Uralkali Announces IFRS 1H 2020 Financial Results

28.08.2020

Uralkali (“the Company”, Moscow Exchange: URKA), one of the world’s largest potash producers, announces its interim financial reporting for the six months ended 30 June 2020 prepared in accordance with IFRS1.

1H 2020 FINANCIAL HIGHLIGHTS:

as compared to the same period of 2019

  • Revenue down 14% y-o-y to US$ 1,323 million
  • Net revenue2 down 20% y-o-y to US$ 1,062 million
  • EBITDA3 down 35% y-o-y to US$ 570 million
  • EBITDA margin4 is 54%
  • Cash COGS5 is US$ 43.4 per tonne
  • Average FCA export price down 31% y-o-y to US$ 170 per tonne of potassium chloride (KCl)

1H 2020 OPERATIONAL HIGHLIGHTS:

  • Production volume down 8% y-o-y to 5.2 million tonnes of KCl
  • Sales volume up 14% y-o-y to 6.1 million tonnes of KCl

1H 2020 CORPORATE HIGHLIGHTS:

  • In February, under its exchange bond programme, the Company attracted RUB 30 billion at 6.85%, which is the lowest coupon rate for the Company in its history of issuances on the Russian debt capital market. There were 80 orders placed in the book from a diversified investor pool consisting of banks, asset managers, insurance and investment companies as well as retail investors.
  • In May, the Company signed a pre-export facility with 11 international banks in the amount of US$ 665 million. The interest rate is LIBOR plus 220 bps margin with a loan maturity of 5 years. The loan was used for refinancing of Uralkali’s existing loans and general corporate purposes.

Dmitry Osipov, Uralkali CEO, commented:

A challenging situation on the global potash market observed in 1H 2020 is now gradually improving. In the long term, we expect a moderate increase in potash prices against a demand recovery on key consumption markets.

The key production and operating results are as follows:



1H 2020

1H 2019

Revenue (US$ million)

1,323

1,543

Net revenue (US$ million)

1,062

1,321

EBITDA (US$ million)

570

874

EBITDA margin

54%

66%

(Losses)/gains from foreign exchange differences and fair value revaluation of derivative financial instruments (US$ million)

(499)

440

Net (loss)/profit (US$ million)

(180)

836

Average export potash price, FCA, (US$)

170

245

Production (KCl, million tonnes)

5.2

5.7

Sales volume (KCl, million tonnes)

— TOTAL

— Domestic

— Export

 

6.1

1.3

4.8

 

5.4

1.3

4.1

Financial review

In 1H 2020, the Company incurred a net loss of US$ 180 million mainly due to the losses from foreign exchange differences and fair value revaluation of derivative financial instruments.

Uralkali’s cash COGS excluding goods for resale was US$ 43.4 per tonne.

1H 2020 average potash export price of US$ 170 per tonne on FCA basis was US$ 75 lower compared to the price in the corresponding period last year.

The Company’s 1H 2020 sales volume was 14% higher than 1H 2019 level mainly due to increase in export shipments to China, the USA, South-East Asia and Latin America countries.

In 1H 2020, Uralkali managed to retain the volume of sales on the premium European market almost at the same level and increased the volume of export to African countries by 10 times as compared to the corresponding period last year.

As of the end of June 2020, the Company’s net debt amounted to US$ 4,634 million.

The ratio of net debt/EBITDA for the last 12 months amounted to 3.64x, while Uralkali’s average interest rate for its loan portfolio for the first six months of 2020 was 3.73% in US$ and 1.72% in Euro.

Operational review

Uralkali continued its investment programme aimed at production expansion, with the following main projects:

  • Construction of the Ust-Yayva mine, with a continued construction of a surface complex and design of an underground complex; completed power facility and shaft construction
  • Construction of the new Solikamsk-2 mine, with continued shaft sinking
  • Expansion of the Solikamsk-3 mine, with construction of surface and underground facilities underway
  • Construction of the Polovodovsky potash plant, with preparatory work underway

Uralkali is implementing a whole range of projects in order to reduce costs, improve technologies as well as to upgrade industrial equipment.

The Company continues to comprehensively monitor the situation at Berezniki-1 and Solikamsk-2 and backfill the mined-out areas at all operating mines. All activities are being carried out as planned and according to schedule.

Market review6

In 1H 2020 the global potash market conditions remained challenging due to overproduction in 2019: potash prices continued their downward trend though the global potash demand was relatively stable. Stronger market conditions are expected to prevail through the remainder of 2020.

As of the end of 1H 2020, there was a record level of global potash imports to Brazil that was a result of longstanding strong demand for soybeans and strengthening of the Brazilian real against the US dollar. In April 2020, the CFR potash price reached the minimum level in the decade, but in the end of 2Q 2020 began to show a gradual increase. Full year potash demand in Latin America is expected to grow by 0.5 million tonnes against 2019 level and total to about 13.6 million tonnes.

In 1H 2020, in North America the price for granular potash FOB NOLA continued to decline despite an increase in corn and soybean acreage relative to 2019 levels when there was adverse weather that eroded potash spring application and led to buildup of potash inventory. In light of this the full year demand is expected to grow by 3-4% compared to 2019.

EMEA potash demand was persistent during 1H 2020. The European market stood as a premium to other major spot markets as of 1H 2020. The full year potash demand in the region in 2020 is expected to increase by 3% against 2019 partly owing to rise in African potash import volumes.

The potash demand in South-East Asia in 1H 2020 was weak mainly due to problems in the sector of palm oil production in Indonesia and Malaysia which is the largest potash fertilizers consumer in the region. Full year potash demand is expected to remain at the level of previous year.

China remains the main importer of potash in the world. In 2Q 2020 there was a slowdown in potash demand owing to big accumulated stocks. In 2H 2020 the potash demand is expected to recover, full year potash demand is expected to show 1-2% increase compared to 2019.

In India, with stable domestic consumption and economic stability in comparison to other developing countries, full year potash demand in 2020 is expected to show an increase of 0.3 million tonnes against 2019 level and reach 4.2-4.3 million tonnes.

In 1H 2020, domestic sales in Russia remained stable and totaled 1.3 million tonnes that corresponds to the level of supplies in the same period of the previous year.

According to the Company’s estimates, the potash global demand is expected to show a slight growth as of the end of year 2020 and reach 65-66 million tonnes, mainly due to good demand in Brazil and expected rebound in the major markets of South-East Asia, the USA and Central America.

Uralkali (www.uralkali.com) is one of the world’s largest potash producers and exporters. The Company’s assets consist of 5 mines and 7 ore treatment plants in the towns of Berezniki and Solikamsk (Perm Region, Russia). Uralkali employs more than 12,000 people in the main production unit.


1 Interim condensed consolidated financial statements of PJSC Uralkali and its subsidiaries for the first half of 2020 have been reviewed by AO Deloitte & Touche CIS and can be found on Uralkali’s website at the following link

2 Net Revenue is revenue net of freight, railway tariff, rental of railway cars and transshipment cost

3 Adjusted EBITDA is calculated as Operating Profit adjusted for depreciation of property, plant and equipment and right-of-use assets, amortisation of intangible assets, impairment and gain/(loss) on disposal of non-current assets, unplanned contributions and social expenses as well as expenses related to COVID-19 response measures

4 EBITDA margin is calculated as EBITDA divided by Net Revenue

5 Excluding goods for resale

6 Sources: Uralkali’s estimates, the IFA data, customs statistics, financial statements of potash producers

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Cardinal rules

Smoking in mines is prohibited.
Work at heights without wearing a safety harness is prohibited.
Work in electrical installations under voltage is prohibited.
It is forbidden to perform work and stay in the bottomhole zone during the operation of the mining machine.
Loading and unloading operations when people are in the danger zone are prohibited.
Working in underground mines with unsecured and/or unassembled roofing is prohibited.
It is forbidden to carry out repairs and maintenance of conveyors without disconnecting from energy sources, use of conveyors for transfer of people and goods (materials and/or equipment), crossing (either above or under) operating conveyors by employees are not allowed.
It is forbidden to carry out welding and flame work in underground mines and mine buildings without the necessary safety measures preventing fire.