PhosAgro, Moscow, reported a 6 percent rise in fourth-quarter net income on a 30 percent increase in revenues. Net income was RUB4.50 billion on revenues of RUB59.40 billion, compared with the year-ago RUB4.26 billion and RUB45.78 billion, respectively. Net income adjusted for forex losses soared by 195 percent, to RUB10.9 billion from RUB3.7 billion in the same year-ago quarter.
Fourth-quarter EBITDA came in 51 percent higher, at RUB18.56 billion, up from RUB12.29 billion, driven, the company said, by robust fertilizer price growth, active markets in Russia and the U.S., and a 14 percent ruble depreciation against the U.S. dollar. However, these were partially offset by inflation of feedstock prices, namely sulfur and potash.
Fourth-quarter sales volumes were up for nitrogen-based fertilizers and for phosphate rock and nepheline – by 15 and 10 percent, respectively – but phosphate-based fertilizers and MCP sales volumes fell by 7 percent compared with the same year-ago quarter.
Full-year net income was down 13 percent, to RUB22.13 billion on revenues of RUB233.4 billion from the year-ago RUB25.33 billion and RUB181.3 billion, respectively. However, adjusted net income almost doubled year-on-year to RUB41.75 billion, up from RUB21.19 billion. Full-year EBITDA came in 47 percent higher, at RUB74.91 billion against the year-earlier RUB50.8 billion.
Full-year sales volumes were all higher year-on-year, with phosphate-based fertilizers and MCP up 2 percent, nitrogen-based fertilizers up 36 percent, and phosphate rock and nepheline up 6 percent.
“Despite disruption in various markets, PhosAgro finished 2018 in good shape, achieving the ambitious milestones set out in our growth strategy for the period through to 2020,” said PhosAgro CEO Andrey Guryev. “…The company was able to respond quickly to new opportunities, as well as to challenges arising in key agricultural markets.”
He said the company’s sales geography has “partially modified” as a result of “political turmoil” in some countries of the CIS, weather conditions affecting agricultural producers in Europe, and strong competition in Latin America.
“Despite these challenges, we were able to increase our EBITDA by more than 47 percent in 2018, while [adjusted] net profit almost doubled year-on-year, pushing down the company’s leverage,” Guryev said.
He pointed to the company’s strategy of moving closer to its end-customers as proving “timely and effective,” noting that it was swift in shipping products to its priority markets and spot markets in North America and Asia.
“Even as the industry stockpiled fertilizers in Europe at the end of the fourth quarter of 2018 as a result of the ongoing anomalous weather conditions, we were redirecting our products to Russia, the U.S., and Latin America in order to get the best netback prices,” he said.
PhosAgro increased its production of fertilizers by 8 percent year-on-year to 9 million mt in 2018, with output boosted by modernization of beneficiation plant number 3 and the new 760,000 mt/y ammonia plant at PhosAgro-Cherepovets in 2017 (GM Aug. 11, 2017), which has increased the company’s self-sufficiency in that product to 90 percent.
The company expects to see further growth of up to 5 percent in fertilizers output in 2019.
Responding to an analyst’s question as to how much of that anticipated output growth would be in the phosphates sector, Guryev said most of the increase would be phosphate-based. He reminded the analysts that unlike some of PhosAgro’s competitors in the phosphates sector, which have mainly MAP and DAP portfolios, PhosAgro’s product portfolio is more mixed, with a high percentage comprising NPK fertilizer products and the like.
Also asked whether PhosAgro had any plans to cut its phosphate production, as some other players have signaled to the market their intentions to do so, PhosAgro CFO Alexander Sharabaika said there were no economics to be seen in the decision for PhosAgro to cut output as “it is one of the most efficient companies in the business.”
Looking ahead, Guryev expects prices for phosphate-based fertilizers to remain under pressure throughout the first quarter of 2019 due to the slow recovery of seasonal demand in the U.S. However, he said the company believes prices in March should be supported by usual levels of activity in Europe and the start of DAP/MAP imports in Latin America.
“We expect to see a recovery in prices for phosphate-based fertilizers in the second quarter of 2019, driven by the beginning of the application season in major agricultural regions – Latin America, North America, and India,” the CEO said. “However, growth is likely to be limited at up to $390-$400/ton of DAP FOB Tampa, mitigated by the gradual introduction of new capacities from Morocco and Saudi Arabia.”
Sales
| |
Q4-2018 |
Q4-2017 |
FY2018 |
FY2017 |
| Phosphate-based (‘000 mt) |
1,492 |
1,599 |
6,635 |
6,485 |
| Nitrogen-based (‘000 mt) |
470 |
411 |
2,196 |
1,616 |
| Phosphate rock (million mt) |
0.8 |
0.7 |
3.0 |
2.7 |
Revenue by key products (RUB million)
| |
Q4-2018 |
Q4-2107 |
FY2018 |
FY2017 |
| DAP/MAP |
19,335 |
14,955 |
77,895 |
62,188 |
| NPK(S) |
15,067 |
12,190 |
60,865 |
47,119 |
| Phosphate rock |
6,309 |
5,357 |
22,098 |
21,158 |
| Nitrogen-based products |
9,594 |
6,846 |
37,011 |
22,495 |
PhosAgro on March 20 announced that its board had approved the company strategy to 2025, aimed at further expanding the company’s presence in its priority domestic and premium export markets and strengthening its position as a producer of phosphate-based fertilizers with low levels of heavy metals, including cadmium.
As part of its strategy to 2025, the company said it will focus on work in three priority areas: expanding capacity, improving operational efficiency, and increasing self-sufficiency in key inputs.
It said its share of direct export sales will be maintained at a level of at least 90 percent with the help of the company’s existing 10 foreign trading offices located in its key sales regions of Europe, Latin America, and Asia. The company also plans to continue to expand its presence in the premium markets of Europe and Latin America, as well as other markets where it said it can achieve the best netback prices.
PhosAgro’s board has recommended dividends in the amount of RUB6.6 billion (approximately $102.8 million), or RUB51 per ordinary share (RUB17 per GDR), from retained earnings as of Dec. 31, 2018.
