Uralkali Announces IFRS FY 2020 Financial Results

26.02.2021

Uralkali (the Company), one of the world’s largest potash producers, today has published its financial statements1 for 2020 prepared in accordance with IFRS, audited by AO Deloitte & Touche CIS and approved by the Company’s Board of Directors.

FY 2020 FINANCIAL HIGHLIGHTS:

  • Revenue down 3% y-o-y to US$ 2,696 million
  • Net revenue2 down 9% y-o-y to US$ 2,151 million
  • EBITDA3 down 23% y-o-y to US$ 1,222 million
  • EBITDA margin4 is 57%
  • Cash COGS5 is US$ 40.8 per tonne
  • Average FCA export price down 29% y-o-y to US$ 166 per tonne of potassium chloride (KCl)

FY 2020 OPERATIONAL HIGHLIGHTS: 

  • Production volume up 2% y-o-y to 11.3 million tonnes of KCl
  • Sales volume up 30% y-o-y to 12.7 million tonnes of KCl

FY 2020 CORPORATE HIGHLIGHTS: 

  • In March, 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 with the option of adding new banks by September in the amount of up to US$ 1 billion. The interest rate is LIBOR plus 220 bps margin with a loan maturity of 5 years. Initially US$ 665 million were obtained under the facility, in September three international banks joined the facility with the total amount of US$ 275 million. As a result, the total amount withdrawn was equal to US$ 940 million. The loan was used for refinancing of Uralkali’s existing loans and general corporate purposes
  • In September, Uralkali AGM voted against the payment of dividends on the outstanding common and preferred shares of Uralkali for the full year 2019
  • In November, Uralkali Board of Directors decided to appoint Vitaly Lauk as CEO of the Company

 SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD: 

  • In February 2021, subsidiary of the Group repurchased 12.7% shares of the Company from a related party
  • In addition, in February 2021 loans issued to related parties during 2016-2020 were repaid in the amount of US$ 870 million. As a result of this, balance of issued loans decreased to US$ 102 million

Vitaly Lauk, Uralkali CEO, commented:

In general, 2020 saw a gradual recovery of demand for potash in most of the key markets, which in turn had a positive impact on late year's pricing.

We are optimistic about the potash industry's dynamics in 2021 and believe that both short-term and mid-term positive market conditions will be preserved.

The key figures are as follows:


2020

2019

Revenue (US$ million)

2,696

2,782

Net revenue (US$ million)

2,151

2,364

EBITDA (US$ million)

1,222

1,578

EBITDA margin

57%

67%

Foreign exchange differences and fair value (losses) / gains on derivative financial instruments (US$ million)

(733)

548

Net (loss) / profit (US$ million)

(43)

1,207

Average export potash price, FCA, (US$)

166

235

Production (KCl, million tonnes)

11.3

11.1

Sales volume (KCl, million tonnes)   

— TOTAL

— Domestic

— Export


12.7

2.6

10.1


9.8

2.4

7.4

Financial review

In 2020, the Company's net loss amounted to US$ 43 million, compared to a net profit a year earlier, mainly due to the foreign exchange losses and losses on revaluation of derivatives.

Uralkali’s cash COGS excluding goods for resale was US$ 40.8.

In 2020, the average export potash price per tonne on FCA basis amounted to US$ 166, a 29% decrease year-on-year, due to price changes in international potash markets.

The increase in sales of potash fertilizers in 2020, compared to the previous year, was mainly due to recovery of demand and favorable environment in the global potash market.

As of the end of December 2020, Uralkali net debt amounted to US$ 4,195 million.

As of the end of 2020 the ratio of net debt/EBITDA amounted to 3.43x, while Uralkali’s average interest rate for its loan portfolio for 2020 was 3.17% in US$ and 1.73% in Euro.

Operational review

Uralkali is progressing with its investment programme aimed at increasing production capacity, with the following key projects:

  • Construction of the Ust-Yayva mine, with the construction of surface facilities underway; shaft construction completed; preparatory work for the construction of underground facilities is ongoing
  • Construction of the new Solikamsk-2 mine, including continued shaft sinking and ongoing construction of surface facilities
  • Expansion of Solikamsk-3, with the construction of surface and underground facilities
  • Construction of the Polovodovsky potash plant, with preparatory development work currently underway 

The Company continues to construct mine panels, develop stowage facilities, replace and upgrade mining equipment in line with the schedule.

Market review6

During the first half of 2020, the global potash market conditions were relatively challenging across the industry and influenced by multidirectional factors.

The spread of coronavirus infection, among other factors, was reflected in the decline in potash spot prices below the 2019 level, along with high inventories and the absence of new contracts with China and India until the end of April-early May 2020.

The second half of 2020 was marked by increased demand in major markets and a rebound in potash prices in key spot markets due to favorable weather conditions, high fertilizer availability and stable demand.

Brazilian potash imports in 2020 totalled to a record high of over 11 million tonnes, according to customs data, as a result of favorable weather conditions, continued high demand for soybeans and corn and weakening of the Brazilian real against the US dollar.

The North American market also showed growth due to good weather conditions, growing acreage and rising prices for agricultural crops, government subsidies to farmers in the United States of America.

Potash demand in Europe, the CIS, the Middle East and Africa was stable in 2020.

The most noticeable impact of coronavirus was felt by the Southeast Asian market. Malaysia, for example, faced a problem with attracting labor to plantations due to restrictions on the movement of citizens across borders. Difficulties were also observed in Indonesia and Malaysia in crude palm oil production sector, the main consumer of potash fertilizers in Southeast Asia, which was the result of the impact of the pandemic and lower oil prices. The signing of contracts with China and India served as an additional catalyst for potash demand in Southeast Asia.

Domestic sales in 2020 totalled to 2.6 million tonnes, which is 8.7% higher than in 2019, mainly because of an increase in supplies to agricultural producers.

According to the Company estimates, in 2020 global potash deliveries increased to 67 million tonnes, compared to 64 million tonnes in 2019.

In 2021, global potash demand is expected to remain at high level amid its availability, favorable weather and major crops expectations, global potash sales are expected to increase of 68-69 million tonnes. 

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 The audited consolidated financial statements may be found on Uralkali’s website
http://www.uralkali.com/investors/reporting_and_disclosure/uk_msfo/

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.