Acron

Earnings Release • Oct 21, 2019

National Storage Mechanism | Additional information

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21 October 2019

Acron Group’s Mineral Fertiliser Output Up 5% in 9M 2019

Group’s Consolidated Output

(including operating results for Acron, Dorogobuzh

and North-Western Phosphorous Company)

Product, ‘000 t	9M 2019	9M 2018	YOY, %
MINERAL FERTILISERS
Ammonia	2,049	1,971	3.9%
Incl. in-house consumption*	1,795	1,606
Nitrogen fertilisers, including	3,887	3,102	25.3%
Incl. in-house consumption	868	696
AN	1,628	1,371	18.8%
Incl. in-house consumption	320	265
Urea	946	724	30.7%
Incl. in-house consumption	548	431
UAN	1,312	1 007	30.3%
Complex fertilisers, including	1,584	1,880	-15.7%
Incl. in-house consumption	24	33
NPK	1,495	1,720	-13.1%
Incl. in-house consumption	24	33
Bulk blends	90	160	-43.9%
Total commercial output for Mineral Fertilisers	4,834	4,619	4.6%
INDUSTRIAL PRODUCTS
Organic synthesis products, including	370	359	3.0%
Incl. in-house consumption	191	181
Methanol	78	80	-2.5%
Incl. in-house consumption	70	66
Formalin	132	132	-0.2%
Incl. in-house consumption	120	114
Urea-formaldehyde resins	160	147	8.9%
Incl. in-house consumption	1	1
Non-organic compounds, including:	608	617	-1.5%
Low-density and technical-grade AN	124	128	-3.2%
Industrial urea	96	86	12.6%
Calcium carbonate	342	357	-4.3%
Liquid carbon dioxide	41	41	-1.9%
Argon	5	5	1.7%
Total commercial output for Industrial Products	787	795	-1.0%
PHOSPHATE INPUTS
Apatite concentrate	783	907	-13.7%
Incl. in-house consumption	603	694
Total commercial output for Apatite Concentrate	180	214	-16.0%
TOTAL COMMERCIAL OUTPUT	5,800	5,628	3.1%

Note: Commercial output is output less in-house consumption.

Chairman of Acron’s Board of Directors Alexander Popov commented on the results:

“In 9M 2019, Acron Group’s total commercial output was up 3% year-on-year to 5,800,000 tonnes, setting a new record, and mineral fertiliser output increased 5% year-on-year to 4,834,000 tonnes.

“Ammonia output was up 4% year-on-year to 2,049,000 tonnes, and the volume of ammonia processed as end products increased to 88%. We plan to finalise upgrades to the ammonia unit at Dorogobuzh in November, increasing its capacity to 130,000 tonnes per annum. The Group’s ammonia output and the volume of processed ammonia continue to grow.

“In the reporting period, Acron Group’s nitrogen fertiliser output was up 25% to 3,887,000 tonnes. Ammonium nitrate output increased 19% to 1,628,000 tonnes due to higher output of nitric acid, which is a key feedstock for ammonium nitrate. This year, we launched two new nitric acid units with production capacity of 135,000 tonnes each at Acron (Veliky Novgorod). Construction of another unit is underway and is expected to be commissioned at the end of this year. In the reporting period, agricultural-grade urea output was up 31% to 946,000 tonnes due to commissioning of a new urea unit in November 2018 and upgrades to existing units. The Group also continued to expand technical-grade urea production, and output was up 13% year-on-year to 96,000 tonnes. Production of UAN based on urea solution increased alongside urea output. In 9M 2019, UAN output was up 30% to 1,312,000 tonnes. In early 2020, we plan to complete the construction of a new urea granulation unit with the goal of making the Group more flexible in allocating its production between AN, urea, and UAN depending on the market environment and thus increasing the profit margin of processed ammonia.

“The Group’s total complex fertiliser output was down 16% year-on-year to 1,584,000 tonnes, and blended fertiliser output fell 44% to 90,000 tonnes, mainly because Dorogobuzh suspended its blend production in response to weaker regional demand. However, in early 2019, the Group brought on stream a new blended fertiliser unit at the Acron production facility in Veliky Novgorod, significantly expanding its product portfolio with blends, which are increasingly popular globally. The Group’s NPK output decreased 13% to 1,495,000 tonnes due to a temporary reduction in apatite concentrate supply from the Oleniy Ruchey mine, which experienced a higher volume of overburden operations year-on-year and lower phosphorus grade of the ore at this stage of underground mine development. That said, apatite concentrate output recovered in Q3 2019, and we expect output to go back up as the underground mine is developed”.

Market Trends

In the third quarter of 2019, global urea prices were down due to a significant increase in exports from China amid seasonal low demand. From January through August 2019, China exported 2.7 million tonnes of urea (against 0.9 million tonnes year-on-year). Baltics prices decreased from $270 to $230 FOB. According to industry experts, Baltics prices for urea will recover to $245 FOB in the fourth quarter due to strong seasonal demand mainly in Brazil, Europe, India, Bangladesh, Ethiopia, and Iraq.

In Q3 2019, AN prices decreased on the back of lower urea prices. UAN prices, which fell in H1 2019 due to weak demand as the United States experienced unfavourable weather conditions, remained stable in Q3 2019.

In the third quarter, NPK prices went down due to lower prices for nitrogen, phosphate and potash fertilisers, while the NPK premium over the basic product basket remained high, at approximately 20%.

Average Indicative Prices, USD/t, FOB Baltic/Black Sea

	Q3 2019	Q2 2019	Q3 2018	Q3 2019 / Q2 2019 change	Q3 2019 / Q3 2018 change
NPK 16-16-16	295	305	308	-3.3%	-4.4%
AN	196	197	213	-0.6%	-8.2%
UAN	142	138	174	3.0%	-18.4%
Urea	247	250	263	-1.2%	-6.1%
Ammonia	216	223	303	-3.3%	-28.9%

	9M 2019	9M 2018	YOY, %
NPK 16-16-16	304	295	3.3%
AN	192	189	1.6%
UAN	152	163	-6.7%
Urea	247	237	3.9%
Ammonia	238	273	-12.7%

Media Contacts:

Sergey Dorofeev

Anastasiya Gromova

Tatiana Smirnova

Public Relations

Phone: +7 (495) 777-08-65 (ext. 5196)

Investor Contacts:

Ilya Popov

Investor Relations

Phone: +7 (495) 745-77-45 (ext. 5252)

Background Information

Acron Group is a leading vertically integrated mineral fertiliser producer in Russia and globally, with chemical production facilities in Veliky Novgorod (Acron) and the Smolensk region (Dorogobuzh). The Group owns and operates a phosphate mine in Murmansk region (North-Western Phosphorous Company, NWPC) and is implementing a potash development project in Perm Krai (Verkhnekamsk Potash Company, VPC). It owns transportation and logistics infrastructure, including three Baltic port terminals and distribution networks in Russia and China. Acron’s subsidiary, North Atlantic Potash Inc. (NAP), holds mining licences for 11 parcels of the potassium salt deposit at Prairie Evaporite, Saskatchewan, Canada. Acron also holds a minority stake (19.8%) in Polish Grupa Azoty, one of the largest chemical producers in Europe.

In 2018, the Group sold 7.3 million tonnes of various products to 67 countries, with Russia, Brazil, Europe and the United States as key markets.

In 2018, the Group posted consolidated IFRS revenue of RUB 108,062 million (USD 1,723 million) and net profit of RUB 13,318 million (USD 212 million). Acron’s shares are on the Level 1 quotation list of the Moscow Exchange and its global depositary receipts are traded at the London Stock Exchange (ticker AKRN). Acron employs approximately 11,000 people.

For more information about Acron Group, please visit www.acron.ru/en.