Phosagro · RUS:PHOR
Phosagro — Non-Deal Roadshow (March 2016)
39 slides from Phosagro's roadshow presentation, March 2016
Slide 1: Presentation for 1-on-1 meetings March 2016
Presentation for 1-on-1 meetings March, 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: Fertilizer price developments
Fertilizer price developments Price dynamics since 1 January 2015 Commodity Currency DAP -23% ↓ RUB/USD -16% ↓ Urea -40% ↓ BRL/USD -30% ↓ MOP -24% ↓ INR/USD -5% ↓ 120 550 110 500 Local currencies rebased to 100 100 450 90 400 80 USD 350 70 300 60 250 50 40 200 30 150 Feb-14 Feb-15 Feb-16 Jan-14 Mar-
Slide 6: 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 6
Slide 7: Fertilizers remain affordable for farmers despite low cycle in soft commodities
Fertilizers remain affordable for farmers despite low cycle in soft commodities Strong correlation between cereals and fertilizers baskets over 10 years 120 100 NPK (4-2-1) basket, USD/t 80 1,3 60 R² = 0,7548 40 1,2 20 Rebased Performance % to 1 Jan 2011 0 100 200 300 400 500 1,1 Grain basket, USD/t
Slide 8: 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 9: Phosphate fertilizers production/consumption balance in China
Phosphate fertilizers production/consumption balance in Chinal 20 000 15 000 Internal production kT P2O5 Capacity 10 000 5 000 Consumption 0 2001 2009 2000 2002 2003 2004 2005 2006 2007 2008 2010 2011 2012 2013 2014 2015e *-DAP/MAP/TSP Source: CRU ‘ 9
Slide 10: 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 11: Phosphate fertilizers production/consumption balance in India
Phosphate fertilizers production/consumption balance in India 6 000 4 000 Consumption kT P2O5 Capacity 2 000 Internal production 0 2010 2015e 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 *-DAP/MAP/TSP Source: CRU 11
Slide 12: 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 13: Phosphate fertilizers production/consumption balance in Brazil
Phosphate fertilizers production/consumption balance in Brazil 4 000 3 000 kT P2O5 2 000 Consumption Capacity 1 000 Internal Production 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e *-DAP/MAP/TSP Source: CRU 13
Slide 14: 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 60 6 16 35 50 5 Harvested area, Ha mn Price in USD/bu Price in BRL/bu 14 40 4 30 Yield, t/Ha 12 30 3 25 10 20 2 8 20 10 1 6 15 Jan-13 Jan-09 Jan-10 Jan-11 Jan-12 J
Slide 15: Phosphate fertilizers production/consumption balance in Russia
Phosphate fertilizers production/consumption balance in Russia 3 000 Capacity 2 000 kT P2O5 1 000 Internal production Internal consumption 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e *-DAP/MAP/TSP Source: CRU 15
Slide 16: Avg. DAP business cash cost actual operating rates in 2015
Avg. DAP business cash cost actual operating rates in 2015 $US/t FOB(1) Morocco 600 Average Feedstock prices for 2015: Ammonia: US$ 454/t, CFR, Tampa Avg. 2015 DAP FOB Tampa: $459/t US$ 427/t, CFR, N.Africa Sulphur: US$ 130/t, CFR, Tampa 500 US$ 142/t, CFR, N.Africa Weighted by production avg. cost
Slide 17: Avg. MAP business cash cost actual operating rates in 2015
Avg. MAP business cash cost actual operating rates in 2015 $US/t FOB(1) Morocco Average Feedstock prices for 2015: Ammonia: US$ 454/t, CFR, Tampa 700 US$ 427/t, CFR, N.Africa Sulphur: US$ 130/t, CFR, Tampa US$ 142/t, CFR, N.Africa 600 Avg. 2015 MAP FOB Baltic: $458/t Weighted by production avg. cost
Slide 18: Urea business cash cost capacity operating rate in 2015
Urea business cash cost capacity operating rate in 2015 $US/t FOB(1) Yuzhny 400 in Q4 2014 350 Average export price in 2015: $273/FOB 300 Cash cost, $US/t 250 Current export price: $218/FOB 200 Weighted by production avg. cost : $165/t 150 PhosAgro 100 50 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70
Slide 19: PhosAgro - Growing production profile & return for shareholders
PhosAgro - Growing production profile & return for shareholders
Slide 20: 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 21: 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 Ammonia, ‘000
Slide 22: Production of P2O5-based fertilizers up 23% since 2012
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 23: Growing return for shareholders
Growing return for shareholders 1800 Key Targets: 1600 Free Cash Flow, USD mn 1400 CAPEX < 50% Of EBITDA Dividends payout at 30-50% of NI (51% Historically) 1164 Operating and 1200 1038 1000 820 800 725 737 587 600 389 154* 400 203 200 335 368 245 141 28 203 300 0 2011 2012 2013 2014 2015 Operating
Slide 24: 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 25: 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 2,3x 1,6x 0,9x 1,1x 1,4x 1,3x 1,0x 0,8x 0,4x 0,5x 0,0x 2011 2012 2013 2014 2015 Total Debt/EBITDA Net Debt/EBITDA Net Debt/EBITDA (ex. Minorities buyout) Repayment of principle 10
Slide 26: PhosAgro: DAP Cash Cost Dynamics over 2011-16
PhosAgro: DAP Cash Cost Dynamics over 2011-16 DAP cash cost 350 50% down since IPO 300 290 280 278 251 250 DAP Cash Costs, USD/t 200 177 150 133 100 50 0 2011 2012 2013 2014 2015 Feb 2016 Phosphate rock Ammonia Sulphur Other Selling expenses at FOB Spb Source: PhosAgro 26
Slide 27: PhosAgro: Urea Cash Cost Dynamics over 2011-16
PhosAgro: Urea Cash Cost Dynamics over 2011-16 Urea cash cost down 55% since IPO Gas Price in February 2016 PhosAgro: USD1.5/mmbtu 169 170 US Henry hub: USD1.9/mmbtu 151 138 Urea cash costs, USD/t 101 77 2011 2012 2013 2014 2015 Feb 2016 Ammonia Conversion Selling expenses at FOB Source: PhosAgro 27
Slide 28: Focus on NPK production secures extra margins
PhosAgro: Focus on NPK production secures extra margins 700 Average realized premium over 2011-15 (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 29/t 400 300 200 100 0 Mar-12 Mar-15 Jan-
Slide 29: 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 30: 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 31: Appendix
+ > a , x eux Say es ye 7 SN | ~ } q 4 .
Slide 32: 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 33: FY15 Cost of goods sold
FY15 2015 Cost of goods sold Cost of Goods Sold DAP production cash cost breakdown RUB 67,5 bn ExW, US$, FY2015 RUB 83,1bn Other items 0,8% 1,7% 2,5% 1,2% Heating energy 3,3% 4,1% Other DAP 3,8% 5,4% production Ammonium 4,8% 4,3% costs sulphate Fuel 8,7% 15% 11,0% Ammonia Electricity 8,8% Phosphate
Slide 34: 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, $/tonne 360 380 400 420 440 460 480 60 864 949 1,033 1,117 1,201 1,285 1,370 65 946 1,030 1,114 1,198 1,
Slide 35: Performance relative to peers
Performance relative to peers EV/EBITDA 1yr fwd P/E 1yr fwd 12 25 10 20 8 15 6 10 4 2 5 0 0 Apr-15 Apr-15 Nov-14 Dec-14 Mar-15 Nov-15 Dec-15 Jul-15 Mar-15 Oct-14 Jan-15 Jun-15 Oct-15 Jan-16 Oct-14 Oct-15 Jul-15 Nov-14 Dec-14 Nov-15 Dec-15 May-15 Aug-15 Sep-15 May-15 Sep-15 Feb-15 Feb-16 Jun-15 Aug-1
Slide 36: Dividend history
Dividend history Post-IPO dividends per share, RUB per GDR, RUB per GDR, US$ 2011 (April-December) 57,50 19,20 0,61 2012 82,90 27,60 0,88 2013 34,75 11,60 0,35 Dividends 2014 45,00 14,97 0,29 1Q2015 48,00 16,00 0,31 2Q2015 57,00 19,00 0,29 3Q2015 63,00 21,00 0,32 4Q2015 57,00 19,00 0,28 Subtotal for
Slide 37: 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 38: Need for a combination of feedstocks and complexity of production act 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 39: Thank you!
Thank you! 39