- Revenue was up 23% year-on-year to RUB 29,504 million (Q1 2018: RUB 24,050 million). In US dollar equivalent, revenue was up 6% to USD 446 million from USD 423 million.
- EBITDA* was up 31% year-on-year to RUB 10,456 million (Q1 2018: RUB 7,958 million). In US dollar equivalent, EBITDA was up 13% to USD 158 million from USD 140 million.
- EBITDA margin was up to 35%, against 33% year-on-year.
- Net profit increased by a factor of 2.1 year-on-year to RUB 8,774 million (Q1 2018: RUB 4,146 million). In US dollar equivalent, net profit was up 82% to USD 133 million from USD 73 million.
- Net debt was down 9% to RUB 67,614 million (31 December 2018: RUB 74,025 million). In US dollar equivalent, net debt was down 2% to USD 1,044 million from USD 1,066 million.
- Net debt/LTM EBITDA** was down to 1.7 against 2.0 as of 31 December 2018. In US dollar equivalent, the ratio was 1.7, against 1.8 as of 31 December 2018.
- Output of key products was 1.936 million tonnes, up 2% year-on-year.
- Sales of key products totalled 1.802 million tonnes, a slight change year-on-year.
“In Q1 2019, Acron Group’s key financials showed positive dynamics due to favourable market conditions.
“We continue implementing projects at Acron and Dorogobuzh as a part of the Development Strategy, as well as the development of Talitsky potash mine. In March, a new 135-ktpa nitric acid production unit was put into operation at the Veliky Novgorod site. A second similar unit will be put into operation in the near future. More than half of the shaft sinking at the Talitsky mine has been completed.
“The Group's capex in Q1 increased 43% year-on-year to USD 66 million, but the debt burden decreased. Net debt / EBITDA in US dollar equivalent as at the end of the reporting period was 1.7, against 1.8 as at its beginning.
“In addition, in May, we extended the 5-year syndicated structured pre-export finance facility of up to USD 750 million for another two years to almost completely cover the need for loan portfolio refinancing in the near future.
“Taking into account the solid market conditions and the Group’s stable financial position, Acron’s Board of Directors has recommended paying dividends twice since the beginning of the year. The first recommendation on dividends of RUB 130 per share was approved by an extraordinary general meeting in March. The second recommendation on dividends of RUB 135 per share is subject to approval by the annual general meeting of shareholders to be held on 30 May”.
Notes to Key Items in the Financial Statements
Acron Group posted Q1 2019 revenue of RUB 29,504 million, up 23% year-on-year. This was due to higher global dollar-nominated prices for the Group's most products, as well as a 16% increase in the average USD-RUB exchange rate. Sales of the Group’s main product changed slightly year-on-year.
Average Indicative Prices, FOB Baltic Sea/Black Sea
|USD/t||Q1 2019||Q1 2018||Change|
In the reporting period, the cost of sales was up 20% year-on-year to RUB 15,388 million, mainly due to higher global prices for potassium chloride purchased for NPK production, increased prices for energy and power, and higher depreciation and amortisation. Depreciation and amortisation increased following the launch of a new urea unit in November 2018 and an equipment upgrade performed at existing production facilities, including an upgrade of NPK and urea units at Veliky Novgorod site under the Development Strategy.
Selling, general and administrative expenses were up 20% to RUB 2,214 million, mainly due to higher personnel costs and fees paid to third parties as a part of the commercial strategy to increase sales to end users. Transportation expenses were up 36% to RUB 4,786 million driven by increased sales to the USA and Latin America on terms that include transportation. Also, the cost of logistics services outside of Russia increased due to a weaker rouble. Railcar lease rates were also up.
EBITDA increased 31% year-on-year to RUB 10,456 million. In the reporting period, EBITDA margin was 35%, against 33% in Q1 2018. Veliky Novgorod-based Acron, Dorogobuzh and NWPC operated at margins of 39%, 25% and 31%, respectively.
Based on Q1 2019 results, the Group posted a net exchange profit of RUB 4,635 million due to the revaluation of assets, loans and liabilities, against RUB 152 million in Q1 2018. In the reporting period, the loss from change in fair value of derivatives was RUB 82 million against a RUB 708 million gain in Q1 2018.
In Q1 2019, net profit increased by a factor of 2.1 to RUB 8,774 million, against RUB 4,146 million year-on-year.
In Q1 2019, net operating cash flow increased 60% to RUB 7,345 million (Q1 2018: RUB 4,590 million). This jump was mainly due to an increase in net profit and a moderate upswing in working capital. In Q1 2019, working capital increased by RUB 761 million, while in Q1 2018, working capital was up RUB 1,663 million.
Net cash used in investing activities in Q1 2019 was RUB 4,358 million, against RUB 2,764 million in Q1 2018. Capital expenditures were up 66% to RUB 4,340 million from RUB 2,613 million in Q1 2018. In dollar equivalent, capital expenditures increased 43% to USD 66 million due to dynamic implementation of investment projects at Acron (Veliky Novgorod) and Dorogobuzh and acceleration of the Talitsky potash project.
Net cash generated from financial activities in Q1 2019 was RUB 1,847 million, against RUB 5,082 million used in financing activities in Q1 2018. In the reporting period, net borrowings of RUB 2,156 million resulted in cash inflow compared with borrowings repaid and dividends paid in Q1 2018.
In Q1 2019, total debt was down 3% to RUB 82,176 million. The share of long-term debt was 75% as of the end of Q1 2019. Net debt was down 9% to RUB 67,614 million against the end of 2018. Net debt/ LTM EBITDA at the end of Q1 2019 was 1.7, against 2.0 as of 31 December 2018. In dollar equivalent, the ratio was down from 1.8 to 1.7.
Urea prices slid in February 2018 as demand on the threshold of the sowing season in the Northern hemisphere tapered off. However, prices start recovering in April 2019 due to strong demand in India. The price of urea reached USD 270 FOB Baltic Sea in January 2019, fell to USD 225 FOB Baltic Sea in February 2019 and recovered to USD 250 FOB Baltic Sea in April 2019. Industry experts expect that urea price will remain almost flat until Q4 2019 because of high demand in India and Latin America. The price increase in Q4 2019 is expected due to stronger demand on the threshold of the sowing season in the Northern hemisphere and the high price for urea available for export to China.
In Q1 2019, the AN price remained almost flat and started to rise in May 2019 as the price of urea recovered. Since the beginning of the year, the UAN price (FOB Baltic Sea) declined along with price for other nitrogen products; however, in Q2 2019, it was supported by positive developments in the urea market.
In Q1 2019, the NPK price decreased amid negative price dynamics in the nitrogen and phosphate fertiliser segments. In Q2 2019, the NPK prices remained unchanged.
Average Indicative Prices, FOB Baltic Sea/Black Sea
|USD/t||Q1 2019||Q4 2018||Q1 2018||Q1 2019 / Q4 2018 change||Q1 2019 / Q1 2018 change|
The full version of Acron Group’s financial statements is available at www.acron.ru/en
Note: The exchange rate used for currency conversion was RUB 64.7347 to USD 1 as of 31 March 2019 and RUB 69.4706 to USD 1 as of 31 December 2018. The average exchange rate for the first three months of 2019 was RUB 66.1271 to USD 1. The average exchange rate for the first three months of 2018 was RUB 56.8803 to USD 1.
* EBITDA is calculated as operating profit adjusted for depreciation and amortisation, foreign exchange gain or loss on operating transactions, and other non-cash and extraordinary items.
** LTM EBITDA is EBITDA calculated for the past 12 months.