URALCHEM announces full year IFRS results for the 12 months ending 31 December 2018

29.03.2019
URALCHEM announces full year IFRS results for the 12 months ending 31 December 2018

URALCHEM’s revenue in the reporting period totalled RUB110.2 billion compared to RUB93.4 billion in 2017.

Operating profit increased to RUB33.6 billion from RUB21.5 billion in 2017.

Adjusted EBITDA grew to RUB37.7 billion compared to RUB25.6 billion in 2017.

The Company’s net loss amounted to RUB25.2 billion compared to last year’s profit of RUB31.0 billion.*

TABLE 1

Key financial figures for the 12 months ending 31 December 2018 (RUB billion)

Indicator

2018

2017

Change

Revenue

110.2

93.4

18%

Gross profit

62.6

50.3

25%

Gross profit, margin

57%

54%

Operating profit

33.6

21.5

56%

Operating profit, margin

31%

23%

Net (loss) / profit

-25.2

31.0

-181%

Net (loss) / profit, margin

-23%

33%

Adjusted EBITDA*

37.7

25.6

47%

Adjusted EBITDA, margin

34%

27%

*The Company's adjusted EBITDA is calculated as depreciation-adjusted operating profit.

Moscow, Russia – 26 March 2019. URALCHEM (hereinafter URALCHEM, the Company or Group), the holding company of URALCHEM Group, one of the largest producers of nitrogen fertilisers in the Russian Federation, announced preliminary unaudited IFRS financial results for the 12 months ending 31 December 2018.

Key financial figures for the 12 months ending 31 December 2018

The Company's revenue was mainly influenced by the growth in sales volume of + 4% from 2017 (+250 thousand tonnes, of which +131 thousand tonnes represented an increase in production volumes in 2018), along with the redirection of products from exports to the domestic market. The sales structure and sales channels also had a positive effect on revenue: sales growth in the premium industrial segment (nitrate, urea, etc.), better sales of premium niche products (calcium nitrate, water-soluble grades) and the development of a domestic distribution network with extra margin sales in the high season.

According to the results for 2018, the Group generated a loss of RUB34.1 billion, which is significantly lower than the 2017 figure. One of the reasons for the decline in this indicator was the revaluation of foreign currency assets and liabilities of the Group at the official USD/RUB exchange rate at the end of the reporting year. In 2018, the exchange loss related to operating and financial activities (net) amounted to RUB45.6 billion; while in 2017, the same indicators generated a profit of RUB12.2 billion. The Group’s financial results are also significantly influenced by its share in the profit/loss of PJSC Uralkali, URALCHEM’s strategic investment. In 2018, the loss from the Company’s share in PJSC Uralkali amounted to RUB11.9 billion compared to the profit of RUB16.1 billion in 2017.

URALCHEM’s adjusted EBITDA in the reporting period amounted to RUB37.7 billion, a 47% increase year-on-year. The main factor behind the growth in EBITDA was the marginal profit growth factor. The EBITDA margin in 2018 was 34% compared to 27% in 2017.

Markets

In 2018, ammonia prices smoothly oscillated with a minimum of US$220 in April and a maximum of $345 in October (FOB Youzhny). The ongoing commissioning of new facilities and a reduction in US imports put pressure on the market, whereas growing demand in industrial consumption segments in Asia and in the production of phosphate fertilisers, alongside regular scheduled and unscheduled interruptions in ammonia production, pushed prices up.

At the beginning of 2018, urea prices fluctuated at US$220, and in the middle of the year, they began to grow steadily reaching US$307 in October (FOB Baltics). The rise in urea prices during the year was influenced by a sharp decline in China’s exports, which offset the oversupply caused by capacity expansion in other countries.

The price for ammonium nitrate in 2018 demonstrated an uncharacteristic seasonal behaviour: a decrease in the peak demand season to a minimum of US$157 in May (FOB Baltics) and US$178 in December and an increase in the off-season to US$217 in August.

In the global phosphate fertiliser market, MAP prices (FOB Baltics) increased from US$385 at the beginning of the year to US$433 in September, with an annual average price of US$413, which was 18.7% higher than in 2017.

NPK prices (10-26-26) in 2018 grew smoothly from US$290 at the beginning of the year to US$350 at the year-end, in line with the rising cost of the main components: phosphates and potassium chloride.

Production

URALCHEM Group’s commercial output in 2018 reached 6.45 million tonnes, 2% more (131 thousand tonnes) year-on-year.

The increase in the output of ammonium nitrate and its derivatives amounted to 3% because of the higher daily performance of nitric acid plants. The output of commercial ammonia decreased by 5% due to an increase in the demand for ammonia used in the production of nitrate and complex fertilisers. Urea output declined by 2% following extended overhauls: at Azot Branch, the repair time increased from nine days in 2017 to 17 days in 2018, and from eight days in 2017 to 15 days in 2018 at PMU Branch.

Compared to 2017, the output of complex fertilisers grew by 9% due to higher daily granulation capacity in the MAP Shop No. 1 for the production of PK 5-55 and in the MAP Shop No. 2 for the production of NPK 10-26-26 at VMF. The largest increase was reported in the production of phosphate fertilisers (+16%) stimulated by a better demand and a shift towards the production of MAP at VMF. The growth in the output of other chemical products was explained by market conditions: in 2018, the sales of calcium nitrate rose. KCCW Branch’s capacities were fully utilised resulting in an additional 26.5 thousand tonnes of calcium nitrate compared to the prior year.

TABLE 2

URALCHEM Group’s commercial output by product types, ‘000 tonnes

Product

2018

2017

Change, ‘000 tonnes

Change, %

Ammonium nitrate and its derivatives

3,041

2,962

79

3%

Ammonia

784

823

-39

-5%

Urea

1,206

1,225

-19

-2%

Complex fertilisers

949

872

77

9%

МАР

134

116

18

16%

Other mineral fertilisers

24

24

0.3

1%

Other chemical products

313

299

14

5%

TOTAL

6,452

6,321

131

2%