Acron Group’s Output Up 4% in H1 2018

24 July 2018

Acron Group’s Output Up 4% in H1 2018

Group’s Consolidated Output (including operating results for Acron, Dorogobuzh and North-Western Phosphorous Company)

Note:

Commercial output is output less in-house consumption.

* Brought up to date

** H1 2017 data is adjusted due to reclassification of a part of urea as an industrial urea

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

“In H1 2018, commercial products output increased 4% year-on-year to 3.7 million tonnes, setting yet another record. Mineral fertiliser output was up 2.5% to 3.1 million tonnes.

“The Group’s facilities increased ammonia output 2%. At the new Ammonia-4 unit, output was 417,000 tonnes, up 7% year-on-year. Following further improvements, we plan to increase the unit’s capacity to 2,500 tonnes per day. Expanding total ammonia output will allow us to increase production of nitrogen and complex fertilisers.

“In 2017, Acron’s site in Veliky Novgorod implemented a number of measures to modernise its urea units, boosting output in H1 2018 to 475,000 tonnes, up 16% year-on-year. We already announced the launch of a sixth urea unit in Q4 2018, which will increase urea solution capacity to 3,650 tonnes per day. As we ramp up production of urea solution, we will be able to increase output of value-added products based on it. Due to the favourable UAN market conditions in the reporting period, Acron’s production of liquid nitrogen fertiliser increased 34%, setting yet another record. There was also a significant increase in high-quality industrial urea production (including for AdBlue), which was up 78% to 53,000 tonnes.

“Acron Group’s complex fertiliser production was down 8%. In the reporting period, there was a significant decrease in bulk blends production due to lower regional demand. However, instead of decreasing the utilisation rate at its main production facilities, the Group shifted end product sales towards AN and NPK. As a result, output of commercial AN and NPK increased.

“In H1 2018, apatite concentrate output was 619,000 t, up 14% year-on-year, mainly due to decreased overburden operations at the open-pit mine compared to H1 2017. The total of 2.099 million tonnes of ore were produced in the reporting period, including 353,000 tonnes produced at the underground mine.”

Market Trends

Urea prices dropped as expected from USD 230 FOB Baltics to USD 215 in Q2 2018, a period with traditionally low seasonal demand. However, in June, prices suddenly started to rise and reached peak values of USD 270 by July, mainly due to lack of supply on the global market as Chinese producers pulled back on their exports in response to cost pressures. High prices for coal, the main feedstock for urea production in China, force local producers to keep their prices above USD 300 FOB China and focus on the domestic market. Chinese companies exported just 0.6 million tonnes of urea in the first five months of the year, down from 2.1 million tonnes year-on-year and 4.3 million tonnes during the same period in 2016. In order to attract additional Chinese products, prices in other regions had to go up. However, despite significant growth, it is expected that global prices will remain high until the end of Q3 due to strong demand from Brazil and India.

Along with urea, AN prices also increased from USD 150 FOB Baltics in May to USD 210 by July. UAN prices are expected to recover with a delay, as they have not yet reacted to price growth in the segment.

In Q2 2018, NPK prices remained stable, showing a slight increase in late June due to the positive dynamics of nitrogen and phosphorous fertiliser prices.

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

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 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 has a wholly owned 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 licenses for 13 parcels of the potassium salt deposit at Prairie Evaporite, Saskatchewan, Canada. Acron also holds a minority stake (19.8%) in Polish Grupa Azoty S.A., one of the largest chemical producers in Europe.

In 2017, the Group sold 7.3 million tonnes of various products to 65 countries, with Russia, Brazil, Europe and the United States as key markets.

In 2017, the Group posted consolidated IFRS revenue of RUB 94,342 million (USD 1,617 million) and net profit of RUB 14,260 million (USD 244 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.

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