OREANDA-NEWS. PhosAgro ("PhosAgro" or "the Company") (Moscow Exchange, LSE: PHOR), one of the world's leading vertically integrated phosphate-based fertilizer producers, today announces its reviewed condensed consolidated IFRS financial results for the six months ended 30 June 2014. PhosAgro earned a net profit for the period of RUB 8.1 billion (USD 231 million), compared to RUB 4.8 billion (USD 154 million) in 6M 2013. Basic and diluted earnings per share came to RUB 60 (USD 1.72) for 6M 2014, compared to RUB 33 (USD 1.06) in 6M 2013.

Production, sales and logistics flexibility:

During the first six months of 2014, PhosAgro's revenue and sales volumes benefited from the Company's strategy of enhancing production flexibility combined with strong global demand: total fertilizer production and sales volumes grew year-on-year by 3% and 4%, respectively. Revenue in 6M 2014 was 6% higher year-on-year, supported by year-on-year increases of over 6% and 2% in average realised prices for export DAP/MAP and NPK, respectively.

Strategic developments:

In January 2014, the Group signed a USD 440.6 million loan agreement with the Japan Bank for International Cooperation (JBIC) and a group of banks consisting of Bank of Tokyo-Mitsubishi (BTMU), Citibank Japan and Mizuho Bank. The proceeds from the loan are being used to fund construction of a new 760 ths tonnes/year ammonia plant at PhosAgro-Cherepovets.

Consolidation of ownership in production facilities and business development:

In February 2014, PhosAgro launched a new subsidiary, LLC Smart Bulk Terminal. The Company will organize the construction and subsequent operation of the new terminal at the port of Ust-Luga that will handle fertilizers produced and sold by PhosAgro. PhosAgro owns 70% of LLC Smart Bulk Terminal.

During the first six months of 2014, the holders of 10.39% of all issued shares in OJSC PhosAgro-Cherepovets accepted PhosAgro's voluntary tender offer. PhosAgro completed the acquisition of these shares in 2Q 2014.

PhosAgro's 6M 2014 net profit was RUB 8.1 billion (USD 231 million), an increase of 70% year-on-year from RUB 4.8 billion (USD 154 million) in 6M 2013. The growth in net profit was primarily due to favourable market conditions and higher prices, in rouble terms, for the main fertilizers PhosAgro produces. Revenue for the period increased by 6% year-on-year to RUB 56.7 billion (USD 1,621 million), compared to RUB 53.7 billion (USD 1,732 million) for 6M 2013. Cost savings in cost of sales and a smaller foreign exchange loss (a more detailed discussion is provided in the analysis below) also contributed to PhosAgro's strong net profit result for 6M 2014.

Operating profit for 6M 2014 was RUB 12.2 billion (USD 349 million), up 21% from RUB 10.0 billion (USD 324 million) in 6M 2013. EBITDA was RUB 16.2 billion (USD 464 million) in 6M 2014, 17% higher year-on-year. EBITDA margin increased to 29% for 6M 2014, compared to 26% in 6M 2013.

Cash flows from operating activities decreased by 7% year-on-year and amounted to RUB 13.4 billion (USD 383 million) in 6M 2014, compared to RUB 14.4 billion (USD 464 million) in 6M 2013. The Company's capital expenditure (capex) in cash terms during 6M 2014 was RUB 7.1 billion (USD 203 million), consistent with RUB 7.1 billion (USD 230 million) in 6M 2013.

Net debt at 30 June 2014 stood at RUB 45.6 billion (USD 1,357 million), up from RUB 43.8 billion (USD 1,339 million) at 31 December 2013. Most of the Company's debt is denominated in USD as a natural hedge against primarily USD-denominated sales. The depreciation of the Russian rouble against the US dollar was the primary reason for the increase of PhosAgro's net debt in RUB terms. The Company's net debt to annualised EBITDA ratio decreased to 1.4 as of 30 June 2014, from 1.8 as of 31 December 2013.

Commenting on the 6M 2014 results, PhosAgro Management Board Chairman and CEO Andrey Guryev said:

“PhosAgro's earnings in the first half of 2014 grew very strongly on the back of a significantly improved operating environment combined with our successful cost cutting initiatives. Healthy global demand for phosphate fertilizers has pushed prices up to USD 500 per tonne FOB Tampa, substantially higher than the crisis levels seen in 2H 2013, when prices bottomed around USD 350 per tonne FOB Tampa in November. While average DAP prices in the first half of 2014 remained below those recorded in 6M 2013, at USD 465 per tonne FOB Tampa vs USD 486 per tonne in 6M 2013, PhosAgro's financial results improved materially, with a gross profit margin increasing to 41% and a solid 29% EBITDA margin. These results are due to our favourable cost position and excellent production capabilities, as we were able to meet higher global demand by increasing production and sales of our fertilizers.

“In addition to delivering excellent financial results, I am pleased to report that we made significant progress on consolidating our ownership of PhosAgro-Cherepovets with the buyout of more than 10% of minority shareholders' shares in 2Q 2014, and we remain on track to achieve full 100% ownership of all our production subsidiaries by the end of this year.”