Phosagro · RUS:PHOR
Phosagro — Non-Deal Roadshow (January 2012)
50 slides from Phosagro's roadshow presentation, January 2012
Slide 1: Presentation for Non-Deal Roadshow, January 2012
Presentation for Non-Deal Non Deal Roadshow January 2012 0 1
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 ON, DIRECTLY OR INDIRECTLY INDIRECTLY, TO ANY OTHER PERSON OR PUBLISHED, PUBLISHED IN WHOLE OR
Slide 3: PhosAgro at a glance
PhosAgro at a glance Leading global phosphate rock producers #1 global producer of high-grade phosphate rock World class (P2O5>35.7%) with 8.1 mln t capacity 2010,, mln t,, excluding g Chinese producers p integrated #2 global DAP/MAP producer(1) with 3.5 mln t 26.8 phosphate capacity #1 producer
Slide 4: The only pure play phosphates producer and best-in-class profitability
The only pure play phosphates producer and b t i l profitability best-in-class fit bilit Gross profit breakdown by segment Phosphate segment gross profit margin Average gross profit breakdown by segment for 2008-2010 Average gross profit margin of phosphate segment for 2008-2010 44% 12% 16% 32% 50%
Slide 5: 1. Phosphates – an attractive industry
1. Phosphates p – an attractive industry y
Slide 6: Phosphorus is essential for life
Phosphorus is essential for life Fertilisers – 85%(1) Without phosphate fertilisers With phosphate fertilisers Effect of phosphate and nitrogen fertilisers on net farmer Effect of phosphate and nitrogen fertilisers on corn yield revenue 200 1,200 Nett revenue, $/A A 160 1,000 1 000 Translates T l t
Slide 7: Phosphorus is essential for life
Phosphorus is essential for life Technical Phosphates – 9%(1) Animal Feed – 6%(1) • Synthetic detergents • Metal treatment • Water W t treatment t t t • Lithium phosphate for hybrid and electric vehicle batteries • Personal care products • Cheese • Processed meat • Soft drinks Source: Fertecon Note:
Slide 8: Potential Phosphate Rock Supply in 2010-2015
Potential Phosphate Rock Supply in 2010-2015 mln t 250 Non Integrated Fertiliser Export Producers 14% 30% 200 Local Export Downstream 16% Integrated Processing(1) Fertiliser 150 Producers 86% 70% Local Downstream Processing 100 84% 50 0 Brownfield(2) Greenfield(2) 2010 2015 Current Supply New Phosph
Slide 9: Growth in US Phosphate Rock Imports
Growth in US Phosphate Rock Imports US phosphate rock imports kt 2,800 Despite the fact that Agrifos had +42% stopped import of about 1 mln t of 2,671 phosphate rock per year in early 2,600 2011 2,400 2,200 2,000 1,856 1,883 1,790 1,800 1 600 1,600 1,400 1,363 1,200 1,000 2007 2008 2009 2010 Jan-Nov
Slide 10: Current and projected US mine phosphate production
Current and projected US mine phosphate production r d cti n capacity ca acit mln t 50 45 40 35 30 25 20 15 10 5 0 2005 2010 2015 2020 2025 2030 US excl. Florida Florida S Source: IFDC (World (W ld Phosphate Ph h t Rock R k Reserves R and d Resources, R 2011) 9 29
Slide 11: Stagnating production of phosphates
Stagnating production of phosphates Global phosphate rock production is mainly driven by … with stagnating production in the rest of the world China … Mln tonnes product Mln tonnes product 200 200 Global CAGR (2000-2010): +2.1% 180 180 160 160 140 140 CAGR (2000-2010): -0.1% 120 120 100 100 80 80 60
Slide 12: 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 p kt kt kt 7,000 From January 2012 the 5,000 10,000 Chinese government has NP/TSP imposed an export tax of 82% on NP/TSP during peak DAP/MAP 6,000 sea
Slide 13: Tight corn supply-demand balance
Tight corn supply-demand balance China corn imports Corn yield per harvested acre in US US corn stocks-to-use ratios, % mln t bu % 80 8.0 16 8.0 170 13.9 165 14 7.0 165 13.1 12.7 12 11.6 6.0 160 10 5.0 155 154 153 8.1 4.0 8 151 6.7 150 149 6.2 3.0 6 147 2.0 145 2.0 4 1.3 1.0 140 1.0 2 0.0 135 0 2006
Slide 14: Phosphate is a consolidated industry
Phosphate is a consolidated industry Global export volumes of MAP / DAP / TSP / Phosphoric acid mln t P2O5 PhosAgro (Russia) 59% 62% 57% 1.1 1.1 GCT (Tunisia) 1.3 14 1.4 1.0 1.1 3.2 PhosChem (US)1 35 3.5 3.1 Mississippi Phosphates (US) 37 3.7 2.9 2.2 CF Industries 2008 2,008 2 008 2009 2,009 2 009 2
Slide 15: 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
Slide 16: Fertiliser utilization rates and price ratio
Fertiliser utilization rates and price ratio 90% 1.8 1.8 85% 1.6 80% 72% 75% 1.4 70% 1.2 65% 1.0 60% 55% 0.8 0.7 0.7 50% 0.6 0.6 45% 05 0.5 48% 0.4 40% 2007 2008 2009 2010 2011 MOP to DAP price ratio DAP/MAP- utilization rate DAP/MAP MOP - utilization rate Source: FMB, Fertecon, The Market 15
Slide 17: Combination of feedstocks and complexity 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 15.2 mln t 4.4 mln t (39.0% P2O5) (12.9% P2O5) SULPHUR SULPHURIC AC
Slide 18: Greenfield plant – costs case-study
Greenfield plant – costs case-study Production facilities Ma’aden Capacity – mln t / year Phosphate rock mine 12.0 27.2 Beneficiation plant 5.0 8.1 Sulphuric Acid Plant 4.7 4.1 Phosphoric Acid Plant 1.5 1.8 Ammonia Plant 1.1 1.1 DAP Plant 2.9 3.7 Key products DAP MAP, DAP, NPK, NPS Ma’aden – total e
Slide 19: Ma'aden is already priced-in by the markets
Ma’aden is already priced-in by the markets New large capacity additions and change in DAP price in Expected Ma’aden start and DAP price changes in 2009-2011 1998-2000 1998 2000 220 700 Period of expectation of 210 650 Ma’aden Ma aden launch in 4Q 2010 200 600 Oswal ((India)) 190 550 1,740 kt DAP pe
Slide 20: Timing and completion of new capacities is uncertain
Timing and completion of new capacities is uncertain OCP seeks to extract the maximum value from its phosphate ore reserve. mln t of P2O5 Management has recently indicated that they will match production to market demand 47.0 Incremental 2.8 2.8 demand in 2011-2015 3.2 6 7 mln 6.7 l t off 66 6.6 1.6
Slide 21: Strong demand fundamentals for fertilisers
Strong demand fundamentals for fertilisers Meat consumption is driving demand for phosphate-based fertilisers and feed phosphates Growing GDP per capita in Emerging Markets Animal feed a key driver for grain consumption ‘000 US$ kg of grain required to produce 1 kg meat 5.8 7x 3.9 4x 2.2 1.4 2x 2000
Slide 22: Significant room for further growth of use of phosphate fertilisers
Significant room for further growth of use of phosphate f tili fertilisers Stagnating yields force farmers to increase planted area to Insufficient application of phosphate fertilisers creates increase production significant room for growth Wheat 22 Wheat 10 year CAGR: 1.1% Corn P2O5 estimated crop
Slide 23: Stock-to-use ratios at low levels driving crop prices
Stock-to-use ratios for the key phosphate-using crops are at l low llevels l driving d i i crop prices i Phosphate fertilizer use by crop World grain stocks-to-use ratios, % 20 year 20 year 30% average average 20 year 20 year 25% average average Wheat 20% 16% 15% 10% 2007/08 2009/10 2007/08 2009/10
Slide 24: High grain prices motivate farmers to use more fertilisers
High grain prices driven by market imbalance motivate ti t ffarmers tto use more fertilisers f tili Corn prices relative to DAP Prices Corn to DAP prices ratio 10 year correlation HIGH DAP PRICES 1,400 3.0 R² = 0.78 1,200 1,000 2.5 AP FOB Tampa, US$/t 800 600 2.0 DA 400 January 2012 average price: J
Slide 25: 2. Company Highlights
2 Company Highlights 2.
Slide 26: World class integrated phosphate producer
World class integrated phosphate producer A leading global phosphate rock producer with over 2.1 bln t of apatite-nepheline ore resources (over 75 years of production) 26.8 #1 producer of high-grade phosphate rock (>35.7% P2O5) 13.3 8.1 7.2 5.9 5.3 5.0 3.6 OCP Mosaic Phosagro GCT PotashCorp JPMC Ma'
Slide 27: Control of world's premium phosphate resource base
Control of world’s premium phosphate resource base Location(1) Morocco USA Jordan China Tunisia 13.0-14.0% Low to Al2O3 content Very low Very low Very low Very low High moderate Ore type Igneous Sedimentary Sedimentary Sedimentary Sedimentary Sedimentary Level of Moderate to Low to Low to Very low M
Slide 28: Control of world's premium phosphate resource base
Control of world’s premium phosphate resource base 100 Higher cadmium Phosphate rock content in GCT with MER > 0.10 29% sedimentary Mosaic significantly OCP 32% rocks 28.5% increases costs for PCS production of nt in ppm 29.5% CF Industries 10 DAP 29% mium conten Agrium 33% verage Cadm 1 Av Eurochem
Slide 29: Self-sufficiency in key feedstocks
Self-sufficiency in key feedstocks PhosAgro DAP production cash costs 1 Phosphate rock: 100% self-sufficient 2010, ExW, US$ 2010, kt Other 17% 1 4,390 3 Sulphur Phosphate 8,101 13% rock 51% 2,522 3,712 1,190 2 Ammonia 19% Total Internal External Domestic Export phosphate sales sales rock sales 2 Amm
Slide 30: Significant cost advantage for integrated producers
Significant cost advantage for integrated producers Estimated DAP production cash costs FOB, US$ per tonne DAP 800 700 600 500 400 300 200 100 0 India (non integrated) USA (non integrated) USA (integrated) PhosAgro (integrated) Source: companies’ data, Fertecon, PhosAgro 29
Slide 31: 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 Asia 32% 37%
Slide 32: 3. Financial Overview
3. Financial Overview
Slide 33: Revenue, EBITDA and Net Income
Revenue, EBITDA and Net Income Revenue (H1 2010/2011) EBITDA (H1 2010/2011) Net Income (H1 2010/2011) Growth: 42% 36% 1,704 25% 60 12 253 24% , 1,200 51 13% 429 US$mn 10 620 US$mn 228 US$mn 1,378 286 160 911 1H2010 1H2011 1H2010 1H2011 1H2010 1H2011 Chemical fertilisers Apatite concentrate EBITDA Ma
Slide 34: Cost of Goods Sold
Cost of Goods Sold Cost of Goods Sold and Sales Volumes DAP Production Cash Cost Breakdown ExW, US$, 2010 Sales (kt) 2008 2009 2010 1H2010 1H2011 Fertilisers(1) 3,103 3,635 3,842 1,920 1,992 Rock 3,517 2,807 3,712 1,933 1,558 Other 17% $1 552 $1,552mn $1 222 $1,222mn $1 592 $1,592mn $795 $795mn $971
Slide 35: Capex and Dividend Policy
Capex and Dividend Policy Capex 700 600 564 500 448 400 384 mn 349 US$m 293 300 200 100 0 2008 2009 2010 2011E 2012E PhosAgro expects to pay between 20% and 40% of consolidated profit for the year calculated in accordance with IFRS as dividends. dividends The preliminary dividend of RUB 250 per sh
Slide 36: Overview of Debt
Overview of Debt Total Debt / EBITDA and Net Debt (1) / EBITDA Net Debt 1.0x 0.8x Actual Net Debt as of 30 June 2011 (USD in millions) 0.4x 0.5x 0.3x 0.6x 0 1x 0.1x 0.2x Total Debt, incl.: 953 0.0x (0.1x) (0.2x) ((0.5x)) Short-term Short term debt 408 (2) 2008 2009 2010 1H2011 Total Debt / EBITDA Ne
Slide 37: 4. Future potential
4 Future potential 4.
Slide 38: Short and medium term strategy for future growth
Short and medium term strategy for future growth Strategic objectives Key initiatives Construction of shaft No. 2 at Kirovsky Underground Mine which will increase the production of apatite-nepheline ore from 12 to 14 mln t from the year 2014 1 Improve efficiency Construction of a new 32 MW gas-p
Slide 39: Long term strategy for volume growth of fertilisers
Long term strategy for volume growth of fertilisers Today Future Future Potential Strategic initiatives Phosphate rock Phosphate rock, mln t The future development of Shtokman field would allow PhosAgro to build new fertiliser capacity near its mines and simplify its export logistics External sales
Slide 40: Thank You
ee Oe aT PHOSAGRO Thank You
Slide 41: Appendix
Appendix PA | Vv
Slide 42: High quality production assets
High quality production assets Murmansk Cherepovets production complex - largest in Europe Apatit Kirovsk Ammophos Resources(1) Capacity by product Apatite-nepheline ore: 2,085 mln t MAP/DAP/NPK/NPS: 2.6 mln t Al2O3: 283 mln t APP: 140 kt REO(2): 7.5 mln t Baltic ports St. Petersburg AIF3: 24 kt Cap
Slide 43: Management with strong track record of organic growth and efficiency improvement
Management with strong track record of organic growth and efficiency ffi i iimprovement 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 +30% +20%
Slide 44: EBITDA development
EBITDA development p EBITDA EBITDA Calculation Margin 51% 22% 27% 24% 36% (RUB in millions) 2008 2009 2010 1H2010 1H2011 Operating Profit 42,173 11,077 14,687 6,152 14,878 2,000 1,907 D&A and impairment 3,231 4,100 5,777 2,450 2,874 Litigation provision 1 992 1,992 (1 992) (1,992) - - - EBITDA 47,39
Slide 45: Revenue per tonne and volume developments for key products
Revenue pper tonne and volume developments p for keyy pproducts DAP MAP Phosphate-based fertilisers volumes Peak 2008 FOB Baltic 4,000 3,842 585 3,635 price: US$1,190/t (1) 600 560 1,200 3,500 3,103 465 1,000 423 3,000 392 ths of tonnes s 400 360 2,500 US$ per tonne 800 US$ per tonne 1,920 1,992 604
Slide 46: Consolidated income statement
Consolidated income statement (USD in millions) 2008 2009 2010 1H2010 1H2011 Revenues 3,709 1,916 2,533 1,200 1,704 Cost of Sales (1,472) (1,258) (1,570) (783) (941) Gross Profit 2,237 658 963 417 763 Selling, General & Administration (435) (295) (387) (181) (206) Other Income (Expense) (104) (14) (
Slide 47: Consolidated balance sheet
Consolidated balance sheet (USD in millions) 2008 2009 2010 1H2011 Cash and Equivalents 488 186 173 248 Accounts Receivable 375 442 522 426 Inventory 299 226 253 351 Other Current Assets 271 30 108 47 Total Current Assets 1,433 884 1,056 1,072 Net Property, Plant & Equipment 1,281 1,407 1,525 1,750
Slide 48: Consolidated cash flow statement
Consolidated cash flow statement (USD in millions) 2008 2009 2010 1H2010 1H2011 Profit before taxation 1,745 1 745 376 515 212 539 Depreciation,amortisation and impairment 130 129 190 81 100 Interest Expense 37 27 14 6 9 Interest Income (59) (34) (23) (14) (11) Other 8 (4) (18) 3 (9) Funds From Oper
Slide 49: Commitment to high corporate governance standards
Commitment to high corporate governance standards Board of Directors Chief Executive Officer Audit Committee Marcus Rhodes (Chairman) Maxim Volkov INDEPENDENT NON-EXECUTIVE Sven Ombudstvedt DIRECTORS Ivan Rodionov Sven Ombudstvedt (Chairman) Remuneration and Human Marcus Rhodes Resources Committee I
Slide 50: 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”, “S “Super Grade” G d ” Urea lines Urea Cherepovetsky Azot Purch