PhosAgro (“PhosAgro” or “the Company”) (Moscow Exchange, LSE: PHOR), one of the world’s leading vertically integrated phosphate-based fertilizer producers, today announces its consolidated financial results for the 12 months (FY) ended 31 December 2023.
FY 2023 highlights
In FY 2023, production of mineral fertilizers and feed phosphates increased by 2.1% year-on-year to 11 million tonnes, while the production of other agrochemicals amounted to about 0.3 million tonnes.
This growth was driven by an 8.4% increase in DAP/MAP production to more than 4.5 million tonnes, a 4.4% increase in ammonium nitrate production to 723 thousand tonnes and a 1.6% increase in urea production to 1.7 million tonnes.
Total fertilizer sales in FY 2023 rose 2.0% year-on-year to around 11.4 million tonnes.
Among the factors driving increased sales were the Company’s flexible sales policy and the affordability of fertilizers, which boosted sales considerably not only in the priority domestic market but also in key export markets. Relatively low inventories were also noted in key markets.
Revenue for FY 2023 amounted to RUB 440.3 billion (USD 5.23 billion), down 22.7% year-on-year amid a correction in fertilizer prices in global markets in 2023, following record highs in 2022.
The Company’s EBITDA was RUB 183.0 billion (USD 2.19 billion) in FY 2023, down 29% year-on-year. The high EBITDA margin of 41.6% was driven by effective cost management and increased sales of high-margin products.
In FY 2023, the Company’s free cash flow amounted to RUB 70.2 billion (USD 0.91 billion). The decrease in free cash flow from the previous year was due to the record-high figure for FY 2022 and a change in the regional sales mix. Nevertheless, FY 2023 was one of the Company’s best years for free cash flow in the last decade.
Net debt as of 31 December 2023 amounted to RUB 223.2 billion (USD 2.49 billion), and the net debt/EBITDA ratio at the end of the year was a comfortable 1.2x.
The Company’s revenue and EBITDA for FY 2023 decreased to the level of the previous year due to the stabilisation of global fertilizer prices after reaching all-time highs in 2022.
At the same time, the EBITDA margin remained above 40% as of the end of the year. This high level of profitability was driven by increased production of high-margin fertilizers and basic feedstocks as well as the Company’s flexible sales policy.
Thanks to a year-on-year increase of over 50% in sales to countries in Latin America, the Company was able to take full advantage of the favourable pricing environment at a time when fertilizers were becoming more affordable, and traders were short of inventories.
The Company enjoyed a high level of free cash flow (FCF) of over RUB 70 billion in FY 2023. This excellent result was possible despite the Company’s negative FCF in 4Q 2023, which was impacted by an additional drain on liquidity from the payment of export duties, a payment at the end of the year for excess profit tax in the amount of RUB 6.4 billion and high capital expenditures, which are typically made in the last quarter of the year.
In light of the above-mentioned drain on liquidity and in accordance with PhosAgro’s dividend policy, a decision was taken not to include the issue of profit distribution for 2023 on the agenda for the Board of Directors meeting where the Company’s annual financial statements are to be discussed. This issue is expected to be included on the agenda for the Board of Directors meeting that will discuss the Company’s 1Q 2024 performance.
Thanks to its strong financial position, capital investments within budget and high free cash flow, the Company was able to service all its debt obligations on time and in full, including those denominated in a foreign currency. As of the end of FY 2023, the Company’s debt load remained at a comfortable level. As of 31 December 2023, net debt amounted to RUB 223.2 billion, and the net debt/EBITDA ratio was 1.2x. The substantial increase in RUB-denominated debt was driven to a large extent by the weakening of the rouble against the US dollar throughout 2023 and the revaluation of the Company’s FX-denominated debt at new rates at the end of the year.
At the same time, it should be noted that the percentage of USD-denominated in debt in the Company’s loan portfolio is decreasing thanks in part to the replacement of redeemed PHOR-23 Eurobonds with RUB- and RMB-denominated exchange-traded bonds and RMB-denominated bank loans.
A number of important events affirmed the Company’s high credit quality, including the issuance of RUB 20 billion and RMB 2 billion in exchange-traded bonds, as well as the replacement of two remaining issues of Eurobonds, PHOR-25 and PHOR-28. As a result of this process, more than 74% of the two Eurobond issues worth USD 740.4 million was replaced.
The successful public debt offering in the Russian market and the replacement of Eurobonds once again affirmed the Company’s high credit quality and its full compliance with its credit ratings from ACRA (AAA (RU)) and Expert RA (ruAAA) at the country ceiling level.
Fertilizer market in 4Q 2023
The global fertilizer market in 4Q 2023 was marked by mixed price trends: prices for nitrogen-based and potash fertilizers declined under pressure from excess supply, while prices for phosphate-based fertilizers remained stable as a result of the overall market balance.
Restrictions on exports from China, in favour of supplying the domestic market, also supported prices for phosphate-based fertilizers. In addition, demand in Asian and Latin American markets remained stable. The average price for MAP in 4Q 2023 was USD 511 per tonne (FOB Baltic).
Prices for nitrogen-based fertilizers gradually declined due to weaker demand in India following the launch of new domestic capacities in
2022–2023
(resulting in decreased dependence on imports). Demand in Latin America (Brazil) decreased in response to weaker agricultural markets and the impact of inclement weather. The average price of urea in 4Q 2023 was USD 319 per tonne (FOB Baltic).
Prices for potash fertilizers decreased due to excess supply in the market. The average price for standard potassium chloride in 4Q 2023 was USD 236 per tonne (FOB Baltic).
Trends in early 2024
The development of seasonal demand in key Western markets — in Europe, North America and Central America — is the main factor affecting the global mineral fertilizer market. The announcement of a major tender for the purchase of urea in India combined with the earlier development of seasonal demand in South-East Asian markets drove up prices for nitrogen-based fertilizers early in the quarter. Continuing restrictions on fertilizer exports from China are helping stabilise markets for phosphate-based fertilizers — at existing levels — above USD 500 per tonne (FOB Baltic) for DAP/MAP.
