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Acron Group’s Q1 2020 IFRS EBITDA Up 11% Quarter-on-Quarter

  Today, Acron Group (Moscow Exchange and LSE: AKRN) released its consolidated IFRS financial statements for Q1 2020.

Key Financials

  • Revenue was USD 423 million, down 5% year-on-year (up 7% quarter-on-quarter).

  • EBITDA* was USD 110 million, down 31% year-on-year (up 11% quarter-on-quarter).

  • Net loss was USD 153 million (Q1 2019: profit of USD 133 million, Q4 2019: profit of USD 30 million). The loss was primarily generated by non-cash items, namely a USD 148-million foreign exchange loss from revaluation of foreign currency-denominated assets and liabilities, due to a slump in the dollar to rouble exchange rate in the reporting period.

  • Net debt was up 4% to USD 1,258 million from USD 1,215 million.

  • Net debt/LTM EBITDA** was 2.5, up from 2.2.

Operating Results

  • Output of key products was 1.948 million tonnes, up 1% year-on-year.

  • Sales of key products totalled 1.994 million tonnes, up 11% year-on-year.

Alexander Popov, Chair of Acron’s Board of Directors, commented on the results:

“With an 11% increase in sales in Q1 2020, we almost offset the decrease in global prices for complex fertilisers and UAN, 19% and 31%, respectively, falling just 5% short of our Q1 2019 revenue.

“That said, financials did improve quarter-on-quarter: revenue was up 7%, EBITDA was up 11%. Despite the Covid-19 pandemic, we are seeing strong demand for mineral fertilisers globally. Supplies of key products to the domestic market are our priority, and these increased 45% to 682,000 tonnes.

“A weaker dollar to rouble exchange rate in the late first quarter has yet to result in higher operating profit but generated a foreign exchange loss from revaluation of the loan portfolio and negative net profit. The loss is non-cash and, therefore, not representative. A weaker rouble coupled with growing output will prop up our financials in future periods.

“In view of the uncertain dynamics on the global markets due to the pandemic, we reduced our capex, which affected the implementation rate of our flexible investment programme and will curb our debt burden”.


Notes on Key Items in the Financial Statements

Financial Performance

In Q1 2020, Acron Group’s revenue was down 5% to RUB 28,079 million year-on-year due to lower global prices for most of the Group’s products. Sales of key products in the reporting period were up 11% year-on-year. The average dollar to rouble exchange rate changed slightly year-on-year.

Average Indicative Prices, USD/t, FOB Baltics/Black Sea

2019  2018 Change
NPK 16-16-16  252 312 -19.2%
Ammonium nitrate 187 182 +3.0%
UAN 123 178 -30.8%
Urea 217 243 -10.4%
Ammonia 222 276 -19.4%

In the reporting period, the cost of sales was up 14% year-on-year to RUB 17,574 million, mainly due to increased sales and higher depreciation and amortisation following the launch of new units and upgrades to existing operations.

Selling, general and administrative expenses were down 1% to RUB 2,183 million. Transportation expenses were down 7% to RUB 4,428 million, despite higher sales, for a number of reasons: lease rates for gondola cars and freight costs both went down, and exports almost remained flat year-on-year as the domestic market accounted for a higher percentage of the Group’s sales.

EBITDA was down 30% to RUB 7,279 million. EBITDA margin in the reporting period was down to 26% against 35% in Q1 2019.

In Q1 2020, Acron Group posted a net foreign exchange loss from revaluation of assets and liabilities in the amount of RUB 12,301 million (in Q1 2019, it posted a profit of RUB 4,635 million). This item caused a negative effect on net profit to the amount of RUB 9,841million in the reporting period. All told, Acron Group generated a net loss of RUB 10,126 million in Q1 2020, against a profit of RUB 8,774 million in Q1 2019.

Market Trends

logistics issues caused by the Covid-19 outbreak. In Q1 2020, Chinese exports were down 40% year-on-year to 786,000 tonnes. Baltic prices, which sank to USD 210 in late 2019, rose to USD 230 towards the end of Q1.

Prices for other nitrogen products saw diverse trends. AN prices, supported by recovering urea prices and a strong Russian market, regained momentum in Q1 2020, while UAN prices continued their downward spiral.

NPK prices remained relatively stable amid higher prices for nitrogen and phosphate fertilisers and lower prices for potash fertilisers. However, since NPK prices declined in the previous quarter, average prices in Q1 2020 were lower than in Q4 2019.

Average Indicative Prices, USD/t, FOB Baltic Sea/Black Sea

Q1 2020 Q4 2019 Q1 2019 Q1 2020 /
Q4 2019 change
Q1 2020 /
Q1 2019 change
NPK 16-16-16 252
AN 187
UAN 123
Urea 217
Ammonia 222

Note: The exchange rate used for currency conversion was RUB 77.7325 to USD 1 as of 31 March 2020 and RUB 61.9057 to USD 1 as of 31 December 2019. The average exchange rate for the first three months of 2020 was RUB 66.3818 to USD 1. The average exchange rate for the first three months of 2019 was RUB 66.1271 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.