Acron Group’s H1 2021 IFRS EBITDA Hits Record High

23 August 2021

Acron Group’s H1 2021 IFRS EBITDA Hits Record High

Today, Acron Group (Moscow Exchange and LSE: AKRN) released its consolidated IFRS financial statements for H1 2021.

Key Financials

• Revenue was up 52% year-on-year to RUB 85,982 million (H1 2020: RUB 56,432 million). In US Dollar equivalent, revenue was up 42% to USD 1,158 million from USD 813 million.
• EBITDA* increased by a factor of 2.6 year-on-year to RUB 40,271 million (H1 2020: RUB 15,308 million). In US dollar equivalent, EBITDA increased by a factor of 2.5 to USD 542 million from USD 221 million.
• EBITDA margin was up to 47%, against 27% year-on-year.
• Net profit was RUB 29,678 million, against a loss of RUB 986 million year-on-year. In US dollar equivalent, net profit was USD 400 million.
  • Net debt was down 15% to RUB 84,901 million, against RUB 99,579 million as of 31 December 2020. In US dollar equivalent, net debt was down 13% to USD 1,173 million from USD 1,348 million.
  • Net debt/LTM EBITDA** denominated both in roubles and US dollars was 1.4, down from 2.8 as of 31 December 2020.

Operating Results

• Output of key products was 4.157 million tonnes, up 6% year-on-year.
• Sales of key products totalled 4.205 million tonnes, up 9% year-on-year.

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

‘Following record high operating results, we are pleased to present Acron Group’s outstanding financial results. In H1 2021, the Group's EBITDA increased by a factor of 2.5 year-on-year to USD 542 million. EBITDA margin increased from 27% to 47%. In addition, the Group reduced its debt burden, and the net debt/EBITDA ratio at the end of the reporting period was 1.4, down from 2.8 as of 31 December 2020.

‘Given the Group’s strong financial position, we stepped up the Talitsky potash project and started preparing for deep upgrades at the Ammonia 2 unit and Urea 1-4 units at our Veliky Novgorod site. All of these projects align with the Group’s ESG principles: improving equipment efficiency, preserving natural resources, and developing our footprint regions.

‘The revised increased capex budget will not affect our commitment to a stable dividend payout. The benchmark of at least USD 200 million per calendar year in dividends remains unchanged’.

APPENDIX

Notes on Key Items in the Financial Statements

Financial Performance

In H1 2021, several factors drove Acron Group’s revenue up 52% year-on-year to RUB 85,982 million, including 9% higher sales of the Group’s key products, higher global dollar-denominated prices for mineral fertilisers, and a 7% increase in the average USD-RUB exchange rate.

Average Indicative Prices, FOB Baltic Sea/Black Sea

In the reporting period, the cost of sales was up 2% year-on-year to RUB 32,465 million, mainly due to higher sales and prices for potash and electric and thermal energy, which were significantly offset by reduced depreciation and amortisation and a decline in expenses for third-party services related to rock mined at Oleniy Ruchey.

Selling, general, and administrative expenses were up 16% to RUB 5,390 million, mainly due to higher personnel costs because salaries were adjusted and foreign-currency staff costs rose as the rouble fell.

Transportation expenses were up 34% to RUB 13,890 million, driven by increased sales and a higher cost of logistics outside Russia due to a weaker rouble. Increased sales to Latin America on terms including transportation also contributed to the change in this item.

EBITDA increased by a factor of 2.6 to RUB 40,271 million. In the reporting period, EBITDA margin reached 47%, against 27% in H1 2020.

In H1 2021, the Group posted a net exchange profit of RUB 1,809 million from revaluation of assets, loans, and liabilities, against a loss of RUB 7,112 million in H1 2020. In the reporting period, financial derivatives delivered a profit of RUB 2,922 million, against a loss of RUB 2,442 million in H1 2020.

Net profit in the reporting period was RUB 29,678 million, against a loss of RUB 986 million in first six months of 2020.

Cash Flow

In H1 2021, net operating cash flow increased by a factor of 4.0 to RUB 20,431 million from RUB 5,114 million in H1 2020 because of an increase in net profit. Working capital increased RUB 11,702 million in H1 2021, while in H1 2020 it was up RUB 6,090 million.

Net cash used in investing activities in H1 2021 was up 11% to RUB 6,915 million from RUB 6,239 million in H1 2020. Capital expenditures increased 2% year-on-year to RUB 7,587 million from RUB 7,410 million. In dollar equivalent, capital expenditures were USD 102 million against USD 107 million in H1 2020.

H1 2021 net cash used in financial activities was RUB 13,633 million, against the RUB 12,400 million the Group’s financing activities generated in H1 2020. Cash outflow in the reporting period mainly consisted of RUB 13,054 million in repaid net borrowings, while cash inflow in H1 2020 resulted from net borrowings of RUB 21,871 million.

Debt Burden

On 30 June 2021, total debt was RUB 100,044 million, down 13% from RUB 115,116 million on 31 December 2020. In US dollar equivalent, total debt was USD 1,382 million, down 11% from USD 1,558 million as of the end of 2020. In the reporting period, the Group executed an amendment agreement to extend its syndicated structured pre-export finance facility, which boosted the share of long-term debt from 68% to 82%.

Net debt as of the end of H1 2021 was RUB 84,901 million, down 15% from RUB 99,579 million as of 31 December 2020. In US dollar equivalent, net debt was USD 1,173 million, down 13% from USD 1,348 million on 31 December 2020.

Net debt/LTM EBITDA at the end of H1 2021 was 1.4, against 2.8 on 31 December 2020. In US dollar equivalent, the ratio was also down to 1.4 from 2.8.

Market Trends

Global urea prices continued to grow in Q2 2021. By the end of the second quarter, Baltic FOB prices reached USD 450, a record high since 2012. This rise was driven by several factors, including continued strong seasonal demand in Europe and the United States, India’s urea purchases, high grain prices, and increased production costs due to higher global prices for natural gas. Limited urea volume available for export from China also contribute to this item. India’s and Brazil’s urea purchases are giving the market additional support in Q3 against the seasonal drop in demand in Europe and the United States.

Second-quarter AN and UAN prices increased to their highest levels since 2014 due to strong seasonal demand in the Northern Hemisphere and growth in urea prices, which are used as a benchmark for other nitrogen fertiliser prices.

NPK prices increased in Q2 2021 as well, mainly driven by higher prices for basic products (urea, DAP, and potassium chloride). The increase in basic product prices outstripped blends because of their higher liquidity, so the NPK 16-16-16 premium over the basic product basket decreased to 0-5% from the historical average of 20%.

Average Indicative Prices, USD per t, FOB Baltic/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 72.3723 to USD 1 as of 30 June 2021 and RUB 73.8757 to USD 1 as of 31 December 2020. The average exchange rate for the first six months of 2021 was RUB 74.2781 to USD 1. The average exchange rate for the first six months of 2020 was RUB 69.3714 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.

Media Contacts:

Sergey Dorofeev
Anastasia Gromova
Tatiana Smirnova
Public Relations
Phone: +7 (495) 777-08-65 (ext. 5196)

Investor Contacts:

Ilya Popov
Sergey Smirnov
Investor Relations
Phone: +7 (495) 745-77-45 (ext. 5252)

Background Information

Acron Group is a leading vertically integrated mineral fertiliser producer in Russia and globally, with chemical production facilities in Veliky Novgorod (Acron) and Smolensk region (Dorogobuzh). The Group owns and operates a phosphate mine in Murmansk region (North-Western Phosphorous Company, NWPC) and is implementing a potash development project in Perm Krai (Verkhnekamsk Potash Company, VPC). It owns transportation and logistics infrastructure, including three Baltic seaport terminals and distribution networks in Russia and China. Acron subsidiary North Atlantic Potash Inc. (NAP) holds mining leases and an exploration permit for ten parcels of the potassium salt deposit at Prairie Evaporite, Saskatchewan, Canada. Acron also holds a minority stake (19.8%) in Polish Grupa Azoty S.A., one of the largest chemical producers in Europe.

In 2020, the Group sold 7.8 million tonnes of its main products to 74 countries, with Russia, Brazil, Europe and the United States as key markets.

In 2020, the Group posted consolidated IFRS revenue of RUB 119,864 million (USD 1,661 million), with EBITDA of RUB 35,311 million (USD 489 million). Acron’s shares are traded on the Moscow Exchange and its global depositary receipts are traded at the London Stock Exchange (ticker AKRN). Acron employs over 11,000 people.

For more information about Acron Group, please visit www.acron.ru/en.