PhosAgro's fertilizer production grew 3.6% year-on-year to 5.9 million tonnes in 1H 2024; revenue rose 13.5% to RUB 241.6 billion, driven by increased sales

August 7, 2024 (press release) –

Moscow, 7 August 2024 — PhosAgro Group (“PhosAgro” or “the Company”) (Moscow Exchange, LSE: PHOR), one of the world’s leading vertically integrated phosphate-based fertilizer producers, today announces its operating results and its consolidated interim condensed financial results for the six months ended 30 June 2024.

1H 2024 highlights

Production of agrochemical products in 1H 2024 increased by 3.6% year-on-year to 5.9 million tonnes, driven mainly by a 4.7% rise in the production of phosphate-based fertilizers and feed phosphates, to 4.4 million tonnes.

The production of basic feedstocks in 1H 2024 rose 1.9% year-on-year, thanks primarily to a 3.9% increase in the production of phosphoric acid and a 3.2% increase in sulphuric acid output.

Total fertilizer sales in 1H 2024 increased by 9.3% year-on-year to nearly 6.1 million tonnes; sales of phosphate-based fertilizers and feed phosphates rose 11.7%.

Revenue in 1H 2024 amounted to RUB 241.6 billion, up 13.5% year-on-year on the back of higher production and sales.

The Company’s adjusted EBITDA amounted to RUB 76.9 billion in 1H 2024, down 7.2% year-on-year.

In 1H 2024, the Company’s free cash flow increased considerably from the previous quarter, rising to RUB 26.6 billion.

Net debt amounted to RUB 217.1 billion as of 30 June 2024, and the net debt/adjusted EBITDA ratio at the end of the first half of the year was a comfortable 1.34x.

Financial and operating highlights:

Despite lower average sales prices, revenue in 1H 2024 increased by 13.5% year-on-year primarily as a result of increased production and sales of phosphate-based fertilizers (mainly NPK fertilizers) following the completion of investment projects as part of the Company’s long-term development strategy.

The Company’s adjusted EBITDA for the first half of the year amounted to RUB 76.9 billion, a 7.2% year-on-year decrease due to lower fertilizer prices in global markets and higher production costs owing to the payment of export duties introduced in 2023.

At the same time, the adjusted EBITDA margin in 1H 2024 was 31.8%, driven by increased production of high-margin fertilizers and basic feedstocks as well as the Company’s flexible sales policy.

Free cash flow (FCF) in 1H 2024 amounted to RUB 26.6 billion, mainly due to an increase in FCF in the second quarter to RUB 24.8 billion (despite an increase in capital investments in the quarter to RUB 20.6 billion as part of the Company’s annual investment plan).

The FCF increase was mainly attributed to the release of over RUB 17 billion from working capital thanks to the collection of accounts receivable for products shipped earlier to trader warehouses before the start of the spring season and to Latin America.

Thanks to its strong financial position, the Company was able to service all its debt obligations, including those denominated in foreign currency, on time and in full. As of the end of 1H 2024, the Company’s debt position remained at a comfortable level. As of 30 June 2024, the Company’s net debt amounted to RUB 217.1 billion, and its net debt/adjusted EBITDA ratio was 1.34x.

The successful execution of the Company’s long-term development programme and large-scale capital investments drove a 3.6% increase in agrochemical production, reaching 5.9 million tonnes. At this rate, the Company expects to surpass 11.5 million tonnes by the end of the year.

Phosphate-based fertilizers (with a focus on three-element — NPK — fertilizers) and feed phosphates (MCP) accounted for the bulk of production increases in 1H 2024, with output rising 4.7% year-on-year to over 4.4 million tonnes. This growth was attributed to two factors: increased processing of phosphate rock at the Group’s production sites and the fact that the Company’s Volkhov production plant reached its design capacity.

The increased production of three-element fertilizers reflected an uptick in sales to the Company’s priority domestic market amid high seasonal demand and was made possible thanks to the flexibility of the Company’s production facilities, which are able to switch between the production of two- and three-element fertilizers.

The high level of output was enabled by an increase in the production of basic feedstocks — phosphoric acid and sulphuric acid.

Production of phosphoric acid, the main feedstock for the production of phosphate-based fertilizers, increased by 3.9% year-on-year in 1H 2024 to nearly 1.8 million tonnes. This increase was driven by earlier upgrades to production units and more efficient equipment operation.

Production of sulphuric acid in 1H 2024 rose 3.2% to over 4.3 million tonnes, owing to efficiency improvements in the operation of the sulphuric acid production unit in Cherepovets and the development of targeted capacities for the production of sulphuric acid in Balakovo following a major overhaul.

The over 9% increase in sales in 1H 2024 was driven by increased production as well as the excellent performance of the Group’s sales network in the Russian market.

Sales rose mainly due to an 11.7% year-on-year increase in sales of phosphate-based fertilizers. The markets that showed the highest growth rates in terms of shipments in 2024 were Russia, Latin America and Africa.

Fertilizer market in 2Q 2024

Global fertilizer markets saw a seasonal decline in demand in the Northern Hemisphere (North America, Europe, Russia, China), leading to a price correction. However, prices for most types of fertilizers have remained stable this year and even increased in some markets. Global markets have remained strong thanks mainly to the continuation of restrictions on fertilizer exports from China and the low volumes of carryover stocks in key markets.

The market for phosphate-based fertilizers found support in Brazil, where seasonal demand resumed at an earlier date in the face of low stocks and decreased imports in 1Q 2024. Continued residual demand in Europe also supported the DAP and NPK markets. As a result, prices for the main types of phosphate-based fertilizers gradually increased during 2Q 2024. Notably, the average price for MAP in 2Q 2024 was USD 532 per tonne (FOB Baltic), up from USD 514 per tonne (FOB Baltic) the previous quarter.

The market for nitrogen-based fertilizers found support in Central and South America, and another tender was conducted in India at higher prices. In addition, some producers faced unscheduled maintenance shutdowns (in Central America and North Africa) due to disruptions in natural gas supplies. The average price for urea (prilled) in 2Q 2024 was USD 278 per tonne (FOB Baltic); for ammonium nitrate, USD 205 per tonne (FOB Baltic).

Outlook for 3Q 2024

In the third quarter of the year, the global fertilizer market has typically been propped up by Latin America and South Asia, where the peak of seasonal demand for phosphate-based fertilizers occurs during this period, followed by increased demand for nitrogen-based fertilizers in the second half of the quarter. However, changes in crop prices in global markets could have an impact on the balance of supply and demand.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.