• Operating
profit amounted to 5.3 bln RUB, compared with 6.7 bln RUB in
January-March 2013.
• Adjusted
EBITDA comprised 6.2 bln RUB, compared to 7.6 bln RUB in
January-March 2013.
• Adjusted
EBITDA margin amounted to 32%, compared to 37% in January-March 2013.
Moscow,
Russia (May 30, 2014) -- URALCHEM,
OJSC (hereinafter URALCHEM or the Company), the
Russian holding company of the URALCHEM Group, one of the largest
producers of nitrogen fertilizers in Russia, announced its IFRS
financial results for the first quarter of 2014.
The
Group’s Key Financial Figures (million RUB)
|
|
January – March,
2014
|
January – March,
2013
|
Year-on-year change,
%
|
|
Revenue
|
19,408
|
20,776
|
-7%
|
|
Gross profit
|
11,221
|
11,956
|
-6%
|
|
Gross profit margin
|
58%
|
58%
|
|
|
Operating profit
|
5,269
|
6,671
|
-21%
|
|
Operating profit margin
|
27%
|
32%
|
|
|
Foreign exchange loss from financing activities
|
(13,562)
|
(404)
|
|
|
Net (loss)/profit |
(8,900)
|
4,838
|
|
|
Net (loss)/profit
margin |
-46%
|
23%
|
|
|
Adjusted EBITDA
|
6,197
|
7,588
|
-18%
|
|
Adjusted EBITDA margin
|
32%
|
37%
|
|
|
Cash generated from operating activities
|
5,557
|
5,057
|
10%
|
Revenue
for the first quarter of 2014 decreased by 7% to 19.4 bln RUB,
compared to 20.8 bln RUB in January - March, 2013. Operating profit
amounted to 5.3 bln RUB (23% of revenue) compared with the operating
profit of 6.7 bln RUB (32% of revenue) in the first quarter of 2013.
Adjusted
EBITDA comprised 6.2 bln RUB, compared to 7.6 bln RUB, a decrease of
18%. The adjusted EBITDA margin for the first quarter of 2014
amounted to 32% of revenue, compared with 37% of revenue for the
first quarter of 2013.
The
negative net profit is the result of so-called paper losses. The bulk
of the company's debt is denominated in dollars, and following the
sharp rise in the foreign exchange rate in the first quarter of 2014,
the company has recognized a foreign exchange loss from financing
activities to the amount of 13.56 billion roubles in the reporting
period. Of this amount, 13 billion roubles is the exchange difference
on the loans, on which there have been no real cash flows. Sharp
fluctuations in exchange rates have a significant effect on the net
income indicator. For example, movement of the dollar exchange rate
in the opposite direction in April and May provided for positive
exchange rate differences on the same loans to the total of about 6.5
billion roubles.
In
addition, the financial result from operations includes foreign
exchange loss in the amount of 957 million roubles arising on
intercompany liability, while the corresponding gain is reflected
directly in the statement of changes in equity. If these exchange
differences were netted off, EBITDA could reach 7.15 billion roubles
and its margin would be 37%.
Thus,
against the background of declining global prices for major
fertilizers, in the first quarter of 2014, URALCHEM showed the
sustainability of its business model. Whilst its financial
performance was lower in absolute terms, the company has maintained
high margins (profitability) and continued to generate a stable
positive cash flow. In response to market trends, the company has
increased production and sales of key products, ammonium nitrate and
its derivatives, as well as continued its efforts to improve the
efficiency of business processes, to increase productivity and
profitability and to reduce operating costs.
Markets
The
first quarter is traditionally a period of significant market
activity and prices are being supported by strong demand in premium
markets, the US and Europe. However, despite the rise in prices in
the first half of the quarter, the average values of quotes were
lower than in the first quarter of 2013. In the second and third
quarters of 2014 the market expects oversupply associated with the
start of Chinese exports. The main demand during the period is
expected from South Asia and Latin America, ie regions in which the
price is traditionally low. The volume of demand is assessed as
insufficient to absorb all available supplies from China and the
Middle East. As a result of the oversupply, price cuts will
inevitably lead to a halt in production in regions with high costs,
including Europe and the CIS.
In
January, the activity in ammonia markets stayed low. Quotes
based on FOB Yuzhnyi Port remained around 410 to 430 dollars/tonne.
In February, prices for ammonia in the ports of the CIS began to
rise, which continued until the end of the quarter. Gazprom's
announcement about cancellation of discounts on natural gas prices
increased interest in purchasing in the Yuzhnyi Port; the lack of
available supplies in Trinidad heightened interest of US importers in
purchasing in the CIS. The main growth in demand was due to the start
of direct application of ammonia and increased requirements for raw
materials from producers of phosphate fertilizers. In March, prices
reached 474 dollars/tonne. However, in general, for the quarter the
prices amounted to 438 dollars/tonne, which is 22.2 % lower than a
year before.
The
greatest activity for urea during the quarter was shown in US,
Europe and Brazil. The US entered the purchasing season with low
stocks. In January, prices in the US rose by 21% and the rapid rise
in prices in the United States resulted in an increase in prices in
the major sources of shipment: in the Port of Yuzhnyi by 15%, in
Egypt also by 15%, in the Middle East by 16%. Prices were also
supported by a lack of free product in North Africa and the Middle
East. However, beginning with the last week of January, the market
trend changed. The devaluation of the Turkish lira and the Brazilian
real impeded imports from these countries and by the end of the
quarter, prices returned to January levels. The average quotes for
urea FOB Baltics in March totalled 314 dollars/tonne. The average
urea price for the quarter was $330/tonne, which is 14.3 % lower than
a year before.
January
and February marked steady growth of quotations for ammonium
nitrate caused by deficiency of the product available for export,
due to the supply to the Russian domestic market. FOB Baltics quotes
grew from $300/tonne up to $320/tonne. But from the beginning of
March there was change in the trend due to lower domestic demand. In
general, during the first quarter of 2014 quotes amounted to
$308/tonne, which is 8.6% lower than a year before.
In
the segment of phosphate fertilizers (MAP/DAP) average
quotations (FOB Black Sea) for the first quarter of 2014 amounted to
$469 dollars/tonne, which is 6% lower than a year before. Since
mid-March, demand in this segment declined markedly; importers,
relying on high inventories, put off new purchases in anticipation of
more lucrative offers. In the second quarter, market participants
expect lower prices.
Sales
Sales
figures of the URALCHEM Group (thousand tonnes):
|
Name of product
|
January – March, 2014 |
January – March, 2013 |
Year-on-year change, % |
|
Ammonium nitrate and its derivatives
|
710 |
613 |
16%
|
|
Urea
|
285 |
295 |
-3%
|
|
Ammonia
|
182 |
195 |
-7%
|
|
Phosphate fertilizers
|
37
|
142
|
-74%
|
|
NPK fertilizers
|
125
|
170
|
-26%
|
|
Other chemicals, including ammonium nitrate for
industrial use
|
175 |
172 |
2%
|
|
Total
|
1,514 |
1,587 |
-5%
|
Financial
Situation
Cash
generated from operating activities in the first quarter of 2014
amounted to 5.6 bln RUB, compared to 5.06 bln RUB in the first
quarter of 2013.
As
at 31 March 2014, the Company's net debt amounted to 163.11 bln RUB.
The debt burden increased after the Company received a loan from VTB
Capital to finance the purchase of 19.99% of shares in OJSC
"Uralkali", which as at 31 March 2014 amounted to 146,01
bln RUB
For
more information, please visit the Company web site
http://www.uralchem.com
or use the following contact information:
Public
Relations Department
URALCHEM,
OJSC
Tel:
+7 (495) 721 89 89
Email:
pr@uralchem.com
URALCHEM,
OJSC is one of the largest producers of nitrogen and phosphate
fertilizers in Russia and the CIS with production capacities of over
2.8 million tonnes of ammonia, 2.5 million tonnes of ammonium
nitrate, 1.2 million tonnes of urea and 0.8 million tonnes of
phosphate and compound fertilizers per year. URALCHEM, OJSC ranks
first in Russia for production of ammonia and ammonium nitrate, and
second for the production of urea. Key production assets of URALCHEM,
OJSC include Azot Branch of URALCHEM, OJSC in Berezniki, Perm Region;
OJSC Minudobrenia, Perm; MFP Kirovo-Chepetsk Chemical Works, OJSC
Branch in Kirovo-Chepetsk, Kirov region; Voskresensk Mineral
Fertilisers, OJSC in Voskresensk, Moscow region.
Some
of the information in this press release may contain projections or
other forward-looking statements regarding future events or the
future financial performance of URALCHEM. We wish to caution you that
these statements are only predictions. We do not intend to update
these statements and our actual results may differ materially from
those contained in our projections or forward-looking statements,
including, among others, the achievement of anticipated levels of
profitability, growth, cost and synergy of our recent acquisitions,
the impact of competitive pricing, the ability to obtain necessary
regulatory approvals and licenses, the impact of developments in the
Russian economic, political and legal environment, financial risk
management and the impact of general business and global economic
conditions.
Annex
to the press release about the financial results for the first
quarter of 2014
EBITDA
is a profit / loss from financial and economic activities during the
reporting period, before deduction of income tax on profits, income
and interest costs, depreciation and amortization. "Adjusted
EBITDA" is EBITDA for the reporting period before goodwill,
profit / loss from associates, profit / loss on foreign exchange
differences arising on financial performance and profit / loss on
operations with derivative financial instruments. Adjusted EBITDA is
operating profit before depreciation and amortization and financial
results of operations with derivative financial instruments. In
accordance with International Financial Reporting Standards ("IFRS"),
depreciation and amortization are included in cost structure, and in
the selling, general and administrative expenses. IFRS does not
require the disclosure and does not describe the calculation of
EBITDA and adjusted EBITDA, among other financial indicators, so they
can not substitute for net profit for the period when evaluating the
results of operations or the measure of cash provided by operating
activities when evaluating liquidity. Approach to the calculation of
EBITDA and adjusted EBITDA, as described earlier, may not coincide
with the approaches used by other companies, therefore, comparability
may be limited. We believe that EBITDA and adjusted EBITDA provide
useful information to investors because they are indicators of the
stability and efficiency of our business and our ability to fund
discretionary spending such as capital expenditures, the acquisition
of subsidiaries and other investments, as well as indicators of our
ability to incur and service debt. IFRS classifies depreciation and
amortization to operating costs, while in fact they are distributed
to the current period non-cash expenses for the acquisition or
creation of fixed assets, incurred in previous periods, and are not
affiliated with the movement of funds.
Calculation
of EBITDA (mln RUB)
|
|
January – March,
2014
|
January – March,
2013
|
|
|
Net
(loss)/profit
|
(8,900) |
4,838 |
|
|
Add:
Income tax
Interest and other finance income
Interest and other financie expense
Depreciation
and amortisation
|
|
|
|
|
(1,324) |
911 |
|
|
|
(11) |
(26) |
|
|
|
1,929 |
539 |
|
|
|
928 |
917 |
|
|
|
Share of loss of associates
|
13 |
5 |
|
|
Foreign exchange loss from
financing activities
|
13,562
|
404
|
|
|
Adjusted EBITDA
|
6,197 |
7,588 |
|
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