30 May 2017
Acron's Q1 2017 IFRS Revenue up 22% to USD 409 Million
Today Acron (Moscow Exchange and LSE: AKRN) released its consolidated IFRS financial statements for the first quarter of 2017.
Key Financials
- Revenue was RUB 24,073 million, down 4% year-on-year (Q1 2016: RUB 25,015 million). In dollar equivalent, revenue was up 22% to USD 409 million from USD 335 million.
- EBITDA* was down 28% year-on-year to RUB 7,434 million (USD 126 million) (Q1 2016: RUB 10,286 million; USD 138 million)
- EBITDA margin was 31%, against 41% for Q1 2016
- Net profit was down 88% year-on-year to RUB 1,571 million (USD 27 million) (Q1 2016: RUB 12,657 million; USD 170 million)
- Net debt was down 1% to RUB 51,369 million (31 December 2016: RUB 51,949 million). In dollar equivalent, net debt was up 6% to USD 911 million from USD 856 million.
- Net debt / LTM EBITDA** was 1.9, against 1.7 as of 31 December 2016.
Operating Results
- Output of key products was 1.773 million tonnes, up 18% year-on-year.
- Sales of key products totalled 1.781 million tonnes, up 19% year-on-year.
Chairman of Acron's Board of Directors Alexander Popov comments on the results:
"First of all, I would like to emphasise the excellent operating results. Sales showed double-digit growth, which gives us an advantage against ever increasing competition on the global mineral fertiliser market. As a result, revenue in the reporting period was up 22% year-on-year in dollar equivalent.
At the same time, a stronger rouble and higher costs contributed to a decrease in EBITDA. EBITDA margin was 31%, which is close to the average over the past five years.
With the investment cycle over, we are reducing capital expenditures, which helps maintain the debt burden at a comfortable level.
In the reporting period, net profit was affected by a loss due to changes in the value of derivative financial instruments, specifically by the expiration of a call option for VPC shares. However, since this loss is non-monetary, it will not affect dividend amount".
APPENDIX
Notes on Key Items in the Financial Statements
Financial Performance
The Group's revenue in the first quarter of 2017 was RUB 24,073 million, down 4% year-on-year. In the reporting period, the global fertiliser market saw different trends for dollar prices: nitrogen fertiliser prices were up, and complex fertiliser prices were down year-on-year. Sales of key products increased 19% year-on-year. At the same time, in the first quarter of 2017, the average RUB to US dollar exchange rate was 21% lower year-on-year.
On the back of a 19% increase in sales, the cost of goods sold in the reporting period was up 21% to RUB 12,807 million. Cost growth was limited due to lower potassium chloride prices.
Selling, general and administrative expenses were down 2% to RUB 1,922 million due to lower foreign currency-denominated staff costs, including at the Group's foreign facilities. Transportation expenses were up 8% to RUB 3,510 million due to increased sales and indexation of Russia's railway tariff.
In the first quarter of 2017, EBITDA was RUB 7,434 million, down 28% year-on-year. EBITDA margin was 31%, down from 41% for the first quarter of 2016. The Group's Veliky Novgorod-based Acron and Dorogobuzh facilities operated at 28% and 26% margin, respectively. NWPC's EBITDA margin was down to 33% due to lower apatite concentrate prices. Based on the results of the first quarter of 2017, the Group posted a net exchange gain of RUB 1,901 million from revaluation of assets, loans and liabilities, against a gain of RUB 1,876 million for the first quarter of 2016.
In the reporting period, the Company posted a loss of RUB 5,079 million from a change in the fair value of derivatives. This paper loss is due to expiration of a call option on a stake of Sberbank Investments in the Talitsky potash project.
Net profit for the first quarter of 2017 was RUB 1,571 million, against RUB 12,657 million for the first three months of 2016. It is worth mentioning that net profit for the first quarter of 2016 was supported by a gain on disposal of investments of RUB 5,461 million, which was mainly due to sale of the Company's stake in Uralkali.
Cash Flow
In the first quarter of 2017, net operating cash flow was down 69% to RUB 1,169 million (first quarter of 2016: RUB 3,816 million) due to increased working capital and reduced operating profit.
Net cash used in investing activities in the reporting period was RUB 2,270 million, against RUB 1,662 million generated in the first quarter of 2016. CAPEX decreased 39% year-on-year to RUB 2,462 million, from RUB 4,040 million due to the completion of the active phase of the investment cycle.
Net cash used in financing activities in the first quarter of 2017 was RUB 10,635 million, against RUB 4,160 million generated in the first three months of 2016. The cash outflow was due to an excess of repayments over obtained borrowings.
Debt burden
In the first quarter of 2017, net debt was down 1% to RUB 51,369 million. The relative debt burden increased, and net debt / LTM EBITDA was 1.9, against 1.7 at the beginning of the year. This increase was due to lower EBITDA.
Market Trends
At the beginning of 2017, nitrogen fertiliser prices increased in response to strong demand prior to the spring sowing season in the northern hemisphere. In February 2017, prices for urea reached USD 260 FOB Baltic Sea. However, as spring sowing orders began to wind down, prices came under pressure. Market stabilisation was due to marginal Chinese producers. High production costs force them to maintain urea prices above USD 200 FOB China.
As prices for primary input products have improved, prices for NPK complex fertilisers have demonstrated growth since the beginning of the year, following a decline throughout 2016. NPK still retains its premium over the basic product basket.
Average Indicative Prices, USD/t, FOB Baltic Sea/Black Sea
| Q1 2017 | Q4 2016 | Q1 2016 | Q1 2017 / Q4 2016 change | Q1 2017 / Q1 2016 change | |
| NPK 16-16-16 | 262 | 254 | 326 | +3.0% | -19.7% |
| AN | 202 | 179 | 186 | +12.9% | +8.7% |
| UAN | 158 | 133 | 152 | +18.4% | +3.4% |
| Urea | 237 | 204 | 194 | +16.1% | +22.1% |
| Ammonia | 302 | 190 | 270 | +58.8% | +12.0% |
The full version of Acron Group's financial statements is available at www.acron.ru/en .
Note: The exchange rate for currency conversion was RUB 56.3779 to USD 1 as of 31 March 2017 and RUB 60.6569 to USD 1 as of 31 December 2016. The average exchange rate for the first three months of 2017 was RUB 58.8366 to USD 1. The average exchange rate for the first three months of 2016 was RUB 74.6283 to USD 1.
* EBITDA is calculated as operating profit adjusted for depreciation and amortisation , foreign exchange gain or loss, and other non-cash and extraordinary items.
** LTM EBITDA is EBITDA calculated for the past 12 months .
Media contacts:
Tatiana Smirnova Public Relations Phone: +7 (495) 777-08-65 (ext. 5196)
Investor contacts: Ilya Popov Investor Relations Phone: +7 (495) 745-77-45 (ext. 5252)
Background Information
Acron Group is a leading vertically integrated mineral fertiliser producer in Russia and globally, with chemical production facilities in Veliky Novgorod (Acron) and Smolensk (Dorogobuzh). The Group owns and operates a phosphate mine in Murmansk region (NWPC) and plans to implement a potash development project in Perm Krai (VPC). It has a wholly owned transport and logistics infrastructure and distribution networks in Russia and China.
In 2016, the Group sold 6.4 million tonnes of various products to 63 countries, with Russia, Brazil, Europe and the United States as key markets.
In 2016, the Group posted consolidated revenue under IFRS of RUB 89,359 million (USD 1,333 million) and net profit of RUB 25,525 million (USD 381 million). Acron's shares are on the Level 1 quotation list of the Moscow Exchange and its global depositary receipts are traded at the London Stock Exchange (ticker AKRN). Acron employs over 11,000 people.
For more information about Acron Group, please visit www.acron.ru/en .
