Phosagro · RUS:PHOR

Phosagro — Non-Deal Roadshow (December 2013)

62 slides from Phosagro's roadshow presentation, December 2013

  1. Slide 1: Presentation for Non-Deal Roadshow

    Presentation for Non-Deal Presentation Roadshow for Non-Deal Roadshow December 2013 December 2011 0 1

  2. 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, DIRECTLY OR INDIRECTLY, TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, BY ANY MEDIUM O

  3. 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 2011, mln t, excluding Chinese producers phosphate  #2 global DAP/MAP producer(1) 27.8 producer #1 producer of high-grade phosphate  Overall fertili

  4. Slide 4: The only pure play phosphates producer

    The only pure play phosphates producer Gross profit breakdown by segment Phosphate segment gross profit margin Average gross profit breakdown by segment for 2011-2012 Average gross profit margin of phosphate segment for 2011-2012 7% 17% 19% 18% 41% 51% 61% 32% 31% 48% 25% 54% 83% 20% 49% 24% 33% 21%

  5. Slide 5: PhosAgro Benchmarks Favourably Against Key Competitors

    PhosAgro Benchmarks Favourably Against Key Competitors 52%  PhosAgro compares well against its global 34% 30% 29% EBITDA Margin peers on EBITDA 17% (2011-2012) margin and Cash Conversion basis Mosaic (1) ICL Potash Corp Agrium  PhosAgro strongly outperformed all major peers in terms of FCF Yield b

  6. Slide 6: 1. Phosphates – an attractive industry

    1. Phosphates – an attractive industry

  7. Slide 7: Strong demand fundamentals for fertilisers

    Strong demand fundamentals for fertilisers Population growth and decrease of arable land per capita Yield Indexed to USA 8 0.30 2011 Fertiliser is 0.27 widely under- 7 0.24 0.25 Rice applied and 0.23 0.22 Soybean inefficiently India applied in 0.20 Corn 6 0.19 0.20 developing Wheat countries 5.3 5.7

  8. Slide 8: Annual Cycle of Seeding and Planting in Key Agricultural Regions

    Annual Cycle of Seeding and Planting in Key Agricultural Regions Source: USDA, PhosAgro 7

  9. Slide 9: Phosphorus is essential for life

    Phosphorus is essential for life Phosphorus consumption structure (1) Phosphate fertilisers – 85%(1) with CAGR of 2.6% (3) (2) Animal feed (CAGR 2.6%) Technical (2) 6% phosphates (CAGR 4.1%) 9% Phosphate(3) fertilisers (CAGR 2.6%) 85% Without phosphate fertilisers With phosphate fertilisers Effect o

  10. Slide 10: Stock-to-use ratios for key phosphate-using crops are at low levels

    Stock-to-use ratios for the key phosphate-using crops are at low levels driving crop prices Phosphate fertiliser use by crop World grain stocks-to-use ratios, % 20 year 30% average 20 year 20 year average average 20 year 25% average Wheat 20% 16% Others 15% 29% 10% 2009/10 2010/11 2011/12 2012/13 20

  11. Slide 11: Significant room for further growth of use of phosphate fertilisers

    Significant room for further growth of use of phosphate fertilisers Corn yield per harvested acre in US Insufficient application of phosphate fertilisers creates bu significant room for growth 170 24 165 Wheat P2O5 estimated crop removal Corn 23 Soybean P2O5 application 160 Rice 154 154 22 153 151 2

  12. Slide 12: High grain prices motivate farmers to use more fertilisers

    High grain prices driven by market imbalance motivate farmers to use more fertilisers Cereals basket prices relative to DAP Prices Cereals basket(1) to DAP prices ratio 10 year correlation 1,400 HIGH DAP PRICES 3.50 R2=0.86 November 2013 price: 1,200 DAP FOB Tampa: US$ 345/t 3.00 Cereals basket: US$

  13. Slide 13: Need for feedstock combination and complex production 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 15.1 mln t 4.38 mln t (39% P2O5) (12.9% P2O5) SULPHUR SULPHURIC ACI

  14. Slide 14: Only few countries have domestic resource base to produce phosphate fertilisers

    Only few countries have domestic resource base which is significant enough to produce phosphate fertilisers Production/resources of phosphate rock, natural gas and sulphur Phosphate Rock, mln t Natural Gas, bln cm Sulphur, k t Region Production Resources Production Resources Production Import World

  15. Slide 15: Estimated DAP production cash cost curve, Nov 2013

    Estimated DAP production cash cost curve (US$/t, FOB) in Nov2013(1) 600 Integrated Integrated into phosphate rock Non-integrated into phosphate 500 rock and ammonia 400 DAP FOB Tampa: $345/t (2) 300 China (Non-integrated producers) USA (Non-integrated producer) USA (integrated producers) China (Larg

  16. Slide 16: Estimated DAP production cash cost curve

    Estimated DAP production cash cost curve (US$/t, FOB) in 2009 jan feb mar apr may june july aug sep oct nov dec 400 Monthly prices, DAP FOB Tampa 350 Average annual price, DAP FOB Tampa 300 250 Non integrated 200 PhosAgro (integrated into rock and ammonia) Integrated into phosphate rock China small

  17. Slide 17: DAP/Potash price ratio vs Phosphate and Potash consumption

    DAP/Potash price ratio vs Phosphate and Potash consumption 2.5 40 Phosphate fertiliser consumption, kt of P2O5 Potash and Phosphate fertiliser consumption. kt of nutrient Potash consumption, kt of K2O DAP/Potash price ratio 2.0 35 1.5 DAP/Potash price ratio 30 1.0 25 0.5 20 15 0.0 2000 2001 2002 200

  18. Slide 18: 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 fertiliser 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

  19. Slide 19: Timing and completion of new capacities is uncertain

    Timing and completion of new capacities is uncertain 5.9 mln t of P2O5 5.9 1.25 -2.6 1.5 0.45 1.2 4.4 Utilization rate of 80% Utilization 0.8 rate of 73% OCP seeks to extract the maximum value from its phosphate ore reserve. Joint Venture Mosaic Management has recently indicated that they will match

  20. Slide 20: 2. Market challenges

    2. Market challenges

  21. Slide 21: Uncertain policy for nutrient subsidies in India

    Uncertain policy for nutrient subsidies in India decrease fertiliser imports and unbalance fertilization Evolution of N: P2O5 :K2O ratio in India Unbalanced fertilisation 0.5 N P2O5 K2O 8,000 0.47 0.5 0.43 0.45 Balanced ratio 4.0 2.0 1.0 0.38 0.39 0.4 2010/11 4.3 2.0 1.0 6,000 2011/12 6.9 3.1 1.0 P2

  22. Slide 22: Fertiliser price developments in 2013

    Fertiliser price developments in 2013 750 100 USD/BLR: -20% 700 USD/INR: -23% 650 90 600 Local currencies rebased to 100 DAP: -43% 550 80 500 US$ Uralkali split with BPC 450 70 400 Potash: -28% 350 60 The break-up of BPC has created market uncertainty for all three nutrients resulting in deferral of

  23. Slide 23: 3. Company Highlights

    3. Company Highlights

  24. Slide 24: Control of world's premium phosphate resource base

    Control of world’s premium phosphate resource base Location(1) Russia Morocco USA Jordan China Tunisia World Phosphate Rock Reserves, 2.1 50 1.4 1.5 3.7 0.1 billion t Ore type Igneous Sedimentary Sedimentary Sedimentary Sedimentary Sedimentary 13.0-14.0% Low to Al2O3 content Very low Very low Very l

  25. Slide 25: Self-sufficiency in key feedstocks

    Self-sufficiency in key feedstocks PhosAgro DAP production cash costs 1 Phosphate rock: 100% self-sufficient 2012, ExW, US$ 2012, kt Other 18% 1 4,348 3 Sulphur 7,889 Phosphate 14% rock 2,614 55% 3,542 2 927 Ammonia Total Internal Internal External Domestic Export 13% phosphate consumption sales sal

  26. Slide 26: 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 12% 11% 11%

  27. Slide 27: PhosAgro - the main phosphate fertiliser supplier for domestic market

    PhosAgro - the main phosphate fertiliser supplier for domestic market #1 phosphate fertiliser supplier for domestic market Fertiliser effects on yields Others In 2012 PhosAgro 80 Eurochem 8% domestic sales were Cereals Yield, 100kg/Ha 70 USA 6% 726 kt 60 China Uralchem EU27 50 10% Brazil 40 PhosAgro

  28. Slide 28: PhosAgro's flexible model meets global demand for NPK

    PhosAgro’s flexible model meets global demand for NPK World NPK production World NPK imports: ~2 mln t of P2O5 per annum(1) 7 Others CAGR 2008-2011 +26% FSU 4% South NPK 8.0% 5% Asia N 2.5% 4% Africa P 6.3% 8% Europe 6 K 6.2% 36% mln t China 8% 5 Lat. America Other 16% East Asia 19% 4 2008 2009 2010

  29. Slide 29: NPK High Margin Demand Drives PhosAgro's production mix

    NPK High Margin Demand Drives PhosAgro’s production mix kt 10 Downstream 6,000 kt 23 Downstream 4X Products in 2008 STPP Products in 2012 NPK/NPKS/NPS/PKS grades from 4 up to 16 MCP in 4 years Overall 5,000 AN CAGR:9% Urea 4,000 MCP APP DAP NPS: AN 20:20:0:14 Urea 16:20:0:14 3,000 14:34:0:8 15:36:0:

  30. Slide 30: 4. Financial Overview

    4. Financial Overview

  31. Slide 31: Revenue, EBITDA and Net Profit

    Revenue, EBITDA and Net Profit Revenue (9M 2012/2013) EBITDA (9M 2012/2013) Net Profit (9M 2012/2013) Total Average DAP FOB Tampa Revenue 2,548 Growth: 1% 2,571 US$ 540/t US$ 467/t 34% 18 16 32 2 24% 0 82 874 24% 99 104 445 429 US$, mn 629 615 US$, mn US$, mn 11% 1,954 1,937 288 9M2012 9M2013 9M2012

  32. Slide 32: Cost of Goods Sold

    Cost of Goods Sold Cost of Goods Sold and Sales Volumes DAP production cash cost breakdown Sales (kt) 2010 2011 2012 9M2012 9M2013 ExW, US$, 2012 Fertilisers(1) 3,842 4,062 4,243 3,230.2 3,479.6 Phosphate Rock 3,712 3,153 3,542 2,534.0 2,316.0 Other 100% DAP 10% 10% 10% 10% 10% production 90% 9% 9%

  33. Slide 33: Overview of debt

    Overview of debt Total debt and net debt / annualised EBITDA Comment 2.00 1.83x  PhosAgro carefully manages its balance sheet 1.50 and cost of financing for all current initiatives, 1.05x 1.50x including both the consolidation of subsidiaries 0.91x and growth projects 1.00 1.10x  Net debt / annual

  34. Slide 34: CAPEX 2013

    CAPEX 2013 EBITDA vs Capex¹ Major expansion projects EBITDA Total capital expenditures (lhs) 35,370 34,695 To be spent Project RUB mln over 20,464 16,801 14,881 10,614 New PKS production facility 303 2013 - 2015 with 100 kt pa at Metachem 2010 2011 2012 Downstream end-products overall capacity incre

  35. Slide 35: Dividend Policy

    Dividend Policy  Dividend per share increased 44% per share, per GDR, Post-IPO dividends  Dividend policy aimed at paying RUB US$ dividends of between 20% and 40% of annual consolidated net 2011 April-December 57.5 0.61 income 9M 2012 63 0.67  Post-IPO dividend yield > 7%* Dividends Final 2012 Di

  36. Slide 36: 5. Future potential

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  37. Slide 37: Long term strategy for volume growth of fertilisers

    Long term strategy for volume growth of fertilisers 2012 Future (one – four years) Phosphate rock Total: 7.9 mln t Total: 7.9 mln t Overall 7.1 mln t New NPK/PKS production Marketable 0.5 37% Ammonia 45% External External AN 0.4 sales sales UREA 1.0 Overall 5.4 mln t Internal Internal 63% STPP 0.1 5

  38. Slide 38: Long-term NPK potential

    Long-term NPK potential 2012 Potential NPK/PKS production of 12 mln tpa Overall: 12 mln t Total: 5.4 mln t AN 0.4 UREA 0.7 NPS MCP 0.7 APP NPK 12.0 MAP PKS DAP 2.0 Total: 1.86 mln t Phosphoric acid Total: 1.1 mln t Total: 1.9 mln t New 1.5 Ammonia 0.8 Phosphoric Ammonia NPK 1.6 0.9 acid 1.94 1.1 0.3

  39. Slide 39: Thank You

    Thank You Ss

  40. Slide 40: Appendix

    Appendix

  41. Slide 41: High quality production assets

    High quality production assets Apatit Resources(1) Murmansk Cherepovets production complex - largest in Europe Apatite-nepheline ore: 2 060 mt Kirovsk PhosAgro Cherepovets Al2O3: 283 mln t Capacity by product REO(2): 7.5 mln t MAP/DAP/NPK/NPS: 3.0 mln t Ammonia: 1,100 kt St. Petersburg Capacity by p

  42. Slide 42: Flexible Production Capacity

    Flexible Production Capacity PhosAgro Production Capacities Capacity Growth 2011-2012 2012(1), mln t MAP/DAP 2011 – 2012, mln t(2) DAP/MAP/NPK/NPS 2.4 1.8 4.2 2012 1.8 NPK capacities 2011 1.7 +6% Urea 0.98 MAP/DAP/NPK: fully flexible production lines with NPK production 2011 – 2012, mln t(2) AN/AN-b

  43. Slide 43: Management with strong track record of organic growth and efficiency improvement

    Management with strong track record of organic growth and efficiency improvement 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 +29% +38% CAGR+16

  44. Slide 44: EBITDA sensitivity

    EBITDA sensitivity(1) 1,600 1,400 EBITDA, $US mn 1,200 1,000 800 600 400 200 0 DAP, 380 400 420 450 470 500 550 $US USDRUB: 35 USDRUB: 30 in mln USD 2013E DAP FOB Baltic price, $/tonne 380 400 420 450 470 500 550 30 334 430 526 693 804 971 1,249 31 391 487 583 750 861 1,028 1,306 32 444 540 636 803

  45. Slide 45: Phosphate rock market liberalisation

    Phosphate rock market liberalisation Comments Projection of PhosAgro rock production breakdown in 2013  Before 2013 Russian domestic phosphate rock 2013, kt prices were inflated to PPI c.1,000 kt apply to  Starting from 2013, the liberalisation of the Uralchem regulated contracts expiring in phosp

  46. Slide 46: Revenue per tonne and volume developments for key products

    Revenue per tonne and volume developments for key products Phosphate-based fertilisers and MCP sales DAP MAP volumes Peak 2008 FOB Baltic price: US$1,190/t (1) 700 594 700 601 608 5,000 600 584 569 571 600 592 580 4,243 534 544 544 493 4,062 537 477 3,842 476 465 485 4,000 3,480 US$ per tonne US$ pe

  47. Slide 47: Consolidated income statement

    Consolidated income statement (USD in millions) 2010 2011 2012 9M 2012 9M 2013 Revenues 2,534 3,420 3,387 2,548 2,571 Cost of Sales (1,570) (1,912) (1,934) (1,442) (1,667) Gross Profit 964 1,508 1,453 1,106 904 Selling, General & Administration (387) (426) (462) (373) (420) Other Income (Expense) (9

  48. Slide 48: Consolidated balance sheet

    Consolidated balance sheet (USD in millions) 2010 2011 2012 9M2013 Cash and Equivalents 173 526 318 272 Accounts Receivable 522 339 416 360 Inventory 253 314 406 364 Other Current Assets 108 66 40 73 Total Current Assets 1,056 1,244 1,181 1,069 Net Property, Plant & Equipment 1,525 1,774 2,190 2,246

  49. Slide 49: Consolidated cash flow statement

    Consolidated cash flow statement (USD in millions) 2010 2011 2012 9M 2012 9M 2013 Profit before taxation 515 963 1,004 782 338 Depreciation, amortisation + reversal of impairment loss 190 206 210 153 183 Finance Costs 14 45 47 36 53 Finance Income (50) (28) (67) (58) (26) Other (15) 16 (60) (43) 104

  50. 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”, “Super Grade” Urea lines Urea PhosAgro Cherepovets (Nitrogen Co

  51. Slide 51: 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 : ~8.5 mln t of P2O5 per annum(1) Global Phosphoric Acid Imports of 4.5 mln t P2O5 FSU India 2.1 Middle East 1% Africa 4% Europe 4% North America Other A

  52. Slide 52: Brazil phosphate fertilisers market outpaces others

    Brazil phosphate fertilisers market outpaces others Substantial growth in production of major phosphate consuming agri-products results in … Breakdown of phosphate fertilisers consumption by crops Growth in corn and soybeans production, yet more arable land in Brazil 170 available 10% CAGR Middle Ea

  53. Slide 53: Greenfield plant – costs case-study

    Greenfield plant – costs case-study Production facilities Ma’aden Capacity – mln t / year Phosphate rock mine 12.0 26.6 Beneficiation plant 5.0 7.8 Sulphuric Acid Plant 4.7 4.6 Phosphoric Acid Plant 1.5 1.9 Ammonia Plant 1.1 1.1 Phosphate Fertiliser Plant 2.9 4.2 Key products DAP MAP, DAP, NPK, NPS

  54. Slide 54: Growth in phosphate rock production capacities 2000-2011

    Growth in phosphate rock production capacities 2000-2011 Morocco controls most of world phosphate ore reserves Net addition to phosphate rock production capacities Russia 2%Others 5% (excl. China) of 14 mn t USA 2% Jordan 2% with 0.8% CAGR Algeria 3% Syria 3% China 5% Morocco Iraq 8% and Western Sah

  55. Slide 55: Phosphate rock/DAP price ratio

    Phosphate rock/DAP price ratio 700 60% 600 50% 500 40% 35% 400 29% 30% 25% 300 20% 200 10% 100 0 0% DAP, FOB Tampa (lhs) Phosphate rock, FOB Morocco (lhs) Phosphate rock/DAP price ratio (rhs) Average Ratio (rhs) Source: FMB 54

  56. Slide 56: China is the major consumer of phosphate fertilisers

    China is the major consumer of phosphate fertilisers The biggest portion of the world’s growing 7 bln population(1)… Limited arable land stimulates fertiliser consumption Breakdown of World population by countries Europe 11% China 0.10 North America China 5% 19% Latin America 9% India 0.14 India ha

  57. Slide 57: Growing food consumption in China drives demand for phosphates

    Growing food consumption in China drives demand for phosphates China’s Economy keeps growing Food Imports are growing in China Corn Imports % 25 16 12,000 20 CAGR +10% CAGR +15% 15 CAGR+13% 14 mln t 10,000 10 5 12 0 8,000 2008/09 2009/10 2010/11 2011/12 2012/13 2022/23 F 10 Soybean Imports US$ 120 C

  58. Slide 58: 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 kt kt kt 9,000 In total more than 230 10,000 5,000 From January 2012 the Chinese phosphate Chinese government 8,000 fertiliser producers with imposed

  59. Slide 59: 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 Mosaic significantly OCP 32% rocks 28.5% increases costs for PCS production of Average Cadmium content in ppm 29.5% CF Industries 10 DAP 29% 10 Agrium 33% 1 1 Euroc

  60. Slide 60: GDRs performance

    GDRs performance 180 Eurobond offering SPO 50 PhosAgro ADTV ($000) in LSE 170 3 months 5,178 45 1 month 1,990 1 week 2,380 160 40 Uralkali announced split with BPC 150 35 Rebased to 100 140 GDRs included in Dow 30 Jones Islamic BRIC Index 130 25 Daily Turnover, $US mn Announcement of GDRs inclusion

  61. Slide 61: GDR performance and DAP prices

    GDR performance and DAP prices November 2013 price: % GDR: US$ 9.67 110 DAP FOB US Gulf: US$ 345/t 100 90 Rebased to 100 80 November 2013 70 60 1st Jan 2012: 50 GDR: US$ 8.44 DAP FOB US Gulf: US$ 535/t 40 DAP, FOB US Gulf PHOR LI URKA LI Source: Bloomberg (data as of 28 November 2013), Argus-FMB, Ph

  62. Slide 62: Fertilisers trading multiples

    Fertilisers trading multiples EV/EBITDA P/E Mcap., EV, Company $mln $mln 2013F 2014F 2013F 2014F Russian peers PhosAgro 3,749 4,842 5.3x 5.2x 7.9x 7.4x Uralkali 14,739 17,024 9.0x 10.2x 13.8x 16.3x Median 7.1x 7.7x 10.9x 11.9x International peers - nitrogen fertilisers Agrium 13,153 16,757 7.3x 7.2x

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