Slide 1: Presentation for 1-on-1 meetings December 2016
Presentation for 1-on-1 meetings December, 2016 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 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 #1 producer of high-grade 2015, mln t, excluding Chinese producers phosphate #3 global DAP/MAP producer(1) 26,3 phosphate rock (>35.7% P2O5) produce
Slide 4: Growing production profile & return for shareholders
PhosAgro - Growing production profile & return for shareholders
Slide 5: Focus on production growth and domestic market
Focus on Production growth and Domestic market 9mo16 Phosphate Rock Production and Sale 9mo16 Fertilizers Production Breakdown 8 Production of P2O5-based fertilizers grew 8,7% YoY in 9mo16 Phosphate rock production, mn t 6,3 6,0 0,1 6 5,7 0,1 5,0 1,1 1,8 Total production, mn t 1,4 1,0 4,3 4,1 0,4 4,
Slide 6: Growing production profile
Growing production profile 6.6% 5-year CAGR Internal Phos Rock consumption 10 7,7 7,9 7,9 production, mn t 7,7 Phosphate rock 8 7,5 2,0 6 3,2 3,5 2,9 2,4 4 5,1 5,9 2 4,6 4,4 4,8 0 2011 2012 2013 2014 2015 Internal consumption Sale to third-parties 8 7.9% 5-year CAGR 6,9 6,3 6,1 production, mn t 6 5,
Slide 7: Strategy for fertilizer volume growth
Strategy for fertilizer volume growth Production of P2O5-based Fertilizers up 23% or 1mn t since 2012 thanks to modernization and debottlenecking 8,0 Total CAPEX USD70mn = 1 mn t production = USD70/t = extra 180mn EBITDA p.a. since 2015 0,2 0,2 6,0 0,2 1,4 0,0 1,4 5,3 1,3 Total production, mn t 4,8
Slide 8: Strategy for fertilizer volume growth
Strategy for fertilizer volume growth Where we have been in 2014 Where we are NOW Where we are headed after 2017 7.5 mn t 7.9 mn t 8,3 mn t Phosphate rock External 25% External 29% External 32% sales sales sales Internal Internal 75% Internal 71% 68% consumption consumption consumption 214 New Ammon
Slide 9: Capex dynamics over 2011-16
Capex dynamics over 2011-16 800 697 620* Capex spending 600 559 535 USD mn 439 430 473 263 367 400 293 152 243 200 146 166 104 75 143 180 122 132 130 137 81 72 0 2011 2012 2013 2014 2015 2016F Maintenace Upstream Downstream * Based on forecasted RUB67,5/USD exchange rate for 2016 CAPEX 2016 Currency
Slide 10: Healthy balance sheet
Healthy balance sheet Total Debt and Net Debt/ EBITDA dynamics 4,0x ND/EBITDA target is 1x 3,3x 3,0x 2,5x 2,2x 1,8x 2,0x 1,6x 1,5x 0,9x 1,1x 1,0x 0,8x 1,3x 1,2x 0,4x 0,0x 2011 2012 2013 2014 2015 9mo16 Total Debt/EBITDA Net Debt/EBITDA Repayment of principle 1000 820 800 USD mn 600 400 351 256 242 2
Slide 11: Growing return for shareholders
Growing return for shareholders 1600 Key Targets: 1400 Free Cash Flow, USD mn CAPEX < 50% Of EBITDA Dividends payout at 30-50% of NI 1200 1038 Operating and 1000 820 858 800 737 724 587 600 389 368 361 400 347 310 203 200 335 300 181 141 28 203 0 2012 2013 2014 2015 9mo15 9mo16 Operating cashflow FC
Slide 12: Unique symbiosis of growing profile and shareholders return
Unique symbiosis of growing profile and shareholders return 8% PhosAgro 6% Average 2016/17 Dividend yield Israel Chemicals 4% Mosaic Yara Agrium Potash Corp K+S 2% 0% -15% -10% -5% 0% 5% 10% 15% Average 2016/17 FCF Yield Source: Bloomberg (as of 21 November, 2016), PhosAgro analysis 12
Slide 13: DAP Cash Cost Dynamics over 2011-16
PhosAgro: DAP Cash Cost Dynamics over 2011-16 DAP cash cost 350 47% down since IPO 300 290 280 278 251 250 DAP Cash Costs, USD/t 200 177 148 150 100 50 0 2011 2012 2013 2014 2015 9mo2016 Phosphate rock Ammonia Sulphur Other Selling expenses at FOB Spb Source: PhosAgro 13
Slide 14: Urea Cash Cost Dynamics over 2011-16
PhosAgro: Urea Cash Cost Dynamics over 2011-16 Urea Cash cost 45% down since IPO 180 169 170 160 151 140 138 Urea Cash Costs, USD/t 120 101 100 93 80 60 40 20 0 2011 2012 2013 2014 2015 9mo2016 Ammonia Conversion Selling expences at FOB Source: PhosAgro 14
Slide 15: Focus on NPK production secures extra margins
PhosAgro: Focus on NPK production secures extra margins 700 Average realized premium over 2011-16 (vs. Urea FOB Baltic , DAP FOB Tampa 600 and MOP FOB FSU basket) PhosAgro realized NPK grade price & main components price, USD/t for PhosAgro stands at 500 USD 30/t 400 300 200 100 0 Jan-12 Jan-11 Mar-
Slide 16: PhosAgro Trade Strategy
PhosAgro Trade Strategy Breakdown of fertilizer Fertilizer Deliveries PhosAgro Market Share1 shipments by region, 2015 in 2014-2015, mln.tonnes MAP/DAP NPK 1,5 RUSSIA 63% 63% 57% Own distribution network 1,5 1,5 CIS Latin America 15% 25% Opened office in 2015 2,1 5% N. America RUSSIA 1,2 8% Europe 1
Slide 17: PhosAgro and the global fertilizer industry
PhosAgro and the global fertilizer industry
Slide 18: Fertilizers remain affordable for farmers
Rebased Performance % to 1 Jan 2011 0,7 0,8 0,9 1,0 1,1 1,3 1,4 1,2 Rebased performance in % to 1 January 2015 Jan-11 Mar-11 0,7 1,0 1,3 1,6 May-11 Jan-15 Jul-11 Sep-11 Feb-15 Nov-11 Mar-15 Jan-12 Apr-15 Mar-12 May-12 May-15 Jul-12 Jun-15 Sep-12 Nov-12 Jul-15 Jan-13 Prices are as of 21 November 2016
Slide 19: Phosphates are better positioned among the main nutrients
Phosphates are better positioned among the main nutrients Nitrogen Supply/Demand Outlook 180 Supply: +2% p.a. 170 160 Demand: +1.7% p.a. Mt N 150 140 130 2016 2017 2018 2019 2020 Supply Demand Phosphates Supply/Demand Outlook 54 P Acid Mt P2O5 52 Supply: +2.4% p.a. 50 48 Demand: +2.5% p.a. 46 44 42
Slide 20: DAP prices are driven by...
DAP prices are driven by… Chinese export potential… (Export market breakdown) Demand in Latam and India… (Import market breakdown) RoW RoW 17% 15% South Asia 30% China Saudi Arabia 37% Global Trade N. America 9% 8% (DAP, MAP, TSP) 13,2 mn t* P2O5 CIS in 2015 S. East Asia 9% 12% * - CRU Estimates N.
Slide 21: 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 DAP demand and consumption in India (CRU est. for 2015-16) 800 70 14 700 60 12 12,2 INR/USD exchange rate 600 10,2 11,6 11,8 12 50 9,8 10 9,2 Subsidies, Rs bn 500 246 243 378 354 38
Slide 22: Brazil is a top ag exporter among developing countries
Brazil is a top ag exporter among developing countries Soybean price is purely attractive in BRL Brazil soybean production and P2O5 consumption 18 45 120 4,0 3,5 16 40 100 Soybeans productions, mn t P2O5 consumption, mn t 3,0 Price in USD/bu Price in BRL/bu 14 35 80 2,5 12 30 60 2,0 10 25 1,5 40 8 2
Slide 23: Argentina – new point of growth in Latin America
Argentina – new point of growth in Latin America Soybean price at record highs in ARS due to devaluation Argentina soybean production and P2O5 consumption 70 600 18 195 175 60 16 500 155 Price in USD/bu Price in ARS/bu Soybeans productions, mn t P2O5 consumption, ' 000 t 14 135 50 400 115 12 40 95 3
Slide 24: Avg. DAP business cash cost actual operating rates in 2016
Avg. DAP business cash cost actual operating rates in 2016 $US/t 450 Current DAP FOB Tampa: $322/t 400 350 Cash cost, USD/t 300 250 200 Weighted by production avg. cost : $293/t 150 100 50 0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 DAP production, mln t Russia MENA CIS China Other United States In
Slide 25: Appendix
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Slide 26: Phosphate fertilizers production/consumption balance
Phosphate fertilizers production/consumption balance China India 25 000 6 000 20 000 4 000 15 000 kT P2O5 Capacity kT P2O5 Capacity 10 000 Consumption Internal production 2 000 5 000 Consumption Internal production 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e
Slide 27: Historical DAP price fluctuation throughout a year
Historical DAP price fluctuation throughout a year 550 -2% +2% -USD8/t +USD10/t +16% +USD73/t -15% DAP price, USD/t FOB Tampa -USD80/t 500 The average throughout the period 450 400 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 10yr avg DAP price Source: FMB Argus, Bloomberg 27
Slide 28: Government is changing its focus from growth into efficiency
Government is changing its focus from growth into efficiency Rock PA kT DAP kT MAP kT Ammonia mln T P2O5 P2O5 P2O5 kT YTH 13.0 3 040 2 220 470 700 Wengfu 6.0 1 950 1 240 460 - Kailin 6.0 1 320 1 250 300 600 Yihua N.D 850 750 100 3 000 4Big - 6 710 5 460 1 330 4 300 China 86.2 19 800 10 048 8 036 81
Slide 29: European heavy metals regulation
European heavy metals regulation 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 countries Maximum limits of cadmium in grouped by national fertilizers containing Russia (Kola) 0.05-0.09
Slide 30: Our production assets
Our production assets Murmansk Apatit Resources(1) PhosAgro-Cherepovets Apatite-nepheline ore: 2,050 mt Kirovsk Capacity by product Al2O3: 283 mn t MAP/DAP/NPK/NPS: 3.5 mn t Baltic REO(2): 7.5 mn t Ammonia: 1,186 kt sea St. Petersburg AN/AN-based: 450 kt Urea: 980kt Capacity by product Volkhov APP:
Slide 31: 9mo16 Cost of goods sold
9mo16 Cost of goods sold Cost of Goods Sold DAP production cash cost breakdown ExW, US$, 9mo16 RUB 68,5 bn RUB 63,2 bn Change in stock 0,2% 0,8% 3,0% 3,3% Other items 0,7% 2,4% 2,4% 2,6% 4,5% Other DAP Heating 4,7% production 5,3% energy 5,3% costs Fuel 6,7% 10,0% 15% Ammonium 7,3% Natural gas sulph
Slide 32: RUB devaluation: EBITDA sensitivity
RUB devaluation: EBITDA sensitivity(1) 1 400 1 200 EBITDA, $US mn 1 000 800 600 400 200 0 320 330 340 350 360 370 DAP, $US RUB/USD: 80 RUB/USD: 55 in mln USD 2016F DAP FOB Baltic price, $/tonne 320 330 340 350 360 370 55 775 819 862 905 949 992 60 875 918 962 1,005 1,048 1,091 65 959 1,002 1,046 1,0
Slide 33: Performance relative to peers
Performance relative to peers EV/EBITDA 1yr fwd P/E 1yr fwd 14 60 12 50 10 40 8 30 6 20 4 2 10 0 0 Dec-14 Dec-15 Jun-15 Jun-16 Oct-14 Oct-14 Jun-15 Oct-15 Oct-16 Apr-15 Oct-15 Apr-16 Oct-16 Apr-15 Apr-16 Jun-16 Aug-15 Dec-14 Dec-15 Aug-15 Feb-16 Aug-16 Aug-16 Feb-15 Feb-15 Feb-16 PHOR LI YARA NO POT
Slide 34: Dividend history
Dividend history Post-IPO dividends per share, RUB per GDR, RUB per GDR, US$ 2011 (April-December) 57,5 19,2 0,61 2012 82,9 27,6 0,88 2013 34,75 11,6 0,35 Dividends 2014 45,0 14,97 0,29 1Q2015 48,0 16,0 0,31 2Q2015 57,0 19,0 0,29 3Q2015 63,0 21,0 0,32 4Q2015 57,0 19,0 0,28 Subtotal for 2015 225,00 7
Slide 35: 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 36: Need for a combination of feedstocks acts as barriers to entry
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 37: Thank you!
Thank you! 37