Today Acron (Moscow Exchange and LSE: AKRN) released its audited consolidated IFRS financial statements for 2012.
Key Financials
· Revenue was up 9% year-on-year to RUB 71.11 billion (USD 2.29 billion), against RUB 65.43 billion in 2011.
· EBITDA* was down 4% year-on-year to RUB 19.92 billion (USD 641 million) (2011: RUB 20.86 billion).
· EBITDA margin was 28%, against 32% in 2011.
· Net profit was down 27% year-on-year to RUB 14.86 billion (USD 478 million), against RUB 20.33 billion in 2011.
· Net debt was RUB 32.67 billion (USD 1.08 billion), down 3% from RUB 33.81 billion at the end of 2011.
· Net debt/LTM EBITDA** was 1.6, with no change year-on-year.
Alexander Popov, Chair of Acron’s Board of Directors, comments on the performance:
“The reporting year was one of the most significant in the Company’s history. The key event was the launch of our mining segment, the crucial element in the Group’s vertically integrated business model. In December 2012, the Oleniy Ruchey mine started shipping apatite concentrate, and Novgorod-based Acron and Dorogobuzh facilities have already produced complex fertilisers using the Group’s own phosphate inputs. We have been gradually expanding the output and plan to achieve 60-65 ktpm by this June, which will completely cover our phosphate commodity needs. We also successfully commissioned a new urea unit in Veliky Novgorod which increased urea and UAN output by 25% in 2012. Both projects were completed to schedule and within budget.
“In 2012, the Group made significant advances with its two other investment projects: construction of the Talitsky mine and a new ammonia unit at Acron facility. We raised the required financing of over RUB 12.8 billion from three investors and commenced construction of two shafts at the potash mine. Work on the Ammonia-4 construction site is on schedule, and we plan to put the new unit on stream in 2015.
“In 2012 the Group invested over RUB 16 billion in its projects. The considerable capex notwithstanding, we are primarily committed to securing the financial sustainability of the Group. The debt burden remains at a manageable level.
“In the reporting year, the Group maintained high operating performance, with total commercial product output of 5.9 million tonnes. Despite a slight decrease of complex fertiliser output at the Russian facilities due to interrupted apatite concentrate supply in June-July and protracted overhaul of the ammonia unit at our Dorogobuzh facility, the Group’s facilities operated at a high capacity utilisation rate and boosted output of certain products.
“2012 was complicated for producers of all types of mineral fertilisers. In the first half of the year, the nitrogen market saw prices hovering around local highs, but a number of factors dramatically depressed the market in the second half, resulting in a price adjustment. Despite the volatility, the nitrogen market was the only one to see higher sales, while phosphate and potash fertiliser producers had to pull back on output due to considerably lower demand. It is important to note that demand on the complex fertiliser market was stable throughout the year.
“We do not forecast any deterioration on the global fertiliser markets this year. The spring sowing season revitalised nitrogen fertiliser prices, and higher agricultural product prices support fertiliser demand globally.”
Notes on Key Items in the Financial Statements
Key Financials
In 2012, revenue was up 9%, to RUB 71.11 billion on the back of favourable nitrogen fertiliser market conditions in the first half of the year, higher sales of urea and UAN, and a sales focus on premium markets of Asia and Latin America.
The cost of products shipped by the Group in 2012 was RUB 40.44 billion, up 14% year-on-year. Higher production costs were due to increased prices for natural gas, commodities and power, and increased commodity consumption in China resulting from higher output. Higher staff costs were mainly due to a 10% increase in the Group’s total personnel in 2012, to 15,644, because of expanded operations and construction of new production capacity.
In 2012, EBITDA was RUB 19.92 billion, down 4% year-on-year. EBITDA margin was 28%. The Group’s profit margin was lower because production costs outpaced mineral fertiliser prices.
Net profit shrank 27% to RUB 14.86 billion, mainly because in 2011 the Group sold exploration permits worth RUB 4.84 billion (before tax) and a stake in its subsidiary which held Apatit shares worth RUB 4.26 billion (before tax). Adjusted net profit for 2011 (less these transactions) was RUB 13.21 billion. Therefore, when compared to the adjusted amount net profit for 2012 was up 12%. The adjusted net profit margin was 21%, up from 20% in 2011. These financials demonstrate improved efficiency in the Group’s core business.
In 2012, net cash outflow from investment activity was RUB 19.91 billion, against RUB 602 million in 2011. The main expenditure items in 2012 were RUB 16.12 billion in capex, including revamping of production assets, investments in the Oleniy Ruchey mine project, investments in the Talitsky mine construction, and acquisition of a stake in Polish Azoty Tarnów worth RUB 3.88 billion.
Net cash flow from financial activity in 2012 was RUB 25.48 billion. The item increased due to proceeds from borrowings earmarked to finance investment activity. Moreover, in 2012 this item was supported by RUB 12.76 billion of cash inflow from the acquisition by Vnesheconombank, Raiffeisenbank and Eurasian Development Bank of shares in VPC’s authorised capital.
As of December 31, 2012, available-for-sale investments were RUB 24.68 billion, up 24% year-on-year. This item accounts for the Group’s stakes in Uralkali and Azoty Tarnów, whose market value increased over the reporting period.
Debt Burden
By the end of 2012, net debt was down 3% to RUB 32.67 billion. The relative debt burden did not change, with net debt/EBITDA ratio remaining at 1.6. As of December 31, 2012, the Group’s total debt under loans and borrowings was RUB 61.56 billion, up RUB 13.12 billion year-on-year. The increase was due to accumulation of free cash balance for its further utilisation in the Group’s investment and financing activity.
Dividends
Based on performance for the first nine months of 2012, the Company’s shareholders approved the Board of Director’s recommendation to pay interim dividends of RUB 46 per share. RUB 1.87 billion was paid out, accounting for 16% of IFRS net profit for the nine months of 2012.
The full financial statements, as well as a presentation on performance in the 2012 fiscal year are available at www.acron.ru. The Group’s operating analysis for 2012 is detailed in the 2012 Annual Report, and a draft shall be available at www.acron.ru on April 30, 2013.
Note: The exchange rate used for currency conversions was RUB 30.37 to USD 1 as of December 31, 2012 and RUB 32.20 for USD 1.00 as of December 31, 2011. The average exchange rate was RUB 31.09 to USD 1 in 2012 and RUB 29.39. to USD 1 in 2011.
* EBITDA is calculated as operating profit adjusted to reflect depreciation of fixed and intangible assets, Forex gains or losses, and other non-monetary and non-core items.
** EBITDA calculated for last 12 months.