Phosagro · RUS:PHOR
Phosagro — Non-Deal Roadshow (February 2016)
57 slides from Phosagro's roadshow presentation, February 2016
Slide 1: Presentation for 1-on-1 meetings February 2016
Presentation for 1-on-1 meetings February, 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 and the global fertilizer industry
PhosAgro and the global fertilizer industry
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 26.5 26.5E 2014, mln t, excluding Chinese producers phosphate #3 global DAP/MAP producer(1) #1 producer of high-grade producer Overall fertilizer
Slide 5: 2014 MAP/DAP production vs consumption, global trade
2014 MAP/DAP production vs consumption, global trade in million tonnes of P2O5 World MAP/DAP demand: 28.4 mn t of P2O5 World MAP/DAP trade: 11.01 mn t of P2O5 3 0.8 2.1 1.6 0.6 5.5 4 4.4 2 6 8 0.8 2.1 5 13.2 7 10.2 1 3.8 0.5 1.7 0.9 4.4 7 South Asia 1.9 1 Latin America 4 Europe 2 North America 5 Mid
Slide 6: 2014 MAP/DAP regional balances of P2O5
2014 MAP/DAP regional balances of P2O5, mn t Consumption Production Export Import 100% 1% 6% 16% 7% 3% 14% Others 90% 2% 3% 6% 6% 5% 80% 7% 14% 2% Africa 2% 1% 14% 3% 70% 13% 12% Middle East 19% 60% 16% 10% Russia & CIS 3% 29% 50% 7% Europe 16% 40% 21% Latin America 30% 11% North America 46% 20% 36%
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 Price dynamics from 1400 DAP prices the beginning of 2015 250 10 year correlation 1,400 R2=0.86 1200 DAP FOB DAP spread relative to ba
Slide 8: 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 8
Slide 9: Fertilizer price developments
Fertilizer price developments INR/USD -6% DAP -21% BRL/USD -34% RUB/USD -31% MOP -18% Urea -38% Source: Argus-FMB, S&P Capital IQ, PhosAgro analysis Note:(*) – rebased at 1 January 2014 9
Slide 10: Phosphate fertilizers production/consumption balance in China
Phosphate fertilizers internal production/consumption balance in China Source: CRU ‘ 10
Slide 11: Government is changing its focus from growth into efficiency
Government is changing its focus from growth into efficiency Company 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 - Corn Production Kailin 6.0 1 320 1 250 300 600 Area Yihua N.D 850 750 100 3 000 Total 4Big - 6 710 5 460 1 330
Slide 12: Aiming to reduce pollution and increase yields and crop quality
......aiming to reduce pollution ...as well as increase yields and crop quality Chinese ag resources deteriorate with limited arable land ... and water availability decreases 125 2.3 120 2.2 115 2.1 110 2 105 100 1.9 95 1.8 1997 2002 2007 2014 1997 2002 2007 2014 Arable land, mn ha Fresh water avail
Slide 13: Phosphate fertilizers production/consumption balance in India
Phosphate fertilizers internal production/consumption balance in India Source: CRU 13
Slide 14: 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 Evolution of N : P2O5 : K2O ratio in India 800 70 N P2O5 K2O 700 65 Balanced ratio 4.0 2.0 1.0 600 60 2010/11 4.3 2.0 1.0 Subsidies, Rs bn 378 USD/INR rate 246 243 2011/12 6.9 3.1 1
Slide 15: India: Fertilizer Demand & Consumption Update – Post NBS
India: Fertilizer Demand & Consumption Update – Post NBS (2010-11) DAP Demand DAP Consumption Urea Demand Urea Consumption 13 33 12 10.9 32 11 10.2 11.8 12 11.6 31 10 9.2 30 30.6 30.9 30 9 9.5 29.6 9.1 7.4 7.5 29 8 32 28 28.1 31.2 7 30.3 6 27 28.8 27.9 5 26 4 25 2010-11 2011-12 2012-13 2013-14 2014-
Slide 16: India: Fertilizer Demand & Import – Medium Term Outlook
India: Fertilizer Demand & Import – Medium Term Outlook Urea Demand Growth estimated @ 2.7% Demand, mln T 70 Urea DAP NPK MOP (direct sale) annually; 60 4.9 5 4.6 4.8 11.4 11.8 12.3 DAP, NPK, and MOP Demand estimated 50 11.1 to grow @ 4% annually; 40 12.4 12.8 13 12.2 30 DAP and Complex fertilizer c
Slide 17: Phosphate fertilizers production/consumption balance in Brazil
Phosphate fertilizers internal production/consumption balance in Brazil Source: CRU 17
Slide 18: Brazil is a top ag exporter among developing countries
Brazil is a top ag exporter among developing countries Soybean price at record highs in BRL Soybeans drive ag production in Brazil 18 40 50 16 CAGR: 6% 35 40 Price in USD/bu Price in BRL/bu 14 30 30 12 25 10 20 8 20 10 6 15 0 Jan-13 Jan-09 Jan-10 Jan-11 Jan-12 Jan-14 Jan-15 Jan-16 Jul-09 Jul-10 Jul-
Slide 19: Phosphate fertilizers production/consumption balance in Russia
Phosphate fertilizers internal production/consumption balance in Russia 3 000 Capacity 2 000 kT P2O5 Internal production 1 000 Internal consumption 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e *-DAP/MAP/TSP Source: CRU 19
Slide 20: 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 2009-2013 2009-2013 2009-2013 Russia 45% Russia 10 Russia 2.2 India 62% India 38 India 3.0 USA 66% USA 24 USA 7.3 Brazil 76% Brazil 62 Bra
Slide 21: Sales focus and Industry developments
Sales focus and Industry developments 21
Slide 22: 2014 Primary phosphate trade flows; PhosAgro Trade Strategy
2014 Primary phosphate(1) trade flows PhosAgro Trade Strategy World DAP/MAP trade: 22.4 mn t Domestic sales platform (largest supplier to Russian market with 20% share) PhosAgro(2) Warsaw (2015) 3.2 5.8 Zug (2015) 11.1 18 12 30 19 15 3.7 16 2.2 4.0 16 14 24 14 6.9 São Paulo (2015) 10.2 1.7 x.x Impor
Slide 23: Priorities: trade restrictions vs. health
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 24: 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 25: Estimated MAP/DAP business cash cost curve in 2016
Estimated MAP/DAP business cash cost curve in 2016 $US/t FOB(1) Morocco Feedstock prices for January 2016: Ammonia: US$ 350/t, CFR, Tampa US$ 310-340/t, CFR, N.Africa Sulphur: US$ 105/t, CFR, Tampa US$ 117/t, CFR, N.Africa DAP FOB Tampa: $382t Weighted by capacity avg. cost : $370/t Cash cost, $US/t
Slide 26: Estimated Urea export cash cost curve
Estimated Urea export cash cost curve $US/t FOB(1) Yuzhny in Q4 2014 Source: PhosAgro estimates, CRU, Fertecon, IFA, Argus-FMB Note: (1) Urea cash cost estimates are based on feedstock prices in Q1 2016 USD/RUB exchange rate of RUB 76,25 applied for calculation urea export cash cost 26
Slide 27: Strategy for fertilizer volume growth
Strategy for fertilizer volume growth Where we are in 2015 Where we are headed (2017-2020) Phosphate rock +15% Total: 7.5 mn t Total: 8.0 mn t Overall 8.2 mn t Amm.sulph. 0.3 25% 25% Ammonia 0.3 External UREA gran 0.5 sales AN 0.5 Overall 7.1 mn t AN 0.5 UREA prill 1.0 Internal 75% 75% UREA prill 1.
Slide 28: Industry Broker Ratings
Industry Broker Ratings
Slide 29: Peer valuations
Peer valuations (Typically a 12 month outlook) # of Analysts 19 23 21 27 17 35 34 30 14 14 15 Average Target Price Premium 48% 48% 76% 20% 23% 29% 20% 33% 12% 24% 27% 5% 6% 4% 6% 8% 16% 12% 19% 32% 36% 38% 42% 46% Recommendations: 31% 56% 54% Sells 27% 77% 86% Holds 84% 36% Buys 59% 56% 54% 50% 41%
Slide 30: Performance relative to peers
Performance relative to peers EV/EBITDA 1yr fwd P/E 1yr fwd 12 25 10 20 8 15 6 10 4 2 5 0 0 Apr-15 Jul-15 Oct-14 Oct-15 Nov-14 Mar-15 Dec-14 May-15 Jan-15 Aug-15 Sep-15 Nov-15 Dec-15 Feb-15 Jun-15 Jan-16 Apr-15 Mar-15 Oct-14 Oct-15 Nov-14 Dec-14 Jul-15 Nov-15 Dec-15 May-15 Aug-15 Sep-15 Jan-15 Feb-1
Slide 31: Appendix
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Slide 32: Supply – demand balance
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 33: 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% 38% 38% 38% Employment in agriculture, % of total 35 47 15 10 2 36% 20,000 36% Rural population, mn 636 852 30 38 59 34% 33% 19,12
Slide 34: 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 3.2 DAP imports, kt Export duty for DAP, % 1600 120 2.3 2.2 2.1 60% 1400 13% VAT since 1.6 100 46% 39% Sept 201
Slide 35: 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 6000 60% Employment in agriculture, % of total 47 35 15 10 2 50% 48% 5000 50% Rural population, mn 852 636
Slide 36: Drop in commodity prices supports budget rebalancing
Drop in commodity prices supports budget rebalancing Commodity prices and Indian fertilizer subsidies 3,000 $/bbl 18.6% 18.2% 17.0% 15.8% 16.3% 15.9% 800 13.7% 2,500 120 700 Brent oil - 50% India subsidies, INR bn DAP - 27% 2,000 100 600 Urea - 49% 80 500 1,500 MOP - 40% 400 60 Wheat & Rice - 32% 1,
Slide 37: 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 60 Country Brazil China India Russia USA Employment in agriculture, % of total 15 35 47 10 2 40 Rural population, mn 30 636 852 38 59 20 Rural populati
Slide 38: 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 39: 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 2012-2014 Average gross profit margin of phosphate segment for 2012-2014 39% 13% 10% 33% 34% 19% 51% 56% 87% 17% 61% 16% 16% 67% 33%
Slide 40: 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 41: PhosAgro became the #1 overall supplier of fertilizers to the Russian market in 2014
PhosAgro became the #1 overall supplier of fertilizers to the Russian market in 2014, and continues to grow its market share Fertilizers sales in Russia, 2014 Market share kt Percent NPK MAP/DAP Ammonium nitrate Urea Total 2014 2013 2012 29 PhosAgro PhosAgro 723 483 248 1483 20% 18% 15% Eurochem 84
Slide 42: Flexible production capacity
Flexible production capacity PhosAgro production capacities Capacity growth 2011-2015 2015(1), mln t MAP/DAP 2011 – 2015, mln t(2) DAP/MAP/NPK/NPS 2.7 2.2 4.9 2015 2.10 NPK +24% MAP/DAP/NPK: 2011 1.70 PKS 0.10 fully flexible production lines with NPK production 2011 – 2015, mln Urea 0.98 capacity of
Slide 43: RUB devaluation: EBITDA sensitivity
RUB devaluation: EBITDA sensitivity(1) 1,600 1,400 EBITDA, $US mn 1,200 1,000 800 600 400 200 0 360 380 400 420 440 460 480 DAP, $US RUB/USD: 85 RUB/USD: 60 in mln USD 2016F DAP FOB Baltic price, $/tonne 360 380 400 420 440 460 480 60 864 949 1,033 1,117 1,201 1,285 1,370 65 946 1,030 1,114 1,198 1,
Slide 44: Consolidated income statement
Consolidated income statement (USD in millions) 2012 2013 2014 9M 2014 9M 2015 Revenues 3 387 3 283 3 205 2 452 2 401 Cost of Sales (1 934) (2 140) (1 791) (1 402) (1 053) Gross Profit 1 453 1 144 1 413 1 049 1 347 Selling, General & Administration (462) (594) (591) (464) (395) Other Income (Expense
Slide 45: Consolidated balance sheet
Consolidated balance sheet (USD in millions) 2012 2013 2014 9M2015 Cash and Equivalents 318 348 545 385 Accounts Receivable 416 20 338 310 Inventory 406 2 223 214 Other Current Assets 40 700 82 59 Total Current Assets 1 181 1 070 1 188 967 Net Property, Plant & Equipment 2 190 2 320 1 530 1 630 Inta
Slide 46: Consolidated cash flow statement
Consolidated cash flow statement (USD in millions) 2012 2013 2014 9M 2014 9M 2015 Profit before taxation 1 004 315 (402) 234 674 Depreciation, amortisation + reversal of impairment loss 210 245 209 170 112 Finance Costs 47 71 302 75 77 Finance Income (67) (36) (28) (18) (17) Other (60) 104 938 259 2
Slide 47: 9M 2015 Cost of goods sold
9M 2015 Cost of goods sold Cost of Goods Sold DAP production cash cost breakdown ExW, US$, 9M2015 Other items RUB 49.6bn RUB 62.4 bn USD 1.4 bn USD 1.05 bn Fertilisers for 1% 0% resale 5% 5% Other DAP 1% Ammonium 2% 1%2% production sulphate 6% costs 10% Heating energy 4% 15% 4% 3% Sulphur and 5% Amm
Slide 48: 2009-2016 Cash Flow for CAPEX
2009-2016 Cash Flow for CAPEX Continuous CAPEX provides visible capacity growth and higher operating efficiency RUB mn 2016F: 7.1 mn t +51% 97,592 2009: 4.7 mn t of overall 77,482 fertilizers, feed phosphates and 42,844 industrial 41,770 phosphates 37,609 2,756 In foreign 35,370 34,917 capacity 12,3
Slide 49: Dividend history
Dividend history Post-IPO dividends per share, RUB per GDR, RUB per GDR, US$ 2011 April-December 57.50 19.17 0.61 2012 82.90 27.63 0.88 2013 34.75 11.58 0.35 2014 45.00 14,97 0,29 Dividends 1Q2015 48.00 16.00 0.31 2Q2015 57.00 19.00 0.29 3Q2015 63.00 21.00 0.32 Subtotal for 2015 168.00 56.00 0.92 Ne
Slide 50: Overview of debt
Overview of debt Total debt and net debt / annualised EBITDA Comment 3.29х 3.5х PhosAgro carefully manages its balance sheet and cost of financing for all current initiatives, including 2.48х both the consolidation of subsidiaries and growth 2.5х 2.20х projects 1.83х 2.29х 1.47х The Company’s net
Slide 51: Debt Maturity Profile
Debt Maturity Profile(1) Payment Schedule Debt Repayment Plan/ Outstanding Debt US$, mn Repayment of principle Debt Outstanding US$, mn 3000 Outstanding debt 800 Committed undrowing lines 731 2500 700 600 2000 1,823 500 1,564 343 1500 400 376 1,246 286 300 1000 200 138 515 91 500 377 100 286 0 0 aft
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 with MER > 0.10 content in 29% sedimentary OCP 32% Mosaic significantly rocks 28.5% increases costs for PCS production of Average Cadmium content in ppm 29.5% CF Industries 10 29% DAP 10 Agrium 33% 1 1 Euroc
Slide 53: 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 54: Barriers to entry: production process 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 55: 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 nutrients mln t 25 170 20 160 5 years 15 150 10 140 5 130 0 120 2004-2009 2009-2014 2014-2019 2010 2011 2012 2013 2
Slide 56: Timing and completion of new capacities is uncertain
Timing and completion of new capacities is uncertain mln t of P2O5 1.3 3.3 3.3 1.5 1.8 4.6 Utilization Utilization rate of 76% -4.5 rate of 83% OCP seeks to extract the Joint Venture Mosaic maximum value from its phosphate ore reserve. and Ma’aden estimated Management has recently cost USD 7 bln ind
Slide 57: Thank you!
Thank you! 57