Acron Group’s 2020 IFRS Revenue Up 4% London Stock Exchange:AKRN8 min read
19 March 2021
Acron Group’s 2020 IFRS Revenue Up 4%
Today Acron (Moscow Exchange and LSE: AKRN) released its audited consolidated IFRS financial statements for 2020.
- Revenue was up 4% year-on-year to RUB 119,864 million (USD 1,661 million) from RUB 114,835 million (USD 1,774 million).
- EBITDA* was down 1% year-on-year to RUB 35,311 million (USD 489 million) from RUB 35,749 million (USD 552 million).
- EBITDA margin was 29%, against 31% a year before.
- Net profit was down to RUB 3,836 million (USD 53 million) from RUB 24,786 million (USD 383 million) a year before.
- Net debt in dollar terms was up 11% to USD 1,348 million from USD 1,215 million as of 2019 year-end.
- Net debt/EBITDA ratio in dollar terms increased to 2.8 from 2.2 as of 2019 year-end.
- Output of key products stood at 7,976,000 tonnes, up 7% year-on-year.
- Sales of key products totalled 7,807,000 tonnes, up 3% year-on-year.
Alexander Popov, Chairman of Acron’s Board of Directors, commented on the results:
‘Early 2020 was challenging as global prices for mineral fertilisers dropped to multi-year lows, and the situation was aggravated by the COVID-19 pandemic in spring. However, most countries made agriculture and related industries a priority, which prevented significant lockdowns and suspended production. Acron Group took all necessary measures to protect the health of its employees, and there have been no outbreaks at any of the Group’s facilities.
‘In 2020, Acron Group’s sales continued to grow and reached 7.8 million tonnes. In response to weak UAN prices, the Group shifted its production structure towards products with a greater margin, including granulated urea and AN. The sales geography covered 74 countries. We increased sales to growing markets in Latin America and our priority Russian market, retaining our leading market position in both regions.
‘The Group’s 2020 financial results demonstrated quarterly growth driven by increased sales, rouble depreciation, and price recovery. In 2020, rouble-denominated revenue was up 4% year-on-year, EBITDA decreased 1%. Net income was down due to non-monetary items such as exchange rate differences and is therefore not representative.
‘In 2020, Acron Group continued to pursue its investment programme, with capital investments totalling USD 249 million. We have successfully implemented three investment projects: construction of a new nitric acid unit and a new urea granulation unit, and upgrades to the Ammonia-4 unit. The Group also continued its Urea 6+ project, which is expected to come on stream in Q2 2021. We have launched three additional projects to support future growth. At our Novgorod site, we are building a calcium nitrate production facility with a capacity of 100,000 tpa and upgrading the Ammonia-3 unit to increase its capacity by 200,000 tpa. These projects are scheduled for commissioning in 2022 and 2023, respectively. At our Dorogobuzh site, we are building a nitric acid unit and increasing capacity at the existing AN units to boost AN output by 180,000 tpa. This project is expected to come on stream in late this year. The Group’s planned capex for 2021 is approximately USD 210 million.
‘The COVID-19 pandemic affected the implementation of our Talitsky potash project, and we postponed the execution of project financing due to increased uncertainty. That said, in 2020 we completed the construction of two vertical shafts and plan to resume raising the project financing in the near future.
‘In early 2021, the mineral fertiliser markets showed significant improvement, with global prices actively recovering from multi-year lows amid strong demand in various regions. However, we remain cautiously optimistic and focused on controlling the Group’s debt burden.
‘In line with the interests of our shareholders, Acron Group remains committed to a stable dividend pay-out, with a total of US 228 million allocated as dividends in 2020. We still have the goal of paying out at least USD 200 million per calendar year in dividends, but in 2021 we expect the Board of Directors to issue its recommendations regarding allocation of the major portion of the amount towards the end of the year. We believe that this measure, combined with limiting capex, will allow us to reduce the Group’s debt burden’.
Notes on Key Items in the Financial Statements
Acron Group’s 2020 revenue was RUB 119,864 million, up 4% year-on-year due to a 3% increase in sales and an 11% increase in the average dollar to rouble exchange rate. Lower year-average prices for all the Group’s products prevented revenue from showing stronger growth, which was in the range of 8-16%.
Average Indicative Prices, FOB Baltics/Black Sea
In the reporting period, the cost of sales was up 10% year-on-year to RUB 65,817 million, mainly due to higher sales, increased costs for repairs and maintenance, and growing depreciation and amortisation after commissioning new units and completing upgrades to existing production facilities.
Selling, general and administrative expenses were up 6% to RUB 9,048 million due to higher staff costs caused by indexed rouble-denominated wages of employees at Russian facilities and staff costs denominated in foreign currency, including at the Group’s foreign companies. At the same time, business trip and representation expenses decreased due to remote work. Commission fees were down due to a decrease in UAN sales to the United States.
Transportation expenses were up 1% to RUB 21,642 million. The higher cost of ocean freight and container transportation was exaggerated by a weaker rouble exchange rate. Ocean freight costs also increased because of a shift in focus to Latin America from Europe and the United States. Higher container transportation costs were driven by an increase in dollar rates to China and Southeast Asia. However, the significant growth of sales in Russia and reduced export restrained costs to some extent. Railway tariff costs were down as Dorogobuzh increased its sales to the domestic market.
EBITDA was down 1% year-on-year to RUB 35,311 million. In the reporting period, EBITDA margin was 29%, against 31% in 2019. Veliky Novgorod-based Acron, Dorogobuzh, and NWPC operated at margins of 30%, 23%, and 26%, respectively.
Interest expense increased to RUB 3,285 million from RUB 1,115million in 2019 due to lower expenses on loans capitalised as part of the cost of construction in progress and the cost of a mining licence.
Based on 2020 results, the Group posted a net exchange loss of RUB 10,735 million, driven by the revaluation of assets, loans and liabilities, against a RUB 7,013 million profit in 2019. In the reporting period, the loss from transactions with derivatives, including payment of the accumulated return on Sberbank Investments LLC participation in Verkhnekamsk Potash Company (VPC) and the revaluation of the fair value of the existing options for shares in VPC, was RUB 4,398 million against a RUB 1,445 million gain in 2019.
In 2020, net profit was RUB 3,836 million, down from RUB 24,786 million a year before.
In 2020, net operating cash flow was RUB 26,190 million, down 7% year-on-year, mainly due to a RUB 2,186 million increase in working capital against a decrease of RUB 2,084 million in 2019.
Net cash used in investing activities in 2020 came in at RUB 17,181 million, against RUB 19,054 million in 2019. Capital expenditures were down 6% to RUB 17,946 million from RUB 19,030 million in 2019. In dollar equivalent, capital expenditures were USD 249 million. Capex increased at Novgorod-based Acron due to a number of investment projects under development there. On the other hand, capital expenditures at Dorogobuzh dropped from last year’s high as the ammonia unit upgrade was completed.
Net cash used in financing activities in 2020 was RUB 7,392 million, slightly up from RUB 7,328 million in 2019. In 2020, the Group sold a 10.1% stake in VPC to OTKRITIE Asset Management Ltd. and repurchased a 10% stake in VPC from Sberbank Investments LLC, which was subsequently sold to VTB Bank (Europe) SE. The sale of these shares brought in RUB 11,883 million. The amount allocated for the acquisition of shares, which also includes the accumulated partner’s return from participation in the potash project, amounted to RUB 8,105 million. In 2020, the Group repurchased Acron shares on the open market for RUB 9,465 million, against RUB 1,330 million in 2019. In the reporting period, RUB 16,448 million were allocated for dividend payments, up from RUB 14,313 million in 2019. In dollar equivalent, dividend payments in 2020 were USD 228 million, up from USD 221 million in 2019. Net proceeds from borrowings in 2020 amounted to RUB 16,478 million, against RUB 8,840 million in 2019.
Total debt in dollar equivalent as of 2020 year-end was USD 1,558 million, up 11% year-on-year from USD 1,398 million. Net debt also increased 11% to USD 1,348 million, against USD 1,215 million as of 2019 year-end. At the end of the reporting period, net debt/EBITDA in dollar equivalent was 2.8, against 2.2 on 31 December 2019.
In 2020, global consumption of mineral fertilisers continued to grow despite the pandemic because of government support for farmers in many countries, including measures to ensure uninterrupted mineral fertiliser supplies. According to the International Fertilizer Association, the global consumption of mineral fertilisers in 2020 increased 2.2% to 191.4 million tonnes of nutrients. Consumption of nitrogen fertilisers was up 2.0%, phosphorous was up 3.2%, and potash was up 1.6%.
Global urea prices remained weak in H1 2020 after declining in 2019, but they recovered in H2 due to a strong demand, mainly in India, Brazil, and the United States. Urea prices were additionally supported by higher global prices for natural gas in H2, which increased the cost of urea production in several countries. Still, year-average prices for urea remained below 2019.
In Q1 2021, global urea prices showed rapid growth. Prices in the Baltic increased from USD 250 to USD 350 FOB, driven by strong seasonal demand in Europe and the United States, the limited amount of urea available for export from China, further increases in global gas prices, and record-high prices for grain crops. Urea purchases by India and the start of seasonal demand in Brazil in April are expected to further support the market. However, once the season is over in Europe and the United States, and Chinese export increases, the market may face an oversupply.
Average AN and UAN prices for 2020 followed the trend set by urea prices and remained below 2019 values; however, Q1 2021 saw both AN and UAN take off.
NPK prices stabilised in 2020 after a 2019 decline and began to recover at year-end, supported by positive price dynamics in the nitrogen and phosphorous segments. The NPK premium over the basic product basket remained around 20%. In the first quarter of 2021, NPK prices continue to grow.
Average Indicative Prices, FOB Baltic Sea/Black Sea
|USD/t||Q4 2020||Q3 2020||Q4 2019||Q4 2020/
Q3 2020 change
Q4 2019 change
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 73.8757 to USD 1 as of 31 December 2020 and RUB 61.9057 to USD 1 as of 31 December 2019. The average exchange rate for 2020 was RUB 72.1464 to USD 1; the average exchange rate for 2019 was RUB 64.7361 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.
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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 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.