Today Acron (Moscow Exchange and LSE: AKRN) released its consolidated IFRS financial statements for 9M 2015.
- Revenue was up 53% year-on-year to RUB 80,654 million (USD 1,361 million) (9M 2014: RUB 52,676 million)
- EBITDA* increased by a factor of 2.4 to RUB 31,409 million (USD 530 million) (9M 2014: RUB 12,831 million)
- EBITDA margin was 39%, up from 24% year-on-year
- Net profit was up 48% year-on-year to RUB 14,322 million (USD 242 million), (9M 2014: RUB 9,695 million)
- Net debt was down 1% to RUB 55,375 million (31 December 2014: RUB 55,788 million). In dollar equivalent, net debt was down 16% to USD 836 million from USD 992 million
- Net debt/LTM EBITDA** was 1.4, against 2.7 as of 31 2014 year end. In dollar terms, net debt/LTM EBITDA was down to 1.2.
Operating Results
- Key products output was 4.710 million tonnes, down 2.7% for nine months of 2014.
- Sales of key products totalled 4.683 million tonnes, down 2.7% from the same index for nine months of 2014.
Chair of Acron’s Board of Directors Alexander Popov comments on the results:
“Acron Group’s financial performance remains strong – key financials are on the rise and the debt burden is going down. Acron optimised the structure of its debt portfolio, significantly increasing the share of its long-term debt, and improvements in the Group’s credit metrics resulted in higher ratings by Fitch Ratings and Moody’s. Acron Group is one of few Russian companies whose credit ratings were upgraded this year.
“Reducing Net Debt/EBITDA below 1.0 is our immediate goal. We intend to maintain our debt burden at a comfort low level, allowing us to increase the share of net profit distributed as dividends.
“The new ammonia unit in Veliky Novgorod is scheduled for commissioning in Q1 2016. Besides, there will be fewer overhauls at the Group's operations than this year. These two factors will help improve operational and financial performance next year.”
APPENDIX
Notes on Key Items in the Financial Statements
Financial Performance
The Group’s revenue in 9M 2015 was up 53% year-on-year to RUB 80,654 million. The major factor driving revenue was a weaker rouble, which reduced the effects of a 2.7% decrease in sales volume of key products due to two events: an equipment upgrade at Hongri Acron to improve environmental safety of the operations, and a scheduled overhaul at Acron site in Veliky Novgorod. The Group’s lower output was partially offset as the first stage of the Oleniy Ruchey mine reached design capacity in March 2015 and Dorogobuzh increased its output due to fewer overhauls. In 9M 2015, dollar-denominated prices were higher for complex fertilisers and lower for nitrogen fertilisers year-on-year.
Average global indicative prices for the Group’s main products in 9M 2015 were USD 360 per tonne FOB for NPK 16-16-16, USD 227 per tonne FOB for AN, USD 275 per tonne FOB for urea, and USD 210 per tonne FOB for UAN.
The cost of goods sold in the reporting period was RUB 39,896 million, up 26% year-on-year. The higher cost of goods was mainly driven by the higher price of potash, which depends on the dollar exchange rate.
Cash Flow
Debt Burden
Market Trends
Prices for premium products such as AN and UAN have been falling year to date, and their premiums over urea are down considerably. UAN prices were under pressure due to low seasonal demand in the United States, while Brazil’s weaker national currency and higher credit interest rate brought down the purchasing power of local farmers, who are major AN consumers.
The full version of Acron Group’s financial statements is available at www.acron.ru/en
* 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 the last 12 months.
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Selling, general and administrative expenses were up 39% 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 29% due to indexation of railway tariffs and the weaker rouble, given that a considerable portion of the expenses that make up this item are denominated in foreign currency.
In 9M 2015, the Group’s share in Grupa Azoty S.A.’s profit calculated based on equity accounting was RUB 1,720 million.
EBITDA for 9M 2015 was up by a factor of 2.4 year-on-year to RUB 31,409 million. EBITDA margin was 39%, up from 24% year-on-year. Novgorod-based Acron and Dorogobuzh facilities operated with margins of 43% and 45%, respectively. NWPC’s margin reached 56% due to expanded operations and streamlined costs.
In 9M 2015, the Group posted a net exchange loss of RUB 5,200 million from revaluation of assets, loans and liabilities, against a loss of RUB 5,932 million year-on-year.
In 9M 2015, net profit increased 48% year-on-year to RUB 14,322 million.
Cash Flow
Net operating cash flow in the reporting period increased by a factor of 4.3 to RUB 23,113 million (9M 2014: RUB 5,413 million), mainly due to higher net profit.
Net cash spent on investments in the reporting period was RUB 9,346 million, against RUB 7,487 million in 9M 2014. CAPEX was RUB 10,171 million (9M 2014: RUB 7,556 million). This growth was mainly due to intensified CAPEX on the Ammonia-4 project.
Net cash spent on financial activities in 9M 2015 was RUB 4,947 million, against RUB 4,898 million received in the same period of 2014.
Debt Burden
The share of long-term debt in the Group’s total debt increased to 68% from 35% as at the year beginning. Net debt in rouble terms in the reporting period was down 1% to RUB 55,375 million. In dollar terms, net debt was down 16% to USD 836 million.
The relative debt burden also decreased: in rouble terms, net debt/LTM EBITDA was 1.4 against 2.7 as of 31 December 2014. In dollar terms net debt/LTM EBITDA was down to 1.2.
Market Trends
In Q3 2015, urea prices decreased to the level of marginal costs of Chinese producers, some of whom are currently operating at a loss. Due to lower coal prices, the cost of Chinese coal-based urea was comparable to that of gas-based urea. As a result, the number of marginal cost producers has gone up and the potential for further urea price reductions appears to be limited.
Prices for premium products such as AN and UAN have been falling year to date, and their premiums over urea are down considerably. UAN prices were under pressure due to low seasonal demand in the United States, while Brazil’s weaker national currency and higher credit interest rate brought down the purchasing power of local farmers, who are major AN consumers.
Unlike the prices of basic products, NPK prices tend to demonstrate less volatility and remained almost unchanged from the beginning of the year. However, in September NPK prices finally declined following prices for basic products.
Despite a decrease in global mineral fertiliser prices, Acron’s competitive ability remains strong.
The full version of Acron Group’s financial statements is available at www.acron.ru/en
Note: The exchange rate for currency conversion was RUB 66.2367 to USD 1 as of 30 September 2015 and RUB 56.2584 to USD 1 as of 31 December 2014. The average exchange rate in 9M 2015 was RUB 59.2777 to USD 1 and in 9M 2014 was RUB 35.3878 to 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 the last 12 months.
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