PhosAgro, Moscow, reported a 45 percent rise in second-quarter IFRS net profit, to RUB30.31 billion (approximately $411 million at current exchange rates) on revenue of RUB88.68 billion ($1.2 billion), up from the year-ago RUB20.88 billion and $59.94 billion, respectively.
Net profit adjusted for foreign exchange gain/loss more than trebled, totaling RUB24.1 billion ($325 million), up from the previous year’s RUB5.65 billion. EBITDA doubled to RUB38.79 billion ($523 million) from the year-ago RUB19.13 billion.
The group cited upgrades to production assets, improved efficiency at its main production lines, and an increase in self-sufficiency of key feedstocks, notably sulfuric acid, as driving an EBITDA margin increase for the quarter, to 43.7 percent versus 31.9 percent a year ago.
“In the context of a favorable global market environment for agricultural products and fertilizers, this enabled us to increase profitability considerably,” said PhosAgro CEO Andrey Guryev.
Second-quarter revenue increased by 48 percent, with the group citing the rise in global prices for phosphate- and nitrogen-based fertilizers amid the depreciation of the rouble against the U.S. dollar. The group’s nitrogen-based fertilizers sales volumes also increased by 3 percent in the quarter versus a year-ago, reaching 623,300 mt (GM Aug. 6, p. 32).
However, phosphate fertilizer sales volumes fell 7 percent, to 1.67 million mt. The group blamed a delay in the start of seasonal demand in India, and said this has had postponed some sales to the third quarter.
PhosAgro’s Phosphate fertilizers segment posted a second-quarter EBITDA of RUB29.7 billion ($400 million), which the group said was “a nearly two-fold increase” year-over-year on the back of higher profits for all key products. The Nitrogen-based fertilizer business posted EBITDA of RUB9.1 billion ($122 million) for the second quarter, “twice the result for 2Q 2020.”
For the first half of 2021, PhosAgro saw a significant boost in IFRS net profit, to RUB48.65 billion, up from the year ago RUB5.29 billion. Net profit adjusted for foreign exchange gain/loss doubled to RUB45.34 billion ($610 million) versus the year-earlier RUB22.24 billion.
Six-month EBITDA increased by 83 percent to RUB73.09 billion ($984 million), up from RUB39.86 billion, while revenue grew by 42 percent to RUB176.3 billion ($2.4 billion), up from the year-ago RUB124 billion.
PhosAgro cited the revenue growth was largely as a result of implementation of the group’s long-term development strategy, which has enabled the launch of new production capacities and improved the efficiency of existing facilities. The rise, it said, was also driven by an improvement in the group’s sales structure in favor of high-margin fertilizers at a time of higher average sales prices in global markets.
In terms of outlook, the group believes the expected seasonal activity in the main fertilizer markets in Brazil and India in the third quarter, coupled with the projected decrease in exports from China in order to supply its domestic market, will help support prices.
As of June 30, 2021, PhosAgro’s net debt had decreased by RUB30.5 billion since the end of 2020, and amounted to RUB126.3 billion ($1.7 billion). The net debt/EBITDA ratio had dropped to 1.07x as at the end of the second quarter of 2021.
The group’s Board has recommended that an extraordinary general meeting of shareholders be held on Sept.13 for shareholders to approve the payment of dividends in the amount of RUB20.2 billion, or RUB 156 per share (RUB52 per global depositary receipt) from retained net profit as of June 30, 2021.
PhosAgro said it was nearing a decision on the construction of new ammonia and urea plants, which forms part of its development strategy to 2025. The group in June confirmed that it was studying the construction of a complex for the production of ammonia and urea and is considering two sites for the project – either at Cherepovets, some 600 km north of Moscow, or at Volkhov in Russia’s Leningrad region (GM June 4, p. 1).
The group plans to provide investors with an update on the project decision as part of its revised strategy to 2025, with an announcement later this year or in early 2022 after the strategy has been reviewed and approved by the group’s Board of Directors.
PhosAgro first of all wants to improve its self-sufficiency in ammonia, but is also thinking about other raw materials, such as sulfuric acid and ammonium sulfate, and said it is adjusting its development strategy through to 2025 to incorporate these ambitions.