Acron Group’s Q3 2020 EBITDA Up 4%

  Today, Acron Group (Moscow Exchange and LSE: AKRN) released its consolidated IFRS financial statements for Q3 and 9M 2020.

Key Financials

• Q3 2020 revenue was RUB 29,656 million (USD 403 million), up 2% year-on-year (Q3 2019: RUB 29,143 million, or USD 452 million).
• Q3 2020 EBITDA* was RUB 8,808 million (USD 120 million), up 4% year-on-year (Q3 2019: RUB 8,468 million, or USD 131 million).
• Q3 2020 EBITDA margin reached 30%, up from 29% in Q3 2019.
• Q3 2020 net loss was RUB 3,175 million (USD 44 million) (Q3 2019: profit of RUB 5,792 million, or USD 90 million).
• At the end of Q3 2020, net debt in US dollar equivalent stood at USD 1,427 million, up 10% from USD 1,300 million at the end of Q2.Net debt/LTM EBITDA** in US dollar equivalent was 3.2 at the end of Q3, up from 2.9 at the end of Q2.

Operating Results

• In Q3 2020, commercial output of key products was 2.036 million tonnes, up 2% year-on-year. In 9M 2020, it was 5.957 million tonnes, up 3% year-on-year.
• In Q3 2020, sales of key products totalled 1.925 million tonnes, down 2% year-on-year. In 9M 2020, it was 5.784 million tonnes, almost unchanged year-on-year.

Alexander Popov, Chairman of Acron Board of Directors, commented on the results:

‘In 2020, Acron Group’s financials have grown incrementally. The third quarter saw the highest EBITDA in US dollar equivalent since Q4 2019. Rouble-denominated EBITDA was up year-on-year. Net profit decreased due to a foreign exchange loss, but this is non-cash and, therefore, not representative. Our financials improved over recent quarters due to recovering prices for mineral fertilisers, and a weaker rouble. We expect these factors to continue to support our financial performance in the coming periods.

‘In Q3, the Group’s debt burden increased due to distribution of annual dividends and higher working capital. We believe we have passed our debt peak and expect it to decrease in the coming quarters.

‘In November, we upgraded the Ammonia-4 unit and expanded its capacity by 70,000 tpa. Another major current project is Urea 6+, where we are increasing the unit’s capacity by 520,000 tpa. Until the debt burden normalises, we will keep CAPEX at a lower level compared with previous periods’.

APPENDIX

Notes on Key Items in the Financial Statements

Financial Performance

In Q3 2020, Acron Group’s revenue was up 2% to RUB 29,656 million year-on-year due to a 14% increase in the average USD-RUB exchange rate. Global US dollar-denominated prices for the Group’s key products decreased significantly (see the table below). Sales of the Group’s key products were down 2%. In 9M 2020, revenue was RUB 86,088 million, down 4% year-on-year.

In Q3, the cost of sales was down 5% year-on-year to RUB 15,081 million, mainly due to effective cost controls.

Third quarter selling, general, and administrative expenses were RUB 2,011 million, almost unchanged year-on-year.

Transportation expenses were up 22% in Q3 to RUB 6,477 million year-on-year, mainly due to higher logistics costs abroad resulting from a weaker rouble, and higher US dollar-denominated costs of container shipments to China and South-East Asia.

Third quarter EBITDA was up 4% year-on-year to RUB 8,808 million. EBITDA margin was 30% in the same period, up from 29% in Q3 2019. In 9M 2020, EBITDA was down 18% year-on-year to RUB 24,116 million.

In Q3 2020, Acron Group posted a net foreign exchange loss from revaluation of assets and liabilities in the amount of RUB 8,651 million (in Q3 2019, the Group posted a loss of RUB 284 million). In Q3 2020, the loss from change in the fair value of derivatives was RUB 109 million, against a RUB 2,119 million gain in Q3 2019.

Acron Group generated a net loss of RUB 3,175 million in Q3 2020, against a profit of RUB 5,792 million in Q3 2019. All told, the 9M 2020 net loss reached RUB 4,161 million, against a profit of RUB 22,988 million in 9M 2019.

Market Trends

In Q3 2020, global urea prices recovered after a seasonal setback in Q2, driven by strong demand from India, which has also continued into Q4, coupled with seasonal demand from Brazil. Urea prices have been further propped up by strong global gas prices. Seasonal demand from Europe and the United States is expected to support the market in Q1 2021.

The third quarter saw AN prices recover after a Q2 seasonal setback, and they have remained high in Q4 as seasonal demand for AN picks up in the Russian market and urea prices recover. In Q3, UAN prices were in a downward spiral due to low seasonal demand in the United States, a key UAN market, and have remained low.

Although Q3 NPK prices declined slightly, the premium to the basic product basket remained relatively high at approximately 20%. In Q4, NPK prices have begun to recover due to higher prices for urea and DAP.

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

The full version of Acron Group’s financial statements is available at www.acron.ru/en

Note: The exchange rate used for currency conversion was RUB 79.6845 to USD 1 as of 30 September 2020 and RUB 61.9057 to USD 1 as of 31 December 2019. The average exchange rate for the first nine months of 2020 was RUB 70.7778 to USD 1. The average exchange rate for the first nine months of 2019 was RUB 65.0789 to USD 1.

* EBITDA is calculated as operating profit adjusted for depreciation and amortisation, foreign exchange gain or loss on operating transactions, and other non-cash and extraordinary items.

** LTM EBITDA is EBITDA calculated for the past 12 months.

 

• IFRS Statements, Q3 2020 pdf, 1.72 Mb