PhosAgro releases 3Q19 and 9M19 results

Total fertilizer production in 3Q19 increased by 15.2% y/y to 2460.4 kt. Fertilizer output for 9M19 grew by 7.2% y/y to 7162.0 kt.

Phosphate rock and nepheline concentrate production in 3Q19 rose by 9.6% y/y to 2939.0 kt. For 9M19, the output of phosphate rock and nepheline concentrate was up by 6.7% y/y and reached 8797.7 kt.

Sales of phosphate-based fertilizers in 3Q19 grew by 12.4% y/y to 1958.8 kt. Sales of phosphate-based fertilizers for 9M19 increased by 7.3% y/y and reached 5516.6 kt.

Sales of nitrogen fertilizers in 3Q19 rose by 11.7% y/y and amounted to 512.0 kt. Sales of nitrogen fertilizers for 9M19 decreased by 3.8% y/y and amounted to 1660.3 kt.

Sales of phosphate rock and nepheline concentrate in 3Q19 grew by 11.7% y/y and amounted to 1029.6 kt. For 9M19 sales of phosphate rock and nepheline concentrate increased by 15.7% y/y and amounted to 3293.3 kt.

PhosAgro CEO, Andrey Guryev, said:"In view of good demand from our primary sales markets in 3Q19, we significantly increased production volumes. This growth was possible due to our decision to delay planned production line overhauls until the fourth quarter, when demand for fertilizers is traditionally lower. Increased production output was also supported by the modernisation of a number of production lines in Cherepovets and Balakovo at the end of last year.

"As a result, fertilizer production reached nearly 7.2 million t in the first nine months of 2019, and we are comfortable confirming our full-year production guidance of around 9.5 million t of finished products. This will represent a new record for the Company and is driven by projects implemented during our recently completed investment cycle.

"We continue to increase production volumes of key feedstocks like phosphate rock, ammonia, sulphuric acid and phosphoric acid, which further strengthens our cash cost advantage and increases the Company's global competitiveness.

"PhosAgro's flexible sales model enabled us increase sales in the third quarter to our priority Russian and CIS market, as well as to European markets, where we see positive pricing developments."

In the third quarter, production of phosphate-based fertilizers increased by 15.0% y/y to 1930.3 kt.

Growth in production was driven by a 17.1% rise in DAP/MAP production to 820.3 kt, which was made possible after completion of technical overhauls at the Company's production sites in Cherepovets and Balakovo at the end of last year. Performance in 3Q19 was also affected by the decision to delay some scheduled maintenance until the fourth quarter, when we traditionally see a seasonal slowdown in demand.

Growth was also supported by higher NPS production, which rose by 171.4% y/y to 175.3 kt due to an increase in production of grades with lower phosphorus content, as well as an increase in the efficiency of production of sulphur-containing fertilizer grades following equipment modernisation.

The production of nitrogen fertilizers rose by 16.1% y/y to 530.1 kt due to increases in the production of ammonium nitrate and urea by 16.0% and 16.2% year-on-year, respectively. This growth was also related to the decision to delay some maintenance projects until the end of the year.

In line with the Company's strategy to increase its self-sufficiency in key feedstocks, the Company grew ammonia production by 17.6% y/y to 484.4 kt. This performance was driven by a series of repairs at existing capacities in September 2018.

In the third quarter, the Company increased its production of sulphuric acid by 18.3% year-on-year to 1590 kt, which enabled PhosAgro to reduce the purchase of this feedstock from third parties. This was made possible following the modernisation of one of the production units at the Cherepovets site in December 2018.

Increased self-sufficiency in sulphuric acid combined with a two-fold decrease in sulphur prices year-to-date made it possible for PhosAgro to lower the cost of fertilizer production, which should have a beneficial effect on profitability.

In 3Q19, PhosAgro's fertilizer sales rose by 12.2% y/y to 2470.8 kt on the back of higher sales in both the phosphate and nitrogen segments.

Sales of phosphate-based fertilizers grew by 12.4% y/y to 1958.8 kt, mainly driven by an increase in sales to Europe, where the start of seasonal demand for fertilizer created a more favourable pricing environment relative to North America, and PhosAgro's integrated and flexible distribution network enabled the Company to maintain high sales volumes amid the price correction and to maximise profitability in challenging market conditions.

In current market conditions (higher margins from DAP), the Company was also able to leverage its flexible production capacities by significantly increasing the output of higher-margin products and selling them not only to markets in Europe, but also to India and other countries in Asia.

In 3Q19, sales of nitrogen-based fertilizers rose by 11.7% y/y to 512.0 kt due to an increase in the sales of urea and AN to Latin America, driven by a recovery in seasonal demand, reinforced by expectations of recovery in prices for agricultural products (including soy and corn).

Active seasonal demand in the domestic market helped to maintain sales of phosphate-based fertilizers at a consistently high level of 890.3 kt. PhosAgro mainly sold high value-added fertilizers, with NPK(S) sales volumes at nearly about 530 kt.

In 3Q19, the price correction for phosphate-based fertilizers continued due to the ramp-up of new capacities at OCP and Ma'aden. Nevertheless, this trend coincided with a decrease in feedstock prices, which supported PhosAgro's profitability.

The company expects preparation for the spring application season in key markets (including Russia & CIS, Europe and Latin America) to start by the end of the year, which will support prices for PhosAgro's products. An additional positive growth driver is the favourable price ratio for agricultural products and fertilizers. At the same time, high volumes of accumulated inventory in the USA and southern Asia will continue to put pressure on the global phosphate-based fertilizers market.

Read the article online at: https://www.worldfertilizer.com/nitrogen/24102019/phosagro-releases-3q19-and-9m19-results/