Russian fertilizer group PJSC PhosAgro on Aug. 29 reported a 49% decline in adjusted net income for the first six months, to RUB55.77 billion (approximately $581 million at current exchange rates) from last year’s RUB108.55 billion, missing analysts’ average estimate of RUB56.8 billion (Interfax Consensus).
Adjusted EBITDA declined 50% year-over-year, to RUB82.82 billion from last year’s RUB165.32 billion, also missing the analysts’ estimate of RUB84.8 billion. Revenue fell 37%, to RUB212.75 billion from RUB336.51 billion, with PhosAgro citing the drop in global fertilizer prices from their peak in early 2022.
Six-month production of mineral fertilizers and other chemicals increased 4% year-over-year, to 5.68 million mt from 5.45 million mt. PhosAgro said the production of MAP, DAP, and liquid complex fertilizers increased by 19%, to 2.4 million mt, driven primarily by an increase in production during the ramp-up to design capacity at its Volkhov production complex in southern Russia.
The group said Volkhov will reach its design capacity of 1 million mt this year. Volkhov also mastered the production of water-soluble MAP during the first half of the year and launched a project to increase the processing of phosphate rock. PhosAgro said it has invested a total of RUB34 billion in its Volkhov production site, where the first phase of production began in March 2021 (GM March 12, 2021).
PhosAgro’s total fertilizer sales in the first half of 2023 decreased by 4% year-over-year, to 5.52 million mt, mainly due to the stockpiling of mineral fertilizers for seasonal deliveries to markets in Latin America and Asia after meeting the needs of the Russian market. At the same time, its DAP/MAP sales rose 6% over the same period, driving high margins in the current price environment.
PhosAgro noted that sales volumes and regional product distribution in the second quarter of the year were in line with seasonal changes in demand, with increased sales of nitrogen-based fertilizer to markets in Russia, North America, and Europe. Overall, it said it increased fertilizer sales to North America, Latin America, and the CIS countries in first half of the year.
Looking ahead, PhosAgro noted that the third quarter has historically been marked by increased seasonal demand from key markets for nitrogen and phosphate-based fertilizers in India, Brazil, and other regional locations in Asia and Latin America.
It believes the low levels of carryover stocks in North American and European markets will drive an earlier resumption of seasonal demand. As a result, prices have shown a strong increase since the start of the third quarter and may stabilize above second-quarter 2023 prices, the group said.
PhosAgro has earmarked what it says is a record RUB67 billion (approximately $698 million at current exchange rates) for its investment program this year and plans to invest more than RUB250 billion in the next five years.
Among its key projects, the group continues to develop its ore and raw material base, with the second start-up complex for the 10th horizon at the Kirovsky mine scheduled to come online in the fourth quarter.
In Cherepovets, a project has been launched to increase the processing of phosphate rock in addition to modernizing the ammonia, phosphoric acid, and sulfuric acid production facilities. And in Balakovo, projects will be completed in the fourth quarter to increase the production of feed phosphates and sulfuric acid as part of the third development stage at the complex.
PhosAgro’s Board of directors has recommended a dividend of RUB126 per share for the first half of 2023. The proposed dividend will be put to the vote at an EGM of shareholders on Sept. 30. The group said the payout could be RUB16.3 billion, “almost level with free cash flow of RUB16.7 billion for the second quarter.”
PhosAgro Production and Sales Volumes
| ‘000 mt | 1H-2023 | 1H-2022 | % change |
| Production | |||
| Phosphate-based fertilizers and feed phosphates | 4,226.9 | 4,054.0 | +4 |
| Nitrogen-based fertilizers | 1,318.9 | 1,265.6 | +4 |
| Other products | 138.8 | 130.7 | +6 |
| Total fertilizers | 5,684.6 | 5,450.3 | +4 |
| Sales volumes | |||
| Phosphate-based fertilizers and feed phosphates | 4,117.9 | 4,335.3 | (5) |
| Nitrogen-based fertilizers | 1,316.2 | 1,346.4 | (2) |
| Other products | 82.9 | 82.0 | +1 |
| Total fertilizers | 5.517.0 | 5,763.7 | (4) |