OJSC PhosAgro (PHOR)
Board of Directors Approves PhosAgro Development Strategy to 2025
The strategy to 2025 aims to further expand PhosAgro's presence in its priority domestic and premium export markets and strengthen its position as a producer of pure phosphate-based fertilizers with low levels of potentially-harmful heavy metals with one of the lowest cash costs of production. The strategy covers the following key areas:
Moscow - The Board of Directors of PhosAgro (Moscow Exchange, LSE: PHOR), one of the world's leading producers of phosphate-based fertilizers, has approved the Company's strategy to 2025.
As part of its strategy to 2025, the Company will focus on work in three priority areas: expanding capacity, improving operational efficiency and increasing self-sufficiency in key inputs.
As part of a programme to modernise existing and build new production capacities using BATs, as well as innovative and digital solutions, PhosAgro plans to increase the production of high-quality fertilizers and feed phosphates that stand out for their naturally low levels of potentially-harmful heavy metals, from 9 million tonnes in 2018 to 11.5 million tonnes by 2025.
The number of fertilizer grades produced by PhosAgro is due to increase from 39 in 2018 to 50, including new high-performance grades with bio-additives.
PhosAgro has already passed the peak of its investment cycle following completion of its key capital-intensive project under the strategy to 2020, which was the construction of high-tech ammonia and granulated urea facilities. Total investments into these facilities is RUB 65 billion. These projects now generate stable cash flow, allowing for balanced payment of decent dividends, as well as implementation of investment, social and charitable programmes.
The company will continue to develop its own distribution network, both in Russia and in export markets.
The Russian market, where PhosAgro is the leading supplier of fertilizers for domestic farmers, will always be a strategic priority for the Company. PhosAgro sells more fertilizers in Russia than to any other country in the world, and the Company will continue to invest in the development of regional infrastructure for the storage and handling of fertilizers, as well as the acquisition of new assets and the digitalisation of its business. The storage capacity of PhosAgro facilities located in the main agricultural regions of Russia currently exceeds 530 thousand tons, ensuring reliable supplies for seasonal demand for mineral fertilizers.
Starting from 2020, the Company plans to implement end-to-end digitalisation of logistics, as well the introduction of elements of precision farming technology, which will enable Russian farmers to achieve even greater impact from the use of plant mineral nutrition systems.
Over the past five years, PhosAgro has nearly doubled its fertilizer and feed phosphate sales in Russia to 2.4 million tonnes. By 2025 the Company plans to increase domestic sales volumes to more than 3 million tonnes.
PhosAgro will continue to expand its presence in the premium markets of Europe and Latin America, as well as other markets where the Company can achieve the best netback prices, while also increasing customer awareness about the safety of the phosphate-based fertilizers produced by PhosAgro.
The share of direct export sales will be maintained at a level of at least 90% with the help of PhosAgro's existing 10 foreign trading offices located in the Company's key sales regions of Europe, Latin America and Asia.
Having a logistics system and sales infrastructure in place in priority markets will enable the Company to continue creating value through the entire supply chain all the way to end customers. To achieve this, the Company will focus on expanding the capacity of its own railway and port infrastructure, as well as increasing and upgrading its fleet of railcars, including through the use of new rolling stock management tools to reduce transport costs.
Commitment to sustainability
PhosAgro continually seeks to improve and introduce best practices in sustainability.
In addition to actively engaging in business in its regions of presence, PhosAgro is implementing a corporate housing programme and is also involved in major social programmes across areas like education, healthcare, youth policy and support for active lifestyles. Annual expenditure for these purposes exceeds RUB 2.5 billion.
The Company is one of the largest taxpayers in the regions where it operates. In the past five years, PhosAgro allocated more than RUB 18 billion to fund environmental programmes.
Together with UNESCO and the UN Food and Agriculture Organization a programme is being implemented to improve health and environmental outcomes by promoting green technologies to support food security and combat soil degradation.
Compliance with the UN's Sustainable Development Goals has been identified as a key priority in the Company's strategy to 2025. The next meeting of the Board of Directors will consider CEO Andrey Guryev's proposal to create a Board of Directors Committee for Sustainable Development.
PhosAgro welcomes and is participating in initiatives in the EU to limit the sale of phosphate-based fertilizers containing impurities such as cadmium, arsenic, lead and other heavy metals; human exposure to such elements through food products has been linked with medical conditions including cancer, renal diseases, osteoporosis and cardiovascular disease.
Fertilizers produced by PhosAgro meet the strictest standards of purity, as well as health and environmental safety. The Company plans to use both mandatory and voluntary green labelling. Limiting levels of harmful impurities will help to improve agricultural safety and benefit food consumers around the world.
PhosAgro Board of Directors Chairman Sven Ombudstvedt said: "PhosAgro has already created significant value for shareholders and other stakeholders through successful investments in sustainable increases in efficiency and production capacity, while also maintaining a solid financial position, paying out dividends and undertaking a wide range of social and environmental projects.
"We have also achieved significant progress in governance and transparency, thanks in large part to an optimal corporate structure and an expanded Board of Directors with a majority of independent directors.
"Looking ahead, the strategy to 2025 that the Board of Directors approved today aims to further strengthen PhosAgro's position as a producer of environmentally safe phosphate fertilizers with among the lowest costs in the industry, while continuing to expand production capacities and ensure the long-term sustainability of our operations globally. The Board of Directors and I have full confidence that this is a strategy that will prepare PhosAgro for the future, and that it will create significant, sustainable value for the Company's shareholders as well as other stakeholders, from employees to the farmers that use our crop nutrients on their fields."
Irina Bokova, a member of PhosAgro's Board of Directors and the former Director-General of UNESCO, said: "The Board carefully considered the interests of all stakeholders in its review of PhosAgro's strategy to 2025, and I am pleased to see that the Company has now included sustainability goals as one of its strategic priorities.
"In fact, PhosAgro has already achieved impressive performance in building value for a wide range of stakeholders at the local and global levels. The Company makes meaningful investments into protecting the environment as well as the health, education and general well-being of its employees and residents of local communities where it operates.
"At a global level, PhosAgro has an established track record of cooperation with UNESCO and the FAO on addressing important issues affecting all of humanity, and the Company recently joined the UN Global Compact, the largest UN international business initiative in the field of corporate social responsibility and sustainable development.
"Looking ahead, PhosAgro's aim will be to integrate 10 of the UN's Sustainable Development Goals into its activities worldwide, with a focus on human rights, labour rights, environmental protection and fighting corruption, among others."
Member of the Board of Directors and PhosAgro CEO Andrey Guryev said: "We have already completed our strategy to 2020 and the Company exceeded all of its production targets. Fertilizer and feed output have increased by 1.5x over the past five years to a record 9.0 million tonnes per year. The number of fertilizer grades produced by PhosAgro, which stand out for their high quality and purity, increased from 19 in 2013 to 39.
"The Company's products are used in 100 countries around the world, including in our priority Russian market and key markets in Europe and Latin America. Implementing key investment projects will enable us to support stable cash flows while pursuing new investment programmes, paying appropriate dividends and implementing social and charitable projects.
"PhosAgro is a significantly different company today than it was just over five years ago when I took over as CEO in 2013, shortly before the strategy to 2020 was approved by the Board of Directors. We have now completed all of the key goals of our strategy to 2020 a full two years ahead of schedule and have achieved significant sustainable advances in terms of efficiency, production capacities, cash flow generation and direct access to customers in priority domestic and export markets.
"Looking ahead, the strategy to 2025 that was developed by PhosAgro management and approved by the Board of Directors aims to further strengthen our competitive advantages by increasing efficiency and production output. Successful implementation of this new strategy will enable us to make sustainable gains in our capacity to provide PhosAgro's unique, high-quality fertilizers, which are unique for their high quality and environmental cleanliness."
Details about PhosAgro's strategy to 2025 will be disclosed at its Capital Markets Day in the fall of this year.
About the Company
PhosAgro is one of the world's leading vertically integrated phosphate-based fertilizer producers in terms of production volumes of phosphate-based fertilizers and high-grade phosphate rock with a P2O5 content of 39% and higher.
The Company is the largest phosphate-based fertilizer producer in Europe (by total combined capacity for DAP/MAP/NP/NPK/NPS), the largest producer of high-grade phosphate rock with a P2O5 content of 39%, a top-three producer of MAP/DAP globally, one of the leading producers of feed phosphates (MCP) in Europe, and the only producer in Russia, and Russia's only producer of nepheline concentrate (according to the RAFP).
PhosAgro's main products include phosphate rock, 39 grades of fertilizers, feed phosphates, ammonia, and sodium tripolyphosphate, which are used by customers in 100 countries spanning all of the world's inhabited continents. The Company's priority markets outside of Russia and the CIS are Latin America, Europe and Asia.
PhosAgro's shares are traded on the Moscow Exchange, and Global Depositary Receipts (GDRs) for shares trade on the London Stock Exchange (under the ticker PHOR). Since 1 June 2016, the Company's GDRs have been included in the MSCI Russia and MSCI Emerging Markets indexes.
More information about PhosAgro can be found on the website: www.phosagro.ru.
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