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PhosAgro Sees Sharp Decline in 1Q Profits; Expects Fertilizer Prices to Stabilize

Earnings, News, Nitrogen, Phosphate, Russia

PhosAgro, Moscow, reported a 35% decline in net profit to RUB28.06 billion (approximately $349.8 million at current exchange rates) for the first quarter ended March 31, 2023, down from RUB43.46 billion the previous year, according to the Russian fertilizer group’s IFRS statement published on May 19.

Adjusted for foreign exchange gains/losses, the Russian fertilizer group posted a net profit of RUB33.9 billion, a 43% fall from the year-ago RUB59.25 billion. The adjusted net profit result beat analysts’ estimates, with a consensus estimate of RUB32.2 billion, according to an Interfax report.

Adjusted EBITDA for the quarter was down 44% year-over-year at RUB48.98 billion versus the year-earlier RUB86.99 billion, and also just beating analysts’ consensus estimate of RUB48.7 billion (Interfax report).

Revenue declined by 36% to RUB116.18 billion from the same prior-year period’s RUB180.68 billion.

PhosAgro attributed the year-over-year revenue decline to a drop in global fertilizer prices from their highs in early 2022. It noted global fertilizer markets in the first quarter of 2023 were marked by weakening demand for all types of fertilizers, driven by high stocks in key markets amid a downward price trend.

The group’s total sales in the first quarter increased by 1.5% over a year ago to 2.74 million mt, up from 2.70 million mt in the first quarter of last year. But sales of phosphate fertilizers, PhosAgro’s main product, remained essentially flat year-over-year at 2.0 million mt.

Nitrogen fertilizer sales, however, increased by 6% to 686,600 mt, up from the year-ago 647,300 mt. The group cited seasonal demand, driven, it said, mainly by “an almost twofold increase” in sales of ammonium sulfate.

PhosAgro highlighted that its high adjusted EBITDA margin of 42.2% in the first quarter was driven not only by an increase in production (+6% year-over-year to 2.8 million mt) and sales volumes, but also by cost optimization in the form of reduced spending on sulfur, ammonia, and especially ammonium sulfate.

However, the adjusted EBITDA margin for the first quarter was several points lower than for first-quarter 2022, when it was 48.1%

As of March 31, 2023, PhosAgro’s net debt had decreased to RUB142.4 billion ($1.85 billion), while its net debt/adjusted EBITDA ratio was 0.62x at the end of the quarter.

Looking ahead, the phosphates group noted the beginning of the second quarter was marked by continued low demand for fertilizers in key markets due to the end of the spring season in the Northern Hemisphere and the off-season in key markets in Asia and South America.

“The decrease in prices for fertilizers in the first quarter of 2023 helped make them more affordable in terms of the cost of fertilizers in relation to a basket of basic of agricultural products, which will help prices in fertilizer markets to stabilize in the near future,” PhosAgro said.

“In addition, the second quarter has seen a rise in seasonal demand in markets in India, Brazil, and Southeast Asia, which should also have a positive impact on prices,” the company added.

PhosAgro 1Q sales volumes

‘000 mt 1Q-2023 1Q-2022 % change
Phosphate-based fertilizers and feed phosphates 2,016.7 2,010.7 +0.3
Nitrogen-based fertilizers 686.6 647.3 +6.1
Other products 39.0 42.8 (8.9)
Total fertilizers 2,742.3 2,700.8 +1.5

Poland’s Azoty Posts 1Q Loss, May Need to Sell Pulawy Unit

Earnings, News, Poland

Polish fertilizers and chemicals group Grupa Azoty AS, Tarnów, has confirmed the group net loss of Pln555 million (approximately $132.3 million at current exchange rates) and an EBITDA loss of Pln401 million for the first quarter ended March 31, 2023, and in line with the preliminary results reported by the group on May 15 (GM May 19, p. 26).

The net loss attributable to shareholders of the group was Pln522 million versus an attributable net profit of Pln854 million for the first quarter of last year. Last week’s report of a first-quarter 2023 attributable net loss of Pln0.6 million was incorrect.

Revenues for the quarter were 43% lower year-over-year at Pln3.895 billion, in line with the group’s preliminary estimates and down from Pln6.83 billion for the same prior year period.

“The first quarter of this year saw a continuation of the supply-demand imbalance in the European market, reflecting Russia’s invasion of Ukraine, soaring energy prices, and duty-free imports of fertilizers and plastics produced outside of the European Union from cheaper feedstocks,” Azoty said in its May 22 results report.

Azoty cited another challenge faced by its Fertilisers/Agro segment, the group’s biggest division in terms of turnover – the EU Council’s decision late last year to temporarily suspend all duties on imports of urea and ammonia from Dec. 16 for six months (GM December 23, p. 3). Some market watchers believe the suspension may be extended for a further six months.

“The macro environment led to lower demand for the group’s products, driving down sales volumes and product prices. The market turbulence also disrupted end-user buying behaviour typical of the first quarter of prior years,” the group said.

The first-quarter loss comes despite the receipt of some Pln234 million in funding granted to the Azoty group by the Polish government’s National Fund for Environmental Protection and Water Management as part of the support provided to the country’s energy-intensive industries amid the unprecedented rises in natural gas and electricity prices last year.

Azoty’s Fertilisers/Agro segment posted a Pln140 million EBITDA loss in the first quarter versus a Pln814 million positive EBITDA a year ago, also in line with preliminary results.

The year-over-year decline in the price of natural gas, being a key feedstock for the production of nitrogen fertilizers, did not offset the drop in product selling prices and sales volumes, Azoty said.

The group’s sales volumes of nitrogen fertilizer dropped 51% year-over-year in the first quarter as farmers limited usage to curb costs amid the uncertain outlook for product prices.

Azoty said it is “actively” responding to the market challenges by adjusting its production volumes “on an ongoing basis” to current supply and demand in Europe, among other measures. Azoty reported a 44% decline in its nitrogen fertilizers production to 176,000 mt in April, down from the year-ago 312,000 mt, as it aims to bring output in line with market demand (GM May 19, p. 5).

Azoty Vice President of the Management Board Marek Wadowski told participants in a May 22 news conference, as cited by a Polish Press Agency (PAP) report, that the group wants to stabilize fertilizer prices in order “to make them more predictable,” The current situation on the fertilizers market causes “big uncertainty” for farmers, he said.

Wadowski said Azoty is continuing its efforts to further diversify its energy sources. He said the group is in talks with Polish energy group PKN Orlen on a new gas supply contract, as the existing contract expires at the end of September.

The Polish fertilizers and chemicals group on May 22 confirmed that it may breach debt covenants at the end of the second quarter, first flagged by the group earlier this month.

Azoty likely will exceed the 4.0x net debt to EBITDA level allowed in covenants at the end of the first half of 2023, but hopes to reach an agreement on the issue with financing institutions, Wadowski – as cited by the PAP report – told news conference participants.

He said the group’s liquidity situation is “good,” but due to the decrease in the first-quarter result, Azoty sees a risk that the net debt to EBITDA ratio will exceed the acceptable values contained in financing agreements.

Net debt to EBITDA already exceeded the maximum 4.0x level included in covenants at the end of the first quarter, but end-first quarter levels are not reported to financial institutions, Wadowski explained.

The end-first-quarter debt stood at 4.77x EBITDA, according to Azoty’s first-quarter financial report.

Reports have been circulating that Azoty may need to sell its prized Puławy subsidiary to PKN Orlen to improve its financial standing. The Puławy unit production includes ammonium nitrate and urea, as well as caprolactam and melamine, and is the group’s most profitable entity.

Erste analyst Jakub Szkopek, as cited in a Bloomberg report on May 23, said selling the Puławy unit would solve Azoty’s problem “for a while,” by reducing debt.

“Following such a potential transaction, there would be an efficient entity on the market consisting of Puławy and Anwil, both belonging to PKN Orlen, itself a gas producer,” he said.

In such a scenario, Azoty will be left with its Police, Tarnów, and Kędzierzynie units, “all less efficient and less competitive than Puławy,” Szkopek said.

Trigon analyst Michal Kozak, as cited by Bloomberg, also believes a sale of Puławy may be seen as negative in the long term.

Ma’aden 1Q Profits Plunge Despite Higher Sales Volumes

Ammonia, Earnings, News, Phosphate, Saudi Arabia

Saudi Arabian Mining Co. (Ma’aden) reported an 81% plunge in net profit to SAR0.42 billion for the first quarter ended March 31, 2023, down from SAR2.17 billion in the same prior-year earlier period.

EBITDA for the quarter was 50% lower year-over-year at SAR2.18 billion against SAR4.40 billion a year ago, with the company attributing the fall mainly to “a one-off utilities charge and higher raw materials prices.”

Revenues were off 10% at SAR8.05 billion, down from SAR8.91 billion. Ma’aden said higher ammonia and ammonium phosphate fertilizer sales volumes in the quarter versus a year-ago were offset by lower selling prices.

The company reported ammonia production in the first quarter was up by 9% over first-quarter 2022, while ammonium phosphate fertilizer production increased 35% year-over-year. However, it did not disclose production volumes or sales volumes.

Commenting on the results in May 22 media statement, Ma’aden CEO Robert Wilt said “We have increased production and sales volumes in our core Phosphates Business Unit and delivered another period of strong cash generation. This was despite softer commodity prices, which impacted our top-line performance and profitability for the quarter compared to last year.”

Wilt noted that supply-demand dynamics are now more effectively managed, while raw materials prices are easing and fertilizers and ammonia prices have normalized and are expected to remain in-range for the remainder of the year, he said.

The CEO said the company continues to make good progress to optimize existing operations and bring new projects online.

“Ammonia 3 production is ramping up towards nameplate capacity and the wider Phosphate 3 project is on track,” said Wilt.

Ma’aden is developing its ambitious Phosphate 3 project in two phases, the first of which will see the installation of an additional 1.5 million mt/y of phosphate fertilizer production capacity.

The first plant in the project, a 1.1 million mt/y capacity ammonia plant – the so-called “Ammonia-3” facility – located at Ras Al-Khair Industrial City facility, started “official” commercial production last August (GM Nov. 4, 2022), although the first shipments from the new plant were made in June (GM June 10, 2022).

For the time being, the ammonia output is being used to cover existing sales contracts and merchant sales.

In March of this year, the company signed a Support Agreement with the Kingdom’s Ministry of Investment that is aimed at accelerating the delivery of the company’s ambitious Phosphate 3 project (GM March 3, p. 1). In January, it signed an engineering, procurement, and construction management services contract with WorleyParsons Arabia Ltd. and JESA International SA for the construction of its Phosphate 3 phase 1 project (GM Jan. 13, p. 30).

Yara Allocated Land in Pilbara Hydrogen Hub

Ammonia, Australia, Hydrogen, News, News Briefs

The Western Australian Government has allocated land to Yara Clean Ammonia (YCA) in the proposed Pilbara Hydrogen Hub in the Maitland Strategic Industrial Estate 24 kilometers (km) west of the town of Karratha and 39 km south of the port of Dampier on the Burrup Peninsula, Yara International ASA said in a May 24 statement.

YCA is developing the Project Yuri renewable hydrogen plant at parent company Yara International’s Yara Pilbara ammonia operations just 40 km away (GM Sept. 24, 2021).Through Project Yuri, Yara will inject the first green molecules into the Pilbara ammonia plant.

The company is also working closely with the Pilbara Ports Authority on assessing the potential uptake of ammonia bunkering (refueling) at the region’s ports, particularly for iron ore carriers operating to and from key Asian markets. Last July, the two parties signed a Collaboration Agreement to jointly facilitate the uptake of clean ammonia as a marine fuel in the Pilbara region in Western Australia (GM July 29, 2022).

YCA President Magnus Krogh Ankarstrand said the company would now enter detailed discussions with the relevant government agencies and traditional owners, and undertake preliminary studies on the land allocation and a potential clean ammonia production site.

Perdaman Holdings Pty Ltd., whose subsidiary Perdaman Fertilisers and Chemicals Pty Ltd. last month began construction of a 2.3 million mt/y granular urea plant some 20 km north of Karratha, announced last month that it also had been allocated land in the Maitland Strategic Industrial Estate by the Western Australian Government, where it plans to construct a 100MW solar power facility and associated transmission infrastructure (GM April 28, p. 1). The development is part of the company’s efforts to decarbonise its urea plant.

Bulgaria’s Agropolychim Set to Double N Fertilizer Capacity After Casale Deal

Eastern Europe, News, News Briefs, Nitrogen

Bulgarian fertilizer producer Agropolychim and Swiss company Casale SA have signed an agreement that will ultimately increase the Bulgarian firm’s nitrogen fertilizer production capacity to 1.5 million mt/y, Agropolychim said in a May 19 press release.

Casale will license and engineer a new state-of-the-art dual pressure nitric acid unit that will also allow the enhancement of local green energy production, the Swiss company reported on its website. The plant is scheduled to be commissioned before the end of 2027.

Agropolychim has been operating a dual pressure nitric acid unit based on Casale technology since 1973. Its nitrogen fertilizer production facilities include capacity for production of ammonium nitrate, CAN, CN, and UAN.

The new unit is part of a five-year €250-mllion (approximately $269 million at current exchange rates) investment plan by the Bulgarian fertilizer producer.

Agropolychim since 2018 has been producing steam for process needs with biomass at a rate of 36 MWh, which allowed it to maintain production at over 100% of its capacity last year despite the gas crisis in Europe. Over the last five years, Agropolychim’s gas consumption has decreased by 98%, Casale reported.

Last year, the fertilizer producer further reduced its dependence on natural gas by completing a major overhaul of several of its production facilities that has helped it reduce natural gas consumption and was part the five-year investment plan (GM Sept. 2, 2022).

According to a SeeNews report, citing the Bulgarian commercial register, Agropolychim is owned by British Virgin Islands’ registered firm Acid & Fertilizers Ltd.

Belaruskali Mulls SOP Production, Says Report; Opposition Group Urges EU to Maintain Sanctions

Belarus, Europe, News, News Briefs, Potash, Sulfate of Potash

Belarus state-owned potash producer Belaruskali OAO is reported to be considering building a plant to produce potassium sulfate (SOP), according to a report by the country’s state-run news agency BelTA, citing the potash company’s Director General, Ivan Golovaty.

According to the report, Belaruskali has held discussions with “Chinese partners” about the SOP production facilities, and is planning to make a decision next year.

In a separate development, a member of the Belarusian opposition this week has urged the European Union (EU) to keep sanctions in place against Belaruskali, warning that lifting them would generate a $1.5 billion windfall for Alexander Lukashenko’s regime, according to an Associated Press (AP) report.

Pavel Latushka, who heads an opposition group, the National Anti-Crisis Management, and who is now in exile in Poland, said he fears the EU may decide to lift sanctions against the potash producer.

His appeal comes as EU foreign ministers were meeting on May 22 for informal talks that focused on sanctions against Belaruskali and its marketing/export arm, Belarusian Potash Co. (BPC).

The EU has been proposing new sanctions on Belarus over the country’s continuing crackdown on opposition to the current presidential regime and its support of Moscow’s war in Ukraine. But some Member States, like Spain and Portugal, have called for exemptions on potash amid food security fears, although the exact nature of these exemptions is unclear (GM March 17, p. 29).

Centrex/Agriflex Ships First Cargo of Ardmore PhosRock to South Korea

Australia, News, News Briefs, Phosphate Rock, South Korea

Centrex Ltd., Adelaide, South Australia, said its wholly-owned subsidiary, Agriflex Pty Ltd., has exported its first shipment of phosphate rock to Samsung C&T Corp. in South Korea, marking the first time an Australian company has supplied phosphate rock to the Asian market, according to a May 22 statement by the Australian firm.

Agriflex made the15,000 mt shipment to the South Korean company from Centrex’s Ardmore phosphate mine located just south of Mt. Isa in northwest Queensland under a binding marketing services agreement signed between the parties for the sale of Ardmore rock in February this year. The binding deal followed a conditional agreement signed in October 2021 (GM Oct. 29, 2021).

Under the agreement, Samsung C&T Corp. is the sole and exclusive agent for sales into Korea, Japan, Indonesia, India, Taiwan, and Mexico, with 20% of total production at Ardmore allocated under the deal. Ardmore has capacity to produce 800,000 mt/y.

Centrex so far has shipped a total of 59,290 mt of phosphate rock from the Ardmore mine, including the South Korean shipment.

Israeli Court Approves Rotem Amfert Israel Settlement for 2017 Ashalim Accident

Israel, News, News Briefs, Phosphate

ICL Group Ltd., Tel Aviv, said the Israeli Court has approved the settlement agreement between its subsidiary Rotem Amfert Israel Ltd. and the Israeli Nature and Parks Authority, as well as all other defendants, related to a massive leak and partial collapse of a dyke in a phosphate evaporation pond at Rotem’s fertilizer plant in Mishor Rotem in southern Israel in 2017.

The collapse caused extensive damage and contamination to the Ashalim Creek Bed and its surrounding area.

Under the settlement deal agreed between the parties last December, Rotem will pay the public and the class groups NIS115 million (approximately $30.9 million at current exchange rates), including the legal and other expenses (GM Dec. 16, 2022).

The approval of the settlement by the Israeli Court will conclude the proceedings between the parties, ICL said.

The Andersons Buys Granulation Facility

Eastern Cornbelt, Featured, Great Lakes, News

The Andersons Inc. on May 22 reported that the company has purchased the operating assets of an existing granulation facility in Laingsburg, Mich. The company said these operating assets will be used to produce natural limestone and gypsum soil amendments in addition to other proprietary granulated products.

“Acquiring this production facility is a significant step towards fulfilling The Andersons commitment to serving the agricultural markets in Michigan and surrounding areas,” said Andrew Spahr, Vice President, Wholesale, of The Andersons. “We are excited to bring this facility into our granulation portfolio, which will allow us to better serve our customers and provide them with the highest quality products.”

Simplot Acquires Turf Ventures, Adds Four Locations

Featured, News, Specialty, U.S.

The J.R. Simplot Co. reported that it has expanded its turf and horticulture services business with the acquisition of Illinois-based based Turf Ventures LLC and its four locations: Downers Grove, Ill., Warsaw, Ind., Erlanger, Ky., and Export, Penn.

“We are proud to welcome these employees to Simplot and look forward to continuing to help customers meet their turf and horticulture goals,” said Barry MacBan, General Manager for Simplot Turf & Horticulture. “These locations broaden our turf and horticulture reach, bringing more opportunity for growth in products, services, and technological capabilities for customers.”

These stores will join the Simplot Turf & Horticulture team, which now includes 25 locations in 37 states in the US. A full range of products and solutions will serve golf course superintendents, landscapers, and nursery managers.

“Joining an organization like Simplot Turf & Horticulture just made sense,” said Brian Baker, Turf Ventures owner. “They are committed to customers, agronomic expertise, and innovative solutions, just like our organization. Now, we have the full breadth of product lines and nationwide distribution that can really bring our customers the best outcomes for their turf operations.”