Press release: Acron’s Q1 2018 IFRS EBITDA up 11% to USD 140 million

“Acron Group’s financial performance is sustainably on an upward drive. In Q1 2018, the Group’s revenue was up 3% year-on-year to USD 423 million. Cost management efforts boosted EBITDA 11% year-on-year to USD 140 million, and EBITDA margin was up to 33%. Maintaining a moderate debt burden, we paid dividends of USD 78 million in Q1 2018.

 

“The Group’s new investment programme has built-in flexibility to allow us to adjust our annual volume of investments. In Q2 2018, we started construction of vertical shafts at the Talitsky site using the Group’s equity, and slightly adjusted the deadlines for several investment projects at Acron (Veliky Novgorod) and Dorogobuzh. This year, the Group’s CAPEX totals approximately USD 200 million. We will continue to focus on paying dividends while our debt burden remains moderate”. 

 

In the reporting period, the cost of sales was RUB 12,791 million, remaining almost flat year-on-year. Selling, general and administrative expenses were down 4% to RUB 1,850 million. Transportation expenses remained almost flat year-on-year at RUB 3,509 million. Other operating expenses were down 43% year-on-year to 432 million due to a decrease in foreign exchange loss on revaluation of assets.

 

In Q1 2018, EBITDA was up 7% year-on-year to RUB 7,958 million. EBITDA margin was 33%, against 31% in Q1 2017. Veliky Novgorod-based Acron, Dorogobuzh and NWPC operated at margins of 33%, 25% and 28%, respectively.

 

Based on Q1 2018 results, the Group posted a net exchange gain of RUB 525 million, down 79% year-on-year due to a revaluation of loans and liabilities.

 

In the reporting period, the Group posted a RUB 708 million gain on derivatives, against a loss of RUB 5,079 million in Q1 2017. This paper loss was due to the expiration of a call option on Sberbank Investments’ stake in the Talitsky potash project.

 

In Q1 2018, net profit was RUB 4,146 million, against RUB 1,571 million year-on-year.

 

 

In Q1 2018, net operating cash flow increased 3.9-fold to RUB 4,590 million (Q1 2017: RUB 1,169 million). This jump was mainly due to an increase in net profit and a moderate upward swing in working capital. In Q1 2018, working capital increased by RUB 1,663 million, while in Q1 2017 working capital was up RUB 4,327 million.

Net cash used in investing activities in the reporting period was RUB 2,764 million, against RUB 2,270 million in Q1 2017. Capital expenditures were RUB 2,613 million (Q1 2017: RUB 2,462 million).

Net cash used in financing activities in Q1 2018 was RUB 5,082 million, against RUB 10,635 million year-on-year. Cash outflow in the reporting period was down year-on-year due to fewer repayments of borrowings. Dividends paid to shareholders totalled RUB 4,412 million, against RUB 103 million in Q1 2017.

 

In Q1 2018, total debt was down 1% to RUB 73,783 million. Net debt was up 4% to RUB 62,738 million. Net debt/ LTM EBITDA was 2.1, against 2.0 at the beginning of the year.

 

 

In Q1 2018, the FOB Baltics price for urea was USD 220-230, supported by strong seasonal demand and export cuts in China. That said, the price of coal, which is a key feedstock for urea production in China, remains high, keeping the urea price of local producers at USD 300 FOB China. With an end-of-season slump in demand, Baltics prices are less volatile this year (in May 2018, prices dropped to USD 215 while in May 2017, they were down to USD 180). Despite lessening pressure from Chinese exports, Baltics prices will be restrained by the seasonal nature of demand through Q2 and Q3 2018, but they are expected to recover in Q4 2018.

 

In Q1 2018, the AN and UAN premium over urea returned to normal levels. The AN premium was down after reaching its peak in Q4 2018, while the UAN premium recovered after disappearing in 2H 2017.

 

In Q1 2018, NPK prices continued the upward drive that started in autumn 2017, fuelled by positive dynamics in the prices for the basic product basket (urea, DAP and potash). NPK still retains a high premium over the basic product basket.

 

 

Average Indicative Prices, USD/t, FOB Baltic Sea/Black Sea

USD / t	Q1   2018	Q4 2017	Q1 2017	Q1 2018 /  Q4 2017 change	Q1 2018 /  Q1 2017 change
NPK 16-16-16	284	271	262	+4.6%	+8.6%
AN	186	218	202	-14.6%	-7.8%
UAN	162	162	158	0%	2.7%
Urea	224	239	237	-6.4%	-5.5%
Ammonia	284	286	302	-0.7%	-6.0%