Acron Boosted by Volumes, Prices, Forex; Expansions Ahead in N, P, K, Overseas

Acron Group, Moscow, reported a five-fold increase in first-half IFRS net profit to RUB17.20 billion on revenues of RUB60.47 billion, up from the year-ago RUB3.43 billion and RUB49.41 billion, respectively.

Ruble-denominated revenues increased 22 percent, with the group attributing the rise to a near 5 percent increase in sales volume and higher global dollar-denominated prices for most of its products, as well as a 10 percent increase in the average U.S. dollar/ruble exchange rate.

Six-month EBITDA came in 34 percent higher at RUB21.04 billion, up from the previous year’s RUB15.67 billion, while EBITDA for the second quarter to June 30 at RUB10.58 billion was 37 percent higher than a year earlier, but fell slightly below VTB Capital analysts’ expectations of RUB11 billion, according to an Interfax report.

Acron posted a net exchange profit of RUB5.91 billion in the reporting period due to the revaluation of assets, loans, and liabilities, against a RUB2.189 billion loss in the first half of last year. It also made a RUB941 million gain in the current reporting period from change in the fair value of derivatives, against a RUB1.778 billion loss a year-ago.

In U.S. dollar equivalent, the group saw its first-half net profit rise by a factor of 4.6 to $263 million, against $58 million a year ago, while revenues increased 11 percent, to $926 million from $833 million. EBITDA in U.S. dollar equivalent was 22 percent higher year-over-year, at $322 million against the year-ago $264 million.

Six-month sales of key products increased nearly 5 percent, reaching 3.835 million mt. Output of key products was 1.5 percent higher year-over-year at 3.803 million mt, up from the year-ago 3.749 million mt (GM July 26, p.26).

“We continued to implement investment projects in the first half of 2019 as part of our Development Strategy, and allocated $127 million to capital expenditures in the period, up 22 percent on the same prior-year period,” said Acron Chairman Alexander Popov.

During the first half of this year, the group brought on stream two nitric acid units at the Veliky Novgorod site in northwest Russia, raising aggregate nitric acid capacity at the site to 1.8 million mt/y (GM June 28, p. 27). It also has started constructing a third nitric acid unit, which is expected to start operating by the end of this year. Production of nitric acid has been a bottleneck at the site, according to the group, and the additional supply will allow it to increase output of key products – ammonium nitrate, UAN, and NPK. This year, it also plans to complete construction of a 700,000 mt/y urea granulation unit at Veliky Novgorod (GM June 14, p. 28), which it said will produce a premium product.

At its Dorogobuzh subsidiary in Russia’s Smolensk region, the upgrade of the ammonia plant also will be finalized this year, boosting the unit’s production capability by 130,000 mt/y from the current 600,000 mt/y (GM May 10, p. 31).

At the North-Western Phosphorus Co. (NWPC) subsidiary’s Oleniy Ruchey phosphate mine in Russia’s Murmansk region, Acron said development of the underground mine is progressing. The first ore from the underground operation was extracted in 2017, and the group is targeting ramp-up to 2 million mt/y of apatite concentrate by 2023. The open pit mine at Oleniy Ruchey has capacity of 1.2 million mt/y apatite concentrate. NWPC produced a total of 1.21 million mt of apatite concentrate at Oleniy Ruchey last year.

At the Talitsky potash project under development in Russia’s Perm region, the group reported vertical shaft sinking was 70 percent complete. Acron continues to target first potash product in 2023, but now expects to reach the full 2.0 million mt/y design capacity in 2026. Earlier this year, it had been targeting 2025 (GM June 7, p. 27; May 31, p. 27). Following full ramp-up, there could be a subsequent expansion of production to 2.6 million mt/y. The group expects to consume some 700,000 mt/y of the potash produced in-house from 2025.

Acron reminded that it has agreed to the preliminary terms of project financing for Talitsky. In early June, it reached a preliminary deal for a 15-year syndicated loan from Russian banks to fund the construction of the project (GM June 7, p. 27). At the time, it indicated that VEB RF may provide $869 million, and Gazprombank and Sberbank could provide a combined $802 million.

The Russian fertilizer group has put the total required capital expenditure for an initial 2 million mt/y mine and processing plant at Talitsky at $1.5 billion (excluding the cost of the license, which was secured in 2008). A further $0.3 billion will be required to expand production to 2.6 million mt/y. The group in June put the total budget for the project at $2.5 billion (GM June 7, p. 27).

Acron’s subsidiary developing the potash project – Verkhnekamsk Potash Co. (VPC) – in early June signed a special investment contract (SPIC) with Russia’s Industry and Trade Ministry and the Perm regional government on the construction of Talitsky. Acron owns a 60.1 percent shareholding in VPC, with the balance of 39.9 percent held by a pool of financial investors.

Acron’s Board of Directors plans to recommend paying dividends for a third time since the beginning of 2019, reflecting the group’s “stable financial position,” said Popov. The group so far this year has paid out $164 million in dividends.

Data source: Acron

Reports have been circulating in recent weeks speculating that Acron is the would-be-buyer of Brazilian state-owned Petróleo Brasileiro SA’s (Petrobras) still-to-be completed nitrogen fertilizer complex, Unidade de Fertilizantes Nitrogenados III (UFN-III), in Três Lagoas, Mato Grosso do Sul state. According to a report by Brazilian financial newspaper Valor Econômico last month, the two companies were expected to sign a sale and purchase agreement before the end of August (GM July 26, p. 26; July 19, p. 25; and June 28, p. 27).

Last year, Acron was reported to be in exclusive negotiations with the Brazilian group to buy UFN-III together with Petrobras’ nitrogen fertilizer plant, Araucária Nitrogenados SA (ANSA), in Paraná state, which at the time were being offered for sale as a package (GM May 11, 2018). The Russian fertilizer group, for its part, has never confirmed publicly its interest in the Petrobras fertilizer plants.

Acron and Bolivian state-run oil and gas company Yacomientos Petrolíferos Fiscales Bolivianos (YPFB) were also said to have reached an agreement for the supply of gas to “a fertilizer plant in Brazil’s Mato Grosso do Sul state,” according to the Bolivian Ministry of Hydrocarbons (GM July 12, p. 1). The two are also reported to be in talks to set up a joint venture for fertilizer production (GM June 28, p. 27).