Acron Group’s Q1 2019 IFRS Net Profit Up 82% to USD 133 Million

27 May 2019

Acron Group’s Q1 2019 IFRS Net Profit Up 82% to USD 133 Million

Today, Acron Group (Moscow Exchange and LSE: AKRN) has released its consolidated IFRS financial statements for Q1 2019.

Key Financials

• 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.

Operating Results

• Output of key products was 1.936 million tonnes, up 2% year-on-year.
• Sales of key products totalled 1.802 million tonnes, changed slightly year-on-year.

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

“In Q1 2019, Acron Group’s key financials showed positive dynamics due to good market conditions.

“We continue implementing our projects at Acron and Dorogobuzh as a part of the Development Strategy, as well as the development of the Talitsky potash mine. This March, a new 135,000-tpa nitric acid production unit was put into operation at the Novgorod site. Another similar unit will be put into operation in the near future. The shaft sinking at the Talitsky mine has been completed by more than 50%.

“The Group's CAPEX in Q1 increased 43% year-on-year to USD 66 million. However, 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 compared to the beginning of the year.

“In addition, in May, we have extended the five-year syndicated structured pre-export finance facility of up to USD 750,000,000 for two more years, and almost completely covered the need for loan portfolio refinancing in the near term.

“Taking into account the favourable market conditions and the Group’s stable financial position, Acron’s Board of Directors recommended paying dividends twice since the beginning of the year. The first recommendation on the dividend payment of RUB 130 per share was approved by an extraordinary general meeting in March. The second recommendation on the dividend payment of RUB 135 per share is subject to approval by the annual general meeting of shareholders to be held on 30 May”.

APPENDIX

Notes to Key Items in the Financial Statements

Financial Performance

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 majority of the Group's products, as well as a 16% increase in the average USD-RUB exchange rate. The Group’s main product sales changed slightly year-on-year.

Average Indicative Prices, FOB Baltic Sea/Black Sea

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, as well as higher depreciation and amortisation. Depreciation and amortisation increased following the launch of a new urea unit in November 2018 and equipment upgrade at the existing production facilities, including the upgrade of NPK and urea units at the 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, which include transportation. Also, the cost of logistics services outside of Russia increased due to 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, the net profit increased 2.1 folds to RUB 8,774 million against RUB 4,146 million year-on-year.

Cash Flow

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, the capital expenditures increased 43% to USD 66 million. This increase was due to dynamic implementation of the investment projects at Acron (Veliky Novgorod) and Dorogobuzh and acceleration of 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, the net borrowings of RUB 2,156 million resulted in cash inflow compared with borrowings repaid and dividends paid in Q1 2018.

Debt Burden

In Q1 2019, total debt was down 3% to RUB 82,176 million. The share of the 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.

Market Trends

In February 2018, urea prices decreased when demand, which was strong on the threshold of the sowing season in the Northern hemisphere, went down. However, the prices start recovering in April 2019 due to the strong demand in India. Urea price reached USD 270 FOB Baltic Sea in January 2019, decreased to USD 225 FOB Baltic Sea in February 2019 and recovered to USD 250 FOB Baltic Sea in April 2019. The 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 high price for urea available for export to China.
In Q1 2019, the AN price remained almost flat and started increasing in May 2019 because of urea price recovery. Since the beginning of the year, the UAN price (FOB Baltic Sea) declined together 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 nitrogen and phosphate fertiliser segment. In Q2 2019, the NPK prices remain unchanged.

Average Indicative Prices, FOB Baltic Sea/Black Sea

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.

Media Contacts:

Sergey Dorofeev
Anastasiya Gromova
Tatiana Smirnova
Public Relations
Phone: +7 (495) 777-08-65 (ext. 5196)

Investor Contacts:

Ilya Popov
Investor Relations
Phone: +7 (495) 745-77-45 (ext. 5252)

Background Information

Acron Group is a leading vertically integrated mineral fertiliser producer in Russia and globally, with chemical production facilities in Veliky Novgorod (Acron) and the Smolensk region (Dorogobuzh). The Group owns and operates a phosphate mine in Murmansk region (North-Western Phosphorous Company, NWPC) and is implementing a potash development project in Perm Krai (Verkhnekamsk Potash Company, VPC). It owns transportation and logistics infrastructure, including three Baltic port terminals and distribution networks in Russia and China. Acron’s subsidiary, North Atlantic Potash Inc. (NAP), holds mining licences for 11 parcels of the potassium salt deposit at Prairie Evaporite, Saskatchewan, Canada. Acron also holds a minority stake (19.8%) in Polish Grupa Azoty, one of the largest chemical producers in Europe.

In 2018, the Group sold 7.3 million tonnes of various products to 67 countries, with Russia, Brazil, Europe and the United States as key markets.

In 2018, the Group posted consolidated IFRS revenue of RUB 108,062 million (USD 1,723 million) and net profit of RUB 13,318 million (USD 212 million). Acron’s shares are on the Level 1 quotation list of the Moscow Exchange and its global depositary receipts are traded at the London Stock Exchange (ticker AKRN). Acron employs approximately 11,000 people.

For more information about Acron Group, please visit www.acron.ru/en.