Phosagro · RUS:PHOR
Phosagro — Non-Deal Roadshow (December 2014)
53 slides from Phosagro's roadshow presentation, December 2014
Slide 1: NDR presentation December 2014
NDR presentation December, 2014 1
Slide 2: Disclaimer
Disclaimer These materials have been prepared by OJSC PhosAgro (PhosAgro) solely for your information and may not be copied, reproduced, retransmitted or further distributed, directly or indirectly, by any recipient to any other person or published, in whole or in part, for any purpose or under any
Slide 3: PhosAgro and the global fertilizer industry
PhosAgro and the global fertilizer industry 3
Slide 4: PhosAgro at a glance
PhosAgro at a glance #1 global producer of high-grade phosphate Leading global phosphate rock producers (by production) World class rock integrated 2013, mln t, excluding Chinese producers phosphate #3 global DAP/MAP producer(1) 26.4 #1 producer of high-grade producer Overall fertilizer capaci
Slide 5: 2013 MAP/DAP production vs consumption, global trade
2013 MAP/DAP production vs consumption, global trade in million tonnes of P2O5 World MAP/DAP demand: 27.8 mn t of P2O5 World MAP/DAP trade: 9.9 mn t of P2O5 3 0.7 2.0 0.7 1.8 5.3 4 3.7 2 6 8 0.3 2.2 12.6 5 10.8 7 1 3.4 1.0 0.6 1.4 4.3 1 Latin America 4 Europe 7 South Asia 2.1 2 North America 5 Middl
Slide 6: 2013 MAP/DAP regional balances of P2O5
2013 MAP/DAP regional balances of P2O5, mn t Consumption Production Export Import 100% Others Others Others 1% 8% North Africa 90% 2% Middle East 19% 3% 5% North Africa Russia & CIS 6% EU 7% 80% 4% Middle East 3% 2% Russia & CIS 12% Latin America 4% Middle East 11% 70% EU 15% North America 19% Russi
Slide 7: High grain prices motivate farmers to use more fertilizers
High grain prices driven by market imbalances motivate farmers to use more fertilizers Cereals basket to DAP price spread High correlation between cereals basket and 1400 DAP prices 250 10 year correlation 1,400 R2=0.86 1200 1,200 DAP and cereals basket price, $US/t DAP spread relative to basket pri
Slide 8: China: key figures
China: key figures(1) China is the world’s largest MAP/DAP consumer China is a farming giant in absolute terms and producer Country China India Brazil Russia USA 40% 38% 25,000 38% Employment in agriculture, % of total 35 47 15 10 2 38% 35% Rural population, mn 636 852 30 38 59 36% 20,000 34% 33% Ru
Slide 9: China: a net P importer on the horizon
China: a net P importer on the horizon Economic growth will affect dietary patterns significantly China will continue to increase food imports 100.0 +3% CAGR 80.0 CAGR: 13% +6% 50 40 +2% 60.0 40 35 +1% 33 28 40.0 30 mn t 20 21 +5% 16 18 20.0 20 7 8 0.0 10 0 Sugar Fresh dairy Vegetable Poultry meat B
Slide 10: China: environmental issues coming to the forefront
China: environmental issues coming to the forefront Chinese ag resources deteriorate with limited arable land ... and water availability decreases 130 2.3 120 2.2 110 2.1 100 2 90 1.9 1997 2002 2007 2012 1997 2002 2007 2012 Arable land, mn ha Fresh water availability per capita, 1000 m³ Chinese farm
Slide 11: Chinese exports go to India
Chinese exports go to India China exports a significant part of its p-based fertilizers to India ... and India imports correspond with China’s “export window” DAP/MAP exports, mn t of P2O5 1600 120 2.3 2.2 2.1 1400 39% 1.6 100 46% 44% 15% 4% 5% 1200 5% 10% 80 57% 80% 1000 50% 46% Export duty for DAP
Slide 12: India: key figures
India: key figures(1) India is the second largest MAP/DAP consumer Rural population and ag production dominate in India and the world largest DAP importer Country India China Brazil Russia USA 50% 48% 6,000 50% Employment in agriculture, % of total 47 35 15 10 2 40% 5,000 40% Rural population, mn 85
Slide 13: India's subsidy policy favouring urea leads to unbalanced fertilization
India’s subsidy policy: favouring urea leads to unbalanced fertilization India introduced a new subsidy system in 2010 …which lead to increased urea consumption at expense of DAP consumption 450 433 Utilisation rate of local DAP production capacities 395 415 12.0 10.9 was below 50% in 2013 vs. > 95%
Slide 14: India will remain a primary P2O5 importer in the long term
India will remain a primary P2O5 importer in the long term Population growth is a key driver for ag production with continuing economic growth 2.0 300 twice faster than world average 8.0 250 6.5 6.7 1.5 6.0 6.2 200 6.0 5.3 4.9 mn t 4.1 % % 1.0 150 4.0 100 2.5 2.5 2.5 2.5 2.5 2.5 0.5 1.9 50 2.0 0.0 0
Slide 15: Brazil: key figures
Brazil: key figures(1) Brazil is the largest ag exporter among developing countries Brazil is a rising star of world ag production and P consumption 80 Country Brazil China India Russia USA 60 Employment in agriculture, % of total 15 35 47 10 2 40 Rural population, mn 30 636 852 38 59 20 Rural popul
Slide 16: Brazil is a top ag exporter among developing countries
Brazil is a top ag exporter among developing counties Exports are a key driver for ag production growth Soybeans drive ag production in Brazil 50% 50 CAGR: 6% 37% 39% 40 30% 30 27% 23% 17% 20 mn ha 8% 6% 7% 10 0 Coffee Soybeans Sugar Corn Cotton 2000 2002 2004 2006 2008 2010 2012 Soybeans (harvested
Slide 17: Russia: key figures
Russia: key figures(1) PhosAgro dominates domestic phosphate market Russia has abundant ag resources Murmansk Country Russia China India Brazil USA Kirovsk Employment in agriculture, % of total 10 35 47 15 2 Baltic sea St. Petersburg Rural population, mn 38 636 852 30 59 Volkhov Rural population, %
Slide 18: Russia: potential for significant ag production growth
Russia: potential for significant ag production growth Growing agriculture land use ...and increased phosphate application rates ... will result in higher yields 2009-2012 2009-2012 2009-2012 Russia 45% Russia Russia 2.0 10 India 62% India 54 India 2.9 USA 66% USA 27 USA 6.6 Brazil 76% Brazil 53 Bra
Slide 19: Sales focus and Industry developments
Sales focus and Industry developments
Slide 20: 2013 Primary phosphate trade flows
2013 Primary phosphate(1) trade flows World DAP/MAP trade: 21.3 mn t PhosAgro(2) 3.3 6.3 3.2 22 20 42 35 35 3.2 16 5.0 2.5 4.0 16 20 45 10 4.0 7.1 1.3 22 x.x Import volumes, mn t x.x Export volumes, mn t x.x xx Freight costs, $US Source: IFA, CRU, USITC, CFMW, PhosAgro estimate Note: (1) - DAP/MAP/N
Slide 21: Supply-demand balance: no changes in regional deficits by 2020
P2O5 : No changes in regional deficits by 2020 mn t P2O5 Oversupply regions Deficit regions 2013 2020 2013 2020 North South Africa 5.2 Africa 4.0 0.5 +3.5 0.7 +4.5 0.5 0.4 -0.1 0.7 0.4 -0.3 Europe Supply – demand balance 2.1 3.1 2.2 3.3 -0.9 -1.2 Latin America 6.2 7.4 2.6 -3.6 2.6 -4.9 North Oceania
Slide 22: Key drivers of P2O5 demand growth in Latin America
Key drivers of P2O5 demand growth in Latin America Demand growth by country CAGR ’12-’20 mn t kt Percent Key drivers 7.5 654 1.3% ▪ Main driver – increase in soybean 1.2 area harvested 65 or 65.0 +11% 6.0 589 0.7 0 Other 0.9 0.3 Argentina 0.6 348 Mexico 0.3 1.3% ▪ Main driver – increase in area 35 o
Slide 23: Key drivers of P2O5 demand growth in Europe
Key drivers of P2O5 demand growth in Europe Demand growth structure Demand growth CAGR ’12-’20 Demand growth CAGR ’12-’20 mn t kt Percent kt Percent France Germany 3.1 3.1 499.3 285.6 495.4 0.1% 0.1% 8.5 283.7 3.3 4.6 1.4 Other 1.2 1.1 Czech Republic Poland Spain 0 0 0 0 336 382 Benelux 0.2 0.2 Ital
Slide 24: Priorities: trade restrictions vs. health (cadmium)
Priorities: trade restrictions vs. health Apatit Sokli Siilinjärvi 2.05 Cadmium restrictions Urals billion tonnes of apatite-nepheline ore Heavy metal content, mg/kg P2O5 Phophate Cd As Pb rock European Maximum limits of cadmium countries grouped in national fertilizers Russia (Kola) 0.05-0.09 0.2-0
Slide 25: New sales model to improve premium market access
New sales model to improve premium market access Our new sales strategy Set up local sales offices in São Paulo and Brussels Domestic sales platform Roadmap − sales office in São Paulo will cover Latin America markets − sales office in Brussels will cover Northern and Eastern Europe and Brussel po
Slide 26: PhosAgro became the #1 fertilizer supplier to the Russian market
PhosAgro became the #1 overall supplier of fertilizers to the Russian market in 2013, and continues to grow its market share Fertilizers sales in Russia, 9M2014 Market share kt Percent NPK Ammonium nitrate Potassium Chloride 9M2014 2013 2012 MAP/DAP Urea PhosAgro 639 380 161 24 1 204 22 18 15 Euroch
Slide 27: Recent industry developments
Recent industry developments Morocco controls most of world phosphate ore reserves Russia 2% Others 5% Net addition to phosphate rock production capacities USA 2% Jordan 2% (excl. China) of 14 mn t Algeria 3% with 0.8% CAGR Syria 3% China 5% Morocco Iraq 8% and Western Sahara 70% RUSSIA +1 mn t 1.3
Slide 28: Estimated MAP/DAP business cash cost curve
Estimated MAP/DAP business cash cost curve $US/t FOB(1) Morocco Ammonia: US$ 655/t, CFR, Tampa in Q4 2014 Estimated with feedstock prices set forth below: US$ 600-620/t, CFR, N.Africa Sulphur: US$ 129/t, CFR, Tampa US$ 150-165/t, CFR, N.Africa Weighted by capacity avg. cost : $418/t DAP FOB Tampa: $
Slide 29: Strategy for fertilizer volume growth
Strategy for fertilizer volume growth Where we are in 2014 Where we are headed (2017-2020) Phosphate rock +25% Total: 7.5 mn t Total: 7.1 mn t Overall 8.1 mn t 23% Amm.sulph. 0.3 External 32% Ammonia 0.3 sales UREA gran 0.5 Overall 6.5 mn t MAP/DAP NPK/NPS 0.5 AN 0.5 AN 0.5 Internal 68% 77% consumpt
Slide 30: Financial performance: Strong balance sheet
Financial performance: Strong balance sheet
Slide 31: Revenue, EBITDA, gross profit and net profit
Revenue, EBITDA, gross profit and net profit Revenue Gross profit CAGR: 9% 620 Average DAP FOB Tampa, $US/t 6,056 -14% 5,338 +24% 4,692 4,953 535 4,499 4,694 498 -17% +2% kt 466 476 3,542 443 3,153 2,921 3,712 2,316 44% 43% 3,420 3,387 1,886 42% 3,283 38% 215 190 161 35% 35% 493 2,571 2,452 $US mn $
Slide 32: Stock/GDR performance
Stock/GDR performance
Slide 33: PhosAgro GDR performance
PhosAgro GDR performance Capital markets day 12 16 SPO Uralkali announced split with BPC $US 14 14 10 12 8 10 Geopolitical unrest 6 8 GDR mn Announcement of GDRs inclusion into the FTSE Global Equity $US Index Series and the FTSE All World Equity Index Series ADTV $US4.1 mn or GDR 306 k ADTV $US3.5
Slide 34: Global political and economic instability
Global political and economic instability 195 50 Uralkali announced split with BPC 45 175 Ukraine crisis development: 40 Malaysian Airlines flight shot down 35 155 Russia-Crimea unification European debt crisis development: 30 Greek debt restructuring Rebased to 100 135 25 Daily Turnover, $US mn 20
Slide 35: EV/EBITDA performance relative to peers
EV/EBITDA performance relative to peers 16.0 Current discount to peer EV/EBITDA average: 35% 14.0 Uralkali announced split with BPC 12.0 10.0 35% Discount to 8.0 peer EV/EBITDA average:43% 6.0 4.0 2.0 0.0 Mosaic EV/EBITDA PhosAgro EV/EBITDA Peer EV/EBITDA average Potash Corp EV/EBITDA Uralkali EV/EB
Slide 36: PhosAgro: the only pure play phosphates producer
PhosAgro: the only pure play phosphates producer Gross profit breakdown by segment Phosphate segment gross profit margin Average gross profit breakdown by segment for 2011-2013 Average gross profit margin of phosphate segment for 2011-2013 7% 14% 18% 18% 39% 52% 60% 31% 47% 25% 22% 54% 86% 18% 27% 4
Slide 37: Appendix
Appendix
Slide 38: RUB devaluation: EBITDA sensitivity
RUB devaluation: EBITDA sensitivity(1) 1,600 1,400 EBITDA, $US mn 1,200 1,000 800 600 400 200 0 400 420 440 460 480 500 520 DAP, $US RUB/USD: 46 RUB/USD: 37 in mln USD 2014E DAP FOB Baltic price, $/tonne 400 420 440 460 480 500 520 37 652 746 839 932 1,026 1,119 1,212 39 740 834 927 1,020 1,114 1,20
Slide 39: Dividend history
Dividend history per share, per GDR, per GDR, Post-IPO dividends RUB RUB US$ 2011 April-December 57.50 19.17 0.61 Dividends 2012 82.90 27.63 0.88 2013 34.75 11.58 0.35 1H2014 25.00 8.30 0.23 9M2014 recommended 20.00 6.67 0,17 Net profit attributable to Post-IPO dividends Dividends, PhosAgro sharehol
Slide 40: Debt Maturity Profile
Debt Maturity Profile(1) Payment Schedule Debt Repayment Plan/ Outstanding Debt Repayment of principle Debt Outstanding 1800 US$ mn US$ mn 700 1,683 1,577 594 1600 600 1400 1,288 500 1200 400 387 1000 901 289 276 800 300 625 600 200 106 400 100 25 200 0 7 32 0 7 7 0 after 2020 2015 2016 2017 2018 20
Slide 41: High quality production assets
High quality production assets Apatit Resources(1) Murmansk Cherepovets production complex - largest in Europe Apatite-nepheline ore: 2 060 mt Kirovsk PhosAgro Cherepovets Al2O3: 283 mln t Capacity by product REO(2): 7.5 mln t MAP/DAP/NPK/NPS: 3.1 mln t Ammonia: 1,150 kt St. Petersburg Capacity by p
Slide 42: Flexible production capacity
Flexible production capacity PhosAgro production capacities Capacity growth 2011-2013 2013(1), mln t MAP/DAP 2011 – 2013, mln t(2) DAP/MAP/NPK/NPS 2.45 1.85 4.3 2013 1.85 NPK capacities 2011 1.7 +9% Urea 0.98 MAP/DAP/NPK: fully flexible production 2011 – 2013, mln t(2) lines with NPK production AN/A
Slide 43: Strong demand fundamentals for fertilizers
Strong demand fundamentals for fertilizers Population growth and decrease of arable land per capita Yield Indexed to USA 8 0.30 2012 Fertilizers are 0.27 widely under- Rice applied and/or 7 0.24 0.25 Soybean 0.23 0.22 India inefficiently Corn applied in 0.20 Wheat 6 0.19 0.20 developing 5.3 countrie
Slide 44: India depends on P2O5 imports
India depends on P2O5 imports India is the major purchaser of DAP/MAP… … and importer of feedstock for phosphates production World DAP/MAP Imports : ~9.5 mln t of P2O5 per annum(1) Global Phosphoric Acid Imports of 3.9 mln t P2O5 FSU India 1.9 2% Europe Oceania Asia (excl. India) 5% India Middle Eas
Slide 45: Uncertain subsidy policy in India decreases fertilizer imports
Uncertain policy for nutrient subsidies in India decrease fertilizer imports and unbalance fertilization Evolution of N : P2O5 : K2O ratio in India Unbalanced fertilization N P2O5 K2O 0.5 0.5 Balanced ratio 4.0 2.0 1.0 0.4 2010/11 4.3 2.0 1.0 2011/12 6.9 3.1 1.0 P2O5 /N ratio 0.3 2012/13 7.7 3.0 1.0
Slide 46: India DAP import demand set to rise
India DAP import demand set to rise Quarterly DAP imports to India Average annual DAP import for 2010-2013: 5.8 mln t 3,028 Expected DAP import 3,000 volumes to India of more than 5 mln t 2,500 2,000 1,488 1,500 kt 1,000 950 500 422 140 0 1Q 2Q 3Q 4Q 2010-2013 average 2014 (est) 2014E Source: FAI, A
Slide 47: Premium/discount to the most affordable Moroccan phosphate rock
Premium/discount to the most affordable Moroccan phosphate rock High grade phosphate rock Apatit (PhosAgro) Phosphate ore affects production costs associated with impurities The benchmark: K10 phosphate rock, made by OCP (Morocco) Important characteristics included:P2O5 content, CaO content, M
Slide 48: Barriers to entry: integrated production model and replacement cost
Need for a combination of feedstocks and complexity of production process act as barriers to entry Integrated phosphate-based production model (1) Replacement cost Ma’aden Phosphate ore Beneficiation 15.9 mln t (12.9% P2O5) 4.60 mln t (39% P2O5) MAP, DAP, NPK, NPS, Key products DAP Urea, AN Replacem
Slide 49: Access to abundant local resources
Access to abundant local resources Russian Federation Potash Consumption in Russia – 2.1 mln.t PhosAgro – Biggest consumer current supply Uralkali PhosAgro Potash Production – 9.0 mlt t 34% Farmers 10% others 2% Acron 23% Uralchem 7% Minudobrenia- Eurochem Rossosch Belaruskali 8% 16% Potash Producti
Slide 50: Commissioning phosphate rock and phosphoric acid capacities
Commissioning phosphate rock and phosphoric acid capacities Delays in addition of new phosphate rock capacities (excl. China) Changes in world fertilizer capacities (excl. China) mln t mln t nutrients 180 30 170 5 years 25 160 150 4 years 20 140 15 130 120 10 2008 2009 2010 2011 2012 2013 2014 2015
Slide 51: Timing and completion of new capacities is uncertain
Timing and completion of new capacities is uncertain mln t of P2O5 0.5 6.7 6.7 0.9 1.5 2.9 Utilization rate of 82% Utilization - 4.6 rate of 71% OCP seeks to extract the maximum value from its Joint Venture Mosaic phosphate ore reserve. and Ma’aden estimated Management has recently 40.5 57.0 indicat
Slide 52: Control of world's premium phosphate resource base
Control of world’s premium phosphate resource base 100 Higher cadmium Phosphate rock 100 GCT content in 29% with MER > 0.10 sedimentary OCP 32% Mosaic significantly rocks 28.5% increases costs PCS for production of Average Cadmium content in ppm 29.5% CF Industries 10 29% DAP 10 Agrium 33% 1 1 Euroc
Slide 53: Thank you!
Thank you!