Today Acron (Moscow Exchange and LSE: AKRN) released its consolidated IFRS financial statements for the first quarter of 2016.
- Revenue was RUB 27,597 million (USD 370 million), almost no change year-on-year (Q1 2015: RUB 27,653 million)
- EBITDA* was down 11% year-on-year to RUB 11,056 million (USD 148 million) (Q1 2015: RUB 12,413 million)
- EBITDA margin was 40%, down from 45% year-on-year
- Net profit was up 79% year-on-year to RUB 12,657 million (USD 170 million) (Q1 2015: RUB 7,067 million)
- Net debt was down 15% to RUB 43,279 million (31 December 2015: RUB 51,185 million). In dollar equivalent, net debt was down 9% to USD 640 million from USD 702 million
- Net debt/LTM EBITDA** was 1.1, against 1.2 as of 31 December 2015.
- Output of key products was 1,589,000 tonnes, down 1% year-on-year
- Sales of key products totalled 1,626,000 tonnes, up 7% year-on-year.
Chair of Acron’s Board of Directors Alexander Popov comments on the results:
“Increased sales achieved through top performance at our Russian production facilities allowed Acron Group to post good financials. With the rouble weak in the first quarter of 2016, we almost completely offset lower global prices for our products. Due to increased net profit, we decreased our debt burden to the lowest level since 2007.
“Taking into consideration the Group’s sustainable financial position, the annual general meeting of JSC Acron held on 26 May 2016 resolved to pay dividends at the rate of RUB 180 per share, for an aggregate amount of RUB 7.3 billion from 2015 profit as recommended by the Board of Directors”.
Notes on Key Items in the Financial Statements
The Group’s revenue in the first quarter of 2016 was RUB 27,597 million and remained unchanged year-on-year. In the reporting period, global fertiliser prices decreased 10-40% in dollar equivalent, which was almost offset by a 7%-growth in sales and a weaker rouble exchange rate. In the first quarter of 2016, the average RUB to USD exchange rate was 20% lower year-on-year.
Average global indicative prices for the Group’s main products in the first three months of 2016 were: USD 326 per tonne FOB for NPK 16-16-16; USD 186 per tonne FOB for ammonium nitrate; USD 194 per tonne FOB for urea, and USD 152 per tonne FOB for UAN.
The cost of goods sold in the reporting period was RUB 13,397 million, up 8% year-on-year. The higher cost of goods was mainly due to increased sales of products manufactured at the Russian facilities, higher personnel costs, cost of natural gas and other materials and components. The higher cost for the Group was partly offset by lower costs at Hongri Acron due to its decreased output.
Selling, general and administrative expenses were up 7%, mainly due to indexation of rouble-denominated wages at Russian facilities and foreign currency-denominated personnel expenses, including at the Group’s foreign facilities. Transportation expenses were up 22% due to indexation of railway tariffs and reclassification of certain costs to deliver raw materials from Cost of Production to Transportation Expenses.
In the first quarter of 2016, EBITDA was RUB 11,056 million, down 11% year-on-year. EBITDA margin was 40%, down from 45% year-on-year. Veliky Novgorod-based Acron and Dorogobuzh facilities operated at 37% and 39% margin, respectively. NWPC reached a record high of 67% for EBITDA margin due to expanded operations and streamlined costs. In the reporting period, Hongri Acron posted negative margin of -15%, as it was not running at full capacity in the challenging market conditions. The Group’s management is making every reasonable effort to improve the situation at this facility.
Based on the results of the first quarter of 2016, the Group posted a net exchange profit of RUB 1,876 million from revaluation of assets, loans and liabilities against a loss of RUB 1,362 million year-on-year.
In the first three months of 2016, the Group’s share in Grupa Azoty S.A.’s profit calculated based on equity accounting was up year-on-year to RUB 1,170 million from RUB 1,015.
In the reporting period, Acron Group posted profit on the sale of investments in the amount of RUB 5,461 million, which was mainly due to the sale of its entire stake in PJSC Uralkali.
As a result, net profit for the first quarter of 2016 was up 79% year-on-year to RUB 12,657 million.
In the first quarter of 2016, net operating cash flow was down 61% to RUB 3,816 million (Q1 2015: RUB 9,771 million) due to increased working capital and reduced profit from operations.
Net cash generated from investments in the reporting period was RUB 1,662 million against a negative value of RUB 3,445 million in the first quarter of 2015. Capital investments increased to RUB 4,040 million in the reporting quarter from RUB 3,672 million in the first quarter of 2015. Capital expenditures were more than offset by the proceeds from sales of available-for-sale investments.
Net cash generated from financing activities in the first quarter of 2016 was RUB 4,160 million against RUB 6,043 million in first three months of 2015. The cash inflow was caused by an excess of obtained borrowings over repayments.
In the reporting period, net debt in rouble equivalent was down 15% year-on-year to RUB 43,279 million. The relative debt burden also decreased, and net debt / LTM EBITDA in rouble terms was 1.1, against 1.2 at the beginning of the year. This reduced debt burden was mainly due to proceeds from sale of investments.
In the first quarter of 2016, global prices for nitrogen fertilisers decreased due to oversupply. Prices for urea reached their 2006 minimum and were lower than many producers’ cost of production. Under these conditions, China slashed its exports of urea in the reporting period 33% year-on-year, which helped the market find a new balance. The Russian market demonstrated sustainable growth in the first quarter of 2016. Supplies of Acron Group’s products to the domestic market in physical terms were up 24%. Prices may also be supported by recovered seasonal demand in Latin America and India at midyear. The nitrogen fertiliser market remains highly competitive and volatile, and global demand continues to grow.
In the first quarter, prices in potash and phosphate segments were also suppressed, affecting prices for NPK complex fertilisers, which were down 10% year-on-year.
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 67.6076 to USD 1 as of 31 March 2016 and RUB 72.8827 to USD 1 as of 31 December 2015. The average exchange rate for the first three months of 2016 was RUB 74.6283 to USD 1. The average exchange rate for the first three months of 2015 was RUB 62.1919 to USD 1.
* EBITDA is calculated as operating profit, including the share of profit of equity accounted investees, adjusted for depreciation of fixed and intangible assets, Forex gains or losses, and other non-monetary and non-core items.
** LTM EBITDA is EBITDA calculated for the past 12 months.