Phosagro · RUS:PHOR
Phosagro — Investor Presentation (June 2015)
58 slides from Phosagro's investor presentation, June 2015
Slide 1: Presentation for 1-on-1 meetings
Presentation for 1-on-1 meetings June, 2015 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 2014, mln t, excluding Chinese producers phosphate #3 global DAP/MAP producer(1) 26.5 26.5E #1 producer of high-grade producer Overall fertilizer
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 1400 High correlation between cereals basket and 250 DAP prices 10 year correlation 1200 1,400 R2=0.86 DAP spread relative to basket price,% 1,200 200 DAP and cereals basket pric
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% 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 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 90 +3% 80 CAGR +6% 70 CAGR: 13% 50 +2% 60 40 40 35 50 +1% 33 28 40 30 mn t 20 21 +5% 30 16 18 20 20 7 8 10 10 0 0 Sugar Fresh dairy Vegetable Poultry meat Be
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 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 availability per capita, 1000 m³
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 3.2 DAP imports, kt Export duty for DAP, % 1600 120 2.3 2.2 2.1 60% 1400 1.6 100 46% 39% 15% 44% 1200 4% 5% 5%
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 6000 60% Employment in agriculture, % of total 47 35 15 10 2 50% 48% 5000 50% Rural population, mn 852 636
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 500 35 10.9 12 10.5 10.2 415 30 395 8.9 10 400 364 25 8 7.4 DAP consumption, mn t 294 7.3 8 Urea consumption,
Slide 14: Uncertain policy for nutrient subsidies in India
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 2010/11 4.3 2.0 1.0 0.4 2011/12 6.9 3.1 1.0 P2O5 /N ratio 2012/13 7.7 3.0 1.0 0.3
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 countries 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% mn ha 20 8% 6% 7% 10 0 Coffee Soybeans Sugar Corn Cotton 2000 2002 2004 2006 2008 2010 2012 2014 Soybeans (har
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 19
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
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 Largest phosphate fertilizer consumers in Latin America by crops mn t Recommended application rates, kg/ha* Solutions 7.5 Soy bean N 0-5 PKS 1:20:25 1.2 P 15-32 MOP 0:0:60 K 0-83 6.0 0.7 N 110-120 MAP 15:15:15 Sugar cane Oth
Slide 23: Key drivers of P2O5 demand growth in Europe
Key drivers of P2O5 demand growth in Europe Demand growth structure Largest phosphate fertilizer consumers in Europe by crops mn t Recommended application rates, kg/ha* Solutions 3.1 3.1 Wheat N 40-210 NPK(S) 15:15:15(10) P 45-110 Urea 46:0:0 K 40-130 Other 1.2 1.1 N 30-160 NPK(S) 15:15:15(10) Barle
Slide 24: 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 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, Geneva and Warsaw Domestic sales − sales office in São Paulo will platform Roadmap cover Latin America markets Warsaw − sales office in Geneva and Warsaw will cover Northern and Geneva
Slide 26: PhosAgro became the #1 overall supplier of fertilizers to the Russian market
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 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 in Q4 2014 Estimated with feedstock prices set forth below: Ammonia: $450/t, CFR, Tampa $420-430/t, CFR, N. Africa Sulphur: $132/l.t, CFR, Tampa 600 $140-155/t, CFR, N. Africa 550 DAP FOB Tampa: $474/t 500 450 Weighted by capacity avg.
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: 7.5 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: Capacity and cost developments
Capacity and cost developments 350 4% 300 -2% 6.5 0.2 0.3 0.6 -15% 250 Cash cost, $US/t 5.3 200 -5% 0% -39% -17% 150 Capacities CAGR -39% 100 +6.8% 50 0 2011 2012 2013 2014 2015 DAP cash cost, $US/t Urea cash cost, $US/t Total capacity, mn t Source: PhosAgro 30
Slide 31: Financial performance: Strong balance sheet
Financial performance: Strong balance sheet 31
Slide 32: FY Revenue, EBITDA and Net Profit
FY Revenue, EBITDA and Net Profit Revenue (1Q2014-4Q2014-1Q2015) EBITDA (1Q2014-4Q2014-1Q2015) Net Profit (1Q2014-4Q2014-1Q2015) 841 US$, mln 40% 300 38 767 2617 808 450 28% 27 49% 119 2830 82 200 50% 69 20% 350 8% 100 6% 228 40% 55 59 US$, mln 33% 0% 0 250 29% 1Q2014 4Q2014 4Q2014 1Q2015 30% -100 6
Slide 33: Industry Broker Ratings
Industry Broker Ratings 33
Slide 34: Industry Broker Ratings
Industry Broker Ratings (Typically a 12 month outlook) # of Analysts 16 19 20 34 28 6 14 28 14 30 13 19 13 Average Target Price 11% 6% 14% 9% 7% 21% 6% 10% 18% 5% 10% 0% 7% Premium 9% 4% 10% 10% 24% 22% 20% 25% 22% 33% 43% 36% 42% 42% 60% 28% 58% Sells 53% 81% 33% 56% Holds 67% 77% Buys 50% 55% 54%
Slide 35: Appendix
Appendix 35
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 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 37: High quality production assets
High quality production assets Murmansk Cherepovets production complex - largest in Europe Apatit Resources(1) Apatite-nepheline ore: 2,050 mt Kirovsk Al2O3: 283 mn t PhosAgro-Cherepovets Baltic Capacity by product REO(2): 7.5 mn t sea MAP/DAP/NPK/NPS: 3.1 mn t St. Petersburg Ammonia: 1,186 kt Capac
Slide 38: Flexible production capacity
Flexible production capacity PhosAgro production capacities Capacity growth 2011-2014 2014(1), mln t MAP/DAP 2011 – 2014, mln t(2) DAP/MAP/NPK/NPS 2.45 1.85 4.3 2014 1.85 NPK MAP/DAP/NPK: capacities 2011 1.7 +9% PKS 0.10 fully flexible production lines with NPK production 2011 – 2014, mln t(2) Urea
Slide 39: Fertilizer price developments
Fertilizer price developments Avg change, 1Q 2014 4Q 2014 1Q 2015 Q1-o-Q4 120 Uralkali split with BPC 500 110 DAP: 5% Local currencies rebased to 100* 100 450 INR/USD: 90 USD 0% 400 BRL/USD: 80 -11% 70 RUB/USD: 350 -25% 60 Potash:1% 300 50 Urea:-6% 40 250 May-15 Aug-13 Sep-13 Sep-14 Oct-14 Oct-13 No
Slide 40: 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: 65 RUB/USD: 40 in mln USD 2015F DAP FOB Baltic price, $/tonne 400 420 440 460 480 500 520 40 577 651 725 799 873 947 1,021 45 745 819 893 967 1,041 1,115 1,18
Slide 41: 1Q 2015 Cost of goods sold
1Q 2015 Cost of goods sold Cost of Goods Sold DAP production cash cost breakdown ExW, US$, 1Q2015 RUB 19,744 mln RUB 17,872 mln USD 317 mln USD 377 mln RUB 17,108 mln Am. Sulphate USD 489 mln Other DAP Heating energy production Sulphur and sulphuric acid costs Fuel 13% Ammonia Ammonia Electricity 13
Slide 42: 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 2012 82.90 27.63 0.88 Dividends 2013 34.75 11.58 0.35 2014 (1H2014, 9M2014) 45.00 14,97 0,29 Recommended final dividend 15.00 5.00 0.1 for 2014* Recommended dividend for 48.00 16.00 0.31
Slide 43: Overview of debt
Overview of debt Total debt and net debt / annualised EBITDA Comment PhosAgro carefully manages its balance sheet and cost of 3.5х 3.29х financing for all current initiatives, including both the consolidation of subsidiaries and growth projects 2.48х 2.5х The Company’s net debt to EBITDA ratio dec
Slide 44: Debt Maturity Profile
Debt Maturity Profile(1) Payment Schedule Debt Repayment Plan/ Outstanding Debt US$, mn Repayment of principle US$, mn Debt Outstanding 700 2500 655 2220 Outstanding debt 600 Committed undrowing lines 558 2000 507 2191 500 1500 400 374 1581 300 1000 1076 200 500 100 75 728 106 75 34 0 11 5 0 0 after
Slide 45: 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 for PCS production of Average Cadmium content in ppm 29.5% CF Industries 10 29% DAP 10 Agrium 33% 1 1 Euroc
Slide 46: 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 47: 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(*) Global Phosphoric Acid Imports of 3.9 mln t P2O5 (*) FSU India 1.9 2% Europe Oceania Asia (excl. India) 5% India Middle
Slide 48: 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 49: Barriers to entry: feedstocks and production complexity
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 50: 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 51: 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 52: 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 53: Estimated Urea export cash cost curve
Estimated Urea export cash cost curve $US/t FOB(1) Yuzhny in Q4 2014 350 300 $290-293/t, FOB Black sea 250 Cash cost, $US/t 200 150 100 PhosAgro 50 MENA MENA China China 0 10 20 30 40 Urea exports, mn t/year Source: PhosAgro estimates, CRU, Fertecon, IFA, Argus-FMB Note: (1) Urea cash cost estimates
Slide 54: Stock/GDR performance
om Stock/G form: PHOSAGRO per
Slide 55: PhosAgro GDR performance
PhosAgro GDR performance Capital markets day SPO $US 14 Uralkali announced split with BPC Announcement of GDRs inclusion into the FTSE Global Equity GDR mn Index Series and the FTSE All World Equity Index Series Geopolitical unrest $US ADTV $US4.1 mn or GDR 306 k ADTV $US3.5 mn or GDR 351 k ADTV $US
Slide 56: Daily Turnover and index performance
Global political and economic instability Uralkali announced split with BPC Ukraine crisis development: Malaysian Airlines flight shot down 190 50 Russia-Crimea unification 45 170 European debt crisis development: Greek debt restructuring 40 150 35 Rebased to 100 30 Daily Turnover, $US mn 130 25 110
Slide 57: EV/EBITDA performance relative to peers
EV/EBITDA performance relative to peers Current discount to peer EV/EBITDA average: 22% 14 Bloomberg PhosAgr 12 EV/EBITDA FY2015 o consensus Discount Discount to Mosaic 7.7x 44% 10 peer EV/EBITDA* Potash 10.3x 67% average: Corp 46% 8 22% Uralkali 7.7x 46% Peer 6 8.1x 49% average PhosAgro 6.1x 4 2 0
Slide 58: Thank you!
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