Phosagro · RUS:PHOR

Phosagro — Non-Deal Roadshow (September 2013)

62 slides from Phosagro's roadshow presentation, September 2013

  1. Slide 1: Presentation for Non-Deal Roadshow

    Presentationfor Presentation forNon-Deal Non-DealRoadshow Roadshow September 2013 December 2011 0 1

  2. Slide 2: Disclaimer

    Disclaimer THIS PRESENTATION IS STRICTLY CONFIDENTIAL AND HAS BEEN PREPARED BY OAO "PHOSAGRO" (THE "COMPANY") SOLELY FOR YOUR INFORMATION. THIS PRESENTATION MAY NOT BE REPRODUCED, DISTRIBUTED OR PASSED ON, DIRECTLY OR INDIRECTLY, TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, BY ANY MEDIUM O

  3. Slide 3: 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 2011, mln t, excluding Chinese producers phosphate  #2 global DAP/MAP producer(1) 27.8 producer #1 producer of high-grade phosphate  Overall fertili

  4. Slide 4: The only pure play phosphates producer

    The only pure play phosphates producer Gross profit breakdown by segment Phosphate segment gross profit margin Average gross profit breakdown by segment for 2011-2012 Average gross profit margin of phosphate segment for 2011-2012 7% 17% 19% 18% 41% 51% 61% 32% 31% 48% 25% 54% 83% 20% 49% 24% 33% 21%

  5. Slide 5: PhosAgro Benchmarks Favourably Against Key Competitors

    PhosAgro Benchmarks Favourably Against Key Competitors 52%  PhosAgro compares well against its global 34% 30% 29% EBITDA Margin peers on EBITDA 17% (2011-2012) margin and Cash Conversion basis Mosaic (1) ICL Potash Corp Agrium  PhosAgro strongly outperformed all major peers in terms of FCF Yield b

  6. Slide 6: 1. Phosphates – an attractive industry

    1. Phosphates – an attractive industry

  7. Slide 7: Strong demand fundamentals for fertilisers

    Strong demand fundamentals for fertilisers Population growth and decrease of arable land per capita Yield Indexed to USA 8 0.30 2011 Fertiliser is 0.27 widely under- 7 0.24 0.25 Rice applied and 0.23 0.22 Soybean inefficiently India applied in 0.20 Corn 6 0.19 0.20 developing Wheat countries 5.3 5.7

  8. Slide 8: Annual Cycle of Seeding and Planting in Key Agricultural Regions

    Annual Cycle of Seeding and Planting in Key Agricultural Regions Source: USDA, Argus-FMB, Fertecon, PhosAgro 7

  9. Slide 9: Phosphorus is essential for life

    Phosphorus is essential for life Phosphorus consumption structure (1) Phosphate fertilisers – 85%(1) with CAGR of 2.6% (3) (2) Animal feed (CAGR 2.6%) Technical (2) 6% phosphates (CAGR 4.1%) 9% Phosphate(3) fertilisers (CAGR 2.6%) 85% Without phosphate fertilisers With phosphate fertilisers Effect o

  10. Slide 10: Stock-to-use ratios for key phosphate-using crops are at low levels

    Stock-to-use ratios for the key phosphate-using crops are at low levels driving crop prices Phosphate fertiliser use by crop World grain stocks-to-use ratios, % 20 year 30% average 20 year 20 year average average 20 year 25% average Wheat 20% 16% 15% 10% 2009/10 2010/11 2011/12 2012/13 2013/14 2009/

  11. Slide 11: Significant room for further growth of use of phosphate fertilisers

    Significant room for further growth of use of phosphate fertilisers Corn yield per harvested acre in US Insufficient application of phosphate fertilisers creates bu significant room for growth 170 24 165 Wheat P2O5 estimated crop removal Corn 23 Soybean P2O5 application 160 Rice 154 154 22 153 151 2

  12. Slide 12: High grain prices driven by market imbalance motivate farmers

    High grain prices driven by market imbalance motivate farmers to use more fertilisers Cereals basket prices relative to DAP Prices Cereals basket(1) to DAP prices ratio 10 year correlation 1,400 3.50 HIGH DAP PRICES R2=0.86 August 2013 price: 1,200 DAP FOB Tampa: US$ 430/t 3.00 Cereals basket: US$ 3

  13. Slide 13: Need for feedstock combination and complex production act as barriers to entry

    Need for a combination of feedstocks and complexity of production process act as barriers to entry Overview of integrated phosphate-based production model based on PhosAgro’s consumption ratios PHOSPHATE ORE BENEFICIATION MINE PLANT 15.1 mln t 4.38 mln t (39% P2O5) (12.9% P2O5) SULPHUR SULPHURIC ACI

  14. Slide 14: Only few countries have domestic resource base for phosphate

    Only few countries have domestic resource base which is significant enough to produce phosphate fertilisers Production/resources of phosphate rock, natural gas and sulphur Phosphate Rock, mln t Natural Gas, bln cm Sulphur, k t Region Production Resources Production Resources Production Import World

  15. Slide 15: Estimated DAP production cash cost curve, Aug 2013

    Estimated DAP production cash cost curve (US$/t, FOB) in Aug 2013 600 Integrated Integrated into phosphate rock Not integrated into phosphate rock and 500 ammonia DAP FOB Tampa: US$ 430/t 400 300 ** China small (non - integrated) China Large (integrated) 200 USA (non - integrated) USA (integrated) I

  16. Slide 16: Estimated DAP production cash cost curve

    Estimated DAP production cash cost curve (US$/t, FOB) in 2009 jan feb mar apr may june july aug sep oct nov dec 400 Monthly prices, DAP FOB Tampa 350 Average annual price, DAP FOB Tampa 300 250 Not integrated 200 PhosAgro (integrated into rock and ammonia) Integrated into phosphate rock China small

  17. Slide 17: DAP/Potash price ratio vs Phosphate and Potash consumption

    DAP/Potash price ratio vs Phosphate and Potash consumption 2.5 40 Phosphate fertiliser consumption, kt of P2O5 Potash and Phosphate fertiliser consumption. kt of nutrient Potash consumption, kt of K2O DAP/Potash price ratio 2.0 35 1.5 DAP/Potash price ratio 30 1.0 25 0.5 20 15 0.0 2000 2001 2002 200

  18. Slide 18: 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 fertiliser 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

  19. Slide 19: Timing and completion of new capacities is uncertain

    Timing and completion of new capacities is uncertain 5.9 mln t of P2O5 5.9 1.25 -2.6 1.5 0.45 1.2 4.4 Utilization rate of 80% Utilization 0.8 rate of 73% OCP seeks to extract the maximum value from its phosphate ore reserve. Joint Venture Mosaic Management has recently indicated that they will match

  20. Slide 20: 2. Company Highlights

    2. Company Highlights

  21. Slide 21: Control of world's premium phosphate resource base

    Control of world’s premium phosphate resource base Location(1) Russia Morocco USA Jordan China Tunisia World Phosphate Rock Reserves, 2.1 50 1.4 1.5 3.7 0.1 billion t Ore type Igneous Sedimentary Sedimentary Sedimentary Sedimentary Sedimentary 13.0-14.0% Low to Al2O3 content Very low Very low Very l

  22. Slide 22: Self-sufficiency in key feedstocks

    Self-sufficiency in key feedstocks PhosAgro DAP production cash costs 1 Phosphate rock: 100% self-sufficient 2012, ExW, US$ 2012, kt Other 18% 1 4,348 3 Sulphur 7,889 Phosphate 14% rock 2,614 55% 3,542 2 927 Ammonia Total Internal Internal External Domestic Export 13% phosphate consumption sales sal

  23. Slide 23: Flexible business model

    Flexible business model Flexible business model NETBACK-DRIVEN EXPORT SALES NOT FLEXIBLE PRODUCTION LOGISTICS SALES TIED TO OVERSEAS CAPABILITIES ALTERNATIVES PRIORITISATION DISTRIBUTION SYSTEM NETWORK Phosphate-based fertilisers and feed phosphate exports by region In volume terms Asia 12% 11% 11%

  24. Slide 24: PhosAgro - the main phosphate fertiliser supplier for domestic market

    PhosAgro - the main phosphate fertiliser supplier for domestic market #1 phosphate fertiliser supplier for domestic market Fertiliser effects on yields Others In 2012 PhosAgro Eurochem 8% 80 France domestic sales were UK Cereals Yield, 100kg/Ha 6% Germany USA 726 kt 60 Uralchem China 10% 40 Brazil P

  25. Slide 25: PhosAgro's flexible model meets global demand for NPK

    PhosAgro’s flexible model meets global demand for NPK World NPK production World NPK imports: ~2 mln t of P2O5 per annum(1) 7 Others CAGR 2008-2011 +26% FSU 4% South NPK 8.0% 5% Asia N 2.5% 4% Africa P 6.3% 8% Europe 6 K 6.2% 36% mln t China 8% 5 Lat. America Other 16% East Asia 19% 4 2008 2009 2010

  26. Slide 26: NPK High Margin Demand Drives PhosAgro's production mix

    NPK High Margin Demand Drives PhosAgro’s production mix kt 10 Downstream 6,000 kt 23 Downstream 4X Products in 2008 STPP Products in 2012 NPK/NPKS/NPS/PKS grades from 4 up to 16 MCP in 4 years Overall 5,000 AN CAGR:9% Urea 4,000 MCP APP DAP NPS: AN 20:20:0:14 Urea 16:20:0:14 3,000 14:34:0:8 15:36:0:

  27. Slide 27: 3. Financial Overview

    3. Financial Overview

  28. Slide 28: Revenue, EBITDA and Net Profit

    Revenue, EBITDA and Net Profit Revenue (H1 2012/2013) EBITDA (H1 2012/2013) Net Profit (H1 2012/2013) Total 1,732 Revenue 1,644 Average DAP FOB Tampa Growth: 6% 67 122 11 US$ 539/t 34% US$ 486/t 12 28 2 277 296 25% 21% US$, mn US$, mn US$, mn 559 1,241 1,319 432 9% 353 154 1H2012 1H2013 1H2012 1H201

  29. Slide 29: Cost of Goods Sold

    Cost of Goods Sold Cost of Goods Sold and Sales Volumes DAP production cash cost breakdown Sales (kt) 2010 2011 2012 1H2012 1H2013 ExW, US$, 2012 Fertilisers(1) 3,842 4,062 4,243 2,123 2,307 Phosphate Rock 3,712 3,153 3,542 1,677 1,479 Other 100% DAP 10% 10% 10% 10% 10% production 90% costs 9% 9% 9%

  30. Slide 30: Overview of debt

    Overview of debt Total debt and net debt / annualised EBITDA Comment 2.00 1.81x  PhosAgro carefully manages its balance sheet 1.50 and cost of financing for all current initiatives, 1.05x including both the consolidation of subsidiaries 1.00 0.91x and growth projects 1.10x  Net debt / annualised E

  31. Slide 31: CAPEX 2013

    CAPEX 2013 EBITDA vs Capex¹ Major expansion projects EBITDA Total capital expenditures (lhs) 35,370 34,695 To be spent Project RUB mln over 20,464 16,801 14,881 10,614 New PKS production facility 303 2013 - 2015 with 100 kt pa at Metachem 2010 2011 2012 Downstream end-products overall capacity incre

  32. Slide 32: Dividend Policy

    Dividend Policy  Dividend per share increased 44% per share, per GDR, Post-IPO dividends  Dividend policy aimed at paying RUB US$ dividends of between 20% and 40% of annual consolidated net 2011 April-December 57.5 0.61 income 9M 2012 63 0.67  Post-IPO dividend yield > 7%* Dividends Final 2012 Di

  33. Slide 33: 4. Future potential

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  34. Slide 34: Long term strategy for volume growth of fertilisers

    Long term strategy for volume growth of fertilisers 2012 Future (one – four years) Phosphate rock Total: 7.9 mln t Total: 7.9 mln t Overall 7.1 mln t New NPK/PKS production Marketable 0.5 37% Ammonia 45% External External AN 0.4 sales sales UREA 1.0 Overall 5.4 mln t Internal Internal 63% STPP 0.1 5

  35. Slide 35: Long-term NPK potential

    Long-term NPK potential 2012 Potential NPK/PKS production of 12 mln tpa Overall: 12 mln t Total: 5.4 mln t AN 0.4 UREA 0.7 NPS MCP 0.7 APP NPK 12.0 MAP PKS DAP 2.0 Total: 1.86 mln t Phosphoric acid Total: 1.1 mln t Total: 1.9 mln t New 1.5 Ammonia 0.8 Phosphoric Ammonia NPK 1.6 0.9 acid 1.94 1.1 0.3

  36. Slide 36: Thank You

    Thank You Ss

  37. Slide 37: Appendix

    Appendix

  38. Slide 38: 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: 3.0 mln t Ammonia: 1,100 kt St. Petersburg Capacity by p

  39. Slide 39: Flexible Production Capacity

    Flexible Production Capacity PhosAgro Production Capacities Capacity Growth 2011-2012 2012(1), mln t MAP/DAP 2011 – 2012, mln t(2) DAP/MAP/NPK/NPS 2.4 1.8 4.2 2012 1.8 NPK capacities 2011 1.7 +6% Urea 0.98 MAP/DAP/NPK: fully flexible production lines with NPK production 2011 – 2012, mln t(2) AN/AN-b

  40. Slide 40: Management with strong track record of organic growth and efficiency improvement

    Management with strong track record of organic growth and efficiency improvement Technical modernisation at Ammophos Divestment of Voskresensk Mineral Fertilisers Sulphuric acid Phosphoric acid NPK Phosphoric acid production capacity mln t mln t of P2O5 mln t kt of P2O5 1,832 1,860 +29% +38% CAGR+16

  41. Slide 41: EBITDA sensitivity

    EBITDA sensitivity In 2013 expected EBITDA is of USD 769 mln EBITDA, $US mn based on DAP price of USD 450 and USD/RUB exchange rate of 33 1,600 1,400 1,200 1,000 800 600 400 200 0 DAP, $US 400 425 450 475 500 550 600 USDRUB: 35 USDRUB: 30 in mln USD 2013E DAP FOB Baltic price, $/tonne 400 425 450 50

  42. Slide 42: Phosphate rock market liberalisation

    Phosphate rock market liberalisation Comments Projection of PhosAgro rock production breakdown in 2013  Before 2013 Russian domestic phosphate rock 2013, kt prices were inflated to PPI c.1,000 kt apply to  Starting from 2013, the liberalisation of the Uralchem regulated contracts expiring in phosp

  43. Slide 43: Revenue per tonne and volume developments for key products

    Revenue per tonne and volume developments for key products Phosphate-based fertilisers and MCP sales DAP MAP volumes Peak 2008 FOB Baltic price: US$1,190/t (1) 700 700 594 584 580 592 580 601 590 5,000 600 569 600 544 534 538 520 4,062 4,243 503 497 3,842 473 486 465 US$ per tonne US$ per tonne 500

  44. Slide 44: Consolidated income statement

    Consolidated income statement (USD in millions) 2010 2011 2012 1H 2012 1H 2013 Revenues 2,534 3,420 3,387 1,644 1732 Cost of Sales (1,570) (1,912) (1,934) (928) (1118) Gross Profit 964 1,508 1,453 716 614 Selling, General & Administration (387) (426) (462) (225) (249) Other Income (Expense) (93) (84

  45. Slide 45: Consolidated balance sheet

    Consolidated balance sheet (USD in millions) 2010 2011 2012 1H2013 Cash and Equivalents 173 526 318 583 Accounts Receivable 522 339 416 383 Inventory 253 314 406 394 Other Current Assets 108 66 40 25 Total Current Assets 1,056 1,244 1,181 1,385 Net Property, Plant & Equipment 1,525 1,774 2,190 2,160

  46. Slide 46: Consolidated cash flow statement

    Consolidated cash flow statement (USD in millions) 2010 2011 2012 1H 2012 1H 2013 Profit before taxation 515 963 1,004 453 206 Depreciation, amortisation + reversal of impairment loss 190 206 210 105 123 Finance Costs 14 45 47 23 38 Finance Income (50) (28) (67) (41) (17) Other (15) 16 (60) 16 106 O

  47. Slide 47: PhosAgro – vertically integrated production model

    PhosAgro – vertically integrated production model Feedstock Processing Product Production unit Apatite-nepheline ore Nepheline Nepheline concentrate concentrate Apatit Phosphate rock Beneficiation plants Phosphate rock “Standard Grade”, “Super Grade” Urea lines Urea PhosAgro Cherepovets (Nitrogen Co

  48. Slide 48: 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 : ~8.5 mln t of P2O5 per annum(1) Global Phosphoric Acid Imports of 4.5 mln t P2O5 FSU India 2.1 Middle East 1% Africa 4% Europe 4% North America Other A

  49. Slide 49: Uncertain policy for nutrient subsidies in India decrease imports

    Uncertain policy for nutrient subsidies in India decrease fertiliser imports and unbalance fertilization Evolution of N: P2O5 :K2O ratio in India Unbalanced fertilisation 0.5 N P2O5 K2O 8,000 0.47 0.5 0.43 0.45 Balanced ratio 4.0 2.0 1.0 0.38 0.39 0.4 2010/11 4.3 2.0 1.0 6,000 2011/12 6.9 3.1 1.0 P2

  50. Slide 50: Brazil phosphate fertilisers market outpaces others

    Brazil phosphate fertilisers market outpaces others Substantial growth in production of major phosphate consuming agri-products results in … Breakdown of phosphate fertilisers consumption by crops Growth in corn and soybeans production, yet more arable land in Brazil 170 available 10% CAGR Middle Ea

  51. Slide 51: Greenfield plant – costs case-study

    Greenfield plant – costs case-study Production facilities Ma’aden Capacity – mln t / year Phosphate rock mine 12.0 26.6 Beneficiation plant 5.0 7.8 Sulphuric Acid Plant 4.7 4.6 Phosphoric Acid Plant 1.5 1.9 Ammonia Plant 1.1 1.1 Phosphate Fertiliser Plant 2.9 4.2 Key products DAP MAP, DAP, NPK, NPS

  52. Slide 52: Growth in phosphate rock production capacities 2000-2011

    Growth in phosphate rock production capacities 2000-2011 Morocco controls most of world phosphate ore reserves Net addition to phosphate rock production capacities Russia 2%Others 5% (excl. China) of 14 mn t USA 2% Jordan 2% with 0.8% CAGR Algeria 3% Syria 3% China 5% Morocco Iraq 8% and Western Sah

  53. Slide 53: China is the major consumer of phosphate fertilisers

    China is the major consumer of phosphate fertilisers The biggest portion of the world’s growing 7 bln population(1)… Limited arable land stimulates fertiliser consumption Breakdown of World population by countries Europe 11% China 0.10 North America China 5% 19% Latin America 9% India 0.14 India ha

  54. Slide 54: Growing food consumption in China drives demand for phosphates

    Growing food consumption in China drives demand for phosphates China’s Economy keeps growing Food Imports are growing in China Corn Imports % 25 16 12,000 20 CAGR +10% CAGR +15% 15 CAGR+13% 14 mln t 10,000 10 5 12 0 8,000 2008/09 2009/10 2010/11 2011/12 2012/13 2022/23 F 10 Soybean Imports US$ 120 C

  55. Slide 55: Development of Chinese phosphate exports

    Development of Chinese phosphate exports Commissioning of new H3PO4 Chinese phosphate rock exports Chinese exports of DAP / MAP / NP / TSP capacities kt kt kt 9,000 In total more than 230 From January 2012 the 5,000 Chinese phosphate Chinese government 8,000 imposed an export duty of fertiliser prod

  56. Slide 56: Control of world's premium phosphate resource base

    Control of world’s premium phosphate resource base 100 Higher cadmium Phosphate rock 100 GCT with MER > 0.10 content in 29% sedimentary Mosaic significantly OCP 32% rocks 28.5% increases costs for PCS production of Average Cadmium content in ppm 29.5% CF Industries 10 DAP 29% 10 Agrium 33% 1 1 Euroc

  57. Slide 57: GDRs performance

    GDRs performance 180 30 PhosAgro ADTV ($000) in LSE Eurobond offering SPO 3 months 5,223 170 1 month 7,448 1 week 5,585 25 160 Uralkali announced split with BPC 150 20 140 GDRs included in Dow Jones Islamic BRIC Index Rebased to 100 Daily Turnover, $US mn 130 15 Announcement of GDRs inclusion into t

  58. Slide 58: GDR performance and DAP prices

    GDR performance and DAP prices August 2013 price: % GDR: US$ 9.20 110 DAP FOB US Gulf: US$ 430/t 100 90 Rebased to 100 80 70 60 August 2013 1st Jan 2012: GDR: US$ 8.44 50 DAP FOB US Gulf: US$ 535/t 40 DAP, FOB US Gulf PHOR LI Source: Bloomberg (data as of 22 August 2013), FMB, PhosAgro analysis 57

  59. Slide 59: Fertilisers trading multiples

    Fertilisers trading multiples Mcap., EV, EV/EBITDA P/E Company $mln $mln 2013F 2014F 2013F 2014F Russian peers 3,542 4,635 4.4x 4.2x 6.0x 5.8x PhosAgro 13,975 16,260 7.8x 8.4x 11.0x 13.1x Uralkali Median 6.1x 6.3x 8.5x 9.5x International peers - nitrogen fertilisers 13,096 16,128 6.5x 6.6x 9.7x 10.0

  60. Slide 60: Current and projected US mine phosphate production capacity

    Current and projected US mine phosphate production capacity mln t 50 45 40 35 30 25 20 15 10 5 0 2005 2010 2015 2020 2025 2030 US excl. Florida Florida Source: IFDC (World Phosphate Rock Reserves and Resources, 2011) 59 29

  61. Slide 61: Fertiliser prices and price ratios

    Fertiliser prices and price ratios % 1,000 2.00 MOP to DAP price ratio 900 1.80 DAP FOB, Tampa 800 1.60 MOP FOB, Vancouver 700 Average MOP to DAP price ratio (1999-2011) 1.40 600 1.20 US$/t 500 1.00 400 0.80 0.75 300 0.60 200 0.40 100 0.20 0 0.00 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200

  62. Slide 62: Fertiliser utilization rates and price ratio

    Fertiliser utilization rates and price ratio 1.8 1.8 100% 100% 1.6 90% 1.4 81% 80% 72% 79% 1.2 70% 1.0 60% 0.8 0.7 0.7 0.6 50% 0.6 0.5 48% 0.4 40% 2007 2008 2009 2010 2011 MOP to DAP price ratio DAP/MAP- utilization rate MOP - utilization rate PhosAgro phosphate-based fertiliser capacity utilisation

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