PhosAgro Group, one of the world’s leading vertically integrated phosphate-based fertilizer producers, announces its consolidated interim condensed financial results for the six months ended 30 June 2023.

In 1H 2023, production of mineral fertilizers and other chemicals increased by 4.3% year-on-year to over 5.6 million tonnes. This growth was driven primarily by an increase in DAP/MAP production during the ramp-up to design capacity at the production complex in Volkhov, which was built as part of the Company’s comprehensive long-term development programme. 

Total fertilizer sales in 1H 2023 decreased by 4.3% year-on-year to about 5.5 million tonnes, mainly due to the stockpiling of mineral fertilizers for seasonal deliveries to markets in Latin America and Asia after meeting the needs of the Russian market. At the same time, DAP/MAP sales rose by 5.8% over the same period, driving high margins in the current price environment.

Revenue for 1H 2023 amounted to USD 2.8 billion, down 36.8% year-on-year. The decrease in revenue was due to a drop in global fertilizer prices from their peak in early 2022, when a high level of uncertainty and sanctions pressure on Russian producers (the largest players in the global fertilizer market) drove up prices for all types of fertilizers amid disruptions in global supply chains.

In 1H 2023, the PhosAgro’s EBITDA amounted to USD 1.26 billion, down 28.8% year-on-year. Effective cost management and increased sales of high-margin products drove an EBITDA margin of 45.4%, a 5.1 p.p. increase from 1H 2022. In 1H 2023, the company’s free cash flow amounted to USD 0.8 billion, up 47.1% year-on-year. 

Net debt as of 30 June 2023 amounted to USD 2.30 billion, and the ratio of net debt to adjusted EBITDA at the end of the quarter was 1.09x.

The high EBITDA margin (accounting for FX differences) in 1H 2023 was driven by, among other factors, a decrease in the cost of key feedstocks and the flexibility of the company’s production chains, which made it possible to switch to the production of the highest-margin products in the current environment.

Sales volumes and regional product distribution in 2Q 2023 were in line with seasonal changes in demand, with increased sales to markets in Russia, North America and Europe (nitrogen-based fertilizers). Overall, the Company increased fertilizer sales to North America, Latin America and the CIS countries in 1H 2023.

Excess fertilizer production compared with sales in 2Q 2023 enabled the Company to stockpile a sufficient amount of product to satisfy the expected seasonal increase in demand in 3Q from key markets in India, Brazil and other regional markets in Asia and Latin America.

Market outlook

The third quarter has historically been marked by increased seasonal demand from key markets for nitrogen- and phosphate-based fertilizers in India, Brazil and other regional locations in Asia and Latin America. The low levels of carry-over stocks in North American and European markets will drive an earlier resumption of seasonal demand. As a result, prices have shown a strong increase since the start of the third quarter and may stabilise above 2Q 2023 prices.