Acron Releases 2014 IFRS Financial Statements

Many of us will remember 2014 as a year of dramatic geopolitical events, which naturally affected the Russian economy and Russian companies. Because Acron Group chose the optimal business model it operated with confidence and posted solid financial results. 

Although the global fertiliser market was relatively stable in the past year, it did not show any growth. World fertiliser consumption was up just 0.5%, far below expectations. Competition gained strength as China increased its exports of major fertilisers, considerably limiting the growth potential of world prices. The market remained balanced due to difficulties with export supplies in some countries, including Ukraine and Egypt. Because Acron Group has diversified and balanced the structure of its sales markets, it was able to react flexibly to changes and maintained 100% sales. The Group expanded its sales geography in 2014 and currently supplies its products to 66 countries. 

With global prices for our products stagnant, we focused on reducing costs with a cost saving programme. These efforts had a positive impact on our financial performance, leveraged by the full vertical integration of the Group’s Russian companies for phosphate feedstock, as well as macroeconomic factors, such as a weaker rouble and frozen tariffs for Russia’s natural monopolies. As a result, Acron Group enhanced its competitiveness in the global context, and its EBITDA margin reached 27%, against 23% last year. 

The adjusted development strategy approved in 2013 helped us focus on the most efficient investment projects, maintaining fiscal discipline and passing the debt burden peak in the third quarter of 2014. Due to macroeconomic factors, we subsequently decreased our debt burden. Dollar-denominated net debt/EBITDA at year-end was 1.9, against 2.4 the previous year. 

In 2014, the Group demonstrated considerable progress in implementing its investment projects. The Oleniy Ruchey mine in the Murmansk region produced 891,000 tonnes of apatite concentrate. In addition to supplying apatite concentrate to our chemical operations, we started selling it in the domestic market and for export. The construction of the second stage of the Oleniy Ruchey mine is underway according to schedule and is to be completed in 2017. 

Our 2015 priorities include: completing construction and starting the test-run of the new ammonia unit, which will be the first project built since Soviet times and the most powerful unit of its kind in Russia. Ammonia-4 project is the key to reduction of the Group’s capex, improved financial performance and, as a result, increased free cash flows. 

With regard to the potash project implemented by Verkhnekamsk Potash Company (development of the Talitsky area of the Verkhnekamsk potassium and magnesium salt deposit) in Perm Krai, together with our co-investors, we have identified optimal ways to finance the potash project. Sberbank Investments acquired a stake in the project in early 2014. In 2015, we plan to complete the design engineering for the Talitsky mine and obtain state expert review approval for the main facilities of the mine and above-ground complex. This year, we will continue construction of temporary buildings and structures followed by ground freezing and shaft sinking. 

We also plan to focus on significantly reducing the Group’s debt burden in 2015 while continuing to invest heavily in strategic projects. To improve the Group’s liquidity and credit, in late December 2014 we executed a 5-year syndicated structured pre-export finance facility for up to USD 525 million with a club of international and Russian banks. This long-term loan facility helps us mitigate refinancing risks, which is especially important in the complicated Russian debt finance market since the end of 2014.