MOSCOW: PhosAgro, one of the world’s leading vertically integrated phosphate-based fertilizer producers, has announces its consolidated IFRS financial results for the three months (4Q) and 12 months (FY) ended December 31, 2018.
Revenue in 4Q 2018 rose by 30% year-on-year to RUB 59.4 billion (USD 893 million), while EBITDA grew by 51% year-on-year to RUB 18.6 billion (USD 279 million).
PhosAgro’s EBITDA margin increased to 31% in 4Q 2018 from 27% in 4Q 2017. Net income (adjusted for non-cash FX items) almost tripled year-on-year to RUB 10.9 billion (USD 164 million) in 4Q 2018, bringing PhosAgro’s FY 2018 adjusted net income to RUB 41.7 billion (USD 666 million).
Commenting on the results for 2018, PhosAgro CEO Andrey Guryev said: “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 2020. Thanks to the professionalism of our team, the Company was able to respond quickly to new opportunities as well as to challenges arising in key agricultural markets. PhosAgro’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 EBITDA by more than 47% in 2018 while net profit almost doubled year-on-year, pushing down the overall company’s leverage.
“Our strategy of moving closer to our end customers has proved to be timely and effective. We were swift in shipping products to our priority markets and spot markets in North America and Asia. Even as the industry stockpiled fertilizers in Europe at the end of 4Q 2018 as a result of the ongoing anomalous weather conditions, we were redirecting our products to Russia, the USA and Latin America in order to achieve the best netback prices.
“This would not have been possible without timely upgrades to our mid-stream capacity. The modernisation of beneficiation plant #3 helped us achieve an unprecedented 92% phosphorous recovery rate from our apatite-nepheline ore, while the new ammonia plant enabled us to boost the self-sufficiency in the crucial feedstock to 90%. As a result, in FY 2018 we increased production of our fertilizers, which are naturally low in potentially harmful impurities, by 8% year-on-year to 9.0 million tonnes. We expect to see further growth of up to 5% year-on-year in 2019.
“PhosAgro’s industry-leading EBITDA margin of 32% for FY 2018 and record high free cash flow of RUB 21 billion are additional milestones. All investment projects remain on track, which meant that we kept our capex to EBITDA ratio for FY 2018 at close to 50%, in line with our guidance. All of this meant that in 2018 PhosAgro was able to cut its net debt to LTM EBITDA ratio to a comfortable level of 1.8x and deliver an attractive 50%+ dividend payout ratio.
“In terms of the market environment, DAP prices peaked for a second straight year in September at USD 439 per tonne (FOB Tampa), growing by 39% from the beginning of 2017 and average at USD 419 per tonne as a result of tighter than expected supply. In the medium term, we expect the market to balance at around USD 390-400 per tonne, as new capacity from North Africa and the Middle East ramps up. The closure of inefficient Chinese production lines, which are on the upper end of the cash cost curve, should counterbalance this supply growth.
“Looking ahead, we have approved a new strategy for the period to 2025. Our main focus during the years ahead will be strengthening our commitment to best ESG practices. We also plan to further strengthen our presence in key markets and solidify our cash cost advantage. All of these initiatives will further improve PhosAgro’s financial and operational results and generate optimal returns for all of our shareholders.”[the_ad id=”31605”]