2020 was a record year for the Company. The long-term development programme allowed us to produce more than ten million tonnes of commercial products a year for the first time ever, while total fertilizer sales grew by more than 5%. Growth in fertilizer sales against a backdrop of favourable pricing environment on the global markets ensured an 11.5% increase in the Company’s EBITDA to RUB 84.3 bln. At the same time, our EBITDA margin of more than 33% remains one of the highest in the industry.
I would also like to highlight our business’s ability to generate significant cash flows despite the challenging conditions – by the end of the year our cash flow reached RUB 42.5 bln, an all-time record for the Company.
PhosAgro’s leverage is stable at 1.86x net debt / EBITDA, while CAPEX for the reporting period amounted to less than 50% of EBITDA.
We currently see a surge in demand and prices for all major types of mineral fertilizers as a result of high prices for major crops and seasonal demand in key sales markets – Europe, the domestic market of the US, and China.
On top of that, India is likely to contribute to fertilizer demand in the near term due to low carry-over stocks and, consequently, a potential early start of seasonal procurement.Alexander Sharabaiko, Deputy CEO for Finance and International Projects
Key drivers of financial results
PhosAgro’s financial performance in 2020 was materially impacted by the following key factors and events:
- surge in prices for all major types of mineral fertilizers during the year as a result of high prices for major crops and seasonal demand in key sales markets – Europe, the domestic market of the US, and China;
- limited supply of phosphate-based fertilizers due to lack of new production capacities and lower output at the beginning of the year amid the spread of COVID-19;
- shrinking phosphate-based fertilizer exports from China and other countries.
Revenue for 2020 grew by 2.3% y-o-y and amounted to RUB 253.9 bln. Revenue growth was driven by higher sales.
In 2020, lower average sales prices for phosphate- and nitrogen-based fertilizers were fully offset by a 5.3% increase in sales volumes and an 11.4% depreciation of the rouble against the US dollar.
|Item||12M 2019||12M 2020||Change y-o-y, %|
|EBITDAEBITDA is calculated as operating profit adjusted for depreciation and amortisation.||75,582||84,280||11.5|
|EBITDA margin||30.5%||33.2%||2.7 p.p.|
|Free cash flow||28,272||42,517||50.4|
|31 December 2019||31 December 2020|
|12M net debt / EBITDA||1.74||1.86|
|Sales volume, kt||12M 2019||12M 2020||Change y-o-y, %|
|Item||2019||2020||Change y-o-y, %|
|Item||12M 2019||12M 2020||Change y-o-y, %|
|Depreciation and amortisation||21,368||23,743||11.1|
|Materials and services||41,221||40,973||(0.6)|
|Phosphate rock transportation||8,641||8,134||(5.9)|
|Drilling and blasting||2,323||3,168||36.4|
|Other materials and services||20,138||19,537||(3.0)|
|Sulphur and sulphuric acid||9,165||4,360||(52.4)|
|Salaries and social contributions||12,744||13,807||8.3|
|Products for resale||6,683||9,102||36.2|
In 2020, cost of sales went down by 2.1% y-o-y, to RUB 133.3 bln. This decline amid increased output was achieved a result of a production upgrade, better self-sufficiency in raw materials, and lower feedstock prices.
Costs for raw materials decreased by 17.7% y-o-y to RUB 35.5 bln on the back of:
- a 52.4% cut in the spending on sulphur and sulphuric acid, to RUB 4.4 bln due to a decline in the sales of sulphur-rich fertilizer grades, pilot commissioning of a new sulphuric acid unit in Cherepovets at the beginning of 2020, as well as falling global prices for this feedstock;
- 10.5% lower spending on potassium chloride, to RUB 12.3 bln, amid falling global prices;
- a 50.9% decline in the spending on ammonium sulphate, to RUB 1.8 bln after our ammonium sulphate plant reached its design capacity.
Ammonia costs increased by 17.3% to RUB 4.8 bln due to higher consumption caused by the launch of the ammonium sulphate plant.
EBITDA for 2020 grew by 11.5% y-o-y and amounted to RUB 84.3 bln, with a 33.2% margin.
The growth was driven by recovering global prices for fertilizers and the completion of technological and operational upgrades. Among other contributing factors were rouble depreciation and low prices for key raw materials. EBITDA margin is one of the highest among direct competitors
In 2020, free cash flow increased 1.5x y-o-y and amounted to a record RUB 42.5 bln. The growth was driven by high EBITDA margin and efficient working capital management.
Capital investments for the year reached RUB 40.9 bln (USD 567 mln), which is equal to 49% of the 2020 EBITDA. The Company’s investments were focused around the development of the raw material base in Kirovsk, upgrade of fertilizer production and railway infrastructure in Cherepovets, launch of a new flexible line producing ammonium sulphate in Balakovo and construction of new facilities at the Volkhov site.
At the end of 2020, our net debt to EBITDA ratio stood at 1.86x. The growth compared to 31 December 2019 was a result of rouble depreciation, since most of the Company’s loan portfolio is denominated in US dollars. Net debt as at 31 December 2020 was RUB 156.9 bln (USD 2.1 bln).
|Direct economic value generated||249,583||254,854|
|Revenue from sales||Wide range of stakeholders||239,130||242,262|
|Revenue from other sales||8,995||11,617|
|Revenue from financial investments||1,458||975|
|Revenue from sale of assets||0|
|Economic value distributed||(243,077)||(247,254)|
|Operating expenses, including:|| Suppliers and contractors |
|wages and other payments to employees||(24,706)||(28,540)|
|Payments to providers of capital:||Shareholders and creditors|
|payments to shareholders||(32,244)||(38,852)|
|payments to creditors||(4,635)||(4,132)|
|Tax expenses and other payments to government:||Government||(12,108)||(11,007)|
|including income tax expense||(9,724)||(8,045)|
|Economic value retained||6,506||7,600|