and complex fertiliser prices. However, it was partly offset by growth in sales volumes of 3% year-on-year to 4.7 million tonnes.
Average indicative prices for key products for 9M 2013 were as follows: NPK 16-16-16 – USD 403 per tonne FOB; ammonium nitrate – USD 292 per tonne FOB; urea – USD 337 per tonne FOB; UAN – USD 268 per tonne FOB.
Following 9M 2013 results, cost of sales and transportation expenses were up 6% and 7% year-on-year, respectively. This was due to an increase in the Group’s production and sales and rate adjustments by natural monopolies.
Selling, general and administrative expenses went down 4% thanks to the start of operations at NWPC and implementation of a cost efficiency programme at the Group’s facilities.
Russian rouble-U.S. dollar volatility in the reporting period had a noticeable impact on the Group’s financial performance. For the reporting period, the Group reported an exchange loss of RUB 1,427 million on revaluation of assets, loans and liabilities (including a net loss of RUB 2,669 million accrued to finance expenses, and a net profit of RUB 1,242 million accrued to operating profit), against a profit of RUB 1,378 million posted last year.
The exchange difference was the main factor holding back the net profit, which in the reporting period was RUB 8,010 million, 32% down year-on-year.
In the reporting period, the Group’s fixed assets increased 21% to RUB 57,949 million and will continue to grow due to the investment programme in progress. CAPEX was RUB 10,510 million.
As of September 30, 2013, available-for-sale investments were RUB 25,657 million, 4% up against 2012 year-end. These include the Group’s stakes in Uralkali and Grupa Azoty. The growth was due to an increased stake in and higher value of shares of Grupa Azoty, although the Uralkali stake fell in value as the exchange-quoted stock’s price declined.
As of the reporting date, the Group’s inventories decreased 10% to RUB 11,669 million owing to considerably lower stock of raw and other materials and spare parts, as well as end products, although the work-in-progress was up.
Net debt was RUB 36,689 million (USD 1,134 million), up 12% against the previous year-end. The Group’s management has been focusing on maintaining a comfortable leverage level by optimising the amount of CAPEX and measures to improve operating and financial performance.
The nitrogen fertiliser market was under pressure in the third quarter. Increased supplies from China, which had a market share of 38% in 2012, had a major impact. Abatement of duties on urea exports from China since this June and lower production costs for Chinese nitrogen fertiliser producers due to lower coal prices both contributed to considerably higher exports of urea and global oversupply. Lower prices in the potash and phosphate segments also provided little room for optimism. The nitrogen market stabilised in September when prices drew level with the production costs of Chinese manufacturers and some marginal producers, Ukrainian companies in particular, had to suspend operations. The urea market started recovering in October in anticipation of expiring export duty abatement in China alongside higher coal prices. By this moment, indicative FOB Baltic prices for urea have risen 30% from their September lows.
NPK fertiliser prices were driven down by turbulence on basic fertiliser markets. However, the situation on the NPK market has levelled off due to higher nitrogen fertiliser prices and stabilisation of the phosphate market.
We expect that the coming spring sowing season in the northern hemisphere will see increased buyer activity and boost demand for mineral fertilisers in the first quarter of 2014.