- Revenue was up 59% year-on-year to RUB 27,653 million (USD 445 million) (Q1 2014: RUB 17,351 million)
- EBITDA* tripled year-on-year to RUB 12,413 million (USD 200 million) (Q1 2014: RUB 4,263 million)
- EBITDA margin was 45%, up from 25% year-on-year
- Net profit was up by a factor of five year-on-year, to RUB 7,067 million (USD 114 million) (Q1 2014: RUB 1,437 million)
- Net debt was down 7% to RUB 51,736 million (Q1 2014: RUB 55,788 million). In dollars, net debt was down 11% to USD 885 million from USD 992 million
- Net debt/LTM EBITDA** was 1.8, against 2.8 as of 31 December 2014. In dollar terms net debt/LTM EBITDA was down to 1.5.
- Key products output was 1.612 million tonnes, down 2% year-on-year
- Sales of key products totalled 1.517 million tonnes, down 4% year-on-year.
Chair of Acron’s Board of Directors Alexander Popov comments on the results:
“In Q1 2015 Acron Group achieved excellent financial results. EBITDA tripled and net profit increased five-fold year-on-year. EBITDA margin was 45%, up from 25%. The Group decreased its debt burden in both absolute and relative terms.
“The Group’s key financials were significantly supported by two factors: the weaker rouble and increased efficiency at NWPC. NWPC’s EBITDA margin was 57% in Q1 2015, up from 27% in Q1 2014 due to mine capacity expansion and streamlining of costs. In March, the Oleniy Ruchey mine achieved its peak operating results of 100,000 tonnes of apatite concentrate, equal to 1.1 mtpa.”
Notes on Key Items in the Financial Statements
The Group’s revenue in Q1 2015 was up 59% year-on-year to RUB 27,653 million. The major factor driving revenue was a weaker rouble, notwithstanding the 4% decrease in sales volume of key products due to preventive maintenance at the Group’s Novgorod-based facility. Dollar-denominated prices for complex fertilisers were higher year-on-year and prices for nitrogen products decreased.
Average global indicative prices for the Group’s main products in the first three months of 2015 were: USD 363 per tonne FOB for NPK 16-16-16, USD 278 per tonne FOB for ammonium nitrate, USD 289 per tonne FOB for urea, and USD 251 per tonne FOB for urea-ammonium nitrate.
The cost of goods sold in the reporting period was RUB 12,424 million, up 19%. The higher cost of goods was mainly driven by the higher price of potash, which is pegged to the dollar exchange rate.
Selling, general and administrative expenses increased 47% due to indexation of rouble-denominated wages at Russian facilities and foreign currency-denominated personnel expenses, including at the Group’s foreign facilities. Transportation expenses were up 43% due to higher railway tariffs and the weaker rouble, given that a considerable portion of expenditures in this item are denominated in currency.
In Q1 2015, the share in Grupa Azoty S.A.’s profit calculated based on equity accounting was RUB 1,015 million.
In Q1 2015, EBITDA almost tripled year-on-year to RUB 12,413 million. EBITDA margin was 45%, up from 25% year-on-year. Both the Novgorod-based Acron and Dorogobuzh facilities operated with 45% margin. NWPC’s margin set a record of 57% due to expanded operations and streamlined costs.
In Q1, the Group posted a net exchange loss of RUB 1,362 million from revaluation of assets, loans and liabilities, against a loss of RUB 2,442 million for Q1 2014.
In Q1 2015, net profit increased almost five-fold year-on-year to RUB 7,067 million.
Operating cash flow in the reporting period increased more than five-fold, to RUB 9,771 million (in Q1 2014: RUB 1,861 million). This increase was mainly due to higher net profit.
Net cash spent on investment activity in the reporting period was RUB 3,445 million, against RUB 1,763 million in Q1 2014. CAPEX was RUB 3,672 million (in Q1 2014: RUB 2,230 million).
Net cash flow from financial activity in Q1 2015 was RUB 6,043 million, against RUB 5,030 million in Q1 2014. Cash inflow came from net borrowings in the amount of RUB 6,889 million, against net repayment of RUB 1,703 million in Q1 2014.
Net debt in rouble terms in the reporting period was down 7% to RUB 51,736 million. In dollar terms net debt was down 11% to USD 885 million. The relative debt burden also decreased: in rouble terms net debt/LTM EBITDA was 1.8, against 2.8 as of 1 January 2014. In dollar terms net debt/LTM EBITDA was down to 1.5.
On 21 May 2015, the Acron annual general meeting supported the resolution to approve distribution of a part of Acron’s profit for previous years and pay dividends in the amount of RUB 139 per ordinary share. Thus, a total of RUB 5.6 billion will be distributed as dividends.
In Q1 2015, global prices for nitrogen fertilisers decreased under pressure from China’s oversupply. Chinese exports ballooned on lower urea export tariffs coupled with termination of the seasonal export window and a further reduction in coal prices. In April, urea prices stopped falling and embarked on a smooth recovery due to buyers in India, who made purchases earlier than usual. Prices were also supported by strong seasonal demand in China and unstable operation of Ukrainian and Egyptian facilities because of interrupted gas supplies. In June, seasonal domestic demand for mineral fertilisers in China will run out. Nevertheless, Chinese producers will attempt to keep prices at a comfortable level of over USD 280 per tonne of urea to cover growing inflation costs and production upgrade expenses. Prices may also be supported by activating seasonal demand in Latin America in July. The nitrogen fertiliser market remains highly competitive and volatile as global demand continues to grow.
In Q1 2015, prices in the potash and phosphate segments were stable with good demand. In this context, NPK mineral fertilisers were also actively sold and price dynamics were neutral.
The full version of Acron Group’s financial statements is available at www.acron.ru
Note: The exchange rate for currency conversion was RUB 58.4643 for USD 1 as of March 31, 2015, RUB 56.2584 for USD 1 as of December 31, 2014. The average exchange rate in Q1 2015 was RUB 62.1919 for USD 1 and in Q1 2014 was RUB 34.9591 for USD 1.
*EBITDA is calculated as operating profit, including share of profit of equity accounted investees, adjusted for depreciation of fixed and intangible assets, Forex gains or losses, and other non-monetary and non-core items.
** LTM EBITDA is EBITDA calculated for last 12 months.