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PhosAgro reports 3Q20 and 9M20 operating results

Published by , Editorial Assistant
World Fertilizer,

PhosAgro, a vertically integrated phosphate-based fertilizer producer, reports that its fertilizer sales increased by 10% y/y in 9M20 to 7.9 million t.

Phosphate rock and nepheline concentrate production increased by 1.3% year-on-year to 8.9 million t in 9M20. In 3Q20, production rose by 1.3% y/y to 2.98 million t.

Total fertilizer production increased by almost 5% y/y in 9M20, reaching 7.5 million t. This growth was due to the ongoing modernisation of production facilities and efficiency improvements achieved during the past year. Fertilizer production for 3Q20 amounted to 2.5 million t, an increase of 1.7% y/y. 

Fertilizer sales increased by 10% y/y in 9M20 to 7.9 million t. This growth was driven by strong demand in PhosAgro's priority sales markets. In 3Q20, fertilizer sales amounted to 2.72 million t, up by 9.9% y/y due to high demand from Canada and India.

The domestic market accounted for 31% of sales in 9M20, nearly unchanged y/y.

Andrey Guryev, CEO of PhosArgo, said: “Despite some improvement in the epidemiological situation in the summer period, we have kept in place the comprehensive prevention measures that were introduced when the first signs of the pandemic appeared. As a result, in the face of a new wave of coronavirus infections in Russia and globally, PhosAgro is fully prepared to continue operating at full capacity, following effective protocols to protect its personnel and the residents of the regions of where it operates.

“I want to highlight PhosAgro's achievements in the field of sustainable development. MSCI ESG research assigns an MSCI ESG rating by assessing companies’ inherent environmental, social responsibility and governance (ESG) risks, and their ability to manage those risks relative to competitors. PhosAgro's achievements in this area earned us a rating upgrade from BB to BBB in 3Q20. This rating is one of the highest assigned to Russia's largest companies. 

"In addition, PhosAgro recently won a prestigious nationwide competition in the field of sustainable development – Russian Business Leaders: Dynamics and Responsibility 2019, held by the Russian Union of Industrialists and Entrepreneurs. The company won the Grand Prix for the second time, making PhosAgro the only winner of the highest award in the entire 23-year history of the competition.

“Looking at our 9M20 operating results, I would note that we [increased] fertilizer production by 5% year-on-year. At the same time, improved production efficiency, a favourable pricing environment and our flexible sales system enabled us to sell a record 6.1 million t of phosphate-based fertilizers in 9M20, an increase of 11% year-on-year, while in 3Q20 sales were up by nearly 15% year-on-year.

Turning to global fertilizer markets, during 3Q20 prices were driven higher by strong seasonal demand in Brazil and India combined with restrictions on exports from China and rising prices for phosphoric acid.”

In 9M20, production in the phosphate segment rose by 4.7% y/y due to increased capacities at existing production lines for phosphoric acid and phosphate-based fertilizers. This was the result of improvements in phosphoric acid production technology and last year's overhauls of fertilizer production facilities.

Output in the nitrogen segment rose 5.8% y/y in 9M20 due to a 26.2% increase in AN production to 505 700 t. This increase was made possible when a new production unit for nitric acid (the main raw material for AN production) was brought online and began operating at full capacity. Other contributing factors included the timely completion of maintenance work on existing nitric acid units and upgrades to AN capacities. 

Sulfuric acid production increased by 11.4% y/y in 9M20 to 5.1 million t. This considerable increase in production was associated with the launch of a new sulfuric acid production unit in Cherepovets, Russia, in the middle of 1Q20. The new production unit also had an impact on year-on-year production growth in Q320. With an annual nameplate capacity of 1.1 million t, the new production line will increase the company's self-sufficiency in sulfuric acid. 

As part of its ‘Strategy-2025’, PhosAgro’s synthetic ammonium sulfate production unit in Cherepovets was increased to full capacity (up to 300 000 tpy) at the beginning of the year; the production increase will reduce the volume of ammonium sulfate purchases from external suppliers by more than half. Ammonium sulfate is used as a feedstock for the production of sulfate grades of NPK(S) fertilizers and reduces the cost of their production in comparison with purchased ammonium sulfate.

In 9M20, fertilizer sales rose by 11% y/y to 6.1 million t. The brisk growth in sales volumes was supported by a favourable pricing environment in both domestic and international markets and by the affordability of fertilizers for end consumers. Other supporting factors included higher demand for NPK(S) fertilizers from India, where production was suspended in spring due to coronavirus restrictions.

In 3Q20, sales of PhosAgro's phosphate-based fertilizers increased by 14.7% y/y to 2.2 million t due to a 26% increase in sales of NPK(S) fertilizers to 1.2 million t. Key growth drivers included the affordability of fertilizers for end consumers in domestic and international markets and reduced supply as a result of the suspension of fertilizer production in China and India due to coronavirus restrictions. 

In 9M20, sales of PhosAgro's nitrogen-based fertilizers rose by 7.0% y/y to 1.8 million t. Ammonium nitrate sales grew at the highest pace, up 19.5% to 467 800 t, amid growth in Russia's agricultural sector.

Global seasonal demand for nitrogen-based fertilizers peaked in the first two quarters of the year; thus, 3Q20 saw a reduction in demand, which resulted in lower sales y/y.

In 9M20, PhosAgro's domestic sales of phosphate-based fertilizers rose by 5.3% y/y to over 2 million t. This increase was driven by higher sales to Russian farmers as the entire agricultural sector in Russia grew.

Export sales for the same period rose by 14.1% y/y to 4.1 million t. To a large extent, this growth was achieved due to the advanced sales system and the high quality of fertilizers produced. Favourable weather conditions, the affordability of fertilizers and the springtime suspension of fertilizer production in India and China as a result of coronavirus restrictions also contributed to sales growth. All these factors enabled PhosAgro to increase its sales in key markets in Latin America and Europe. 

In 9M20, sales of phosphate-based fertilizers to the US totalled approximately 200 000 t, almost two times lower than in the same period in 2019. This was due to an unfavourable pricing environment in the US market at the beginning of the year and the Mosaic petition filed against suppliers of phosphate-based fertilizers from Morocco and Russia. PhosAgro's flexible sales and distribution network enabled it to redirect fertilizer supplies to other markets, including Canada and India, without losses.

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