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PHOSAGRO
We are a vertically integrated phosphate-based fertilizer producer
with mining, processing, logistics and distribution assets in
Russia. PhosAgro is one of the largest phosphate-based fertilizer
producers by capacity, enjoys a sustainable cash-cost advantage
and produces some of the purest phosphate-based fertilizers
available worldwide thanks to its high-quality resource base.
The phosphate journey begins at our Apatit mine and
beneficiation plant on the Kola Peninsula in north-west Russia,
where we extract unique apatite-nepheline ore that contains
almost no cadmium or other harmful heavy metals. This high-
quality raw material is a key input for our downstream production
sites, which make some of the world’s purest and safest
phosphate-based fertilizers that farmers use to grow the food
that ends up on our plates.
We sell 35 grades of fertilizers and other end products
to agricultural producers from over 100 countries. PhosAgro
has flexible, efficient production lines, its own distribution and
sales network in Russia, as well as sales offices in priority export
markets like Latin America, Europe and Asia. With integrated
logistics, including a fleet of railcars and a port terminal in Ust-
Luga, we are able to further secure our sustainable low cash-cost
advantage.
Our vision
Our purpose
We aim to supply safe and effective crop
nutrient solutions to farmers around the
world. We seek to help our end customers
meet increasing global demand for food
by enabling them to grow superior-quality
crops, utilising the uniquely safe and
pure phosphate-based crop nutrients that
PhosAgro produces.
We contribute to global food security by
producing mineral fertilizers that increase
the output, quality and heartiness of crops.
Thanks to the exceptionally low content
of cadmium and other dangerous heavy
metals, our crop nutrients minimise the risk
of these elements entering the food supply
through fertilization.
We have already completed, or are nearing
completion of, major investments in
upstream, downstream, logistics and sales
operations as part of our strategy to 2020,
with the goal of expanding our ability
to produce the world’s purest and safest
mineral fertilizers.
By 2050, the global population is expected
to reach 9.6 billion people, which implies
a 60% increase in demand for soft
commodities just to feed the increased
population. Changing diets and alternative
uses for soft commodities add to this
already substantial growth in demand.
Our strategy builds value for our
shareholders by enabling us to increase our
internal use of apatite-nepheline ore for
value-added end products and to achieve
sustainable cost savings with more efficient
technologies or vertical integration of key
parts of the value chain.
We believe that, by implementing our
strategy aimed at strengthening our core
sustainable advantages, we will best serve
our shareholders, the local communities
where we work, farmers all over the
world who use our products, as well as
the consumers of the food grown with
PhosAgro fertilizers.
About this report
The purpose of this integrated report is to
inform the reader about the material issues
that have the potential to impact our
business, and to help the reader understand
how this influences our strategy, our
operations, our financial performance, the
long-term sustainability of our business
and the value we seek to create for our
stakeholders. In this report, we answer the
eight questions that integrated reporting
is meant to address:
1. What does the organisation do and
what are the circumstances under which
it operates?
2. How does the organisation’s governance
structure support its ability to create
value for stakeholders in the short,
medium and long term?
3. What is the organisation’s business
model?
4. What are the specific risks and
opportunities that affect the
organisation’s ability to create value
for stakeholders in the short, medium
and long term?
5. What are the Company’s key strategic
goals and how does it intend to achieve
them?
6. To what extent has the organisation
achieved its strategic objectives for the
period, and what was the effect on the
value of the Company for stakeholders?
7. What are the key challenges and
uncertainties that the organisation
is likely to encounter in pursuing its
strategy, and what are the potential
implications for the business model and
future performance?
8. How does the organisation determine
which matters are worth including in
the integrated report, and how are such
matters quantified or evaluated?
Pure and safe fertilizers
In this report, we also discuss how
the unique quality of our phosphate
raw materials allows us to produce
some of the purest and safest fertilizers
in the world, enabling farmers and
consumers to be confident that PhosAgro
fertilizers are not introducing dangerous
heavy metals like cadmium into the global
food supply.
Corporate responsibility
In order to secure the long-term
sustainability of our business model and
our operations in Russia, we take a broader
view of our interaction with stakeholders
and the material issues that could affect
our business. In this report, we discuss
our investments in human capital, health
and safety, and the local communities in
the regions where we operate. We provide
details on how our governance systems
have been adapted to address business
conduct issues, what we are doing to
diminish our impact on the environment
and how we maintain relationships with
our key stakeholders.
Determining our material issues
The information within this report was
compiled after determining and assessing
PhosAgro’s material financial and non-
financial issues. Matters for inclusion in the
report are determined by their scope and
relate to the businesses over which the
organisation has operational control.
Contents
S T R AT E G I C R E P O RT
Year at a glance
Oracle
Chairman’s statement
Chief executive
officer’s statement
Our assets
Business model
Strategy
Where we operate
Market overview
Scientific approach
Operational review
Financial review
CO R P O R AT E R E S P O N S I B I L I T Y
R E P O RT
Environmental review
Health and safety review
People review
Community investment review
Business conduct review
Stakeholder engagement
Managing our risk
6
8
10
14
18
20
24
28
32
38
44
48
56
64
68
76
82
84
96
CO R P O R AT E G OV E R N A N C E
Board of Directors
Executive management
Corporate governance
Management responsibility
statement
104
106
108
122
F I N A N C I A L S TAT E M E N T S
Independent Auditors’ Report 123
127
IFRS FS and notes
A D D I T I O N A L I N FO R M AT I O N
Shareholder information
Glossary
Names of legal entities
used in this report
Contacts
162
164
167
168
2016 AT A GLANCE
Financial highlights
PhosAgro continued to deliver outstanding value for investors in 2016:
we declared dividends totalling RUB 28 billion, or RUB 216 per share
(RUB 72 per GDR) backed by sustainable cash flows, we remain on track
to launch new, efficient capacities in 2017 that will support further growth,
and we finished the year with net debt/EBITDA of just 1.45x.
See additional information
on page 50
Revenue, RUB bln
EBITDA, RUB bln
187.7
-1.05%
72.4
-12.24%
Net profit, RUB bln
59.9
+ 64.56%
24.5
18.1*
8.6
59.9
36.4
2012
2013
2014
2015
2016
*Adjusted net profit is calculated as net
profit adjusted for unrealised foreign
exchange loss
Dividend payout ratio, %
Dividends accrued for a given year
50%
-2 p.p.
189.7
187.7
105.3
104.6
123.1
34.9
23.9
37.6
82.5
72.4
52
52
50
43
43
Operating highlights
• While new ammonia and granulated urea capacities are on track to launch in 2017,
we increased finished goods output by 8% year-on-year by investing in modernisation
and debottlenecking existing capacities
• With the lowest cash cost in the industry, PhosAgro was able to maintain near 100%
capacity utilisation throughout 2016, even as other global players were forced to shutter
ineffective and loss-making production in the face of historically low prices
• Increased sales in the domestic Russian market, where agricultural production
continues to grow and ongoing investments in the agricultural sector represent
a significant opportunity for domestic fertilizer producers with well-developed
distribution networks like PhosAgro
Corporate responsibility highlights
We continue to invest in improving
our environmental footprint, as well as
in maintaining leading workplace health
and safety solutions.
See additional information
on page 58
See additional information
on page 46
Downstream
sales volumes, kt
7,319
+8.45%
7,319
6,749
6,056
6,221
5,338
Phosphate-based fertilizers,
MCP and STPP sales volumes, kt
Emissions into the air
per unit of production, kg/t
5,925
+10.05%
1.75
-4.37%
4,794
4,837
4,243
5,384
5,925
1.93
2.00
1.86
1.83
1.75
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Cash flow from
operating activities, RUB bln
50.4
-20.38%
EBITDA margin, %
Net debt/EBITDA
39%
-4 p.p.
1.45
+0.2%
63.3
50.4
33
31
23
43
39
2.5
1.8
1.5
1.3
0.8
25.5
17.9
27.5
Upstream sales volumes
of apatite-nepheline ore products, kt
Nitrogen fertilizers
sales volumes, kt
Lost time injury frequency rate
(LTIFR), per 200,000 hours worked
3,418
+17.18%
4,583
3,912
3,329
3,418
2,917
1,394
+2.09%
0.10
-33.33%
1,385
1,365
1,394
0.21
0.20
1,262
1,095
0.18
0.15
0.10
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
6
7
Chief Executive Officer’s statementWE MADE SIGNIFICANT PROGRESS IN 2016 ACROSS KEY ASPECTS OF OUR BUSINESS AND ONE MORE LINE MAXIMUMPhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION ORACLE
In 2016, PhosAgro launched a project to introduce Oracle Enterprise Business
Suite (OEBS) R12, an enterprise resource planning (ERP) system that offers
integrated and often real-time management of core business processes.
PROCUREMENT
MANUFACTURING
FULFILMENT
INVENTORY
SALES & ORDER
MANAGEMENT
BUSINESS
INTELLIGENCE
E-BUSINESS SUITE
FINANCIAL & ASSET
MANAGEMENT
REPORTING
HUMAN CAPITAL
MANAGEMENT
CUSTOMER
RELATIONSHIP
MANAGEMENT
CUSTOMER
SERVICE
THE NEW SYSTEM WILL INCLUDE:
Oracle Primavera
A project management system that will
Oracle Demantra
A demand forecasting system that gives
unify and automate business processes,
PhosAgro greater granularity by product
including capital investment projects, IT
category and by market.
projects and organisational restructuring.
In testing since December 2016.
Oracle Strategic
Network Optimisation
(SNO)
An integrated planning solution that will
increase efficiency and reduce costs
by consolidating Company data and
automating processes that previously
Oracle Siebel CRM
Will be used by traders to increase
transparency and create a single client
database.
Oracle Hyperion
Financial Management
Will be used for preparation of
had to be done by hand. Planning will be
IFRS financial statements, reducing
brought into a single central function.
preparation time and retaining an audit
trail for all data.
Integration of OEBS R12
is a key project to increase
the efficiency of PhosAgro’s
business processes. It is the
largest project in Russia,
Central and Eastern Europe
in 2016–2017, according
to Oracle Consulting data
Integration of OEBS R12 is a key project
to increase the efficiency of PhosAgro’s
business processes. Around
3,000 employees will use the system once
it is fully deployed. As such, the integration
project is a substantial undertaking,
involving around 150 members of staff, as
well as external consultants.
OEBS R12 is being installed from scratch
to replace the previous version, R11,
which PhosAgro introduced six years ago.
Since then, the Company has evolved at
a fast pace, and its requirements have
outgrown what the previous system could
offer in terms of integrated resource
planning, project management, forecasting,
preparation of financial statements
to International Financial Reporting
Standards and CRM. These solutions
will all be integrated using a corporate
database that includes all of the Company’s
operational and financial data, as well as
staff information.
When completed, PhosAgro will have one
of the most advanced ERP systems of any
Russian corporation, and a significantly
higher percentage of automated business
processes. This will increase transparency
and efficiency and reduce costs across the
Company.
~150
MEMBERS OF STAFF
INVOLVED, AS WELL AS
EXTERNAL CONSULTANTS
8
9
STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com CHAIRMAN’S STATEMENT
“
PhosAgro delivered
impressive
performance on its
strategy to 2020,
and the Board is
finalising a new
set of priorities
through 2025 that
aim to continue
to create value for
stakeholders, from
the mines of Apatit
to food consumers’
plates around the
world.
“
Sven Ombudstvedt
Chairman of the Board
of Directors
Nearing completion of 2020 strategic goals
Since announcing its strategy to 2020 at the
end of 2014, PhosAgro has made significant
progress towards achieving the goals
that the Board of Directors set before the
Company.
When we approved the current strategy,
the Board and I believed that it would
create value for stakeholders by making the
business more sustainable, more efficient
and better able to meet demand from
customers around the world.
Efficient growth: Since 2012, PhosAgro's
fertilizer production has grown at a CAGR
of 7.9%, while the Company has invested
just USD 95 million into upgrades and
modernisation of existing production
capacities. The resulting 1.6 million tonnes
of production capacity has strengthened our
business and brought an EBITDA uplift of
roughly USD 180 million per year.
PhosAgro’s strategic strengths
benefitted stakeholders in 2016
New production capacity and self-
sufficiency: At the same time, PhosAgro is
nearing completion of larger, ambitious
strategic projects that will secure the
Company’s position as one of the world’s
leading fertilizer producers longer-term: the
new 760 ths tonnes/year ammonia unit, and
a new 500 ths tonnes/year granulated urea
line are both on track to launch in 2017, as
planned.
Direct access to premium markets:
During 2016, in addition to Zug, Warsaw,
Sao Paulo and Singapore, PhosAgro opened
trading offices in Biarritz and Hamburg.
The Company is already benefitting
from the ability to work directly with
local farmers and distributors in these
markets, and this will further strengthen
as production capacity ramps up with the
launch of new capacities.
With the launch of these new capacities,
PhosAgro will further secure its position
as one of the lowest cash-cost producers
of phosphate-based fertilizers in the world,
with significant potential to continue
to expand production capacity and remain
self-sufficient in key inputs.
Corporate governance
In my role as the Chairman of the Board of
Directors, I am directly involved in ensuring
that PhosAgro’s corporate governance
systems meet the needs of the business
and its stakeholders. We have worked
hard in recent years to introduce policies
KEY MILESTONES 2016
MAJOR INVESTMENT
PROJECTS ON
TRACK FOR LAUNCH
IN 2017: 760 KT/
YEAR AMMONIA
AND 500 KT/YEAR
GRANULATED UREA
NEARING
COMPLETION OF
KEY TARGETS FOR
STRATEGY TO 2020
RUB 28 BILLION
IN DIVIDENDS
PAID IN 2016
NET DEBT/EBITDA:
1.45X
STRATEGY
TO 2025 WILL AIM TO
DEVELOP PHOSAGRO
ASSETS FURTHER
AS GLOBAL COST
LEADER
10
11
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION Chairman’s statement (continued)
and systems to ensure proper and efficient
monitoring, oversight, communication and
accountability across the Company's assets.
Being well-informed: Members of the Board
have access to up-to-date information on
financial and operating performance across
the Group and regularly interact with the
management team, maintaining dialogue on
all material issues facing the Company.
Independence: Maintaining representation
from independent members of the
Board helps to ensure that the interests
of all stakeholders in the Company are
represented and have a voice at Board
meetings.
Experience: Our backgrounds range from
global chemical and fertilizer companies
to soft commodities trading, audit and
internal controls. As a large Russian
business, our Board also has individuals with
significant experience and expertise that is
specifically Russia-focused.
ESG PRIORITIES
WE HAIL FROM ALL OVER
THE WORLD, WHICH
HELPS US TO BETTER
UNDERSTAND OUR
MANY INTERNATIONAL
STAKEHOLDERS
PhosAgro’s growth helps create jobs
for highly qualified specialists in the
communities where we operate in
Russia
Diversity: In addition to diverse backgrounds,
we hail from all over the world: Russia,
Norway, the United Kingdom and the United
States. This helps us to better understand
our many international stakeholders, which
include customers, shareholders, lenders,
suppliers and other business partners.
Corporate responsibility from mine to
plate
Corporate responsibility for PhosAgro starts
at the mines in Apatit where we extract
apatite-nepheline ore and continues all the
way through every step of the phosphates’
journey to the food on our plates.
Constant focus on improvement:
Throughout 2016, the Board oversaw
implementation of several important
initiatives for PhosAgro’s corporate
governance, which are discussed on
pages 110–123 of this report.
We maintain stringent workplace health
and safety practices and constantly aim
to ensure that we are providing the people
who work at our production facilities with
the best available practices in this area.
Environmental protection is another high
priority: we invest in new capacities and
WE MAINTAIN STRINGENT
WORKPLACE HEALTH AND
SAFETY PRACTICES
WE INVEST IN NEW
CAPACITIES AND
MODERNISATION TO
INCREASE EFFICIENCY
AND MINIMISE OUR
ENVIRONMENTAL
FOOTPRINT
modernisation to increase efficiency and
improve our environmental footprint.
PhosAgro’s growth helps create jobs
for highly qualified specialists in the
communities where we operate in Russia,
and we are constantly investing in
education, health and other aspects of local
communities in a mutually beneficial way.
Strategic review – looking ahead to 2025
The Board and I have been impressed
by the pace at which the Company has
reached key milestones in the strategy
to 2020. We launched a strategic review
in 2016 and are in the process of finalising
the strategy to 2025, which specifies a new
set of targets for PhosAgro’s next phase of
growth and development.
PhosAgro continues to implement and
refine business conduct policies and
practices to ensure that the Company
and its suppliers are doing business in an
ethical and honest way.
Supported by extensive research and
flexible production and sales models, we
can supply farmers with the right crop
nutrients for specific crops and growing
conditions.
Finally, food consumers benefit from proper
use of PhosAgro fertilizers because of the
unique high quality of the ore that is mined
at Apatit: this ore is exceptionally pure and
enables us to efficiently produce fertilizers
that are free of dangerous contaminants
like lead, arsenic or cadmium that could
eventually find their way into the food we
put on our plates.
Having already seen impressive execution
and the positive impact on financial and
operating results of the strategy to 2020,
the Board and I have all the confidence
that the ambitious goals we set under the
strategy to 2025 will continue to create
value for PhosAgro’s stakeholders, from
the mines of Apatit to the plates of food
consumers around the world.
Sven Ombudstvedt
Chairman of the Board of Directors
12
13
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION CHIEF EXECUTIVE
OFFICER’S STATEMENT
“
PhosAgro proved
once again that it is
able to deliver value
throughout market cycles,
with 2016 production
output increasing by 8%
year-on-year, an EBTIDA
margin of 39% and
sustainable progress in
achieving our strategic
goals.
“
Andrey A. Guryev
Chief Executive Officer and
Chairman of the Management
Board
HIGHLIGHTS 2016
+9.4%
TOTAL FERTILIZER
PRODUCTION VOLUME
GROWTH, YEAR-ON-YEAR
From mine to plate
Phosphorous is essential to plant and
animal life. PhosAgro mines and processes
apatite-nepheline ore, which it uses
to produce high-quality phosphate-based
fertilizers that agricultural producers all
over the world may use to produce the
food we eat.
I am especially proud of the fact that, due
to the unique qualities of the apatite-
nepheline ore that we mine and use as a
key raw material, PhosAgro’s phosphate-
based fertilizers are among the purest
and safest in the world. Our products are
naturally free of dangerous heavy metals
and other impurities found in many other
phosphate deposits.
When our fertilizers are applied to fields,
plants receive only helpful and necessary
nutrients, while not introducing
potentially hazardous elements into the
food chain. Proper use of PhosAgro
products helps farmers produce food that
is safe and healthy for the end consumer.
We delivered impressive results
in a challenging market in 2016
Strategic performance
PhosAgro delivered another strong
year in terms of strategic performance.
Against the backdrop of challenging
market conditions, 2016 demonstrated
the advantages of our efforts to further
improve our industry-leading low cash-
cost position.
PhosAgro operated at near 100% capacity
utilisation, increasing both production
output and sales volumes for the year,
while many global producers had to cut
back capacities.
We continued to generate strong cash
flows and maintained solid profitability,
enabling PhosAgro to pay dividends
to shareholders in line with the dividend
policy, while continuing to implement an
ambitious investment programme and
also reducing debt levels.
We continued moving closer to customers,
opening new sales offices in Europe,
and benefitted from recently completed
projects like Smart Bulk Terminal and
underground mining at Main Shaft No 2
at Apatit’s Kirovskiy mine.
With our key investment projects, the new
760 ths tonnes/year ammonia line and
500 ths tonnes/year granulated urea shop,
on track to be commissioned in 2017, we
have begun work on a new strategy, which
will set ambitious goals for management
to 2025.
DIRECT ACCESS TO
PRIORITY MARKETS: NEW
SALES OFFICES IN BIARRITZ
(FRANCE) AND HAMBURG
(GERMANY)
ALMOST 100% CAPACITY
UTILISATION DESPITE
CHALLENGING MARKET
CONDITIONS
+9%
INCREASE IN FERTILIZER
SALES VOLUMES,
YEAR-ON-YEAR
14
15
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION Chief Executive Officer’s statement (continued)
Operating performance
On the back of continued investments in
debottlenecking and modernisation, we
delivered a 9.4% year-on-year increase in
fertilizer production volumes
in 2016, and total fertilizer sales increased
by 8.8% year-on-year. Production of
phosphate-based fertilizers and feed
phosphates increased by 10.8% year-
on-year to 5.9 million tonnes, while
production of nitrogen-based fertilizers
increased by 4.3% year-on-year
to 1.5 million tonnes.
Financial performance
While 2016 was a challenging year for
the fertilizer industry, PhosAgro continued
to generate solid operating cash flows,
and paid out dividends in line with
our dividend policy, despite being in a
capex-intensive period. We delivered an
EBITDA margin of nearly 40% in 2016,
which remains an unachievable target
for even our most integrated and largest
phosphate-based fertilizer peers.
In 2016 the Company entered into the
final stage of construction of the new
ammonia production line
With prices under significant pressure
globally, our EBITDA for 2016 decreased
by 12% year-on-year to RUB 72.4 billion
from RUB 82.5 billion in 2015.
Net debt as of 31 December 2016
stood at RUB 105.1 billion, down from
RUB 105.2 billion as of 31 December 2015,
as a result of rouble appreciation against
the USD as of 31 December 2016. Our net
debt to EBITDA ratio increased to 1.45 as of
31 December 2016, from 1.28 as of
31 December 2015.
Corporate responsibility
We continued to work hard on our
corporate responsibility activities
in 2016, focusing on environmental impact,
education in the cities and towns where
we work, corporate conduct and a variety
of other areas that build value for a wide
range of stakeholders.
Market environment
Market conditions remained challenging
throughout 2016, driven by high levels
of supply. Several major players that
had undertaken large-scale investment
programmes increased their phosphoric
acid output, which decreased prices
for this key input, allowing some non-
integrated mineral fertilizer producers
to increase production volumes, which
decreased import demand. Global prices
for phosphate-based fertilizers declined
significantly. This had a significant effect
on China, which is the world’s largest
phosphoric acid producer. Low prices
combined with production costs rising for
the first time in the last 7-8 years led to a
significant contraction of China’s share in
export markets.
At the same time, global demand for
phosphates was healthy in 2016, according
to preliminary numbers from the IFA,
advancing more than 3% vs 2015. This is
a much faster rate of growth than what
was seen for either nitrogen or potash
fertilizers. Demand growth was supported by
a recovery in consumption in Latin America,
and stable performance in South Asia.
In the domestic market, PhosAgro’s sales
increased impressively by 30% year-
on-year in 2016 and reached nearly
2.1 million tonnes. The Russian market
remained one of the globally fastest-
growing last year, up 16% year-on-year
according to preliminary data from the
Russian Association of Fertilizer Producers,
driven by strong development of the
domestic agriculture industry (as a result
of government policies and support from
mineral fertilizer producers).
Outlook
We started 2017 at prices that represent
historical lows for the past 7 years. Unlike
2016, however, I expect price seasonality
to be in line with what the market normally
sees. The fundamentals driving demand for
phosphate-based products remain strong.
The combination of a recovery in ammonia
prices, greater rationalisation by high-cost,
non-integrated Chinese producers and
very tight product availability should push
prices up as the high season unfolds. As of
the end of March, DAP prices have already
risen by 16%, with potential to continue
growing ahead of the buying season
in South Asia and Latin America. At the
same time, this is balanced by more new
production coming on line in North Africa
and Saudi Arabia, which will constrain
potential price growth.
Both our key investment projects, the
construction of new ammonia and urea
HIGHLIGHTS 2016
+10.8%
YEAR-ON-YEAR INCREASE
IN PHOSPHATE-BASED FERTILIZER
AND FEED PHOSPHATES
PRODUCTION
+4.3%
YEAR-ON-YEAR INCREASE
IN NITROGEN FERTILIZER
PRODUCTION
+30%
YEAR-ON-YEAR INCREASE
IN PHOSAGRO’S DOMESTIC
MARKET SALES
units, on schedule and expected to be fully
operational in the second half of 2017.
After their completion, PhosAgro will begin
to achieve cost savings from using the
ammonia we produce instead of purchasing
externally, combined with higher sales
volumes. This should have a positive
impact on free cash flow and potentially on
dividend payments.
Andrey A. Guryev
Chief Executive Officer and Chairman
of the Management Board
PHOSAGRO WILL BEGIN TO
ACHIEVE COST SAVINGS
FROM USING AMMONIA
WE PRODUCE INSTEAD OF
PURCHASING EXTERNALLY,
AND WILL BENEFIT FROM
HIGHER SALES VOLUMES.
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR ASSETS
UPSTREAM CAPACITIES
DOWNSTREAM CAPACITIES
DISTRIBUTION AND SALES
Apatit
PhosAgro-Cherepovets
Balakovo branch of Apatit
Metachem (Volkhov)
PhosAgro-Region
PhosAgro Trading
JSC Apatit
100%
JSC PhosAgro-Cherepovets
100%
Balakovo branch of JSC Apatit
100%
JSC Metachem
100%
PhosAgro-Region LLC
(storage and distribution)
99.90%
Phosint Trading Ltd.
(distribution)
• Mining of apatite-nepheline ore
Production of phosphate-based fertilizers, nitrogen
Production of phosphate-based fertilizers, feed
Production of PKS, SOP, STPP, sulphuric and
Russia’s largest distributor of fertilizers, with 10
PhosAgro Asia Pte. Ltd.
(distribution)
100%
100%
• Production of phosphate rock
fertilizers, sulphuric and phosphoric acids and
phosphate, sulphuric and phosphoric acid.
phosphoric acid.
• Production of nepheline concentrate
ammonia.
distribution centres and three branches in close
proximity to Russia’s major agricultural regions.
PhosAgro Trading SA
(trading company based in Zug)
98.44% as of
19.04.2017
Phosphate rock
8.5 mln t
Nepheline concentrate
1.7 mln t
MAP/DAP/NPK/NPS
4.0 mln t
Urea
980 kt
Ammonia
1,190 kt
APP
140 kt
AN
450 kt
MAP/DAP/NPK
1.5 mln t
MCP
360 kt
PKS/SOP
100 kt
STPP
130 kt
Distribution centres in Russia
Sales offices in Biarritz (France), Hamburg (Germany),
10
Zug (Switzerland), Warsaw (Poland), Singapore (Asia)
and Sao Paulo (Brazil) bring vertical integration
Regional representative offices
into priority export markets.
4
LOGISTICS
International trading offices
6
ENGINEERING AND R&D
Investing in the future
We have made highly productive
investments into existing capacities
to improve efficiency and increase
production output even as we continue
to construct entirely new ammonia and
granulated urea plants that are due
to launch in 2017.
Focus on efficiency from mining
to sales and distribution
Our new capacities use the latest, most
efficient production technologies available,
meaning they improve our environmental
footprint while also securing PhosAgro’s
position as one of the lowest cash-cost
producers in the global fertilizer industry.
Expanding vertical integration
Our vertical integration into logistics, with
the launch of the Smart Bulk Terminal,
delivered sustainable cost savings in
2016, as we shipped 1.3 million tonnes of
fertilizers to export markets through this
efficient new facility in Ust-Luga.
In a continued effort to move closer
to farmers in priority markets, we set
up sales offices in Biarritz (France) and
Hamburg (Germany) during 2016.
PhosAgro-Trans
Smart Bulk Terminal
PhosAgro-Trans LLC
(transportation)
100%
Smart Bulk Terminal LLC
(loading)
70%
OJSC NIUIF
(research and development)
94.41%
Handles domestic freight rail operations, with 5,559
Modern container and bulk terminal in Ust-Luga
railcars (primarily mineral hoppers) in operation.
with an export capacity of 2 million tonnes/year.
CJSC Mining and Chemical Engineering 100%
Railcars
5,559
Own shipment terminal capacity
2 mln t
18
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION BUSINESS MODEL
Ongoing investments in
efficiency and business process
optimisation, combined with
domestic access to all key inputs,
support our sustainable low-cost
position among global producers
of phosphate-based fertilizers
As a vertically integrated company, we
capture value for shareholders at every
step of the process, from mining of
phosphate raw materials to distribution
and sales of finished products to farmers
in Russia or sales to distributors in
priority export markets like Europe, Latin
America and Asia.
At the same time, we aim to create value
for other stakeholders at every link in
the chain, whether by managing our
environmental footprint, implementing
leading workplace health and safety
practices, investing in flexible production
lines and new fertilizer grades that meet
farmers’ crop nutrient needs or ensuring a
reliable supply of safe and pure fertilizers
for our customers.
Ultimately, every consumer of food grown
with PhosAgro fertilizers benefits from
high-quality and plentiful crops that are
grown with fertilizers free from harmful
elements like cadmium, lead or arsenic.
The journey from mine to plate takes
place through every step of our vertically
integrated business:
• At Apatit, we are mining a large,
high-quality igneous phosphate
resource base that, unlike many other
producers’ raw materials, contains
almost no harmful impurities and can
be processed into premium-quality
phosphate rock
• Our downstream fertilizer production
assets enjoy domestic access to other
key inputs like natural gas and sulphur
• We are continuously investing
in upgrades, modernisation and
new production capacities at our
downstream facilities, which further
secures our position as the world’s
lowest cash-cost producer
• Further integration in logistics,
distribution and sales, including
opening trade offices in priority
markets, has helped us to achieve
sustainable cost savings through the
entire value chain
HIGHLIGHTS:
$ 95 MLN
INVESTED IN
MODERNISATION AND
DEBOTTLENECKING SINCE
2012 HAS RESULTED IN
1.6 MLN T
OF NEW PRODUCTION
CAPACITY, WHICH GIVES
PHOSAGRO UP TO
$ 180 MLN
ADDITIONAL EBITDA P.A.
SINCE 2015
Building value from
mine to plate
KEY ASPECTS OF PHOSAGRO’S VALUE CHAIN
1
High-quality natural resources
Apatit, where we mine apatite-nepheline
ore and process it into phosphate rock, is the
heart of our business. The phosphate rock
we produce at Apatit is high in P2O5 nutrient
content, and contains almost none of the
dangerous impurities, like cadmium, often
associated with other phosphate mineral
deposits.
2 Upstream: mining and processing
Investments in underground mining and
beneficiation capacities, as well as the
introduction of leading-edge workplace
health and safety practices and technologies,
have helped turn Apatit into a world-class
phosphate rock production operation. We
have achieved a more-than 94% recovery
ratio for phosphate rock with high nutrient
content.
3
Downstream: fertilizers, feed & industrial
phosphates
We produce 35 grades of fertilizers, including
grades containing secondary (sulphur) and
micro nutrients like zinc and boron at our
three downstream production sites in Russia.
With major investments into new capacities
on track for completion in 2017, we plan
to increase our flexible fertilizer and end
product production capacities by another
20% in the coming years.
4
Sales
We have moved closer to customers in our
priority markets by opening sales offices in
Brazil, Europe and Asia. This has helped us
to significantly improve relations with local
buyers, enabling us to meet their needs
better with the crop nutrients they need.
5
Logistics
In-house logistics infrastructure provides
sustainable cost advantages and improves
the reliability of operations. We manage our
own fleet of 5,559 railcars in Russia, and
in 2016 we shipped 27% of downstream
products export volumes through our Smart
Bulk Terminal at the Ust-Luga port.
6
Distribution
We are the largest supplier of fertilizers
in the domestic Russian market, where
we operate a fully integrated distribution
and sales network. This has enabled us
to significantly increase sales volumes and
market share at the time when Russia’s
agricultural production industry is growing
rapidly.
7
Value created
We aim to create value for all of our
stakeholders, including the consumers of
food grown with the help of PhosAgro crop
nutrients, which benefit from very low levels
of cadmium and other harmful elements
thanks to the exceptionally pure raw
materials we use from the very start.
20
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION Logistics
27 %
Sales
80%
OF DOWNSTREAM PRODUCTS
EXPORT VOLUMES VOLUMES WENT
THROUGH SMART BULK TERMINAL
IN UST-LUGA
OF DOWNSTREAM PRODUCTS
EXPORT SALES TO KEY MARKETS
MADE VIA OUR OWN SALES
OFFICES
Downstream fertilizers, feed & industrial phosphates
Upstream mining and processing
17.2%
Y-O-Y INCREASE IN PRODUCTION
OF NPK/NPS FERTILIZERS IN 2016
74%
APATITE-NEPHELINE ORE
EXTRACTED FROM UNDERGROUND
MINES IN 2016
22
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGY
We have already delivered a significant portion of our key strategic milestones under the strategy
to 2020, which aims to further enhance PhosAgro’s inherent strengths: vertical integration,
ownership of unique and high-quality phosphate resources, and domestic access to all key inputs
for fertilizer manufacturing. Implementation of our strategy to 2020 will strengthen our position
as one of the lowest cash-cost producers in the global industry, and will significantly enhance our
ability to provide safe crop nutrient solutions to farmers nearly anywhere in the world.
3
INCREASED
OPERATING
EFFICIENCY
• Upstream: we increased the share of
underground mining to 74% of total
apatite-nepheline ore extraction at
Apatit in 2016, following the launch of
Main Shaft No 2 at the Kirovsky mine,
which increased extraction capacity
to 16 million tonnes of ore per year.
• Downstream: new, leading-edge
ammonia and granulated urea
capacities are at the heart of our
downstream efficiency efforts. These
new and efficient production facilities
will use the latest technologies
to strengthen our low cash-cost
position and will help to minimise
PhosAgro’s environmental impact as
we grow our total output.
• Logistics: after its first full year of
operations, the Smart Bulk Terminal
in Ust-Luga near Saint Petersburg has
further improved our netback earnings
through vertical integration into port
logistics.
2016 highlights:
OUR KEY STRATEGIC PRIORITIES:
We have already started to benefit from
implementation of parts of our strategy
to 2020, and are on track to deliver on key
milestones during the year ahead:
1 DIRECT ACCESS
TO PREMIUM
MARKETS
• Increased fertilizer production output
by 9.4% year-on-year through
investments in modernisation
and debottlenecking of existing
capacities. Since 2012, investments in
debottlenecking of just USD 95 million
have delivered 1.6 million tonnes of
additional capacity, which provides up
to USD 180 million of EBITDA per annum
• Increased sales to priority export markets
with the help of our own sales offices in
South America, Europe and Asia (for more
information, see “Where we operate” on
pages 24–25)
• Shipped 27% of 2016 downstream
products export volumes through Smart
Bulk Terminal in Ust-Luga, achieving cost
savings vs. non-integrated port terminals
• Ramped up Main Shaft No 2 of the
Kirovsky mine, significantly expanding
the scale of our lower-cost underground
mining operations
• Increased domestic sales by 30% year-on-
year with the help of our market-leading
domestic distribution network
PhosAgro produces some of the safest
phosphate-based fertilizers in the
world thanks to the exceptionally low
levels of cadmium and other harmful
impurities in the raw materials we mine
at Apatit on the Kola Peninsula. Our aim
is to bring our crop nutrient solutions
closer to our customers in priority
markets by establishing our own sales
offices in these markets. We already have
a presence in our three priority export
markets of Latin America, Europe and
Asia, and this has helped us to speak
directly with our customers about what
they want, to react faster to changes in
demand, to gain a better understanding
of the local markets and to promote the
unique quality of the phosphate-based
fertilizers we produce.
2
PRODUCTION CAPACITY
GROWTH AND ENHANCED
SELF-SUFFICIENCY
We increased our production capacity
from 5.0 million tonnes in 2011
to 7.6 million tonnes in 2016, which
represents a CAGR of 8.7%. This was
achieved primarily through investments
in modernisation and debottlenecking
of existing capacities to expand our
production of value-added fertilizers.
With the launch of our new
760 ths tonne/year ammonia line and
500 ths tonne/year granulated urea line
on track for 2017, we aim to continue
to increase our production capacity, with
significantly enhanced self-sufficiency.
Reaching strategic targets
and delivering results
1. DIRECT ACCESS TO PRIORITY MARKETS
Opportunity
Why this is our priority
We aim to increase our share
of export sales to markets
with significant demand for
premium-quality phosphate-
based fertilizers and structural
deficits of local phosphate
supply.
Brazil, Asia and Europe are priority
regions with premium markets for
exports:
• Local P2O5 nutrient deficit is
forecasted to increase
• PhosAgro can achieve fair netback
prices for fertilizers
• European and other customers are
potentially sensitive to hazardous
impurities such as cadmium, giving
PhosAgro an advantage over other
producers
In our domestic market, we aim
to continue to expand our market-leading
distribution network to provide Russian
farmers with our high-quality crop
nutrients and support the development of
Russia’s agricultural sector.
WHAT WE DID IN 2016
WHAT WE AIM TO DO IN 2017
WHERE WE WANT TO BE IN 2020
• Opened sales offices in Biarritz (France)
and Hamburg (Germany)
• Increased sales to Europe by 20% year-
on-year to 1.5 million tonnes
• Increased sales to Asia by 20% year-on-
year to 1.1 million tonnes
• Domestic sales grew by 30% year-on-
year to 2.1 million tonnes
• Ramp up marketing and other
activities aimed at increasing
awareness of the advantages
of PhosAgro’s phosphate-based
fertilizers, which are naturally very
low in heavy metals content in
particular cadmuim.
• Expand the number of grades
available to farmers based on input
from our international and domestic
sales offices
Domestic market: expand domestic sales
volumes to 2.6 million tonnes through
a vertically integrated sales network
that includes ten sales centres and 21
цwarehouses
Export markets: increase share of direct
sales to over 75% through seven sales
offices located in priority markets around
the world
RELATED RISKS
Strategic risks
Ineffective strategic planning
Operational, regulatory, reputational
and financial risks
For more information on risks
please see pages 98–105
24
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STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com 2. PRODUCTION CAPACITY GROWTH AND GREATER SELF-SUFFICIENCY
3. INCREASE OPERATING EFFICIENCY
Opportunity
Why this is our priority
Opportunity
Why this is our priority
Ammonia is a key input that PhosAgro
requires to expand its fertilizer output
while maintaining self-sufficiency, which
is why we are building a 760 ths tonnes/
year ammonia plant.
By 2020, we aim to produce 8.7 million
tonnes of fertilizers, including through the
addition of:
• 500 ths tonnes/year of granulated urea
capacity (new capacity)
• 400 ths tonnes/year of MAP/DAP/
NPK production (modernisation +
debottlenecking)
Further strengthen our
sustainable low cash-cost
position by modernising
existing facilities and
improving vertical integration.
The key to our competitive advantage
is maintaining industry-leading low
production costs.
In order to reduce production costs
throughout the cycle, we are focusing on
reducing costs at all stages of production
and logistics.
Investments in modernisation
and debottlenecking of
existing facilities have proven
to be a highly efficient way of
increasing capacity without
major capital expenditure
programmes. At the same time,
with an eye to our long-term
sustainability, we are building
new downstream capacities
to produce ammonia and
granulated urea to improve
PhosAgro’s self-sufficiency while
increasing fertilizer production
volumes and maintaining
vertical integration.
WHAT WE DID IN 2016
WHAT WE AIM TO DO IN 2017
WHERE WE WANT TO BE IN 2020
• Debottlenecking, which requires
relatively low costs compared to new
greenfield or brownfield projects,
enabled PhosAgro increase overall
phosphate-based fertilizer production by
10.8% year-on-year to 5.9 million tonnes
• The number of grades reached 35, while
NPK and NPS fertilizers contributed
to 43% of total phosphate-based
fertilizer production
• Ramp up marketing and other
activities aimed at increasing
awareness of the advantages of
PhosAgro’s phosphate-based fertilizers,
which are naturally free of cadmium
and other hazardous elements
• Expand the number of grades
available to farmers based on input
from our international and domestic
sales offices
Domestic market: expand domestic sales
volumes to 2.6 million tonnes through
a vertically integrated sales network that
includes ten sales centres and
21 warehouses
Export markets: increase share of direct
sales to over 75% through seven sales
offices located in priority markets around
the world
WHAT WE DID IN 2016
WHAT WE AIM TO DO IN 2017
WHERE WE WANT TO BE IN 2020
• Ramped up operations at Main Shaft
No 2 at the Kirovsk mine to full capacity,
expanding the share of our lower-cost
underground mining operations to 74%
for 2016 vs. 71% in 2015 (excluding off-
balance ore)
• Continue monitoring costs, with the
aim of containing fixed costs growth
below CPI
• Complete modernisation of
Beneficiation Plant No 3 at Apatit
• Launch of new, efficient 760 ths
• Shipped 27% of our total export volumes
tonne/year ammonia production line
• Launch of new, efficient 500 ths
tonne/year granulated urea production
line
for 2016 through the Smart Bulk
Terminal in its first full year of operations
reducing fertilizer transportation and
transshipment costs
• Launched a modernisation programme at
Beneficiation Plant No 3, which will help
optimise our beneficiation capacities and
cut relevant operation and maintenance
costs
• With the launch of new ammonia and
granulated urea units in Cherepovets
in 2017, PhosAgro aims to reduce
costs by becoming fully self-sufficient
in ammonia (purchased ammonia
accounted for 7% of 2016 CoGS)
• Reduce natural gas consumption ratio
by 8% following the comissioning of
the new ammonia plant
• Continue modernisation of fertilizer
production lines with the goal of
increasing production capacity by 20%
in 2016–2020
• Reduce mining cash costs by increasing
share of underground mining up to 80%
• Continued construction of:
– new 760 ths tonnes/year
ammonia plant
– new 500 ths tonnes/year
granulated urea line
RELATED RISKS
Strategic risks
Ineffective strategic planning
Operational, regulatory, reputational and
financial risks
For more information on risks
please see pages 98–105
RELATED RISKS
Strategic risks
Ineffective strategic planning
Operational, regulatory, reputational and
financial risks
For more information on risks
please see pages 98–105
26
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Strategy (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
PhosAgro is Russia’s
No 1 fertilizer supplier
average of 29.6% in 2011–2015. Russian
farmers’ demand for fertilizers has been
supported by strong performance thanks
to years of investment and advantageous
export market conditions.
Domestic sales
Sales volumes in our domestic market
increased 30% year-on-year in 2016,
to 2.1 million tonnes.
Domestic market
The Russian market holds significant
potential, and PhosAgro views it as one of
the best opportunities globally in terms of
agricultural sector growth option. Russian
agricultural enterprises have become more
competitive thanks to the depreciation
of the rouble and state support for the
sector, as well as significant investments
into modernising agricultural production.
PhosAgro’s sales to local farmers grew by
30% year-on-year in 2016, while our share
of the overall Russian fertilizer market is
nearing 27%. We have become the largest
supplier of fertilizers to Russian agricultural
producers thanks to continued investments
into our market-leading distribution and
sales network. Our home market accounted
for 33.6% of revenue in 2016, up from an
Phosphate-based fertilizer production/
consumption balance in Russia –
DAP/MAP/TSP,
mln t P2O5
Production
0.44
Consumption
1.47
Distribution Centres and Regional
Representative Offices in Russia
• PhosAgro-Orel
• PhosAgro-Kursk
• PhosAgro-Lipetsk
• PhosAgro-Belgorod
• PhosAgro-Belgorod
(Voronezh branch)
• PhosAgro-Tambov
• PhosAgro-Kuban
(Krasnodar)
• PhosAgro-Don (Rostov-on-Don)
• PhosAgro-Stavropol
• PhosAgro-Volga
(Nizhny Novgorod)
• PhosAgro-Volga (Saransk branch)
• PhosAgro-Volga (Kazan branch)
• PhosAgro-SeveroZapad
• PhosAgro-SeveroZapad
(branch in Volgograd)
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WHERE WE OPERATEPhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION Where we operate
We think that this approach is paying off:
in 2016, PhosAgro’s sales to the European
market increased by over 20% year-on-
year, sales to Latin America declined by
just 10% against a backdrop of challenging
economic conditions, while sales in Asia
grew by 20% year-on-year.
International sales offices
• Biarritz
• Zug
• Hamburg
• Warsaw
• Sao Paulo
• Singapore
Export markets
Our flexible production and sales models
enable us to supply the tailored fertilizers
that farmers in over 100 countries on every
inhabited continent use to grow better
crops. Our strategy to 2020 calls for a
particular focus on the priority markets of
Europe, Latin America and Asia because of
the significant demand in each of these
regions, coupled with insufficient local
supply of phosphate resources.
In order to better reach clients in these
priority markets, we have focused on
opening sales offices there. In 2016,
we established new offices in Hamburg
(Germany) and Biarritz (France). These
came in addition to existing offices in Zug
(Switzerland), Sao Paulo (Brazil), Warsaw
(Poland) and Singapore. These offices bring
us closer to our end customers, enabling
us to better understand their needs and
better explain what differentiates PhosAgro
fertilizers in terms of safety and purity.
Phosphate-based fertilizer production/
consumption balance in Latin
America – DAP/MAP/TSP,
mln t P2O5
Balance
-3.8
Production
1.4
5.2
Consumption
*DAP/MAP/TSP Production — Demand
Source CRU — January 2017 Phosphate Fertilizer Market Outlook
30
Phosphate-based production/
consumption balance in East, Central
and West Europe (not EU-28) –
DAP/MAP/TSP,
mln t P2O5
Balance
-1.0
Production
0.8
1.9
Consumption
Phosphate-based fertilizer production/
consumption balance in East Asia,
Middle East, South Asia and South East
Asia – DAP/MAP/TSP,
mln t P2O5
Production
Consumption
Balance
17.1 0.6
16.5
PhosAgro sales structure by regions in 2016,
ths t
Russia
2,095
29%
Europe
1,512
21%
Latin
America
1,341
18%
Asia
CIS
India
701
554
450
North
America
353
Africa
313
10%
8%
6%
5% 4%
31
Where we operate (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION MARKET OVERVIEW
AGRICULTURAL MARKET DEVELOPMENTS & IMPLICATIONS ON FERTILIZER DEMAND
Crop price index,
January 2010 = 100
200
150
100
50
Maize
Rice
Wheat
Soybean
N, P and K fertilizer demand developments,
mln t
181.6
183.2
182.8
186.7
186.8
MLN T NUTRIENTS
N, P, K FERTILIZER
DEMAND IN 2016
(ESTIMATED BY IFA)
year
2010
2011
2012
2013
2014
2015
2016
109.2
109.7
108.9
111.0
Nitrogen
Brazilian barter ratio,
60 kg bags soy/tonne MAP
30
25
20
15
Soybean
Around 27 bags of
soy bought 1 tonne
of MAP in Brazil
Lower fertilizer
prices together with
a devaluation of
the real contributed
to improved farmer
affdorability
year
2010
2011
2012
2013
2014
2015
2016
Nutrient demand drivers
Global economy
In October 2016, the IMF revised its
estimate for global GDP growth downwards
to 3.1% for 2016, reflecting weaker than
expected growth in advanced economies,
the United Kingdom’s vote to leave the
European Union in June and slower
than expected growth in the United
States for much of the year. The fortunes
of developing and emerging market
economies in general were mixed: in
China, government support measures
provided support to commodity prices, and
strong credit growth helped push GDP
growth to the 6.5—7.0% range during 1H
2016. Encouragingly, there were signs of
a rebalancing of the economy away from
industry towards more of a service-based
market. While India also enjoyed robust
growth in 2016 due to improved trade
terms and effective policy actions, Brazilian
growth remained under pressure because
of ongoing political scandals. Meanwhile, in
Russia, prospects improved during 2H as oil
prices increased. This was further boosted
by an agreement in December with OPEC
to limit production.
Agricultural markets
Following two seasons of strong growth,
global cereal production fell in 2015/16
as unfavourable weather conditions (El
Niño) came to the fore. This provided
temporary support to pricing, but poor
demand and large stock levels (China)
kept fundamentals under pressure. By
year-end, prices were deemed low enough
to encourage additional feed usage, but
stocks remained plentiful and are set
to grow further through the 2016/17
harvest.
An important component of this view is
that of maize, which, according to the USDA
and the IGC, will be 7% higher y/y, driven
by good harvests in the USA, the European
Union, Ukraine, Brazil, Argentina, India,
Russia and South Africa. Two factors have
driven growth: first, despite lower prices,
returns are still above those for competing
crops. Second, global 2016/17 yields are
estimated to be up year-on-year, spurred
on by favourable conditions. The latter is
also relevant when assessing the 2016/17
wheat crop. An assessment taken by AIMS
in November 2016 indicated that Northern
Hemisphere winter wheat planting had
been completed, mostly under favourable
conditions, and production estimated to be
up year-on-year in Russia, the USA, Canada,
India and Kazakhstan. Meanwhile, it also
noted that harvests had begun in Argentina
and South Africa, under favourable
conditions, and under exceptional
conditions in Australia due to good rainfall.
As such, global wheat yields for the season
are estimated at a record 3.4 tonnes/ha in
2016/17, and production between 745—
748 million tonnes.
Moving to oilseeds, soybean production
expectations are improved in 2016/17,
following a 2% contraction in 2015/16.
The USDA, IGC and FAO see production
growing from 313—315 million tonnes in
2015/16 to above 330 million tonnes in
2016/17, as better growing conditions have
supported yields, especially in the USA
and Brazil. As is the case with cereals, soya
prices enjoyed a modest recovery in early
2016, but have since come under renewed
pressure with news of bumper crops.
High-level nutrient
supply review
The IFA estimated global N, P and K
production – for both fertilizer and non-
fertilizer use – at 250 million tonnes
of nutrient in 2016. The production of
fertilizers accounted for 75% of the total,
or 187 million tonnes of nutrient.
Looking at the different nutrients, during
2016 there was a net 2% increase in
global urea production, taking the total
to 178.4 million tonnes. Capacity increased
in 2016 by 1%, to 211.5 million tonnes.
Increases seen in Egypt, Nigeria, Iran,
Bangladesh and Indonesia were offset by
closures in China, where 1.5 million tonnes
was permanently curtailed.
In the case of concentrated phosphate
fertilizers, combined DAP, MAP and
TSP production was 2% higher at
32 million tonnes of P2O5. This was
due to a greater volume of MAP being
produced in the USA, Morocco and Saudi
Arabia. Global capacity was estimated at
45.4 million tonnes of P2O5.
In contrast, MOP production decreased
by 2.8% to 63.3 million tonnes of product
in 2016, as producers curtailed capacity
temporarily to draw down on existing
inventories. This saw operating rates fall
to their lowest levels since 2010 despite
better sales volumes year-on-year. On
the capacity front, total potash capacity
was estimated 4.8% higher year-on-year
at 55.1 million tonnes of K2O, driven by
increases in Canada, Russia, Uzbekistan
and China.
187MLN T
NUTRIENT EQUIVALENT
.
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b
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g
A
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C
/
A
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41.3
31.1
41.3
32.3
41.3
32.6
42.7
33.1
Phosphate
Potash
2013
2014
2015
2016
High-level nutrient demand review
for fertilizer in most developing/emerging
markets. Demand in South and Central
America, Africa, part of Asia and Oceania is
expected between 4—6% higher year-on-
year. N use is improved, growing by 2.4%
year-on-year to 113.0 million tonnes of
nutrient, while P and K demand continue
growing by 1.6% and 1.8% year-on-year,
respectively,.
The aforementioned estimates have been
converted to calendar year estimates by
the IFA. N, P and K demand was assessed
at 182.8 million tonnes of nutrient in 2015
and 186.8 million tonnes in 2016. In this
instance, N demand was estimated up by
1.9% year-on-year, while K demand was
1.4% higher. The strongest year-on-year
growth, however, was reserved for P, which
was 3.4% higher at 43.3 million tonnes of
nutrient, as consumption in South Asia was
9.8% higher year-on-year.
The implications of the above on fertilizer
demand have been estimated by the
International Fertilizer Industry Association
(IFA).
The preliminary estimate of nitrogen (N),
phosphate (P) and potassium (K) fertilizer
demand stands at 183.8 million tonnes
of nutrient for the 2015/16 season. This
represents a reduction of 0.1% year-on-
year and is explained by a lower crop
production volume year-on-year, caused
by an exceptionally strong El Niño event.
Rather unexpectedly, the reduction in the
total volume was due to a smaller usage
of N. N fertilizer demand fell by -0.9%
year-on-year, while both P and K demand
increased (1.4% and 0.6%, respectively),
driven by better than expected usage in
India (P), China (K) and North America
(also K).
Moving to the 2016/17 crop year,
demand for N, P and K is estimated at
187.6 million tonnes of nutrient, as a return
to growth in cereal and soybean production
has spurred on an additional requirement
The IFA has also assessed demand for non-
fertilizer uses in 2016 at 64 million tonnes
of nutrient.
PRODUCTION OF N, P
AND K FERTILIZERS IN
2016
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
DEMAND DEVELOPMENTS IN KEY MARKETS
P2O5 demand
(mln t)
Demand index
(100 = 2014)
Europe & CIS
North America
South & Central America
100
99.6
101.9
100
99.7
102.1
3.8
3.8
3.9
5.1
5.1
5.3
100
6.7
92.9
6.2
95.9
6.4
Better credit
availability &
affordability
2014
2015
2016
2014
2015
2016
2014
2015
2016
South Asia
119.5
108.9
100
7.4
8.0
8.8
Better
monsoon
in 2016/17
supported
Kharif and rabi
demand
East & South East Asia
The rest of the world
14.7
14.5
14.6
100
98.8
99.8
100
100.5
102.9
3.6
3.6
3.7
2014
2015
2016
2014
2015
2016
2014
2015
2016
Focus on phosphate fertilizer markets in 2016
Indian imports across the P value chain, %
The IFA’s preliminary assessment shows
that phosphate fertilizer demand stood at
42.69 million tonnes of P2O5 in 2016. This
was the first time in five years that demand
grew by more than 2% year-on-year.
In South Asia, demand was estimated just
short of 8.8 million tonnes of P2O5, 9.8%
higher than the previous year. According
to the IFA, 2016 marked the second
consecutive year of growth in Indian P2O5
demand, this time due to better water
availability, contributing to a 1% expansion
of planted area during the Kharif and an 8%
year-on-year increase in sowings during the
rabi.
European phosphate fertilizer demand
was stable year-on-year in 2016 despite a
5% year-on-year contraction of the cereal
harvest, as French wheat yields disappointed
due to the wetness of the spring. The maize
harvest is estimated up for 2016, and winter
wheat sowing occurred under favourable
conditions towards the end of the calendar
year, which helped support regional NPK and
DAP/MAP demand.
Moving to the Americas, El Niño played
an important role in Brazil and Argentina
during the 2015/16 crop, bringing
about poor maize and soybean harvests.
However, phosphate fertilizer demand
improved throughout the 2016 calendar
year, supported by an attractive crop-to-
fertilizer price ratio, the introduction of
a more favourable grain export policy in
Argentina and better weather conditions
in 2H affecting the 2016/17 crop. For the
year, regional phosphate fertilizer demand
is estimated at 6.4 million tonnes of P2O5, an
increase of 3.3% over 2015, as more DAP/
MAP and NPs was consumed. Meanwhile,
imports and consumption of NP/NPSs
(mostly into Brazil) were again estimated
above 1.0 million tonnes of product in
2016, reflecting the growing preference for
phosphates rich in sulphur.
In North America, phosphate fertilizer
demand was estimated up by 2.3% year-on-
year to 5.2 million tonnes of P2O5 in 2016,
owing to the exceptionally good growing
conditions through much of the year.
Preliminary estimates indicated yields and
production to be at record levels, especially
for maize and soybean. Sulphur-based
ammonium phosphates continued to gain
market share throughout 2016 due to their
lower prices, as well as the agronomic
DAP
Phosphoric
acid
Rock
2012
39%
25%
36%
2013
30%
32%
38%
2014
27%
28%
45%
2015
41%
24%
35%
2016
31%
34%
35%
More MGA was forthcoming
from Tunisia, Jordan & South
Africa
>2% Y-O-Y
INCREASE IN
PHOSPHATE FERTILIZER
DEMAND IN 2016
k
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e
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r
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A
F
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A
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KEY PRICE DEVELOPMENTS IN 2016
price index (week 1 2016 = 100)
DAP versus other commodities
DAP, FOB TAMPA
high/low commodity
price change range
Phosphate fertilizer prices were
among the weakest-performing
commodities in 2016
200
150
100
50
$ 395/t
$ 315/t
week
1
3
6
9
12
15
18
21
24
27
30
33
36
39
42
45
48
51
DAP’s key price driver developments
Phosphate rock,
FOB Morocco
Phosphoric acid,
CFR India
Ammonia, FOB
Black Sea
Sulphur, FOB
Middle East
100
75
50
Hydrocarbon-
led recovery
week
1
3
6
9
12
15
18
21
24
27
30
33
36
39
42
45
48
51
benefits they offer for cereals and soybean
growth.
On the supply side of the industry, the IFA
estimated global phosphoric acid capacity at
58.1 million tonnes of P2O5. This represents
a net increase of 0.7 million tonnes of P2O5
year-on-year, as additional capacity was
commissioned in Morocco and Kazakhstan,
and one unit in Iraq was removed from the
assessment.
Phosphoric acid production was
estimated to be up 0.9% in 2016, reaching
43.7 million tonnes of P2O5, as more was
forthcoming from Saudi Arabia, Morocco,
Jordan, South Africa and Tunisia.
Around 10% of the total was traded
internationally, with India accounting for
50%. While that country remains the largest
importer, two important shifts occurred in
2016: firstly, its purchases of phosphoric acid
were prioritised to maximise local DAP/NPK
granulation. Secondly, more of the purchased
acid was sourced from Tunisia, Jordan and
South Africa, reducing its dependence
on Morocco. As a result, its production of
phosphate fertilizers expanded by 10% y/y,
whereas DAP imports were 20% lower at
2.4 million tonnes of P2O5.
These actions had an impact on
the world’s largest producer, China,
where phosphoric acid volumes were
estimated 2% lower year-on-year at
17.5 million tonnes of P2O5. Chinese
producers struggled with stagnant
domestic demand and unfavourable
competitive pressures in trade markets.
The lower netbacks offered on
international sales rendered much of the
Yunnan, Guizhou and Sichuan capacity
uncompetitive, and producers were
forced to curtail production. In November
2016, news emerged of an agreement
between 8—10 companies to curtail
their DAP production by 10—30% of their
normal rates.
Outside of China, production of
ammoniated phosphate fertilizer fared
better: DAP and MAP output increased
by 5% and 13%, respectively. CRU, a
consultancy, associates this with lower
input costs. Their estimate for DAP costs
Global DAP, MAP & TSP production
production index (1995 = 100)
MAP
DAP
TSP
MTP2O5
(mln t)
300
200
100
Larger NP+S
production
11.8
11.7
13.3
16.2
15.1
2.7
16.3
2.4
2.6
year
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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Market overview (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
PHOSPHATE ROCK MARKET DEVELOPMENTS THROUGH 2016
Global phosphate rock capacity & production,
mln t
250.4
252.5
254.0
257.7
253.9
Capacity
196.8
193.8
197.1
200.7
200.1
Production
2012
2013
2014
2015
2016
Global phosphate rock rock trade in 2016,
mln t
30.3
25.9
29.0
29.6
28.0
2012
2013
2014
2015
2016
was 20% lower year-on-year in 2016 at
USD 252/tonne as prices of phosphoric acid
(CFR India), sulphur (FOB Middle East) and
ammonia (FOB Black Sea) fell by 19%, 27%
and 2%, respectively, while ammonia ended
the year only slightly lower. At one point,
the benchmark was close to 40% lower, but
recovered as hydrocarbon prices improved.
These trends also had an impact on end-
use products, with the DAP FOB Tampa
benchmark ending the year 20% lower at
USD 315/tonne.
Phosphate rock market
review
In 2016, phosphate rock mining was
undertaken in 29 countries, with 13
producing more than 2.5 million tonnes.
The IFA estimates 200.1 million tonnes
of rock concentrate was produced,
a reduction on the 2015 total of
200.7 million tonnes. Although miners
in Russia, Kazakhstan, Egypt, Senegal,
South Africa, Jordan and Saudi Arabia
all increased their y/y output by an
excess of 500,000 tonnes in 2016,
their total was not sufficient to offset
reductions in Syria and China. Output
from these two countries fell by a total of
2.5 million tonnes. In Syria, mining was
suspended due to the war, while in China
production fell to 81 million tonnes as
demand weakened.
Most phosphate rock concentrate is
also consumed within the country it
was produced in. In 2016, domestic
deliveries were estimated at
171.8 million tonnes, registering an
increase of 1.7 million tonnes over 2015.
In contrast, trade fell by 1.6 million tonnes,
as the industry continues to move
towards downstream integration. The IFA’s
assessment notes that trade into Europe
and Latin America was especially weak.
Other fertilizers
The IFA estimates that around
148.5 million tonnes of N was consumed
for both fertilizer and non-fertilizer
uses during the 2016 calendar year. This
was 2.1% higher than the 2015 total,
yet in general, the market remained
oversupplied. Improvement in demand is
associated with a recovery in agricultural
markets, which account for around 75% of
the N total. In 2016, N fertilizer demand
was estimated to be up 1.9% year-on-
year, as lower prices helped to stimulate
consumption following the difficulties
caused by El Niño.
Urea
Domestic urea deliveries were assessed
to be up for a third consecutive year in
2016. The bulk of the growth stemmed
from locations outside of China, with
higher rates recorded in areas where
new capacity was commissioned (USA,
Nigeria and Iran) or where operating rates
improved (Argentina, Egypt, India, Italy and
Pakistan). Somewhat unexpectedly, trade
was also assessed to be 1.8% higher year-
on-year. This occurred despite weak import
demand into India, where large stocks
and higher domestic production reduced
requirements. Instead, it was driven by
particularly strong trade into Brazil and
Western Europe, where imports were
estimated to be 19% and 25% higher year-
on-year, respectively.
On the supply side, urea capacity and
production grew by between 1% and 2%
year-on-year in 2016. Significant additions
were recorded in Egypt, Nigeria, Iran,
Bangladesh and Indonesia. However, the
IFA also estimates that 1.5 million tonnes
of capacity was permanently curtailed due
to a combination of overcapacity, poor
economics and the national government’s
drive to address negative environmental
records.
Global production also saw growth in
2016. In this instance, there were two
major differences in recent trends: the
first being that, in China, production fell
by 5% year-on-year to 67.5 million tonnes
of product. This was associated with
reduced competitiveness brought about
by the removal of transportation and
energy subsidies, as well as higher
feedstock prices. The government’s efforts
to stimulate domestic coal markets in 2H
saw thermal coal prices doubling to around
USD 110/tonne, impacting local coal-based
urea production costs. As a result, exporters
saw their sales squeezed in international
markets (falling by around a third year-
on-year). This created a gap, which led
to the second key difference: the fact that
production and trade from the rest of the
world increased sharply year-on-year,
growing by 6% and 13% year-on-year,
respectively. Notably, production gains
were made in Egypt, where natural gas
availability improved; Argentina, where
maintenance supported better operating
rates; Russia and Saudi Arabia, where new
capacity was commissioned.
1–2% Y-O-Y
UREA CAPACITY
AND PRODUCTION
INCREASE IN 2016
Ammonia
2016 was a mixed year for ammonia,
with prices fluctuating widely across all
benchmarks. The Black Sea benchmark
started the year at USD 265/tonne, keeping
stable above USD 250/tonne for most of
1H, before falling dramatically from June
onwards, bottoming out at USD 163/tonne
in mid-November.
This momentum was driven by a surge
in merchant ammonia availability. CRU
estimates that a total of 15 new ammonia
plants were commissioned (outside of
China) during the year, seven of which
have merchant ammonia capacity. The USA
accounted for the largest portion of new
merchant capacity, adding three new plants,
followed by Russia and Saudi Arabia, which
added one plant each. This put pressure
on the market’s higher-cost participants,
many of which struggled to compete in the
lower price environment. Most affected was
capacity in Ukraine, where curtailments
followed.
With this, Russia’s Black Sea ammonia
exporters took over as the market’s
swing producer, and when prices fell
to below USD 180/tonne in 2H, it was
these producers that cut back production
to balance supply. This strategy was largely
successful, and from mid-November prices
rallied. By the end of the year, following
a dramatic surge in prices, Black Sea
ammonia had recovered almost all of its
lost ground and finished the year at USD
260/tonne (only USD 5/atonne below the
level at which it started the year).
Potash
MOP deliveries disappointed throughout
much of 1H 2016, with Chinese importers
delaying contracts due to the large
volume of stocks that had accumulated
in local warehouses. While importers
typically wait for China to set the floor
for contract pricing before committing
to their own volumes, in this instance a
lack of action prompted direction from
India, with an agreement reached at the
end of June. Once Indian contracts were
agreed at lower prices, trade into the
country and elsewhere soared, ensuring
that global demand was flat y/y at around
63 million tonnes of product.
On the supply side, production
was estimated by the IFA to be
1.8 million tonnes lower for the 2016
calendar year, at 62.7 million tonnes
of product. This corresponds with even
greater efforts to limit supplies in North
America, where marginal operations in
Canada and the USA were closed and
operating rates at other mines were cut.
Notably, curtailments were also made
in the CIS for the first time since the
break-up of BPC in 2013, as producers
looked for price stability. The one
notable contrast was in East Asia, where
production was estimated at close
to 9.0 million tonnes of product, showing
a 2.5 times expansion since 2010.
2 .8% Y-O-Y
DECREASE IN POTASH
PRODUCTION IN 2016
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Market overview (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION SCIENTIFIC
APPROACH
World's premium phosphate
resource base
World phosphate
rock reserves:
1.4 bln t
2.05 bln t
PHOSAGRO
1
Ore type
Igneous
AL2O3 content
13.0–14.0% High
Minor element ratio
(MER)2
0.02–0.04
Level of radioactivity
Very low
Hazardous metals
content
Very low
Cadmium content3
Less than 0.1
3.7 bln t
0.1 bln t
1.5 bln t
50 bln t
1
USA
MOROCCO
1
TUNISIA
1
JORDAN
1
CHINA
1
Ore type
Sedimentary
Ore type
Sedimentary
Ore type
Sedimentary
Ore type
Sedimentary
Ore type
Sedimentary
AL2O3 content
Very low
AL2O3 content
Very low
AL2O3 content
Low to moderate
AL2O3 content
Very low
AL2O3 content
Very low
Minor element ratio
(MER)2
0.05–0.1
Minor element ratio
(MER)2
0.02–0.04
Minor element ratio
(MER)2
0.05
Minor element ratio
(MER)2
0.02–0.03
Minor element ratio
(MER)2
>0.05
Level of radioactivity Moderate to high
Level of radioactivity Moderate
Level of radioactivity Moderate
Level of radioactivity
Low to moderate
Level of radioactivity
Low to moderate
Hazardous metals
content
Moderate to high
Hazardous metals
content
Moderate
Cadmium content3
9–38
Cadmium content3
15-40
Source: Fertecon, IMC, USGS 2011.
1 Primary global DAP/MAP producing
regions.
2 Average Minor Element Ratio (MER)
greater than 0.1 not sustainable for
production of high-quality DAP.
3 Average cadmium content in ppm.
Hazardous metals
content
Low to moderate
Hazardous metals
content
Low
Hazardous metals
content
Low to moderate
Cadmium content3
40
Cadmium content3
5-6
Cadmium content3
2
38
39
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION Researching the impact of
safer fertilizers
PhosAgro is cooperating with leading
European research institutions
to investigate how the high quality of
our products benefits our stakeholders.
We have signed agreements with the
University of Milan and the Wageningen
University in the Netherlands to undertake
research to determine the impact of
cadmium contained in phosphate-based
fertilizers on a variety of crops and soil
types in different locations.
Our ultimate goal is to demonstrate
that reducing the cadmium content in
phosphate-based fertilizers could have an
important positive impact of the safety of
the food that we eat every day.
The increasing threat of soil contamination
by cadmium and other heavy metals is
the subject of ever-greater attention in
the context of food safety. The European
Commission, for example, is currently
considering adopting EU-wide limitations
for cadmium content in phosphate-based
fertilizers. An analysis of phosphate-based
fertilizers used in Europe has shown
that around 8% of fertilizers contained
more than 60 mg/kg P2O5 of cadmium,
while around 31% of fertilizers have
over 40 mg/kg P2O5. Phosphate-based
fertilizers produced by PhosAgro are some
of the safest, and contain just 0.2 mg of
cadmium per kg of P2O5 (in PhosAgro’s DAP
fertilizers).
The formation of phosphate ore deposits
Phosphate deposits can be found in
several forms on all continents, but the
two most common sources of phosphate
raw materials are igneous and sedimentary
deposits.
Igneous deposits like PhosAgro’s form over
a period of tens or hundreds of millions
of years as a result of the cooling of
magma. These deposits usually contain
less dangerous impurities such cadmium,
lead and radioactive elements. The largest
deposits are located in Brazil, Canada,
Finland, Russia and South Africa.
Sedimentary deposits are formed over
thousands of years and are the most
common: more than 80% of phosphate
minerals currently extracted are of
sedimentary origin. The largest reserves
of ore of this type are concentrated in
North Africa, the Middle East and the USA.
The accumulation of dead organisms that
inhabited ancient seabeds create the
deposits. Since aquatic flora and fauna also
accumulate heavy metals, many of which
can be dissolved in water, the raw material
from sedimentary deposits can contain
dangerous impurities such as cadmium,
lead, mercury, etc.
Phosphate-based fertilizers
cadmium content,
mg/kg P2O5
>60
>40
31%
8%
PhosAgro
phosphate-
based fertilizers
contain
>1 MG/KG
P2O5 CADMIUM
HOW CADMIUM GETS TO YOUR PLATE
ORE DEPOSIT
FERTILIZER
SOIL
PLANT
FOOD
HUMAN
Cadmium and heavy metals
Extensive study has shown that cadmium
can cause kidney failure and has been
statistically associated with an increased
risk of cancer. The food we eat is the
primary source of human exposure
to cadmium among the non-smoking
population.1 Cadmium and other heavy
metals are present in many phosphate
deposits, especially those of sedimentary
origin.
Cadmium (Cd) occurs naturally as
an impurity in rock phosphate at
concentrations 1—200 mg Cd (kg P2O5), and
is present in most commercial phosphate-
based fertilizers. The application of
these fertilizers is the main source of the
cadmium that accumulates every year in
Europe’s agricultural soils.2 Higher levels of
cadmium in the soil are likely to increase
the concentration of the element in crops
grown in the soil. Plant roots absorb
cadmium contained in water, meaning
that the uptake rate increases as cadmium
concentration increases. The element
then moves from the roots to the above-
ground parts of the plants. This increased
concentration in crops forms a risk for
human health through food intake.2
PhosAgro produces phosphate-based
fertilizers from apatite-nepheline ore
mined at its own igneous deposit by Apatit,
which contains virtually no cadmium or
other harmful elements. We therefore
believe that application of PhosAgro
fertilizers to crops helps farmers to produce
safer foods, and that this contributes
to improving food security as well as the
overall health of consumers of agricultural
products.
RESEARCH HIGHLIGHTS
Wageningen University :
1
2
Determining the difference between
Determining the long-term changes
actual presence and bioavailability
in cadmium and other heavy metals
(ability to be absorbed) of cadmium
content in soil and plants where
from application of fertilizers and
phosphate-based fertilizers with high
cadmium that has previously
and low hazardous elememts content
accumulated in the soil. This research
are applied by using simulations
will test soils and the absorption of
and soil and plant measurements
heavy metals, cadmium in particular by
from the experiments. This will
plants in greenhouse conditions using
help to understand how the use of
suitable crops (vegetables, root crops,
phosphate-based fertilizers with low
grains) and forage grasses. The goal of
cadmium and other heavy metals
this study is to understand how heavy
content leads to a decrease in heavy
metals contained in some fertilizers
metals in soil and plants in the medium-
affect the quality of plants, whether
and long-term (50—100 years).
the cadmium content in fertilizers has
an immediate effect, and whether the
cadmium content in agricultural soils
decreases.
University of Milan:
1
Conducting field tests in Italy
on crops (rice and wheat)
to compare soil parameters, as
well as biochemical and biological
parameters of crops using standard
fertilizers and fertilizers with very low
heavy metals content.. The research
involves three years of field tests on
cultivated farm fields.
Linear increase of Cd concentration
in the crop with the increasing soil Cd
concentration 2
mg kg-1
d
C
p
o
r
C
Slope=TF=[Cd]crop/ [Cd]soil
Soil Cd
1 European Food Safety Authority. Cadmium dietary
exposure in the European population. EFSA Journal
2012;10 (1):2551. [37 pp.] doi:10.2903/j.
efsa.2012.2551.
2 Erik Smolders & Laetitia Six. Revisiting and
updating the effect of phosphate fertilizers
to cadmium accumulation in European agricultural
soils. 2013. http://ec.europa.eu/health/scientific_
committees/environmental_risks/docs/
scher_o_168_rd_en.pdf
40
41
Scientific approach (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
PhosAgro fertilizers
contain a full range
of essential elements
The Company is in constant dialogue with
agricultural producers to adapt its product
offering. The Company’s in-house R&D facilities
and flexible production lines mean it is able
to develop new fertilizer grades with additional
secondary nutrients or microelements in
response to market demand.
Elements currently available
Elements currently available
in PhosAgro products
in PhosAgro products
MICRONUTRIENTS
PhosAgro
products
contain almost
no heavy
metals
ESSENTIAL NUTRIENTS
N
NITROGEN
Р
PHOSPHORUS
K
POTASSIUM
+ increases protein accumulation in
plants
+ part of enzymes, nucleic acids,
chlorophyll, vitamins, alkaloids
+ reduces moisture content in crop
yield
+ determines protein synthesis
intensity
+ accumulates energy in plants
+ accelerates biosynthesis
+ facilitates root system growth
+ increases winter hardiness,
improves yield’s quality
+ increase plant resistance against
adverse conditions and diseases
+ acts in processes of carbohydrates
synthesis and their flow in plants
+ determine cell and fiber ability for
water retention
deficiency symptoms:
deficiency symptoms:
deficiency symptoms:
• plant growth rate reduction and
• slow growth and maturing
• leaf edges browning known as
• as a result yield dropdown
• yield decrease and its quality
leaf burn
reduction
• plants become irresistible against
diseases
SECONDARY NUTRIENTS
Ca CALCIUM
+ supports plant’s photosynthesis,
hydrocarbons transport and
nitrogen assimilation
+ acts in cell walls construction
+ determines watering and supports
cell organelle structure
Mg
MAGNESIUM
+ central atom of each chlorophyll
molecule
+ takes part in phosphate
metabolism,
+ acts in plant respiration
+ activates a number of enzyme
systems
S
SULPHUR
+ is a part of every living cell ad
+ is a constituent of two of 21 amino
acids which form protein
+ helps develop enzymes and
vitamins
+ aids in seed production,
+ promotes nodulation for nitrogen
fixation by legumes
deficiency symptoms:
deficiency symptoms:
deficiency symptoms:
• root system suppression
• yellowish, bronze or reddish color,
• small leaves with pale green
• chlorosis
while leaf veins remain green
coloring, stretched stems
• foliage yellowing and even death
• deteriorated plant growth and
maturation
B
BORON
+ essential for germination of pollen
grains, growth of pollen tubes
+ provides seed and cell wall
IRON
Fe
+ acts as a catalyst to chlorophyll
formation and as an oxygen carrier
+ helps form respiratory enzyme
formation
systems
Mo MOLYBDENUM
+ facilitates nitrate reductase by plants
+ vital for symbiotic nitrogen fixation by
Mn MANGANESE
+ is a part of enzyme systems in plant
+ accelerates germination and
Rhizobia bacteria in legume root nodules
maturity
+ aids chlorophyll synthesis
+ supports ammonium and nitrate
deficiency symptoms:
• stunts plant growth
• degrades growing point
• black heart (sugarbeets)
• corky core (apples)
• potato scab
deficiency symptoms:
deficiency symptoms:
nitrogen uptake
• Low respiratory and photosynthesis
• yield and protein content decrease in
intensity
• chlorosis
plants
deficiency symptoms:
• when high doses of nitrogen fertilizers
• yellowing between the veins
are applied low molybdenum causes
• leaves specks and further dieback
nitrate accumulation in plants
Cu COPPER
+ acts in chlorophyll formation
+ increases resistance against lodging
+ supports drought tolerance, winter
hardiness
ZINC
Zn
+ is a part of enzyme systems
+ aids synthesis of auxins (plant
growth hormones)
Co COBALT
Cl CHLORIDE
+ helps fixing atmospheric nitrogen
+ accelerates energy reactions in
in legumes
+ is a constituent of B12 vitamin
plant
+ activates several enzyme systems
+ maintains turgor
deficiency symptoms:
• small germ
• dieback in citrus
deficiency symptoms:
deficiency symptoms:
deficiency symptoms:
• growth reduction, chlorosis, “little
• external symptoms similar
• wilting leaf edges
leaf” of fruit trees and ”white bud”
to nitrogen deficiency
• thick side roots
• blasting in vegetable crops
of corn
• livestock suffers anemia, bad
appetite and productivity
42
43
Scientific approach (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION PhosAgro fertilizers
contain a full range
of essential elements
The Company is in constant dialogue with
agricultural producers to adapt its product
offering. The Company’s in-house R&D facilities
and flexible production lines mean it is able
to develop new fertilizer grades with additional
secondary nutrients or microelements in
response to market demand.
Elements currently available
in PhosAgro products
MICRONUTRIENTS
HARMFUL ELEMENTS
N
N
ESSENTIAL NUTRIENTS
Hg MERCURY
N
NITROGEN
Р
PHOSPHORUS
K
POTASSIUM
As ARSENIC
– Arsenic poisoning can cause nausea,
vomiting, abdominal pain and other
digestive disorders
– Regular exposure can cause
cancer, cardiovascular disease, skin
hyperpigmentation, keratoses, neurological
Pb
problems and developmental disorders
Cd CADMIUM
N
Causes
– Cancer
– Cardiovascular diseases
– Kidney disfunction
– Lung problems
– Osteoporosis
Pb
– May have toxic effects on the
nervous, digestive and immune
systems, and on lungs, kidneys, skin
and eyes
– For unborn and very young children,
even small amounts may cause
serious health and development
problems
Pb
LEAD
– Repeated exposure can cause
abdominal and digestive problems,
aggressive behaviour, headaches,
fatigue, memory loss, anemia
and numerous other negative
symptoms
– Children exposed to lead may
suffer from behaviour problems,
low IQ, developmental disorders
Cr+6
HEXAVALENT CHROMIUM
– Carcinogen
– Targets the respiratory system,
kidneys, liver, skin and eyes
– May cause asthma or damage
to the nasal epithelia and skin
+ increases protein accumulation in
plants
+ part of enzymes, nucleic acids,
chlorophyll, vitamins, alkaloids
+ reduces moisture content in crop
yield
+ determines protein synthesis
intensity
+ accumulates energy in plants
+ accelerates biosynthesis
+ facilitates root system growth
+ increases winter hardiness,
improves yield’s quality
+ increase plant resistance against
adverse conditions and diseases
+ acts in processes of carbohydrates
synthesis and their flow in plants
+ determine cell and fiber ability for
water retention
deficiency symptoms:
deficiency symptoms:
deficiency symptoms:
• plant growth rate reduction and
• slow growth and maturing
• leaf edges browning known as
• as a result yield dropdown
• yield decrease and its quality
leaf burn
reduction
• plants become irresistible against
diseases
SECONDARY NUTRIENTS
Ca CALCIUM
+ supports plant’s photosynthesis,
hydrocarbons transport and
+ acts in cell walls construction
+ determines watering and supports
cell organelle structure
Mg
MAGNESIUM
+ central atom of each chlorophyll
molecule
+ takes part in phosphate
metabolism,
+ acts in plant respiration
+ activates a number of enzyme
systems
S
SULPHUR
+ is a part of every living cell ad
+ is a constituent of two of 21 amino
acids which form protein
+ helps develop enzymes and
vitamins
+ aids in seed production,
+ promotes nodulation for nitrogen
fixation by legumes
deficiency symptoms:
deficiency symptoms:
deficiency symptoms:
• root system suppression
• yellowish, bronze or reddish color,
• small leaves with pale green
• chlorosis
while leaf veins remain green
coloring, stretched stems
• foliage yellowing and even death
• deteriorated plant growth and
maturation
and learning difficulties
nitrogen assimilation
B
BORON
+ essential for germination of pollen
grains, growth of pollen tubes
+ provides seed and cell wall
IRON
Fe
+ acts as a catalyst to chlorophyll
formation and as an oxygen carrier
+ helps form respiratory enzyme
formation
systems
Mo MOLYBDENUM
+ facilitates nitrate reductase by plants
+ vital for symbiotic nitrogen fixation by
Mn MANGANESE
+ is a part of enzyme systems in plant
+ accelerates germination and
Rhizobia bacteria in legume root nodules
maturity
+ aids chlorophyll synthesis
+ supports ammonium and nitrate
deficiency symptoms:
• stunts plant growth
• degrades growing point
• black heart (sugarbeets)
• corky core (apples)
• potato scab
deficiency symptoms:
deficiency symptoms:
nitrogen uptake
• Low respiratory and photosynthesis
• yield and protein content decrease in
intensity
• chlorosis
plants
deficiency symptoms:
• when high doses of nitrogen fertilizers
• yellowing between the veins
are applied low molybdenum causes
• leaves specks and further dieback
nitrate accumulation in plants
Cu COPPER
+ acts in chlorophyll formation
+ increases resistance against lodging
+ supports drought tolerance, winter
hardiness
ZINC
Zn
+ is a part of enzyme systems
+ aids synthesis of auxins (plant
growth hormones)
Co COBALT
Cl CHLORIDE
+ helps fixing atmospheric nitrogen
+ accelerates energy reactions in
in legumes
+ is a constituent of B12 vitamin
plant
+ activates several enzyme systems
+ maintains turgor
deficiency symptoms:
• small germ
• dieback in citrus
deficiency symptoms:
deficiency symptoms:
deficiency symptoms:
• growth reduction, chlorosis, “little
• external symptoms similar
• wilting leaf edges
leaf” of fruit trees and ”white bud”
to nitrogen deficiency
• thick side roots
• blasting in vegetable crops
of corn
• livestock suffers anemia, bad
appetite and productivity
42
43
Scientific approach (continued)CaPhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OPERATIONAL REVIEW
Increasing production
capacity while maintaining
utilisation rates
UPSTREAM
Capacity by product
Phosphate rock sales in 2016, kt
PRODUCTION AND SALES VOLUMES – APATIT MINE AND BENEFICIATION PLANT
Mikhail Rybnikov
Executive Director, COO
PhosAgro’s
production of
phosphate-based
fertilizers increased
by another 10.8%
year-on-year in 2016
on the back of low-
cost investments in
modernisation and
debottlenecking.
Looking ahead, we
are about to embark
on a new phase of
self-sufficient growth
and greater internal
processing of our
own phosphate rock
with the completion
of new ammonia
and granulated urea
capacities on track
for 2017.
Phosphate rock
8.5 mln t
Nepheline concentrate
1.7 mln t
999
Domestic
1,449
Export
External sales
Internal sales
2,448
6,110
Total: 8,558
Phosphate segment — upstream
The upstream operations in our phosphate
segment take place at Apatit, which mines
apatite-nepheline ore that is processed
into phosphate rock and nepheline
concentrate.
The downstream operations in our
phosphate segment take place at
PhosAgro-Cherepovets, the Balakovo
branch of Apatit (formerly Balakovo Mineral
Fertilizers) and Metachem. PhosAgro-
Cherepovets and the Balakovo branch of
Apatit produce phosphate-based fertilizers,
and the Balakovo branch of Apatit also
produces feed phosphate (MCP). Metachem
produces PKS, industrial phosphates such
as sodium tripolyphosphate (STPP) and the
fertilizer sulphate of potash (SOP).
Highlights
• Phosphate-based fertilizer
production up 10.8% year-on-year
to 5.9 million tonnes
• Phosphate-based fertilizer
sales up 10.6% year-on-year
to 5.9 million tonnes
• Internal use of our own phosphate rock
accounted for 71.4% of total production
volume
Upstream
We extracted 33.4 million tonnes of
apatite-nepheline ore in 2016, compared
to 27.2 million in 2015. We produced
8.5 million tonnes of phosphate rock, up
from 7.9 million tonnes in 2015.
Intra-Group sales of phospate rock
amounted to 71.4% (6,110 kt) of our total
phosphate rock sales in 2015, compared
to 74.8% (5,808 kt) in 2015. This was
primarily due to the 10.8% year-on-year
increase in our own phosphate-based
fertilizer production in 2016.
We sold 11.7% of the phosphate rock we
produced to domestic external customers
and 16.9% to international customers,
compared with 11.2% and 14.0%,
respectively, in 2015. Prayon (Belgium)
and Yara (Norway) accounted for most of
the exports. A decline in domestic sales
volumes was primarily due to higher
internal use.
In 2016, nepheline concentrate production
and sales increased by 0.7% and 1.6%
year-on-year, respectively. We sell all of our
nepheline concentrate to Basel Cement
Pikalevo, which slightly increased its
nepheline concentrate processing in 2016.
Production volumes, kt
Sales volume1, kt
2016
2015
Change y-o-y, %
2016
2015
Change y-o-y, %
Phosphate rock
8,530.2
7,853.3
8.6%
2,448.3
1,962.4
24.8%
Nepheline concentrate
958.1
951.9
0.7%
969.7
954.6
1.6%
1 Not including Intra-Group sales.
PHOSAGRO’S ORE RESOURCES AS OF 1 JANUARY 2017
Deposit
Kukisvumchorr
Yukspor
Apatitovy Cirque
Rasvumchorr Plateau
Koashva
Njorkpahk
Lyolitovy otrog
Plot Plateau
TOTAL
Resources, 000 t
(Categories A+B+C1)
Average P2O5
content
401,042
505,273
105,799
321,059
593,393
58,029
1,754
2,058
14.26
14.12
14.24
13.02
16.89
13.31
14.14
16.52
1,988,407
14.78
PhosAgro’s upstream subsidiary Apatit
holds five mining licences and two
exploration licences, which allow it
to conduct exploration and mining
activities at six apatite-nepheline ore
mines, and to conduct exploration activities
at two deposits.
MINING LICENCE
Kirovsky mine (Kukisvumchorr and Yukspor
deposits)
31.12.2025
Vostochny mine (Koashva deposit)
31.12.2017
Resource category
classification
sufficient detail to ensure the basic reliability
of the projected exploitation.
Vostochny mine (Njorkpahk deposit)
31.12.2063
Category A: the deposit is known in detail;
Category C1: the deposit has been estimated
Rasvumchorrsky mine (Apatitovy Cirque
boundaries of the deposit have been outlined
by a sparse grid of trenches, drill holes
by trenching, drilling or underground
or underground workings. The quality
and Rasvumchorr Plateau deposits)
01.01.2024
workings. The quality and properties of the
and properties of the deposit are known
ore are known in sufficient detail to ensure the
tentatively by analogy with known deposits
reliability of the projected exploitation.
of the same type, and the general conditions
Tsentralny mine (Plateau Rasvumchorr deposit)
31.12.2017
Category B: the deposit has been explored
category includes resources peripheral to the
for exploitation are tentatively known. This
EXPLORATION LICENCE
but is only known in fair detail; boundaries of
boundaries of Categories A and B and also
the deposit have been outlined by trenching,
reserves allocated in complex deposits in
Illitovy otrog deposit
01.02.2024
drilling or underground workings. The quality
which the ore distribution cannot be reliably
and properties of the ore are known in
determined even by a very dense grid.
Plot Plateau
14.12.2040
44
45
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION DOWNSTREAM
Phosphate segment capacity by product
PRODUCTION AND SALES VOLUMES – PHOSPHATE BASED FERTILIZERS AND MCP
Nitrogen segment capacity by product
PRODUCTION AND SALES VOLUMES – NITROGEN BASED FERTILIZERS
MAP/DAP/NPK/NPS
Feed phosphate
5.5 mln t
360 kt
APP
140 kt
Phosphoric acid
2.3 mln t
PKS
100 kt
STTP
130 kt
Phosphate segment:
downstream
Production volume, kt
Sales volume, kt
2016
2015
DAP/MAP
2,768.9
2,643.2
NPK
NPS
APP
MCP
PKS
SOP
2,060.0
1,922.6
512.4
138.8
338.6
85.1
26.1
272.8
109.6
272.2
95.9
36.7
Change
y-o-y, %
4.8%
7.1%
87.8%
26.6%
24.4%
(11.3%)
(28.9%)
2016
2015
2,696.4
2,639.2
2,043.5
1,878.5
517.3
115.4
338.5
90.1
28.0
265.3
104.5
257.7
89.8
35.8
Change
y-o-y, %
2.2%
8.8%
95.0%
10.4%
31.4%
0.3%
(21.8%)
We increased our production and sales of
phosphate-based fertilizers by 10.8% and
10.6% year-on-year, respectively.
12.2% year-on-year to 5.5 million tonnes
and MCP production capacity by 6.2% year-
on-year to 360 kt.
Our ability to quickly switch between
production of MAP/DAP and NPK/NPS
fertilizers and our competitive position as
a low-cost producer (we are positioned at
the low end of the cash-cost curve) helped
us to increase production and sales of
MAP/DAP by 4.8% and 2.2% year-on-year,
respectively, in 2016.
Outlook
• PhosAgro will continue to focus on
strategic goals of optimising costs in
upstream operations.
• We are intensifying production activities
at our Cherepovets site. In 2016, we
managed to increase production output
by 8% year-on-year.
DAP/MAP vs NPK/NPS sales, kt
DAP/MAP
2016
2015
NPK/NPS
2016
2015
2,696.4
2,639.2
2,560.8
2,143.8
Production of NPK fertilizers increased
by 7.1% to 2.1 million tonnes, while sales
rose by 8.8% to 2.0 million tonnes in 2016.
NPS production and sales increased by
87.8% and 95.0% (to 512 kt and 517 kt,
respectively).
Our PKS fertilizer production and sales of
fertilizers amounted to 85.1 kt and 90.1 kt,
respectively.
In-house R&D – Playing a Key Role
in PhosAgro’s Growth
In May 2016,our in-house engineering
as well as feed and industrial salts, sulphuric
company Mining and Chemical Engineering
and extracted phosphoric acids, and the
has merged its resources with the Y.
mining and beneficiation of ores in the
Samoylov Scientific and Research Institute
areas of:
for Fertilizers and Insectofungicides (NIUIF).
Production and sales volumes of SOP
in 2016 decreased by 28.9% and 21.8%,
respectively, to 26.1 kt and 28.0 kt.
As a result, PhosAgro’s in-house capacity
• conducting scientific research work
includes an extensive design base and is
• developing basic data for design and
able to implement comprehensive projects
planning (including basic designs)
in the field of mineral fertilizer production,
Due to our production flexibility and
cash-cost leadership, we were also able
to maintain near-100% capacity utilisation
throughout 2016, even as we increased
MAP/DAP/NPK/NPS production capacity by
Ammonia
1,190 kt
Urea
980 kt
AN
450 kt
Production volume, kt
Sales volume, kt
2016
2015
1,036.1
978.1
458.9
455.3
Change
y-o-y, %
5.9%
0.8%
2016
2015
Change
y-o-y, %
1,018.5
949.4
7.3%
375.5
416.0
(9.7%)
Urea
AN
Nitrogen segment
Our nitrogen segment includes the assets
of PhosAgro-Cherepovets, which produces
ammonia, ammonium nitrate, ammonium
nitrate-based fertilizers and urea.
Performance
Overall sales volumes of nitrogen fertilizers
were stable year-on-year in 2016.
we produced was consumed within the
Group to support higher phosphate-based
fertilizers and urea production volumes in
2016.
In 2016, production of ammonium nitrate
(AN) and ammonium nitrate-based
fertilizers (NP) increased by 1%, while sales
declined by 9.7%.
Outlook
• New ammonia plant due to come online
in 2017, adding 760 kt of annual capacity
and increase self-sufficiency considerably
• New 500 kt/year urea plant due to come
online in 2017
Highlights
• Nitrogen fertilizer production increased
4.3% year-on-year to 1.5 million tonnes
• Nitrogen fertilizer sales were stable at
1.4 million tonnes
• Construction of new 760 000 tonnes/
year ammonia plant remains on track for
commissioning in 2017
• modernising existing production capacities
to increase capacity and energy efficiency,
using patented technologies
• conducting investigations and pilot testing
• conducting exploratory work (geological
and geodesic surveys)
• developing planning, detailed and
engineering documentation
• supporting the comissioning and ramp-up
of production facilities, including designer
supervision
Urea production increased by 5.9%
year-on-year to 1,036.1 kt in 2016, while
sales increased by 7.3% year-on-year
to 1,018.5 kt.
In 2016, 43% of our urea exports were
attributed to long-term urea sales contracts
with Trammo AG (Switzerland), which
we signed for the period from July 2013
to June 2015 (in 2015, this contract was
prolonged through September 2016),
and with Ameropa AG (Switzerland).
The majority of our remaining urea sales
were on the spot market or based on short-
term quarterly sales contracts. We believe
that this balance ensures a significant
degree of stability in our urea sales
volumes and prices, while at the same time
enabling us to benefit from the flexibility
that spot sales provide.
The ammonia we produce is used internally
for the production of phosphate-based
and nitrogen fertilizers. In 2016, ammonia
production increased by 7.8% compared
to 2015 as a result of effectively scheduled
maintainance. This brought our self-
sufficiency in ammonia from 72.4% in 2015
to 73.1% in 2016. Most of the ammonia
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONOperational review (continued)
FINANCIAL REVIEW
Comprehensive income
statement
Gross profit, operating profit, EBITDA
and net income for the period
Revenue
PhosAgro’s revenue in 2016 amounted
to RUB 187.7 billion. Continued
implementation of our strategy aimed
at improving production flexibility and
expanding capacity supported growth in
sales volumes, thereby increasing fertilizer
production and sales volumes year-on-year
by 9.4% and 8.8%, respectively. PhosAgro’s
revenue for the period decreased by 1%
year-on-year to RUB 187.7 billion.
In 2016, gross profit decreased by 5% year-
on-year, amounting to RUB 101.4 billion
(RUB 106.7 billion in 2015), resulting in a
2 p.p. decrease in gross profit margin (from
56% in 2015 to 54% in 2016).
PhosAgro’s operating profit in the reporting
period was RUB 61.6 billion, a 16% decrease
from RUB 73.3 billion in 2015. The operating
profit margin decreased by 6 p.p. from 39%
in 2015 to 33% in 2016.
In 2016, export sales amounted to 66.4%
of the Company’s consolidated revenue
compared to 73.2% in 2015.
EBITDA for 2016 decreased by 12%
year-on-year to RUB 72.4 billion from
RUB 82.5 billion for 2015. The EBITDA
Production flexibility drives
revenue growth
margin decreased by 4 p.p. to 39% from
43% in 2015.
PhosAgro’s financial performance was
supported by the devaluation of the rouble
in 2016 compared to 2015 (the exchange
rate to the US dollar averaged RUB 67.03
in 2016 compared to RUB 60.96 in 2015),
as prices for most of the Company’s export
sales are denominated in USD, while costs
are primarily RUB-based. At the same time,
the appreciation of the rouble as of 31
December 2016 (RUB 60.66 per USD 1)
compared to 31 December 2015 (RUB 72.88
per USD 1) resulted in a foreign exchange
gain of RUB 16,962 million in 2016;
in 2015, the foreign exchange loss was
RUB 22,178 million.
Basic and diluted earnings per
share increased by 64% in 2016
to RUB 462 from RUB 281 in 2015.
Statement of financial
position
Gross debt as of 31 December 2016
decreased to RUB 112.4 billion compared
to RUB 134.5 billion as of 31 December
2015. Net debt as of 31 December 2016
stood at RUB 105.1 billion, down from
RUB 105.2 billion as of 31 December 2015
as a result of the rouble’s appreciation
against the US dollar as of 31 December
2016. Most of the Company’s debt is
denominated in US dollars and as a natural
hedge against primarily USD-denominated
sales. The Company’s net debt to EBITDA
ratio increased to 1.45 as of 31 December
2016 from 1.28 as of 31 December 2015.
Other
0.4%
Nitrogen
fertilizers
10%
Phosphate-based
products
89.6%
Revenue
structure by
products
Africa
3%
CIS
8%
Asia
12%
North and
Latin America
18%
Revenue
structure by
regions
Russia
34%
Europe
25%
KEY FINANCIAL PERFORMANCE INDICATORS,
RUB,mln
2016
2015
Change y-o-y, %
Revenue
Cost of sales
Gross Profit
• Gross profit margin
Operating profit
• Opertaing profit margin
Loss/Profit for the year
• Loss/Profit margin
EBITDA
EBITDA margin
Net Debt
187,742
189,732
-86,391
-83,064
101,351
54%
61,598
33%
59,886
32%
72,365
106,668
56%
73,331
39%
36,436
19%
82,464
39%
43%
105,115
105,165
Net Debt/EBITDA ratio
1.45
1.28
KEY OPERATIONAL INDICATORS SALES VOLUMES,
kt
-1%
4%
-5%
2 p. p.
-16%
6 p. p.
64%
-13 p. p.
-12%
4 p. p.
0%
13%
Phosphate-based products
Nitrogen-based fertilizers
Apatit mine and beneficiation plant
Other products
REVENUE STRUCTURE BY REGION,
RUB mln
North and Latin America
Europe
Africa
Asia
CIS
Russia
TOTAL
2016
5,925
1,394
3,418
94
2015
Change, y-o-y %
5,384
1,365
2,917
103
10%
2%
17%
-8%
2016
2015
Change, y-o-y %
32,992
46,738
6,367
22,742
15,883
63,020
44,430
47,303
12,475
23,909
10,740
50,875
187,742
189,732
-26%
-1%
-49%
-5%
48%
24%
-1%
SEGMENT REVENUE STRUCTURE,
RUB mln
2016
2015
Change, y-o-y %
Phosphate-based products
168,136
167,430
Nitrogen fertilizers
Other operations
TOTAL
18,829
21,574
777
728
187,742
189,732
0%
-13%
7%
-1%
48
49
STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com Phosphate-based
products segment
Revenue from the phosphate-based
products segment increased slightly
to RUB 168.1 billion in 2016. PhosAgro
increased both production and sales
volumes of phosphate-based fertilizers and
MCP by 11% year-on-year in 2016. Sales
volumes for phosphate rock and nepheline
concentrate in 2016 increased by 17% year-
on-year.
The phosphate-based products segment’s
gross profit for 2016 decreased by 4%
to RUB 93.5 billion, resulting in a gross profit
margin of 56%, compared to a 58% margin
in 2015.
The phosphate-based fertilizers
market in 2016
• The average prices of DAP (FOB Tampa)
and MAP (FOB Baltics/Black Sea) in
2016 were USD 347 per tonne and
USD 339 per tonne, respectively, which
represent respective year-on-year
declines of 24% and 26%. The decrease
in global prices for phosphate-based
fertilizers was triggered by weak market
conditions in the main commodity
markets, combined with a higher supply
of fertilizers from new capacities in
Morocco (2 million tonnes of DAP/MAP/
NPS/NPK in 1Q 2016 and 3Q 2016) and
heightened competition.
• A significant decrease in major
feedstock prices triggered a spike in
India’s domestic DAP production, which
lowered demand for import volumes.
DAP imports to India for 2016 stood at
4.3 million tonnes, which was a 30%
year-on-year decline. Imports of NP/NPK
to India dropped by 26% year-on-year
to 0.5 million tonnes.
• Relatively low prices for phosphate-
based fertilizers, coupled with
Africa
2%
CIS
9%
Asia
13%
North and
Latin America
15%
Phosphate-
based segment
revenue
by region
Russia
34%
Europe
27%
PHOSPHATE-BASED PRODUCTS SEGMENT,
RUB mln
Result
Revenue
Cost of goods sold
Gross Profit
Gross Profit margin
2016
2015
Change, y-o-y %
168,136
167,430
-74,667
-70,344
93,469
97,086
0%
6%
-4%
56%
58%
-2 p. p.
PHOSPHATE-BASED SEGMENT REVENUE BY REGION,
RUB mln
REVENUE AND SALES VOLUMES FOR PRINCIPAL PHOSPHATE-BASED PRODUCTS
Region
2016
2015
Change, y-o-y %
Revenue, RUB mln
Sales Volume, kt
North and Latin America
Europe
Africa
Asia
CIS
Russia
TOTAL
25,765
44,271
3,912
21,102
15,408
57,678
33,623
43,692
9,057
23,782
10,719
46,557
168,136
167,430
-23%
1%
-57%
-11%
44%
24%
0%
favourable economics in Brazil’s and
Argentina’s agriculture industries,
spurred a recovery in consumption
and import of phosphate-based
fertilizers. In 2016, DAP/MAP/TSP/NP/
NPK imports grew by 23% year-on-
year and exceeded 6.3 million tonnes,
including 2.7 million tonnes of imported
MAP. Liberalisation of agricultural
export rules in Argentina was an
additional driver of growth in fertilizer
consumption. Argentina’s DAP/MAP
imports in 2016 grew by 74% year-on-
year to 1.15 million tonnes.
• Exports of phosphate-based fertilizers
(DAP/MAP/NP/TSP) from China in
2016 decreased by 19% year-on-year
to 10.1 million tonnes. Separately,
exports of DAP dropped by 15%
year-on-year to 6.8 million tonnes.
Production curtailments due to low
efficiency and stricter environmental
regulations were the key reasons for the
decline in exports.
The growth in fertilizer sales volumes was
primarily due to the Company’s flexible
production and sales models, which
enabled a substantial increase in sales
2016
2015
Change, y-o-y %
2016
2015
Change, y-o-y %
Phosphate rock
26,037
19,155
36%
DAP/MAP
NPK/NPS
MCP
63,906
73,362
-13%
48,373
45,769
9,990
7,749
6%
29%
2,448
2,684
2,561
339
1,962
2,625
2,144
258
25%
2%
19%
31%
of MAP and NPK to the domestic market,
NPS to export markets and phosphate rock
to both markets.
• MAP/DAP fertilizers: revenue from
DAP/MAP sales was down by 13%
year-on-year from RUB 73.4 billion
(USD 1,203 million) in 2015 to RUB
63.9 billion (USD 953 million) in 2016,
reflecting a 15% year-on-year decrease
in DAP/MAP average revenue per tonne
denominated in RUB and 2% year-on-
year growth in sales volumes.
• NPK fertilizers: revenue from NPK sales
increased by 1% year-on-year from RUB
38.9 billion (USD 638 million) in 2015
to RUB 39.2 billion (USD 585 million)
in 2016, reflecting a 9% year-on-year
increase in sales volumes and an overall
7% year-on-year decrease in NPK
average revenue per tonne denominated
in RUB.
• Phosphate rock: revenue from phosphate
rock sales rose by 36% year-on-year
to RUB 26.0 billion (USD 388 million) in
2016. Revenue per tonne in RUB terms
increased by 9% year-on-year. Sales
volumes increased by 25% year-on-year
as a result of increased supplies to both
export and domestic markets.
Phosphate based fertilizers market,
USD
Average DAP price FOB Tampa
2016
2015
347
459
Average phosphate rock price FOB Morocco
2016
2015
106
125
50
51
Financial review (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com Nitrogen segment
Nitrogen segment revenue decreased from
RUB 21.6 billion in 2015 to RUB 18.8 billion
in 2016. PhosAgro increased production and
sales volumes of nitrogen-based fertilizers
by 4% and 2%, respectively, year-on-year in
2016.
Nitrogen segment gross profit for
2016 decreased by 18% year-on-year
to RUB 7.8 billion. The gross margin for
2016 was 41%, compared with 44% in 2015,
which was mainly due to price decreases:
in 2016, average revenue per tonne for
the Company’s nitrogen-based fertilizers
decreased by 15% year-on-year.
The nitrogen market in 2016
The average urea price (FOB Baltic) in 2016
stood at USD 194 per tonne vs USD 267 per
tonne in 2015. This was driven by stronger
competition in key markets related to the
launch of new capacities in the Middle East
and the USA, as well as a nearly 3.0 million
tonne year-on-year decline in urea
exports to India due to growth in domestic
production.
Export revenue from urea declined from
RUB 15.7 billion (USD 258 million) in 2015
to RUB 13.3 billion in 2016. The decrease
in revenue per tonne of 18% year-on-year
was partially balanced by a 3% year-on-year
increase in sales volumes. Total revenue
from ammonium nitrate (AN) decreased
by 13% year-on-year from RUB 5.4 billion
in 2015 to RUB 4.6 billion in 2016 due
to a 10% year-on-year decrease in sales
volumes and a 4% year-on-year decrease in
revenue per tonne.
CIS
3%
Asia
9%
Africa
13%
Europe
13%
Russia
24%
North and
Latin America
38%
Nitrogen
segment
revenue
by region
Cost of sales
PhosAgro’s cost of sales increased by 4%
year-on-year in 2016 to RUB 86.4 billion,
while overall fertilizer sales volumes
increased by 9% year-on-year. This cost of
sales performance was primarily due to the
following factors:
• An increase of RUB 2.8 billion, or
12%, year-on-year in the cost of
materials and services primarily due
to an increase in repair expenses, a
23% increase in apatite-nepheline
ore mining, 9% growth in fertilizer
production volumes and 5% year-on-
year inflation.
REVENUE AND SALES VOLUMES FOR
NITROGEN FERTILIZERS
Revenue, RUB mln
Sales Volume, kt
2016
2015
Change, y-o-y %
2016
2015
Change, y-o-y %
Urea
14,119
16,101
AN
4,635
5,358
-12%
-13%
1,019
376
949
416
7%
-10%
NITROGEN PRODUCTS SEGMENT,
RUB mln
Results
2016
2015
Change, y-o-y %
NITROGEN SEGMENT REVENUE BY REGION, RUB mln
• A year-on-year increase in personnel
Revenue
Region
2016
2015
Change, y-o-y %
North and Latin America
Russia
Europe
Africa
Asia
CIS
TOTAL
7,227
4,565
2,467
2,455
1,640
475
10,807
3,590
3,611
3,418
126
22
-33%
27%
-32%
-28%
1,202%
2,059%
18,829
21,574
-13%
Average urea price FOB Baltic,
USD
2016
2015
194
267
costs of RUB 629 million, or 6%,
primarily due to payroll indexation and
PhosAgro’s 15th-anniversary bonuses.
• A decrease in expenditures on sulphur
and sulphuric acid of RUB 2.3 billion, or
28%, year-on-year from RUB 8.4 billion
in 2015 to RUB 6.1 billion in 2016.
This was driven by a 34% decline in
sulphur and sulphuric acid purchase
prices denominated in RUB, which was
partially offset by a 9% year-on-year
increase in volumes consumed due
to higher production of phosphate-
based fertilizers, mainly MAP/DAP and
NPS.
• A year-on-year decrease in expenditures
on ammonia purchases of RUB
2.4 billion, or 29%, from RUB 8.2 billion
in 2015 to RUB 5.8 billion in 2016. This
was mainly due to a 30% decline in
RUB-denominated prices, which was
slightly offset by a 1% year-on-year
decrease in consumption volumes.
• A year-on-year decrease of 6% in
expenditures on potash from RUB
7.6 billion in 2015 to RUB 7.1 billion in
2016. This was due to a 16% decrease
in RUB-denominated prices and 11%
growth in purchase volumes as a result
Cost of goods sold
Gross Profit
Gross Profit margin
18,829
21,574
-13%
–11,025
-12,063
-9%
7,804
41%
9,511
44%
-18%
-3 p.p.
of a 7% increase in NPK production
during the period.
• A year-on-year increase in expenditures
on natural gas of RUB 600 million, or
8%, to RUB 8.1 billion in 2016. This
was mainly due to an 8% increase in
ammonia production volumes.
• A year-on-year increase in expenditures
on electricity of RUB 535 million, or 14%,
to RUB 4.5 billion in 2016. This was due
to a 7.5% indexation in tariffs from 1 July
2016 and an increase in phosphate
rock production volumes (Apatit is the
Group’s main consumer of electricity
from third parties).
• A year-on-year increase in expenditures
on ammonium sulphate of RUB
371 million, or 17%. This was due
to 32% year-on-year growth in
ammonium sulphate purchase volumes
as a result of higher production volumes
of NPS. Purchase prices decreased by
11% year-on-year in 2016.
• A decrease in expenditures on fuel
by 20% from RUB 2.9 billion in 2015
to RUB 2.3 billion in 2016. This was
driven by a 14% decline in overall
fuel purchase prices denominated
in RUB. Lower fuel consumption
volumes resulted from an increase in
extraction of apatite-nepheline ore from
underground mining, where electricity is
primarily consumed.
• A year-on-year decrease in heating
energy expenses of RUB 42 million, or
by 6%, from RUB 718 million in 2015
to RUB 676 million in 2016. This was
mainly due to a 5% decline in RUB-
denominated prices.
52
53
Financial review (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com Heating energy
1%
Cost of sales
Fuel
3%
Ammonium sulphate
3%
Chemical fertilizers and other
products for resale
5%
Electricity
5%
Ammonia
7%
Sulphur and
sulphuric acid
7%
Potash
8%
Natural gas
9%
Materials and services
30%
Salaries and social contributions
12%
Depreciation
11%
COST OF SALES
Item
RUB mln
% of cost of sales
RUB mln
% of cost of sales
y-o-y, %
2016
2015
Change
Materials and services
Salaries and social contributions
Depreciation
Natural gas
Potash
Sulphur and sulphuric acid
Ammonia
Chemical fertilizers and
other products for resale
Electricity
Fuel
Ammonium sulphate
Heating energy
Other items
Change in stocks of works in
progress and finished goods
25,746
10,784
9,377
8,084
7,104
6,065
5,801
4,254
4,462
2,299
2,547
676
42
-850
30%
12%
11%
9%
8%
7%
7%
5%
5%
3%
3%
1%
–
-1%
22,905
10,155
8,057
7,484
7,559
8,385
8,190
4,091
3,927
2,865
2,176
718
23
27%
12%
10%
9%
9%
10%
10%
5%
5%
3%
3%
1%
–
-3,471
-4%
TOTAL
86,391
100%
83,064
100%
12%
6%
16%
8%,
-6%
-28%
-29%
4%
14%
-20%
17%
-6%
83%
-76%
4%
Selling, general and
administrative expenses
Administrative expenses rose by 14%
year-on-year to RUB 13.9 billion in 2016,
primarily due to an increase in personnel
costs of RUB 1.1 billion, or 16%, year-on-
year. The increase was mainly due to the
indexation of salaries, PhosAgro’s 15th-
anniversary bonuses, and the relocation
of a significant proportion of operational
management to Cherepovets.
Selling expenses rose by 19% year-
on-year from RUB 17.8 billion in 2015
to RUB 21.1 billion in 2016. This was
primarily due to the following changes:
• Russian Railways infrastructure tariff
and operators’ fees increased by 34%
from RUB 6.1 billion in 2015 to RUB
8.2 billion in 2016. This was mainly due
to an increase in railway tariffs of 9%
in 2016, as well as growth in fertilizer
sales (primarily to the domestic market,
where predominantly CPT shipments
increased by 31% year-on-year).
Statement of cash flows
Capital expenditure
CASH FLOW STATEMENT, RUB mln
• Growth of 54% in materials and services
from RUB 1.6 billion in 2015 to RUB
2.5 billion in 2016. This was mainly
driven by an increase in multimode
shipment volumes to export markets.
• Growth in freight, port and stevedoring
expenses by 2% from RUB 9.2 billion in
2015 to RUB 9.4 billion in 2016 mainly
due to an increase in export shipment
volumes of 7%. After the commissioning
of the Smart Bulk Terminal in June
2015, the Company transferred its
export shipping activity from Baltic
ports to Ust-Luga. This helped PhosAgro
to achieve sustainable savings in port
fees, which was balanced by an increase
in export shipment volumes.
Cash flow from operating activities
Cash flow from operating activities
decreased by 20% year-on-year in
2016 to RUB 50.4 billion compared
to RUB 63.3 billion in 2015 due to lower
operating cash flow and higher income tax
payments, which was partially offset by
favourable changes in working capital.
Cash used in investing activities
Net cash used in investment
activities increased by 21% in 2016
to RUB 38.0 billion.
Cash used in financing activities
In 2016, net cash used for financing activities
amounted to RUB 29.9 billion.
Cash spent on capital expenditure in
2016 amounted to RUB 40.2 billion,
a decrease of 6% in comparison with
RUB 42.7 billion in 2015. PhosAgro’s capital
expenditure, which consists of additions
to property, plant and equipment, amounted
to RUB 45.3 billion for 2016, compared
to RUB 44.2 billion in 2015. Capital
expenditure focused on the construction of
the new 760 ths tonnes/year ammonia plant
and the new 500 ths tonnes/year urea plant
at PhosAgro-Cherepovets.
Results
Cash flow from operating activities
Cash flow from investing activities
Cash flow used in/from financing activities (net of dividends paid)
Dividends paid to shareholders
Net change in cash and cash equivalents
CAPITAL EXPENDITURE*, RUB mln
2016
2015
50,361
63,261
-38,014
-31,463
-1,872
-27,974
-17,499
-19,243
-18,130
-5,575
2016
2015
Change, y-o-y %
Phosphate-based products/mining and
beneficiation
13,342
10,471
27%
Phosphate-based products/fertilizers production
10,448
7,442
Nitrogen fertilizers
Other
TOTAL
20,968
25,025
533
1,255
45 291
44,193
40%
-16%
-58%
2%
* capital expenditure, which consists of additions to property, plant and equipment
54
55
Financial review (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com ENVIRONMENTAL REVIEW
We introduced new KPIs for
the Company’s Environmental
Service in 2016, aimed at helping
to ensure regulatory compliance
and to minimise payments for over-
limit environmental impact
Environmental strategy
Policy highlights
PhosAgro maintains a policy framework and
related management systems procedures
to address business conduct matters.
Here are some of the highlights of the
organisation’s policy framework:
• We continually monitor and analyse the
impact that our production sites have
on the environment and implement
corrective measures with the goal of
limiting that impact.
• We aim to comply with all applicable
Russian and international legislation and
standards.
• We continually invest in new
technologies and processes that reduce
our use of energy and finite resources.
• We look to reduce, process or recycle the
waste we produce wherever possible.
• We embed a culture of respect for the
environment and the indigenous natural
communities where we operate.
Effective management of the Company’s
environmental footprint is a key factor
in PhosAgro’s ability to meet its goal
of being a long-term sustainable
business and in balancing its obligations
to all stakeholders. In addition to internal
guidelines, PhosAgro adheres to Russian
regulatory requirements, and is guided by
EU environmental protection directives
and international agreements, including
the Basel Convention and the Helsinki
Convention.
We have in place environmental
management practices that ensure our
compliance with applicable regulations,
and that help to reduce the impact of our
operations on the environment. We also
invest in advanced technologies and high-
quality production processes to make the
most efficient use possible of finite natural
resources.
Our environmental strategy focuses on the
following key areas:
• Reducing our waste production,
emissions and discharges of pollutants
and resource usage on a per-unit basis
by investing in new, more efficient
technologies
• Ensuring that we act as a conscientious
neighbour and maintain a constructive
dialogue with local stakeholders about
our environmental impact
• Implementing energy-efficiency and
energy-saving programmes at all our
enterprises
56
57
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 2016 Highlights
System highlights
The main KPIs of the Company’s
environmental function are:
• possession of all necessary
environmental permits for the key
production assets and subsidiaries
• the size of payments for environmental
impact, including over-limit payments,
which is a key indicator of the Company’s
overall environmental impact
We introduced new KPIs for the
Environmental Service in 2016:
• obtain all necessary permits at the
key production assets to ensure their
compliance with environmental
legislation
• reduce over-limit payments for
environmental impact in year-on-year
terms
Over-limit payments equalled 48% of total
payments in 2014, 35.3% in 2015 and just
5.6% in the first three quarters of 2016. A
KPI was set in 2016 for a maximum over-
limit payment of 15.4% of the total in 2015.
The result for the first three quarters of
2016 was around 10% of the 2015 level.
Apatit:
•
switching to new, more effective chemicals for hardening dusty surfaces
at tailing facilities
•
selecting chemicals for cleaning wastewater as part of the programme
to reduce discharge of pollutants that is being implemented over
2015-2019
•
acquiring two waste disposal and recycling units
PhosAgro-Cherepovets:
Signing a four-party agreement with the Russian Ministry of Natural Resources
and Environment, Federal Service for the Supervision of Natural Resources,
and the administration of Vologda region, which includes the following plans:
•
finishing construction of wastewater treatment facilities at the Rybinsk
reservoir, which will provide regulatory sewage treatment
for 10,000 cubic metres per day of ammonia production, as well as
sanitary sewage containing phosphorous and nitrogen complexes at the
village of Novye Ugli
Over-limit payments, %
48
35
Over-limit
payments
Total
payments,
100%
58
•
upgrading the aluminium fluoride plant to increase waste recycling
5.6
volumes, and as part of an import substitution programme
•
continuing PhosAgro’s “2 Thousand Trees” programme
Metachem:
•
developing construction design for a wastewater treatment facility on the
Volkhov river, which will provide Metachem’s required regulatory sewage
2014
2015
2016
treatment
Management and reporting
PhosAgro’s environmental affairs are
overseen by the chief ecologist based at
PhosAgro-Cherepovets, who is supported
by environmental control and resource
use divisions at each of our production
sites. These divisions are responsible
for undertaking activities related
to environmental protection, ensuring
compliance with regulatory requirements
and reporting on these issues. Employees
of these divisions provide support
to production site management when they
engage with local stakeholders.
PhosAgro management receives weekly
updates on all ongoing environmental
issues, and monthly reports are produced
for the Chairman of the Health, Safety
and Environment Committee of the
Board of Directors. On a quarterly basis,
Management and the Board receive regular
updates on any expenses or payments the
Company has made for its environmental
impact. On an annual and semi-annual
basis, the Board of Directors receives
updates on PhosAgro’s environmental
protection initiatives and current
environmental performance.
KEY EVENTS AT PRODUCTION SITES IN 2016
ISO AND OHSAS CERTIFICATES HELD BY PHOSAGRO ENTERPRISES:
• payment of a fine and potential liability
in the event of a violation up to and
including criminal prosecution
• penalties are calculated in material
terms for damage caused to the
environment
None of PhosAgro’s enterprises use ozone-
depleting substances in the production
process. A small amount of carbon
tetrachloride (not more than 250 kg/year)
is used for some laboratory testing
processes. We do not undertake cross-
border hazardous waste transportation,
and our production sites are not situated
in protected areas. Hence, there are no
significant restrictions on our operations.
Permits and certificates
The Company’s production sites hold all
necessary licences and permits related
to environmental protection.
In addition to observing Russian
environmental law, we adhere
to international standards relevant
to our business to guide our approach, for
example, the Balakovo branch of Apatit is
the first Russian enterprise to be certified
as compliant with the European GMP+
quality control standard for feed materials.
We also undertake regular internal and
external audits to assess our compliance
and obtain certification, together with
exposure assessments, international format
safety data sheets and recommendations
for safe handling that are developed in
compliance with the requirements of
European Regulation No 1272/2008 on
classification, labelling and packaging, and
No 1907/2006 concerning the Registration,
Evaluation, Authorisation and Restriction of
Chemicals (REACH) in the development of
exposure scenarios.
59
ISO 9001
OHSAS 18001
ISO 14001
Apatit
Since 2011
-
-
PhosAgro-Cherepovets
Since 2004
Since 2008
Since 2006
Balakovo branch of Apatit Since 2005
-
Since 2009
Legislative and administrative framework
In general, Russian environmental law
meets international standards, utilising
the following main pieces of legislation:
the Environmental Protection Law, the
Russian Federation Water Code, the Law
on Industrial Waste and Consumption,
the Law on Protection of Atmospheric Air
and the Environmental Expert Review
Law. These pieces of legislation require
environmental impact assessments prior
to the implementation of a project that
may have an impact on natural resources.
No construction or operation is permitted
until the Company is in receipt of a positive
report from the State Environmental Expert
Review (an essential precondition for
financing and implementation).
Russia is also a signatory to most of
the major international environmental
conventions and treaties, which, in the
event of a conflict with Russian law, take
precedence, as dictated by the Constitution
of the Russian Federation and the Federal
Law on Environmental Protection.
In general, any activity in Russia that
may have an adverse impact on the
environment is subject to:
• issuance of permits or licences
(including for water use; subsoil use,
for example, in mining; forest use; air
emissions; disposal and recycling of
waste; operation of hazardous industrial
facilities)
• establishment of limits with respect
to the amount of environmental impact
Regional legislation supports and expands
on these federal laws and regulations.
• payment for negative environmental
impact (emissions and waste disposal)
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONEnvironment review (continued) ENVIRONMENTAL IMPACT OF THE COMPANY’S PRODUCTION SITES IN 2016
Emissions and air quality
In 2016, consolidated atmospheric
emissions by PhosAgro’s production
subsidiaries increased by 1 kt to 29.9 kt, up
3% year-on-year. The increase in emissions
was primarily due to higher production
volumes, with total fertilizer output
growing at a faster pace of 9.4% year-on-
year. This brought atmospheric emissions
per unit of production down by 4.4% year-
on-year to 1,749 kg/t in 2016.
Emissions
into the atmosphere, kt
29.8
27.4
28.9
29.9
26.5
11.5
Apatit
Total
volume
Per unit
(kg/t)
60
2012
2013
2014
2015
2016
1,836
1,830
1,748
5.4
1.3
Balakovo branch of Apatit
Metachem
11.9
PhosAgro-Cherepovets
4.4%
DECREASE
IN ATMOSPHERIC
EMISSIONS PER UNIT
OF PRODUCTION IN 2016
Waste disposal
As PhosAgro continually modernises its
production facilities, one goal is to reduce
the volume of waste produced, including
through recycling. We also aim to reduce
the danger that produced waste poses for
the environment. At production facilities,
some types of waste are used as raw
materials in the production process.
One key area where we are working on
recycling solid waste is in the development
of new technologies for reprocessing of
phosphogypsum.
Apatit used 22.8 million tonnes of
overburden from surface mining for road
construction. In 2016, the total volume of
waste produced was 94.1 million tonnes.
Approximately 90% of this volume was
produced by Apatit. The 8% year-on-year
increase in phopsphate rock production
volumes was the primary driver behind
this increase in waste. The majority of solid
waste (up to 70%) consists of rocks and
overburden from Apatit.
Solid waste,
mln t
Reuse/recycling
mln t
116.3
101.4
85.9
78.2
94.1
Total volume
Volume excluding
overburden
Per unit volume
excluding overburden,
t/t of production output
25.4
26.5
27.7
26.5
31.1
5.6
2.2
2.2
22.8
37.3
2012
2013
2014
2015
2016
8.3
7.9
5.1
5.4
5.5
84.5
34.5
4.3
5.3
0.0024
0.15
2.7
0.0020
61
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONEnvironment review (continued) ENVIRONMENTAL IMPACT OF THE COMPANY’S PRODUCTION SITES IN 2016
Water use
PhosAgro’s subsidiaries try to implement
the latest available technologies when
using water in the production process,
maximising use in cycles to reduce waste-
water volumes. The Balakovo branch of
Apatit, for example, uses a process that
produces no waste-water.
Apatit and PhosAgro-Cherepovets are
responsible for the majority of PhosAgro’s
water withdrawal, accounting for 60% and
28% of the total, respectively. In addition,
Apatit provides drinking water for Kirovsk
and Apatity. The largest volume of waste-
water discharges, 95%, comes from Apatit.
Water discharges by PhosAgro’s production
sites increased slightly, amounting
to 200.0 million m3.
In 2016, PhosAgro’s total consumption from
surface water sources increased by 1.7%
year-on-year to 86.6 million cubic metres.
Water consumption per unit of production
declined by 5.5% year-on-year in 2016
to 5.1 cubic metres per tonne.
Electricity
PhosAgro used a total of 3,334 million
kWh of electricity in 2016. PhosAgro-
Cherepovets and Apatit’s Balakovo
branch generated 1,272 million kWh of
electricity (79.6% self-sufficiency) using
on-site facilities, which have a total rated
generation capacity of 183 MW.
Energy efficiency
PhosAgro’s subsidiaries were 39.91% self-
sufficient in electricity in 2016, including
from thermal energy generated by heat
recapture units installed on sulphuric
acid production lines. The Company also
continues to implement programmes
aimed at improving energy efficiency.
39.91% 4.2%
SELF-SUFICIENCY
IN ELECTRICITY AT
PHOSAGRO PRODUCTION
SUBSIDIARIES
YEAR-ON-YEAR
DECREASE IN PER-
UNIT ELECTRICITY
CONSUMPTION
Electricity consumption,
million kWh
Natural gas and fuel oil
In 2016, PhosAgro’s natural gas
consumption increased by 5.2% year-on-
year to 1,914 million m3, while fuel oil
consumption grew by 3.7% year-on-year
to 141 kt.
Apatit is our only consumer of fuel oil.
The increase in fuel oil consumption was
a result of higher production volumes at
Apatit’s beneficiation facilities.
In 2016, we completed work on a new
facility for the capture, storage and
regasification of natural gas, which is part
of the ventilation and heating system at the
Rasvumchorrsky underground mine. This
new system will enable Apatit to decrease
its consumption of fuel oil and diversify its
sources of energy.
Water
discharges,
mln m3
75.2
78.5
80.5
85.1
86.6
52.5
Apatit
Water
withdrawal,
mln m3
200.0
Total
volume
Per unit
(m3/t)
62
2012
2013
2014
2015
2016
4.6
5.4
5.4
5.4
5.1
24.3
7.2
2.6
PhosAgro-
Cherepovets
2016
Balakovo branch of Apatit
Metachem
189.0 (95%)
9.9 (4.5%)
1.1 (0.5%)
3.089
3.158
3.126
3.260
3.334
1.63
Total
volume
Per unit
(kWh/t)
2012
2013
2014
2015
2016
211
211
210
206
197
1.16
0.43
0.11
63
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONEnvironment review (continued) HEALTH AND SAFETY REVIEW
We have established unified policies and governance systems
across our production facilities, which aim to maintain high safety
levels for production processes and employees of PhosAgro and
our subcontractors.
Health and safety strategy
Workplace health and safety are of critical
importance for PhosAgro’s efficient and
uninterrupted operations, which include
large-scale mining and processing
enterprises. PhosAgro’s workplace health
and safety strategy aims to achieve three
key goals:
1. Zero fatal incidents involving employees
of PhosAgro or its subcontractors
2. Zero accidents involving production
equipment
3. Sustainable performance achieved by
creating a culture of safety at production
sites
PhosAgro management understands
that creating a culture of safety requires
commitment and leadership by supervisors
at every level, as well as involvement in the
work done by employees of the Company
and its subcontractors.
Our strategic and operational goals and
tasks in the area of workplace health
and safety are based on the analysis of
large volumes of data from internal and
external audits and inspections, incident
investigations, and recommendations from
representatives of the workforce.
Policy highlights
• We have established and maintain the
required level of workplace health and
safety, whereby the risk of injuries or
death, or accidents at production sites
is minimised and reflects the latest
scientific, industrial and community
standards
• We seek to constantly develop and
update our workplace health and
safety practices based on international
standards and the experience of other
companies that are leaders in the field of
production site safety
• We are promoting a unified corporate
culture concerning workplace health and
safety among the employees at each of
our production sites
• We provide for adherence to all legal
and regulatory requirements in the area
of workplace health and safety by all
employees, regardless of their position in
the Company
• We aim to improve the monitoring of
compliance with workplace health and
safety requirements at our production
sites with the help of modern
information technologies
System highlights
We create a clear culture that embraces
personal, team and company-wide
responsibility for health, safety and care for
fellow employees. In addition to adherence
to federal legal requirements for workplace
safety, PhosAgro’s management has
introduced additional measures to improve
our workplace health and safety practices
based on international standards and best
practices. We are also constantly learning –
we use our own experience and that of
others to ensure PhosAgro is implementing
leading-edge practices in workplace health
and safety across its enterprises.
Starting from the second half of 2016,
we have introduced the development
and implementation of comprehensive
programmes to address the most
problematic areas of workplace health and
safety in order to focus on type of activity,
job or specific worksite where workplace
health and safety risks are considered to be
heightened..
Governance and oversight
• Oversight begins at the Board of
Directors, with the Environmental, Health
and Safety Committee chaired by Igor
Antoshin
2016 PERFORMANCE HIGHLIGHTS
• Management receives weekly reports on
workplace health and safety performance
across the Company; if and when
incidents do happen, management
is immediately informed about the
situation, and then receives detailed
information as it becomes available
• At the executive management level, we
aim to create a culture of safety whereby
each manager embraces responsibility
for his or her own safety, as well as that
of others in his or her unit
• Each of our subsidiaries has a workplace
health and safety service, or dedicated
specialists. Their responsibilities include
advising management, monitoring
adherence to safety requirements,
helping to identify and mitigate
hazardous activities or conditions,
ensuring employees evaluate risks prior
to starting work, investigating the root
cause of incidents and serious deviations,
assisting management with developing
and implementing activities to prevent
incidents, and to mitigate any identified
risks
• The Company conducts regular audits
and inspections of workplace safety
conditions, including internal Safety
Behaviour Audits. Our production sites
also regularly undergo government
regulatory inspections
• We operate a whistle-blower hotline,
and we strongly encourage employees
to report to management any concerns
regarding possible violations or
potentially dangerous situations at our
production sites, as well as any issues
related to health and safety
Unified standards
• As part of the integration and
streamlining of PhosAgro’s production
assets, we have introduced new, unified
safety standards and practices across
all of our subsidiaries. These new
standards are based on internationally
recognised best practices, and are being
implemented together with some of the
best external experts available
• Currently, our PhosAgro-Cherepovets
production site has OHSAS 18001:2007
certification for its occupational health
and safety management systems
Training
Every single manager, specialist and
production line employee at PhosAgro
receives workplace health and safety
instruction and training, and undergoes
testing on the subject in accordance with
Russian legal requirements. In addition, we
conduct a number of additional internal
trainings. Specific training highlights
in 2016 included the following sessions:
• 89 employees participated in an eight-
hour course on worlplace safety and safe
production operations
• Training on basics of safe behaviour was
attended by 4,481 employees
• Safe behaviour audit classes, organised
in cooperation with DuPont Science
and Technology, were taught to 575
employees
• Root Cause Analysis workshop was
attended by 102 employees
Implementing best practices in
workplace health and safety
20% 75% 28%
DECLINE YEAR-ON-YEAR
IN MINOR INJURIES
(8 MINOR INJURIES)
YEAR-ON-YEAR DECLINE
IN SERIOUS INJURIES
(1 SERIOUS INJURY)
YEAR-ON-YEAR
LTIFR DECLINE
(0.52 PER 1 MILLION HOURS)
64
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION WORKPLACE INJURIES AND FATALITIES
CASE STUDY
2013
2014
2015
2016
29
5
2
15
3
5
10
4
0
8
1
1
1.03
0.92
0.73
0.52
2013
2014
2015
2016
Minor injuries
Serious injuries
Fatalities
LTIFR
(per 1 million
hours)
1. Three steps to safety
2. Improving transportation safety
3. Improving safety of mining work
PhosAgro regularly participates in the All-Russian Week of Workplace
Health and Safety, which is organised by the Russian Government,
in order to learn more about the latest developments at other
companies. At the 2016 forum, a number of companies shared their
experience implementing practices to identify hazards and evaluate
risks before starting any job.
This idea was quickly adopted by PhosAgro’s workplace health
and safety team, and approved by management. New procedures
to improve safety before starting work were developed and entitled
“Three steps to safety”. This new methodology was introduced at all
of our production sites during the second half of 2016
.Step 1:
Stop! Think and
Step 2:
Take measures
Step 3:
Decide whether it
identify hazards!
to eliminate any
is safe to proceed
During 2016, PhosAgro launched a programme to improve the
The Apatit mine is the heart of PhosAgro, providing us with the
safety of automobile, rail, and mine vehicle transportation.
exceptionally pure and high-quality phosphate raw materials we
use to produce phosphate-based fertilizers. We undertook several
measures during 2016 to improve the safety at Apatit, including:
1.
Improved techniques and tools for installing and maintaining
containment walls for mining excavation sites
2. Organised new training and testing for employees responsible
for maintaining excavation sites and roadways in mines
3. Purchased new equipment for installation and maintenance of
containment walls
hazard!
with work!
Measures taken to improve safety included:
Our performance
We have achieved good results in 2016:
zero incidents resulting in loss of the
ability to work at PhosAgro’s chemical
processing sites, and a 28% year-on-year
decline in LTIFR.
However, we deeply regret that one fatality
occurred at the Apatit mine in 2016 due
to a landslide. Following an investigation
into the causes of this incident and an
analysis of safety procedures, we took
measures to improve the safety of our
mining work (described below).
Days without injuries
(as of 31 December 2016)
Balakovo branch of Apatit
PhosAgro-Cherepovets
446
Metachem
Apatit
77
706
650
1.
Introducing new requirements for drivers responsible
for transporting passengers and operating large mining
vehicles
2. Providing additional training for personnel responsible for
rail transport on the territory of PhosAgro production sites
3.
Installing monitoring devices and equipment in certain
vehicles to monitor and control the driving style
4. Granted access to automated monitoring of the location of all
4. Professional training for drivers of mining equipment,
including reviewing reasons for past accidents and learning
5.
accident-avoidance driving techniques
5. Renovating to certain road- and railways
mining equipment and personnel is for dispatchers
Installed new equipment to monitor levels of CO, NO2, CH4
and O2 at mining sites
6. Distributed new leaflets on workplace health and safety for
employees of the Apatit mine
66
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Health and safety review (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION PEOPLE REVIEW
We create value for our employees and other stakeholders
by investing in our people: PhosAgro aims to provide stable
employment, safe working conditions and fulfilling job
opportunities. We start at the primary school level and continue
to invest in our people throughout their careers with PhosAgro.
Our people are our most
important asset
Strategy highlights
Policy highlights
Our people are our most important asset:
without their hard work, we would not
be able to achieve our strategic goal of
creating shareholder value. Our recruitment
and retention efforts help ensure that we
have the right people for the job.
• We aim to maintain our reputation as an
employer of choice in the regions where
we work
• We use a KPI system to link executive
remuneration to priorities like health and
safety, as well as financial performance
• We strive to motivate our staff by
providing competitive wages, paying
close attention to the conditions at our
work sites and offering generous non-
monetary benefits
• We rely on a talent pipeline of staff with
the potential to take on leadership and/
or more technically challenging roles
to ensure our viability in the long term
• We help prepare future generations
of PhosAgro employees by supporting
school and university programmes that
encourage students to pursue STEM
studies
• We train our staff to prepare them
to better navigate our ever-changing
working environment
Our policy focuses on ensuring that
our staff remain healthy and properly
motivated. In the coming year, we plan
to reassess social benefits for the overall
PhosAgro Group, as well as analyse the
collective agreements of PhosAgro Group’s
main production facilities. Overall, our
policy priorities are as follows.
• We place an increased priority on
preventive health care for our young and
middle-aged employees who have been
with us for two or more years.
• We have begun moving toward
a standardised collective agreement with
our workers
• We aim to maximise the number of our
staff who participate in exercise and
sports programmes to improve both their
personal health and work productivity
• We have analysed our accident and
health insurance policies to develop
a single approach and unified criteria for
selecting providers
• We have revamped our recreational
offerings for employees and their
children
• We have worked to standardise the
social policies of our subsidiaries
HIGHLIGHTS
2.8%
OF OUR STAFF
PARTICIPATED
IN PERIODIC
PERFORMANCE AND
CAREER DEVELOPMENT
ASSESSMENTS UNDER
THE KPI SYSTEM
107
HOURS
OF TRAINING
PER EMPLOYEE
822
EMPLOYEES
TOOK PART
IN PROFESSIONAL
TRAINING PROGRAMMES
IN 2016 (DOWN FROM
908 IN 2015)
~700,000
TOTAL HOURS
OF TRAINING ATTENDED
BY PHOSAGRO EMPLOYEES
IN 2016 (COMPARED TO
>1 MILLION HOURS IN 2015)
7, 599
TRAINING COURSES
ATTENDED BY PHOSAGRO
EMPLOYEES IN 2016 (DOWN
FROM 8,342 IN 2015 DUE TO
HEADCOUNT REDUCTIONS)
THE DRIVER BEHIND
THE YEAR-ON-YEAR
REDUCTION IN TOTAL
TRAINING HOURS ATTENDED
WAS A 2% DECREASE
IN HEADCOUNT
68
69
STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com OUR EMPLOYEE
Headcount, average per year
Upstream & processing
division
2014
8,708
2015
7,375
2016
6,993
2.8%
Downstream
division
8,904
Storage
and distribution
Logistics Engineering
units
Other
532
75
425
989
19,633
8,136
8,420
89
346
611
963
17,520
86
342
671
633
17,145
Share of staff participating in periodic performance and career
development assessments
Managers
140
122
229
Male
Specialists
114
Workers
51
62
45
52
18
76
Female
6
share of men participating in
periodic performance and career
development assessments
3.3%
share of women participating in
periodic performance and career
development assessments
1.8%
EMPLOYEE PRODUCTIVITY
Upstream & processing division,
tonnes/person
Downstream division,
tonnes/person
1,350
1,189
969
850
893
705
System highlights
Executive remuneration
We introduced a KPI system in 2014,
which began by linking top executive
remuneration via a set of uniform
standards to priorities like health and
safety performance at the management
company and subsidiary levels. In 2016, we
expanded the KPI system to encompass all
PhosAgro subsidiaries, as well as additional
categories of staff.
HOURS OF TRAINING ATTENDED
Employee benefits
We strive to motivate our staff by providing
competitive wages, paying close attention
to the conditions at our worksites and the
quality of our employee dining facilities, as
well as by offering generous non-monetary
benefits like corporate medical, rest and
recreation programmes for employees and
their family members. Additionally, our
staff enjoy private pension plans, housing
programmes, corporate sport facilities and
numerous sporting and cultural events.
Communication and feedback
We have a multichannel communication
and feedback programme that allows
employees to address employment-related
or other issues. The formats include Q&As
in the corporate newspaper, town hall
meetings for staff and management and
an anonymous whistle-blower hotline,
allowing staff to choose from various
degrees of anonymity when deciding how
to raise an issue.
Total
1,306,647
Apatit
677,260
PhosAgro-Cherepovets
1,057,205
Per
employee
535
427
406
699,065
326,662
264,301
Group
average
174,766
477,568
272
233
157
280,796
437,640
459,086
141
142
304,238
61
2014
2015
2016
2014
2015
2016
Balakovo branch of Apatit
Metachem
75
152,101
61
62
47
67
50
89,267
95,069
39,646
31,284
18,962
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
2016
70
71
People review (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com External fraud
Internal fraud
6
Tenders
Working conditions
21
Other
31
39
Every complaint received via telephone,
email or regular mail is recorded in a
unified register, which also contains any
instructions from the Economic Security
Service and the results of investigations
conducted following a complaint. In 2016,
the Company adopted a new standard
governing the work of the hotline, and
placed information about the hotline in
relevant media. This led to an increase in
use of the hotline to submit complaints:
from just six complaints in 2014 to 41
in 2015 and 149 in 2016. The table to the
right contains information about the types
of complaints received in 2016.
Our employees also use the corporate
intranet for internal messaging, receiving
announcements, planning and accessing
informational resources.
Training and development
We rely on a talent pipeline of staff with
the potential to take on leadership and/
or more technically challenging roles
to ensure our viability in the long term.
Our focus on training and developing
our people also helps us hedge against a
potential shortage of talent in the future,
especially in areas where it can be difficult
to find candidates with the skill sets
that we need. One aspect of this that we
prioritise is including schools, universities
and our own staff programmes in our
recruitment and training initiatives.
62
PhosAgro Classes
Our PhosAgro Classes initiative encourages
school students to pursue STEM (science,
technology, engineering and mathematics)
studies. The programme’s annual budget
totals RUB 19 million.
High-Potential Graduates
We build upon the foundation laid by
PhosAgro Classes by partnering with
universities through our High-Potential
Graduates programme as an avenue
to better reach university students
interested in working at PhosAgro. We offer
programme recruits a competitive salary, as
well as relocation and housing support, and
assign them a mentor upon their arrival at
PhosAgro.
Workplace training
We use our Professional Training and
Development Centre to help our staff
prepare for changes, both external
(legislative/regulatory) and internal (related
to optimisation, changes to production or
business processes). The Centre helps run
our long-term HR initiatives, like PhosAgro
Classes, High-Potential Graduates and
the Staff Reserve programme, and holds
competitions for professional skills and
young managers.
Management development
This programme includes trainings and
development courses on the following
topics:
• Leadership
• Management skills
• Setting goals and objectives
• Organising and monitoring mentoring
programmes
• Time management
• Results-oriented work styles
• Situation analysis and decision-making
• Effective communications and
relationship management
Staff Reserve
PhosAgro relies on the Staff Reserve
initiative as a means of identifying talented
staff with the potential to expand their
roles and step into more senior positions,
and by providing additional training to help
them achieve these goals. The programme
includes management training courses on
personal and business skills like decision-
making, leadership and delegation, conflict
management, project management,
communication skills and staff mentoring.
Equal opportunity
We pride ourselves on being an employer
of choice in the regions where we
operate, and having an equal opportunity
programme as the cornerstone of our
reputation. We take a straightforward
approach to equal opportunity: we
strive to select the best person for each
role without regard to gender, sexual
orientation, religion, ethnicity or race.
We take seriously our obligations under
Russian federal and regional laws that
stipulate a business’s social responsibilities
and obligations to its employees. This
includes not using child or forced labour
and ensuring that our staff have the right
to exercise freedom of association and
collective bargaining.
How we measure success
To further develop our employees’ personal
and professional skills in 2017, we plan
to hold workshops on cross-functional
training, proactive thinking, change
management and time management.
We also plan to focus on our staff’s
professional development via the following
initiatives:
• A repair safety course for employees
of PhosAgro facilities, subsidiaries and
contractors
• A group training programme for key
users of the new Oracle system
• A training course for HSE staff
NUMBER OF WORKERS PARTICIPATING IN PROFESSIONAL TRAINING PROGRAMMES
NUMBER OF TRAINING COURSES ATTENDED
Total
2,156
Apatit
912
PhosAgro-Cherepovets
539
396
330
908
822
115
115
539
Group
average
227
206
2014
2015
2016
2014
2015
2016
Balakovo branch of Apatit
Metachem
378
143
164
327
254
213
Total
9,178
8,342
7,599
Group
average
2,295
2,086
1,900
Apatit
PhosAgro-Cherepovets
4,560
3,415
3,037
3,126
3,233
1,260
2014
2015
2016
2014
2015
2016
Balakovo branch of Apatit
Metachem
1,798
1,602
1,622
839
470
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
2016
2014
2015
72
157
2016
73
People review (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com TRAINING AND DEVELOPMENT
PhosAgro Classes
High-Potential Graduates
Oracle 12
Cross-functional training
Management streamlining
Other programmes
A total of 254 students took part in the
PhosAgro recruited 38 young specialists under
We prepared a training course for the Oracle
In an effort to build upon the managerial
In order to streamline our management
Other key training and development events in
PhosAgro Classes programme in 2016, all
the High-Potential Graduates programme
12 project group with the help of consultants.
skills of our project management staff, in
functions, we moderated a discussion among
2016 included:
of whom excel at, and are interested in,
in 2016. This brought to he total of 200
The programme included cross-functional
June 2016 we held the first session of our
our economic affairs staff and managers of
• A corporate seminar was held in February
studying chemistry, physics, mathematics and
graduates who have joined the Company
training and situational management. In
cross-functional training programme for
subsidiaries about new interaction models.
and March for about 40 employees from
computer science. The programme graduated
under this programme since its inception in
between each stage of training, participants
51 members of our staff. The courses were
As a result, new communications schemes
all business units with workshops on
132 students from five schools in 2016, 52%
2012. A total of 169 of these employees are
joined a moderated discussion to share
developed with the support of business trainer
were developed and a number of problems
implementing professional standards
of whom went on to join technical degree
still with PhosAgro today, pursuing careers in
lessons learned and plans for the upcoming
Maxim Dolgov of Sales Training International
regarding communication between
•
Staff from the corporate training centre
programmes with a potential career track
mineralogy, geology, hydraulic engineering,
session. Members of the management team
Russia. In mid-September, we conducted the
subsidiaries and the management company.
launched a continuous production
with PhosAgro. Another 17% were accepted
chemistry, thermal energy and electricity
joined the sessions as well.
second session, which covered management
More than 70 people took part in the
improvement training project. The first
into universities on sponsored placement
production, rail transport, open-pit and
programmes.
underground mining, and mine surveying.
Our annual goal remains to have 125
Of the programme participants still employed
participants join PhosAgro Classes in the five
with PhosAgro, a total of 27% had received
schools in five Russian cities where we run
promotions and/or been included in the Staff
the programme. We hope that 50% of these
Reserve as of December 2016, and many of
students will join PhosAgro by 2021.
them had successfully completed the projects
that they were entrusted with when they
joined the Company.
skills, and in December we held the final
discussion, which was facilitated by business
classes were held over the summer in
session on relationship management.
trainers.
Balakovo, after which it was expanded
to Cherepovets in December. In 2017, the
programme will be introduced at other
facilities, including Kirovsk and Volkhov
•
Several groups of employees took part in
the Business Engineer training programme
throughout the year
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People review (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com COMMUNITY INVESTMENT
REVIEW
PhosAgro implements social programs to promote sustainable
socio-economic development in regions where the Company
operates.
We devise our community
investment initiatives to maximise
our positive impact
Strategy highlights
System highlights
PhosAgro implements social programs
to promote sustainable socio-economic
development in regions where the
Company operates.The main principles for
external social investment are a targeted
approach, control over how funds are spent,
transparency and information disclosure,
cooperation and accountability.
Our strategic goals for 2016 and 2017
include:
• Support for education, science, culture,
art, education and spiritual development
• Support for healthcare, as well as
the promotion of a healthy lifestyle
and improvements in the moral and
psychological wellbeing of citizens
• Promote a patriotic, spiritual and moral
upbringing of children and youth
• Promote physical education and sports
(excluding professional sports)
• Social support and the protection
of citizens, including financial aid
for the poor, social rehabilitation of
the unemployed, disabled and other
individuals
• Promote volunteer activities
• Protect and maintain buildings, objects
and territories of historical, religious,
cultural or environmental significance,
including burial sites
PhosAgro actively cooperates with
representatives of the local communities
in which it operates, as well as with
representatives of federal, regional and
municipal authorities.
Our programmes are the result of
joint efforts to meet the needs of all
stakeholders and ensure compliance with
regulatory requirements.
We strive to conduct our activities in the
interest of future generations. This includes
upgrading and replacing old equipment
to minimise any harmful impact on the
environment.equipment to minimise our
impact on the surrounding environment.
Education Support Program
PhosAgro successfully implements a unique
multi-level educational support program.
It is distinctive in its integration of social
projects within a single programme that
covers all levels of education, from pre-
school to higher professional education,
with the possibility of subsequent
employment in the company. For children
and young people, projects include
Educated and Healthy Children of Russia
(“DROZD”), PhosAgro Classes and a project
supporting vocational education.
Educated and Healthy Children of Russia
aims to combine quality education,
vocational guidance and physical training
for full-fledged spiritual and moral
development, as well as improving the
health of the younger generation.
In 2013, the DROZD initiative was
expanded into the PhosAgro Classes
programme which runs in the areas
where we operate. Unlike ordinary
comprehensive schools, the programme
provides for more in-depth study of
physics, mathematics, chemistry, biology
along with additional lectures in career
planning, economics, management, ethics,
and social responsibility. PhosAgro
Classes also cover the basics of corporate
culture, as well as laboratory research in
physics and chemistry in the facilities of
leading universities. The PhosAgro Classes
programme acts as a stepping stone
to Russia’s leading science and technical
universities, after which most participants
find work at either PhosAgro or other
leading Russian companies.
DROZD also helps promote sports, fitness
and tourism. PhosAgro supports the idea
of a healthy lifestyle by financing sports
events, clubs and facilities in the regions
where we are present. Our programmes
range from children’s activities
to competitive sports and includes
outreach to children from underserved
villages. The sports initiatives help serve as
a pipeline to funnel young athletes into the
regional competitive sports programmes,
where many have gone on to participate in
Russian and European championships.
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STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com PhosAgro’s Educated
and Healthy Children
of Russia (DROZD)
initiative provides
thousands of children
with opportunities in
education, sport, and
vocational training,
helping prepare our
future generations for
success
CASE STUDY
Our Favourite Cities initiative
Our Favourite Cities is PhosAgro’s award-winning initiative aimed at
creating a quality environment for growth. We have partnered with
regional and municipal governments, NGOs, charities, community
organisations, and even founded our own NGOs to reach our
programme goals. Our target audience includes: local government
organisations; civil society; the Company stakeholders, employees,
and their families; and the more vulnerable members of our society.
The programme covers Russia’s Murmansk, Vologda, Saratov and
Leningrad regions.
We determine cities’ needs, including any partnership or funding
requirements, by conducting sociological surveys, questionnaires,
and interviews, as well as by meeting with legislators and
representatives of local and regional governments. We then create
a project or event to address the issue or request, and add it to the
programme and funding plans. The programme managers monitor
and report on implementation. Where necessary for project
implementation, we may select an NGO to partner with or create an
NGO specific to the project.
PHOSAGRO COMMUNITY INVESTMENT PROGRAMMES AND INITIATIVES
Programme phases
Programme goals
1. Research pressing social problems
1. Create modern social infrastructure in the
2. Establish necessary partnerships and NGOs
cities where we live and work, including
3. Monitor project implementation and take
sports and recreation facilities, roads,
corrective action
health care centres, etc.
4. Perform annual summary and new project
search, periodic project reviews, interim
project results
5. Report programme results to stakeholders
and expand geography of successful
projects
CHILDREN’S EDUCATION AND HEALTHY
LIFESTYLES
CULTURAL
ENRICHMENT
CARING FOR ELDERLY
AND NEEDY
OUR FAVOURITE
CITIES INITIATIVE
SPIRITUAL
ENLIGHTENMENT
SPORTS
• Educated and Healthy Children of Russia
• Apatit corporate museum
• Volunteer centres in the Murmansk region
• Partnering with cities and government
• Providing ongoing charitable support for the
• Russian Olympians Foundation
(DROZD) NGO
• PhosAgro-Cherepovets corporate museum
• Harmony recreation centre in Cherepovets
organisations
renovation and construction of Orthodox holy
• Russian Federation of Rhythmic Gymnastics
• PhosAgro Classes programme
• Apatit’s Balakovo branch corporate museum
• Volleyball Without Borders project in
• Supporting medical institutions
places in Russia and abroad
• Russian Chess Federation
• Supporting colleges and universities
• Metachem corporate museum
Cherepovets
• Building and renovating sports centres
• Organising Patriarchal charter flights for
• Champion Foundation
• Apatit CEO’s grant for youth education, cultural
• Landscaping and caring for monuments
• Providing financial assistance to World War II
• Repairing and renovating educational and
pilgrimages to the Italian city of Bari for
• Saint Petersburg Judo Federation
enrichment and sport
• Supporting the Spasskaya Tower festival,
veterans
training institutes
St. Nicholas the Miracle-Maker’s Saint’s day
• Severyanka women’s volleyball team,
• Installing children’s playgrounds and sports
including the participation of employees and
• In the Name of Good charity foundation
• Putting on citywide concerts
celebrations
Cherepovets
areas in residential neighbourhoods
their children
• Renovating and landscaping city parks, squares
• Restoring the tradition of factory chapels:
• Proton-BAES volleyball club, Saratov
KHIBINSK START INITIATIVE
HEALTH CARE
• Khibinsk initiative movement
• Supporting the Bakulev Cardiology Research
• Khibinsk business incubator NGO
and Cardiovascular Surgery Centre
and pedestrian areas
• Repairing roads
began construction of four churches on the
• Avtodor basketball club, Saratov
premises of the Company’s sites in Kirovsk and
• Turbine speedway club, Balakovo
Cherepovets
• Russian Cross-Country Skiing Federation
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Murmansk Region
Vologda Region
Saratov Region
Leningrad Region
• Within the framework of a public-private partnership with
•
PhosAgro is one of Vologda Region’s largest
One of the priorities of the Balakovo branch of Apatit is investment
•
PhosAgro finances reonvations in the orphanage, palace of
the Government of the Murmansk region, a project is being
taxpayers and invested RUB 63 billion in the region
into the region’s social infrastructure, including:
culture, schools and pre-schools in Volkhov. The Company
implemented to develop a tourist cluster in the city of Kirovsk.
by modernising its production facilities and repairing
•
Investing in the region’s social infrastructure, including repairing
has allocated funds to renovate public spaces around Volkhov,
The programme aims to support the social and economic
local infrastructure. PhosAgro is also involved in
the local health resort.
and to restore the World War II memorial at the mass grave in
development of the Kirov-Apatity region, to create a comfortable
repairing schools, pre-schools and sports facilities,
• At the request of legislators from the Bykov Ostrog region, the
Novooktyabrsk.
living environment and to reduce Kirovsk’s mono-industry
as well as the local cultural centre, college and
Company is helping repair roads using gypsum, a production
dependence.
university.
Within the framework of the project, the modern ski resort Big
• Over the past eight years, the Company has built
Woodyavr has been established and has been recognised as the
housing for more than 1,700 of its employees in one
best resort in Russia as well as being named the best snowboard
of the suburbs of Cherepovets. At the request of the
park twice. The airport of Apatity has been modernised. Modern
local community, it has also funded the construction
tourist infrastructure is also being created, including hotel and
of the new Church of St Athanasius and Theodosius
by-product.
• The DROZD-Balakovo club has launched the “DROZD-village”
programme, and has organised lessons for conscription-age
men in hand-to-hand combat and firearms training.
• Apatit’s Balakovo branch has helped restore several of the
city’s World War II memorials, as well as the open-air military
recreation complexes, a children’s belt lift and a new training
of Cherepovets, which is the city’s first new religious
equipment museum.
slope, as well as a ski piste at the Tirvas sanatorium.
centre since the fall of the Soviet Union.
This is the highest-altitude resort in the North-West of Russia.
•
PhosAgro has helped sponsor various municipal
The wide, European-quality ski tracks are FIS certified and meet
events, including an annual religious festival as well as
the requirements of both professional and beginner alpine skiers.
an annual rock music festival.
The Russian freestyle team trains here.
•
In honour of the 70th anniversary of the end of
The total length of the trails exceeds 35 kilometres, and the
World War II, the Company helped the Perspectiva
Khibiny Start project
number of ski routes of various complexity has increased to 28.
Foundation repair a tank that fought in the war
In 2015, the Khibiny Initiative was established as a community movement.
The project focuses on two key areas of activity:
•
Kirovsk’s infrastructure was also updated under the ski resort
and place it as a monument to the victory in a
project, including the airport, regional hospital, museum and
Cherepovets park.
Active citizens, deputies of the city council of Kirovsk and the youth
organisation of Apatit participated in its creation.
exposition hall, city parks, and heating and water distribution
networks.
• Thanks to the development of the Bolshoy Woodyavr ski resort,
tourism and business activity in the tourism and related sectors
has been growing for two years in a row. With the goal of
decreasing its “mono-industry” dependence, the city was given
TOR status (territory for advanced development). This will attract
around RUB 300 million of investments into the economy of
Kirovsk, and create more than 500 new jobs. Tourist traffic to the
city is expected almost double.
>3.2 BLN RUB
PHOSAGRO SPENT TO
HELP THE REGIONAL
GOVERNMENT BUILD
A SKI RESORT AS AN
ANCHOR FOR TOURISM IN
MURMANSK REGION
63 BLN RUB
PHOSAGRO INVESTED
IN THE REGION BY
MODERNISING ITS
PRODUCTION FACILITIES
AND REPAIRING LOCAL
INFRASTRUCTURE
1.
Teaching the basics of entrepreneurial activity; consulting on issues like
The main task of the Khibiny Initiative is the formation of the economic
marketing, personnel management, planning, organisation and control,
basis of the city through combining efforts and opportunities of the city,
management of financial and economic activities, accounting, tax
regional and federal authorities with the initiative of citizens and support
systems, business-related legal issues; further consulting services to assist
of Apatit. Through such cooperation, key issues facing the city’s residents
in the development of business plans, business models, investment
can be solved.
projects..
To reduce the city’s unemployment rate, the Khibiny Initiative proposed
the Khibiny Start project. Its main objective is the formation of
2.
The Khibiny Start grant contest focuses on supporting young
a comfortable environment for the development of self-employment
entrepreneurs. The “Do Business” business plan contest is conducted out
and small business.
to support existing entrepreneurs. One of the most important criteria for
obtaining a grant is the creation of at least one workplace.
The Khibiny Business Development Centre (HCRB), an autonomous
non-profit organisation, was established to manage the project. It acts
In 2016:
as an operator for the development and support of small business.
The project is carried out within the framework of a public-private
partnership with local government and regional authorities.
•
•
•
27 business projects were implemented
45 jobs were created
SMEs paid a total of RUB 400,000 in taxes
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Community investment review (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com BUSINESS CONDUCT REVIEW
PhosAgro’s business conduct framework
is based on global best practice
CORPORATE POLICIES
FINANCIAL & ASSET
MANAGEMENT
CODE
OF ETHICS
POLITICAL
NEUTRALITY
CHARITY
POLICY
ANTI-CORRUPTION
POLICY
CONFLICTS
OF INTEREST
STAKEHOLDERS
INVESTMENT
AND FINANCE
COMMUNITY
REGIONAL
GOVERNMENTS
& LOCAL
COMMUNITIES
EMPLOYEES
& TRADE UNIONS
THE GENERAL
PUBLIC AND
MEDIA
BUSINESS
PARTNERS
Policy highlights
PhosAgro’s business conduct policy
framework and management procedures
are based on best practice standards.
Highlights of this framework include:
• Our Government Relations Policy dictates
that PhosAgro’s relationships with local,
regional and federal governments must
be legal and ethical, and based on
principles of fairness and partnership. In
accordance with this policy, interactions
involving government bodies should
only relate to PhosAgro’s strategic or
operational matters.
• Our Conflicts of Interest Policy
establishes rules for identifying and
addressing potential conflicts of interest.
• Our Anti-corruption Policy states that
our directors and senior management
must adhere to high standards and set
an example for the entire business.
It commits all employees to a zero-
tolerance approach to corruption.
• Our Code of Ethics specifies the rules
for relationships with stakeholders
ranging from employees, shareholders,
government officials and NGOs
to customers, suppliers and other
business partners. It commits PhosAgro
to engaging with stakeholders in a fair
and proper manner.
• PhosAgro’s Charity Policy commits us
to supporting sustainable development
in the regions where we operate.
PhosAgro’s charitable giving is based
on the following principles: it must
address a clear need and be used for
clear purposes, the use of funds is
closely monitored, and transparency
and disclosure of information must
be ensured. We do not engage in
charitable giving to representatives
of the Government, to political parties
All employees receive regular
training and undergo testing on
preventing corruption
or movements, or to commercial
organisations. This policy sets priority
areas for charitable giving, including
education, sport, health and well-being,
and vulnerable members of society such
as veterans and the elderly.
• PhosAgro does not participate in
political activities or provide financial
support to political organisations.
System highlights
• PhosAgro has in place a whistle-blowing
procedure that includes a telephone
hotline. All employees are provided with
information about the purpose of the
hotline and when it should be used (for
example, to confidentially report matters
such as theft, corruption, reputational
risks, conflicts of interest, legal violations
and environmental, health and safety
incidents). PhosAgro’s Chief Executive
Officer is responsible for the allocation
of internal resources to document and
investigate issues reported via the
hotline.
• All employees receive regular training
and undergo testing on preventing
corruption as part of a company-wide
process. This exercise aims to build an
understanding of the importance of
preventing corruption and of maintaining
a culture of corruption avoidance
throughout the business.
• PhosAgro maintains a Commission
for Adherence to the Code of Ethics
and Regulating Conflicts of Interest.
Commission members are appointed
by the Chief Executive Officer and are
responsible for identifying potential
conflicts of interest and assisting with
resolution, implementing behaviour
standards and creating an environment
that supports adherence to the Code of
Ethics and the Conflicts of Interest Policy.
Activities in 2016
In 2016, the Internal Audit service conducted 14 audits including
consultations for management & risk management efficiency
evaluation. The audits looked at areas like capital investments,
domestic sales, energy consumption, environmental compliance,
industrial safety, as well as audits of risk management activities
involving external consultants.
INTERNAL AUDIT SERVICE ACTIVITIES IN 2016 INCLUDED:
14
AUDIT PROJECTS INCLUDING CONSULTATIONS FOR
MANAGEMENT & RISK MANAGEMENT EFFICIENCY EVALUATION
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STAKEHOLDER ENGAGEMENT
We create long-term value by building solid and sustainable
relationships with our stakeholders. PhosAgro aims to engage
in a strategic way with the groups that are affected by our
business or may impact it. Our ability to understand and respond
to stakeholders’ evolving expectations helps us to create
a sustainable and strong company.
INVESTMENT AND FINANCE COMMUNITY
Why we engage
EXPLAIN
PHOSAGRO’S
STRATEGY AND
PROGRESS WE HAVE
MADE TOWARDS
ACHIEVING OUR
GOALS
How we engage
• Roadshows
• One-on-one meetings with investors
• Capital Markets Day
• Investor conferences
• Conference calls on financial results
• Ongoing engagement with analysts
• Regulatory press releases
• AGM and formal reporting
• Corporate website
• Provision of a dedicated in-house
investor relations team and the support
of knowledgeable professional advisory
services
• Three independent non-executive
directors on the Board of Directors
ensure that the interests of public
shareholders are represented
SUPPORT LIQUIDITY
AND SHARE PRICE
BY ATTRACTING
NEW INVESTORS TO
THE COMPANY
SUPPORT A POSITIVE
PERCEPTION OF
OUR CORPORATE
GOVERNANCE
SYSTEMS
PROMOTE
KNOWLEDGE
OF THE LONG-
TERM POTENTIAL
AND VALUE OF
THE COMPANY
MAINTAIN
ACCESS TO
A WIDE ARRAY
OF CAPITAL
MARKET
INSTRUMENTS
USE DIALOGUE AS
AN OPPORTUNITY
TO OBTAIN NEW
IDEAS AND IDENTIFY
BEST PRACTICES
2016 ENGAGEMENT ACTIVITIES
• Conducted four non-deal roadshows with Company
management in key financial market centres like London, Paris,
Zurich, Geneva, Stockholm, Copenhagen, Helsinki, New York,
Boston, etc.
• Organised 30 investment conferences and forums
• Organised four conference calls and webcasts for analysts and
investors to discuss the Company’s financial results
• Disclosed 40 press releases via UK regulatory news service
• Disclosed 181 Russian Federation mandatory information press
releases via the corporate information disclosure centre and
Interfax
How we create our value
We continue to implement a generous
dividend policy, and paid RUB 28 billion or
RUB 72/GDR in dividends in 2016
We were included in MSCI Russia index
from May 2016, and significantly increased
the GDRs’ liquidity while ADTV (average
daily trading volumes) grew by more than
75% YoY and reached almost USD 6mn per
day in 2016
We have maintained an investment-grade
credit rating from Standard & Poor’s thanks
to our conservative financing policy and
solid cash flow generation capacity
84
85
4
30
NON-DEAL ROADSHOWS
TO GLOBAL FINANCIAL
CENTRES
INVESTMENT
CONFERENCES AND
FORUMS
11
INDUSTRY
CONFERENCES
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION REGIONAL GOVERNMENTS & LOCAL COMMUNITIES
Why we engage
TO PROMOTE
SOCIO-ECONOMIC
DEVELOPMENT IN
REGIONS WHERE
WE WORK
TO ADDRESS
COMMUNITY NEEDS
AND SOCIAL OR
ENVIRONMENTAL
CONCERNS
TO SUPPORT
THE HEALTH AND
WELL-BEING OF
THE COMMUNITIES
WHERE WE OPERATE
TO MAINTAIN A DIALOGUE AROUND
GOVERNMENT POLICIES OR
POTENTIAL REGULATORY CHANGES
THAT MAY AFFECT OUR BUSINESS
TO ENSURE THAT
WE ARE A GOOD
NEIGHBOUR
How we engage
• Implementing environmental
programmes
• Funding medical treatment for
employees and residents in the regions
where we operate
• Developing cooperation agreements with
regional governments based on what is
most appropriate for the region
• Meetings with government and
community representatives
• Supporting local social and sporting
organisations
• Sponsoring PhosAgro Classes to support
chemistry education for school-aged
children
• Investing in universities and technical
colleges that grant degrees that could
lead to careers in PhosAgro
• Introducing university scholarship and
recruitment programmes aimed at
encouraging the study of chemistry
2016 ENGAGEMENT ACTIVITIES
• Organised visits of specialists from the Bakuleva Cardiological
Centre to regions where PhosAgro operates to conduct medical
examinations and provide treatment for PhosAgro employees
and local residents
•
Signed and implemented agreements with regional
governments where PhosAgro has operations
•
Signed agreement with the Russian Federation Ministry of
Economic Development and the Vologda region to support a
programme for projects in the areas of industrial and agricultural
biotechnology
•
PhosAgro-Cherepovets signed an agreement on cooperation
with the Ministry of Natural Resources, the Federal Service for
Environmental Monitoring and the government of Vologda
region as part of the Year of the Environment
•
Signed plan for renovation of roads near Bykov Ostrog using
phosphogypsum from PhosAgro production sites
•
Signed agreements with the Proton volleyball club, Avtodor
basketball club and the Turbina speedway racing club
•
Started construction of a rehabilitation centre in Cherepovets
as part of the development programme for the Cherepovets
Chemical and Technical College
•
Signed agreement with the Vologda region regarding
modernisation of the vocational education system and the
supply of professional personnel for the chemicals sector
How we create our value
We help ensure that the local communities
that supply the workforce for our
production sites are healthy and well-
educated
We pay taxes into local and federal budgets
We help improve comfort and quality of
life of community residents by cooperating
with local and regional governments in
priority areas of development
418 MLN RUB 14.5 BLN RUB
INVESTED IN
LOCAL EDUCATION
INITIATIVES
TAXES PAID INTO LOCAL,
REGIONAL AND FEDERAL
BUDGETS
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Stakeholder engagement (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION EMPLOYEES & TRADE UNIONS
Why we engage
ESTABLISH
A CORPORATE
CULTURE THAT
IS ALIGNED WITH
PHOSAGRO’S
STRATEGIC GOALS
ENSURE EMPLOYEE
MOTIVATION IS
APPROPRIATE AND
EFFECTIVE
PROVIDE MEANINGFUL
SOCIAL GUARANTEES
FOR CURRENT AND
RETIRED EMPLOYEES
MAINTAIN
CONSTRUCTIVE
RELATIONSHIPS
WITH TRADE
UNIONS AND
EMPLOYEES
RESPONSIBLE AND
EFFECTIVE USE OF
HUMAN RESOURCES
PROVIDE RELEVANT
PROFESSIONAL
DEVELOPMENT
OPPORTUNITIES FOR
OUR EMPLOYEES
How we engage
2016 ENGAGEMENT ACTIVITIES
• Trade unions engaged in development of PhosAgro’s
• The Ruskhimprofsoyuz trade union held a meeting of its
workplace health and safety programmes
Presidium in Kirovsk, hosted by the PhosAgro-Apatit trade union
• Collective agreements negotiated with trade unions
and the Minudobreniya Association of Trade Unions
incorporating conditions and compensation for
employees (usually for three-year terms, entered
into with each of our production entities)
• Collaboration with trade unions including sporting
and cultural events, joint participation in workplace
health and safety committees, nomination of
workplace health and safety representatives and
participation in health and safety workshops
• Employee development programmes, including our
Staff Reserve Programme
• Employee surveys, presentations, bulletin boards,
intranet and corporate newspapers
• Meetings with general directors of production sites
and management responsible for social and HR
issues together with trade union representatives
• Whistle-blower hotline: dedicated email addresses
for complaints, telephone hotlines for inquiries
about social issues, reporting violations
•
Signed collective agreements negotiated with trade unions at
PhosAgro-Cherepovets (June 2016), Apatit (March 2016), the
Balakovo branch of Apatit (December 2016) and Metachem
(December 2015)
• Trade unions, with the support of PhosAgro, arrange the
following events annually:
– PhosAgro Stars Festival
– Company-wide sporting competitions
– Professional skills competitions (including welding, lathe
turning and electrical work)
– Professional development workshops on topics like
workplace health and safety, and management skills
• General directors and HR personnel at production facilities,
together with trade unions, regularly meet with employees;
every corporate newspaper provides contact information for
feedback, and in the event of a violation of Company rules,
employees are encouraged to call dedicated hotline numbers
How we create our value
By providing fulfilling careers that reward,
recognise, motivate and develop our
people, we create a sustainable business
that is a global leader in its sector
We aim to deliver training programmes
to help employees meet their personal
career goals and benefit the Company.
For more information, see the People
review section of this report
11 .4 THS 72.8% >
1,000
EMPLOYEES ARE
UNION MEMBERS
AVERAGE UNION
MEMBERSHIP PER
TEAM
INSPECTIONS CONDUCTED
BY AUTHORISED WORKPLACE
SAFETY MONITORS
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Stakeholder engagement (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION THE GENERAL PUBLIC AND MEDIA
Why we engage
TO ENHANCE PUBLIC
PERCEPTION AND
UNDERSTANDING OF
THE COMPANY
INFORM STAKEHOLDERS
ABOUT THE COMPANY’S
PLANS, PERFORMANCE AND
PRIORITIES
PROMOTE UNDERSTANDING
OF THE ROLE OF MINERAL
FERTILIZERS IN SUPPORTING
GLOBAL FOOD SECURITY
How we engage
2016 ENGAGEMENT ACTIVITIES
• Interaction with experts and public
•
Published four weekly newspapers at production sites and monthly corporate
How we create our value
We protect the reputation of our Company
and make sure the public is informed about
our activities
organisations
• Media engagement, including regular
meetings and briefings with journalists,
access to senior management, site tours
for press and press releases
• Attendance at public hearings
• Company plant tours, exhibitions and
congresses
• Corporate website, social media
newspaper
•
PhosAgro and its subsidiaries published over 230 press releases
• Domestic and international media mentioned PhosAgro over 20,000 times
•
PhosAgro’s CEO conducted regular meetings and interviews with Russian and
foreign journalists, providing expert comments on important Company and
industry events to leading publications including the Financial Times, Bloomberg,
Reuters, The Wall Street Journal, Forbes, CNBC, Business FM, Vedomosti,
Kommersant, Interfax, RBC, RIA Novosti, TASS, Rossiskaya Gazeta and Izvestia
The CEO:
• Held press conferences as part of various domestic and international events,
including the Saint Petersburg International Economic Forum, the World
Economic Forum in Davos, the International Fertilizer Association conference,
the Sochi International Economic Forum, the Russo-German Natural Resources
Forum, VTB’s Russia Calling! Investor Conference and other industry and
investment conferences
•
Protected the Company’s reputation and informed the public about its ongoing
activities
•
Participated in international and regional industry conferences
• Maintained membership in Russian and international professional associations
(A. Guryev was elected President of the Russian Association of Fertilizer Producers
and was reappointed as the Vice President for Eastern Europe and Central Asia of
the International Fertilizer Association)
• Organised grant ceremony for talented young scientists as part of the PhosAgro/
UNESCO/IUPAC Green Chemistry for Life programme
• Organised PR support for a variety of corporate events, awards and investments
during the year
90
91
230
PRESS RELEASES
PUBLISHED
71
MEDIA EVENTS
ORGANISED
>20THS
PUBLICATIONS
IN RUSSIAN AND
INTERNATIONAL PRESS
Stakeholder engagement (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION BUSINESS PARTNERS
Why we engage
CONSUMER
HEALTH
How we engage
• Contracts and agreements
• Conferences
• Joint submissions on issues affecting our
industry
• Support for international applied
research and sustainability projects
• Negotiations with consumers,
publications and distribution of
advertising materials
• Membership in industry associations
UNDERSTANDING AND
CONTRIBUTION TO
MAJOR ISSUES AFFECTING
THE FERTILIZER
AND MINING INDUSTRIES
2016 ENGAGEMENT ACTIVITIES
• Attended 15 international and local industry conferences (4 IFA,
3 CRU, 4 FMB Argus, 2 IPNI, 2 other)
• Hosted a conference to award the first grants given out under
the PhosAgro/UNESCO/IUPAC Green Chemistry for Life
programme sponsored by PhosAgro to support promising
projects by young chemists
•
Participated in domestic and international professional
associations
CREATING A BUSINESS
RELATIONSHIP BUILT ON
TRUST AND RESPECT
MUTUAL UNDERSTANDING
OF OBLIGATIONS AND
EXPECTATIONS OF
THE RELATIONSHIP
How we create our value
We are a reliable partner and a sought-
after client within our industry
We work with our peers to ensure that the
industry’s voice is properly represented
around the world
We support scientific research to help
develop “green chemistry” technologies,
including in the field of crop nutrients
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93
Stakeholder engagement (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FARMERS
Why we engage
TO MAINTAIN A DIALOGUE WITH
OUR CUSTOMERS AND ENSURE
WE OFFER THE PRODUCTS THEY
NEED
EDUCATE FARMERS ABOUT
THE BENEFITS OF PHOSAGRO’S
CONTAMINANT-FREE
PHOSPHATE-BASED FERTILIZERS
PROMOTE RESPONSIBLE AND SUSTAINABLE USE OF
FERTILIZERS IN ORDER TO ENCOURAGE FARMERS NOT TO
INTRODUCE HARMFUL ELEMENTS INTO THE FOOD CHAIN
WITH LOW-QUALITY PHOSPHATE-BASED FERTILIZERS
How we engage
• In our domestic market:
— through feedback from our
distribution network, which works
directly with Russian farmers and
agricultural holdings
• International markets:
— establishment of our own trading
operations
in priority markets, bringing us closer
to farmers
— membership in industry organisations
like the International Plant Nutrient
Institute and the International
Fertilizer Association
• Agreements signed with leading
scientific research institutes in Europe
(Wageningen in the Netherlands and the
University of Milan) to conduct extensive
research that will assess the impact on
the quality of crops and soil of using
almost entirely cadmium-free fertilizers
produced by PhosAgro. The tests will be
run in different geographical locations,
as well as for different types of crops,
and will include a direct comparison with
the traditional types of fertilizers used in
each selected location
2016 ENGAGEMENT ACTIVITIES
•
Participated in 55 domestic and international meetings,
seminars, exhibitions, conferences and forums dedicated
to agriculture and/or fertilizers
• Began conducting «Field Day» seminars for agricultural
cooperatives, famers and agronomists
•
Introduced customised recommendations for fertilizer
application based on region, crop, soil and other conditions
• Gave out sample products to introduce farmers to new grades
of fertilizers
•
Promotion of responsible application of mineral fertilizers for
sustainable farming that minimises environmental impact.
•
Launched new grades of PKS, as well as NPK and NPS fertilizers
containing micro-elements (boron and zinc)
• Opened new sales offices in Biarritz (France) and Hamburg
(Germany), to enhance our ability to work directly with farmers
in our priority export markets
• Cooperating with IPNI to develop recommendations for
application of phosphate-based and complex fertilizers for soy,
wheat, corn and sugar beets in order to provide farmers with
recommendations in accordance with 4R Nutrient Stewardship
principles
How we create our value
Our strategy to 2020 aimed
at bringing us closer to farmers
We offer customers 35 fertilizer grades
after introducing two new PKS grades and
one new NPS grade in 2015.
We continue investing in further enhancing
our product offering
Our fertilizers have one of the
lowest levels of impurities due
to the exceptionally high quality
of our phosphate rock, meaning
it is more effective
We provide information about the positive
effects of phosphate-based fertilizers on
crop output and their important role in
global food security
55
2
6
FERTILIZER AND/OR
AGRICULTURE SECTOR
EVENTS ATTENDED
NEW SALES
OFFICES OPENED
IN EUROPE
TOTAL NUMBER OF TRADING
OFFICES OUTSIDE OF RUSSIA
IN PRIORITY EXPORT MARKETS
94
95
Stakeholder engagement (continued)PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION MANAGING OUR RISKS
RISK MANAGEMENT SYSTEM
Board of Directors
• Has overall responsibility for management of
financial and non-financial risks
• Establishes and monitors performance of risk
management systems
• Holds management accountable for
implementation of risk management system
Risk Management
Committee
• Carries out regular assessment of the risk
Audit Committee
• Has oversight responsibility for the finance
Risk Commission
• Reviews the status of risk management
function
• Evaluates the effectiveness of risk
management system and principles
• Provides recommendations to the Board on
management measures
• Provides recommendations to the Board
changes and improvements to the financial
on changes and improvements to the
risk management system
financial risk management system
Internal Audit
Department
• Carries out regular assessment of the
Risk Management
Department
• Facilitates work across the Company’s
Company’s internal control and risk
divisions to identify and assess risks, as well
management systems
as develop programmes to manage and
• Oversees compliance of PhosAgro’s financial
address risks
Executive management
(CEO and Management
Board)
• Oversees implementation of, and
adherence to, risk management policies
and economic operations with Russian
• Provides PhosAgro employees with
• Monitors and manages of risks relevant
legislation and the Company’s Charter
methodological and consultative support on
to job function
• Develops recommendations for the Audit
issues related to risk management
• Carries out risk identification and
Committee and the Board of Directors on
• Organises risk management training
reporting
strategic changes to the risk management
• Performs operational risk management
Impact
high
RISK MAP
Strategic risks
• Risk of inadequate strategic planning
1
2
•
Social and human resources
Production risks
• Risks in the production process
4
• Risks related to occupational health and
3
industrial safety
5
•
Environmental risks
Operational risks
6
•
7.1
• Risks of inefficiency and infringement of
Project risks
business processes (key risk)
7.2
• Taxation risks (key risk)
• Risks in the field of information security
8
medium
• Risks in the area of economic security
9
Regulatory risks
10
• Compliance with legal and regulatory
requirements
11
• Corruption
Reputational risks
12
• Reputational risks
Financial risks
13
• Credit risks
14
• Currency risks
15
• Marketable goods
low
Probability
4
6
15
1
2
7.1
7.2
3
8
5
10
13
14
9
11
12
Please see the full
description of each risk in
the table on pages 100–105
low
medium
high
In 2016, PhosAgro ensured the effective
functioning of its risk management
system by identifying and assessing
risks in a timely manner and developing
and implementing measures to manage
those risks. Senior management devoted
significant attention to managing key
risks that have a high impact and a high
probability. The Board of Directors reviewed
information on managing the Company’s
key risks on a quarterly basis.
In 2016, the Company continued to develop
its risk management system:
• At the management level, a Risk
Commission was formed that is
responsible for the regular review of
the status of risk management and
the effectiveness of risk management
measures. The Commission includes
managers responsible for key functions
within the Company. The Commission is
headed by PhosAgro’s Chief Operating
Officer.
• A declaration and provision on
PhosAgro’s risk appetite were approved
by the Board of Directors. Risk appetite
establishes the level of risk that is
acceptable in terms of achieving the
Company’s goals and facilitates effective
decision-making while taking risks
into account.
• The Company’s bylaws establishing a
unified methodology and procedure for
cooperation and responsibility regarding
risk management were updated.
No significant changes were made to the
Company’s corporate governance system
in 2016 overall as a result of changes
to the risk management system. The Risk
Management Committee coordinates issues
related to risk management on behalf of
the Board of Directors, and both the Risk
Commission and the Risk Management
Department coordinate risk management
on behalf of Company management.
The Director of the Risk Management
Department reports operationally to the
CEO and functionally to the chair of the
Board’s Risk Management Committee.
At the end of 2016, an independent
external evaluation of PhosAgro’s risk
management system was carried out, which
confirmed that it was at the level of other
leading Russian companies. In 2017, the
Company plans to maintain the effective
functioning of its risk management system.
The risks outlined in this report that may
impact the Company do not constitute
an exhaustive list. The report aims only
to identify the key risks.
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC RISKS
PRODUCTION RISKS
Risk of inadequate strategic
planning (key risk)
Risk of inadequate strategic planning associated
Social and human resources
(key risk)
Social and human resources risks are those
Production risks
(key risk)
Risks in the production process are negative
Workplace health and safety
risks (key risk)
Workplace health and safety risks are related
Environmental risks
(key risk)
Environmental risks cover the occurrence of
with the adoption of an incorrect strategic decision
associated with the hiring, development and
events of a technical/industrial nature or naturally
to injury, occupational illnesses, accidents and
potential damage to the environment as a result of
and associated management decisions, resulting
retention of employees, as well as risks in relations
occurring events that lead to disruptions in the
incidents at hazardous production facilities, as well
the Company’s activities.
from an erroneous assessment of internal and
with local communities and the risk of adverse
production process: downtime of production
external factors that have an impact on the
social situations in regions of operation.
equipment, outages, incidents and accidents at
Company’s prospects for development and its ability
to achieve its strategic objectives.
Risk level
Impact
• Failure to reach the target values of key strategic
indicators (assessment adjusted in connection
with the updated strategy until 2020)
• Loss of competitive advantages associated
with the level of technological development
of production and the constraints of external
infrastructure
Measures for minimising risk
In 2016, an updated version of the Company's
strategy until 2020 was approved by PhosAgro's
Board of Directors, while preparation of
the Company's strategy until 2025 continues.
There is a system in place that monitors both
internal and external factors that could have
an impact on implementation of the strategy.
PhosAgro also carries out analysis comparing best
industry practices to the practices it employs, or
plans to employ, to assess costs and benefits in
order to facilitate optimal decision-making.
production sites and production infrastructure
facilities, failure to meet planned production
volumes.
• Discrepancies between the number of
staff members and their qualifications and
the Company’s needs
• Unscheduled downtime, accidents and incidents
at production facilities, the loss of production
output, setbacks in economic indicators, damage
to, or loss of, equipment
• Unscheduled downtime, accidents and incidents
at facilities related to energy infrastructure
PhosAgro carries out independent and joint
programmes aimed at attracting talented
young specialists, including from other
regions, developing employees’ professional
competencies and increasing employee
motivation to ensure long-term retention.
PhosAgro aims to operate all types of equipment
without breakdowns or unplanned stoppages,
and to take steps to limit the length of unplanned
stoppages when they do occur. With this aim in
mind, the Company invests in the construction
of new equipment and the upgrading of existing
equipment, schedules preventative maintenance
of equipment and major overhauls, while using
back-up equipment and creating a reserve
of components, accessories and spare parts.
A programme to boost the quality and reliability
of repair work carried out by suppliers is in place.
Insurance covers the Company’s dangerous
production facilities and property.
as risks associated with discrepancies between the
workplace health and safety elements of the risk
management system and legal requirements.
• Occupational injuries, complete or partial loss
• Non-compliance with established regulations
of the capacity to work (assessment adjusted to
reflect risk statistics for 2016)
regarding the impact on various components of
the environment
PhosAgro ensures workplace health and safety
in compliance with relevant legislation and
global best practices in this area. To this end,
the Company carries out training for staff and
checks their knowledge related to workplace
health and safety, promotes a culture of safety,
ensures that all contractors adhere to workplace
health and safety standards, carries out safety
audits and inspections to ensure compliance
with guidelines both for Company divisions and
for suppliers for which the Company has put
the OHSAS 18001 system in place. Additional
measures to reduce workplace injuries when
performing work underground have also been
developed and are being implemented.
PhosAgro regularly assesses and analyses its
impact on the environment. In an effort to
limit its environmental impact, the Company is
modernising its clean-up and storage system
and is putting energyefficiency programmes
in place. The Company partners with UNESCO
and the International Union of Pure and Applied
Chemistry (IUPAC) to provide grants for research
in the field of green chemistry with the aim
of protecting the environment and human
health, creating energyefficient processes and
implementing ecological safety technologies
on the basis of innovative ideas. Facilities being
launched by PhosAgro in 2017, in particular its
ammonia and granulated urea plants, as well as
its biochemical treatment facilities, have been
included as environmentally safe production
facilities by the Russian Ministry of Natural
Resources and the Environment in its plan of
activities for the Year of the Environment. These
facilities utilise best available technologies, and
after being commissioned, they will make it
possible to reduce specific consumption of raw
materials and energy, as well as specific emissions
of regulated substances.
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONManaging our risks (continued) OPERATIONAL RISKS
Project risks
(key risk)
Project risks are related to exceeding planned
Risks of inefficiency and
infringement of business
(key risk)
Risks associated with inefficiency or the intentional
Taxation risks
(key risk)
Information security risks
(key risk)
Risks to economic
security
Taxation risks are related to potential claims by tax
Risks in the field of information security are risks
Economic security risks are related to losses caused
budgets and timelines for the completion of new
or unintentional infringement of the Company’s
authorities that the Company has not correctly filed
associated with losses caused to the Company’s
to the Company’s property and assets as a result of
construction and modernisation projects, as well
business processes, including counterparty risk
its tax return or made payment on time.
property and assets by means of unauthorised
legal violations in the economic sphere committed
as the failure to achieve efficiency targets related
related to supply chain.
to projects.
Risk level
Impact
access to its information systems or by the
by employees or third parties, including fraud and
disclosure of confidential information.
theft.
• Exceeding the planned budgets and timelines for
• Late deliveries of feedstock, raw materials,
• Financial (penalties), administrative and criminal
• Disclosure of confidential information
• Loss of an enterprise’s property as a result of illegal
the implementation of key projects
• Poor implementation or work tasks
equipment and spare parts from third parties
• Interruption of production lines and lower
production volumes
Measures for minimising risk
PhosAgro aims to carry out its projects (the key
projects are the construction of new ammonia
and granulated urea plants) in line with planned
budgets and timelines. Uniform approaches
to project implementation and management
are employed. Projects undergo a multi-step
review and approval process. Project offices are
established for particularly large and important
projects. Contracts can be made with a fixed (hard)
price. Regular monitoring to ensure compliance
with project timelines and budgets is carried out.
PhosAgro aims to support the efficient functioning
of all of the Company’s business processes. To
achieve this, the efficiency of business processes
is regularly evaluated, bottlenecks are identified,
and measures to improve efficiency or eliminate
bottlenecks are developed and implemented.
We also aim to minimise risk in our supply chain
by choosing suppliers through competitive tender
processes. PhosAgro aims to establish long-term
relationships with reliable suppliers by signing
long-term supply contracts.
consequences as a result of violations uncovered
by the tax authorities (assessment adjusted
on account of risk management measures
undertaken in 2016)
PhosAgro complies with tax legislation in
the countries where it operates. Tax legislation,
including planned changes, is monitored; law
enforcement practices are analysed; clarifications
are sought from government bodies regarding
tax assessments; law firms, accountancies and tax
authorities are consulted on questions related to
double taxation and various tax-related laws.
actions, including fraud and theft
The Company carries out various measures
aimed at preventing unauthorised access to
information systems as well as disclosure of
confidential information. Different technical and
software solutions are used to control access to
information resources and systems; access rights
to information are regulated according to different
user groups; there is a clear definition of what
constitutes confidential information and how it
should be handled; periodic audits are carried out
to ensure strict compliance with the Company’s
confidentiality policy.
The Company takes measures aimed at preventing
potential damage to its property and assets as
a result of legal violations in the economic sphere.
A system controlling access to the Company’s
administrative and production facilities is in place;
a clear division of responsibility is established
when it comes to concluding contracts or
transactions; checks are carried out on all
counterparties before contracts are executed;
a hotline has been created to enable the Company
to receive feedback from employees.Besides,
additional oversight checks are carried out by
various departments within the Company.
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONManaging our risks (continued) REGULATORY RISKS
Compliance with legal and
regulatory requirements
(key risk)
Corruption
risks
REPUTATIONAL RISKS
Reputational
risks
FINANCIAL RISKS
Credit risks
(key risk)
Currency risks
(key risk)
Marketable goods risks
(key risk)
Compliance with legal and regulatory requirements
Corruption risks associated with losses resulting
Reputational risks cover damage to the Company’s
Credit risks resulting in potential financial losses
Currency risks resulting in potential financial losses
Marketable goods risks cover possible losses
cover the risk of timely receipt / extension of licences
from penalties levied against the Company by
business reputation as a result of unauthorised
caused by the failure of buyers, commercial
caused by unfavourable changes in exchange rates
associated with unfavourable changes in the
and risks from changes in legislation that could
state authorities as a result of non-compliance
disclosure in the media of information about the
contractors, suppliers, banks, insurance companies,
with respect to the Company’s base currency.
market prices for mineral fertilizers and other
lead to an increase in the cost of doing business, the
or inadequate compliance on the part of the
Company’s operations, financial results, upper
implementation of restrictive measures by regulatory
Company or its employees with the requirements of
management, etc.
bodies, a reduction in investment appeal and/or
applicable anti-corruption legislation.
changes in the competitive environment.
clearing centres or other financial contractors
to fulfil their financial obligations to the Company
completely and on time.
products, as well as increases in the price of
the main raw materials and equipment that the
Company purchases.
Risk level
Impact
• Non-compliance on the part of the Company
with the requirements for licensed activities
• Publication by federal and regional authorities of
the Russian Federation, foreign states, associations
of states and international organisations of legal
acts that result in new burdens and restrictions for
the Company
Measures for minimising risk
The Company ensures full compliance of its
activities with applicable legislation. In order
to ensure that it receives information about
potential legislative changes in a timely manner,
the Company closely tracks initiatives at a
government and regulatory level, and takes part in
discussions of legislative initiatives and preparation
of recommendations through professional
associations. The Company acts in a timely
manner in preparing and submitting documents to
receive or prolong the necessary licences needed
to carry out its business.
• The performance of corrupt acts by
the employees or contractors of the Company’s
enterprises
The Company ensures compliance of its activities
with the requirements of relevant anti-corruption
legislation. It conducts training focused on
combatting corruption and on how to apply anti-
corruption legislation in practice, and a principle of
zero tolerance is communicated to all employees
and counterparties with respect to corruption, and
they are warned that they will be held accountable
for any violation of anti-corruption legislation. JSC
PhosAgro-Cherepovets is a member of the Anti-
Corruption Charter of Russian Business.
• The unauthorised disclosure of information to
the media about the Company’s operations by
unauthorised and/or unidentified representatives
of the Company (leaks)
• Public statements and actions on the part of third
parties (individuals or organisations) concerning
the Company that denigrate the Company’s
business reputation in order to have a negative
impact on its operations
The Company is transparent and discloses all
material facts and developments, while also
having adopted an information policy and media
engagement policy. The Company publishes
information about its business on its website and
in the media, provides comments in response to
media enquiries and regularly monitors all relevant
coverage in both Russian and international media.
• Failure by clients to pay for delivered goods
• Late payments by clients for delivered goods
• Inability to repay debt upon maturity
The Company has adopted policies on managing
credit risk that employ different methods of
managing and reducing credit risk, including
by completing deliveries after full or partial pre-
payments, with full or partial insurance of credit risk
and by using letters of credit. Delivery without pre-
payment and insurance is only permitted for long-
established clients. Providing advance payments to
suppliers and contractors is only considered after
the counterparties have been tested for reliability,
and also after the provision of bank guarantees in
the event that the sum of the advance payment
exceeds established internal limits. The Company
works with banks and insurance companies with
a high level of financial stability and that meet
the criteria set out by the Company’s treasury
policy.
To mitigate credit default risks, the Company runs
three internal policies that provide enough flexibility
in cash management:
a) the total amount of capital spending should not
exceed 50% of forecast EBITDA (earnings before
taxes, interest, depreciation and amortisation)
b) the Company aims to keep leverage at
the appropriate level with Net Debt/EBITDA below 1
c) a flexible dividends policy that keeps the dividend
payout in the range of 30—50%
The Company monitors all covenants applicable to
existing loans on a regular basis.
• Debt levels as reported in our main operating
currency could increase as a result of
unfavourable fx rate changes
• Losses from derivative financial instruments
• Realised and unrealised losses from revaluation of
FX-denominated debt
• Decrease in cash flow in our main operating
currency
In the current environment of volatility with
respect to the oil price and the fluctuations in
the rouble exchange rate against major currencies,
the Company aims to align the currency structure
of its debt financing with the currency structure
of its main sales. Most of the Company’s debt is
denominated in US dollars as a natural hedge
against primarily USD-denominated sales.
The Company carefully tracks analyst forecasts
and factors that can influence the rouble
exchange rate against major currencies. Where
needed, the Company is able to use full or partial
hedging instruments against its currency positions.
• Critical impact on the cost of production of one or
more raw materials, cost increases and worsening
financial results
• Loss of revenue as a result of the poor choice of a
product with low marginality
In the current environment of reduced prices for
its core products, the Company is continually
optimising its sales structure according to
fertilizer brands and regional sales focus in order
to maximise margins, while also increasing
the share of fertilizer sales to end users, increasing
production efficiency and providing add-on
services to customers such as packaging, blending
and storage.
In 2016, PhosAgro opened trade offices in
Hamburg, Germany, and Biarritz, France, in
addition to its existing offices in Zug, Switzerland;
Warsaw, Poland; Sao Paulo, Brazil; and Singapore.
With a presence in priority export markets,
the Company will be able to respond more quickly
to changes in market demand and customer
needs. The anti-dumping duty on imports of urea
produced by the PhosAgro Group into the United
States, one of the world’s largest importers of this
type of fertilizer, was abolished in 2016.
In order to reduce the cost of raw materials and
equipment, the Company conducts tenders
among multiple suppliers, conducts long-term
supply contracts and develops lasting relationships
with its suppliers.
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONManaging our risks (continued) BOARD OF DIRECTORS
Audit Committee
Executive Director
Strategy
Committee
Remuneration
and Human Resources
Committee
Environmental, Health
and Safety Committee
Risk Management
Committee
Board of Directors
structure, %
We have the right mix of knowledge of Russia and
international business to help PhosAgro succeed in
all of its priority areas.
25%
37.5%
37.5%
Executive
directors
Independent
directors
Non-executive
directors
Board of Directors
professional experience, %
The Board of Directors consists of a diverse group
of professionals with experience in audit, chemicals,
investing and financial markets.
50%
Chemical
industry
25%
12.5%
12.5%
Finance and
audit
Capital
markets
Sales
ANDREY A. GURYEV
Executive Director
CEO of PhosAgro
Year appointed to Board:
SVEN OMBUDSTVEDT
Independent Director
ANDREY G. GURYEV
Non-executive Director
MARCUS RHODES
Independent Director
JAMES ROGERS
Independent Director
MIKHAIL RYBNIKOV
Executive Director
IGOR ANTOSHIN
Non-executive Director
IVAN RODIONOV
Non-executive Director
Year appointed to Board:
2013
2006
2013
2011
2014
2016
2004
2004
Committee appointments:
(Head of the committee)
Recent roles
2013-present: CEO of PhosAgro
2011-2013: Deputy CEO for Sales
and Logistics of PhosAgro AG
2011-2013: Deputy CEO of
PhosAgro
Education
2010-present: Chief Executive
Officer, Norske Skogindustrier ASA
2008-2009: Senior Vice President,
SCD SAS
2006-2008: Chief Financial
Officer and Head of Strategy, Yara
International ASA
2006-present: Vice President
of the Russian Union of
Chemical Sector Businesses
and Organisations, a non-profit
organisation
2001-2013: Member of
the Federation Council
• Bachelor’s degree in Economics
• Master of Science degree in
from the University of Greenwich
(UK)
• Graduated from the Russian
Academy of National Economy
under the Government of
the Russian Federation. PhD in
Economics
International Management from
the Thunderbird School of Global
Management (USA)
• Bachelor of Science degree in
Business Administration from
Pacific Lutheran University (USA)
Graduated from
• the G.V. Plekhanov St Petersburg
State Mining Institute
• the Lenin State Central Institute of
Physical Culture
Shares in PhosAgro
Mr Andrey A. Guryev owns no
shares in PhosAgro. According
to information available to
the Company, the ownership of
companies holding 43.66% (45.46%
as of 31/12/2016) of PhosAgro’s
authorised capital, namely Private
Company Limited by shares
Chlodwig Enterprises Limited and
Private Company Limited by shares
Adorabella Limited, is held in trusts,
the economic beneficiaries of which
are Andrey A. Guryev and members
of his family.
Mr Ombudstvedt owns 4,000
Global Depositary Receipts
(GDRs – 3 GDRs = 1 ordinary
share) for PhosAgro shares,
which represents 0.001% of
the Company’s authorised capital.
Mr Andrey A. Guryev owns no
shares in PhosAgro. According to
information available to the Company,
the ownership of companies holding
43.66% (45.46% as of 31/12/2016) of
PhosAgro’s authorised capital, namely
Private Company Limited by shares
Chlodwig Enterprises Limited and
Private Company Limited by shares
Adorabella Limited, is held in trusts,
the economic beneficiaries of which
are Andrey A. Guryev and members
of his family. Andrey A. Guryev’s wife
owns shares representing 4.82% of
PhosAgro’s authorised capital.
(Head of the committee)
2002-2008: Audit Partner,
Ernst & Young
1998-2002: Audit Partner, Arthur
Andersen
• Graduate degree in Economics
from the University of
Loughborough (UK). Qualified
Chartered Accountant, member
of the Institute of Chartered
Accountants in England & Wales
(ICAEW) and member of the Non-
Executive Director Group of
the ICAEW
Mr Rhodes owns 2,500 Global
Depositary Receipts (GDRs – 3 GDRs
= 1 ordinary share), which represents
0.0006% of the Company’s
authorised capital.
Membership of the Board of Directors
in other organisations
Member of the Boards of Directors,
QIWI PLC, and Zoltav Resources Inc.
Committee appointments:
(Head of the committee)
Recent roles
Jim Rogers is currently the president
of Beeland Interests, Inc. He is a
legendary investor and co-founder
of the Quantum Fund, a global
investment partnership.
He is an author, financial
commentator, adventurer and
successful international investor,
and currently holds directorships
and advisory positions at a dozen
companies and investment funds
around the world.
2013-present: Chief Operating
Officer, PJSC PhosAgro
2012-present: Chief Executive
Officer, JSC PhosAgro AG
2008-2012: Chief Operating Officer,
CJSC PhosAgro AG
2006-2008: Chief Financial Officer,
CJSC PhosAgro AG
2004-2006: Chief Financial Officer,
OJSC Apatit
2001-2004: Chief Financial Officer,
OJSC Ammophos
(Head of the committee)
(Head of the committee)
2013-2016: Adviser to the CEO of
PhosAgro
2009-2013: CEO of PhosAgro
Engineering Centre
2006-2009: CEO of PhosAgro
2003-present: Professor, Higher
School of Economics
2006-2014: Professor, Russian State
University for the Humanities
2004-2006: Managing Director,
AIG-Interros RCF Adviser
1997-2006: Managing Director, AIG
Brunswick Capital Management
Education
• BA from Yale University, BA/
MA from Balliol College, Oxford
University
• Bachelors/masters degree in PPE
from Balliol College at Oxford
University (UK)
Shares in PhosAgro
Mr Rogers owns 25,000 Global
Depositary Receipts (GDRs – 3 GDRs
= 1 ordinary share) for PhosAgro
shares, which represents 0.0064% of
the Company’s authorised capital.
Membership of the Board of Directors
in other organisations
Member of the Boards of Directors,
First China Financial Network
Holdings Limited; Geo Energy
Resources Limited; Spanish Mountain
Gold Limited; Virtus Global Dividend
& Income Fund Inc. (The Zweig Total
Return Fund, Inc.), The Zweig Fund,
Inc.; Crusader Resources Limited
• Graduate degree in Economics
from the Lomonosov Moscow
State University
• Graduate degree in Economics
from the G.V. Plekhanov
St. Petersburg State Mining
University
• Graduate degree in Economics
from the Lomonosov Moscow
State University (Russia)
Mr Rybnikov owns shares equal to
0.0258% of PhosAgro’s authorised
capital.
Based on information available
to the Company, Mr Antoshin
holds the right to indirectly control
100% of the voting shares of
Vindemiatrix Trading Limited,
Carranita Holdings Limited and
Dubberson Holdings Limited, which
together hold shares equivalent
to 11.88% (12.66% as of 31/12/2016)
of PhosAgro’s authorised capital.
Igor Antoshin’s stake in PhosAgro
includes 2,489,540 ordinary shares
in the Company (1.92% of the share
capital) that were transferred by him
under a REPO deal on 21/12/2016.
Mr Rodionov owns shares and GDRs
equivalent to 0.0064% of PhosAgro’s
authorised capital.
Membership of the Board of Directors
in other organisations
Member of the Board of Directors,
RUSS-INVEST Investment Company,
Interdepartmental Analytical Centre,
AgroGard-Finance.
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EXECUTIVE MANAGEMENT
SERGEY SEREDA
First Deputy CEO,
ALEXANDER SHARABAIKO
Chief Financial Officer,
ALEKSEY SIROTENKO
Deputy CEO for Corporate and
SIROJ LOIKOV
Human Resources and Social
SERGEY PRONIN
Deputy CEO for Sales and
IRINA EVSTIGNEEVA
Director for Marketing and
ROMAN OSIPOV
Director of Business
JSC PhosAgro-Cherepovets
PJSC PhosAgro
Legal Affairs, PJSC PhosAgro
Policy Director, PJSC PhosAgro
Marketing, PJSC PhosAgro
Development, PJSC PhosAgro
Development, PJSC PhosAgro
Deputy CEO for International and
Adviser to the CEO,
Head of Legal, JSC PhosAgro-
Human Resources and Social
Special Projects, PJSC PhosAgro
JSC PhosAgro-Cherepovets
Cherepovets representative office
Policy Director, JSC PhosAgro-
representative office in Moscow
in Moscow
Cherepovets representative office
in Moscow
Deputy CEO for Sales,
JSC PhosAgro-Cherepovets
representative office in Moscow
Advisor to the CEO, LLC PhosAgro-
Region
Recent roles
Recent roles
2016-present: First Deputy CEO, JSC
PhosAgro-Cherepovets; Deputy
CEO for International and Special
Projects, PJSC PhosAgro
2014-2016: First deputy CEO,
OJSC PhosAgro
2013-2015: Deputy CEO for Sales
and Logistics, CJSC PhosAgro AG
2013: Sales Director,
CJSC PhosAgro AG
2013-2014: Deputy CEO
for Government Relations,
OJSC PhosAgro
2012-2013: Deputy CEO for
Government Relations and Control,
OJSC PhosAgro
2007-2012: Chief Executive Officer,
CJSC Hydrostroy Burgas
2007: Chief Executive Officer, CJSC
AgroGard
2005-2007: Chief Executive Officer,
Chairman of OJSC AgroGard-
Finance
2003-2005: Adviser to the Chairman
of the Board of Directors, Head of
Internal Control and Audit Division,
Director of the Voskresensk branch
of CJSC PhosAgro AG, CEO of
Voskresensk Mineral Fertilizers, First
Deputy CEO of CJSC PhosAgro AG
Education
• Graduated from the Moscow State
Institute of International Affairs
with a degree in International
Economic Relations
2014-present: Adviser to the CEO,
JSC PhosAgro-Cherepovets
(CJSC PhosAgro AG)
2011-present: Head of Legal, JSC
PhosAgro-Cherepovets (CJSC
PhosAgro AG)
2013-present: Human Resources
and Social Policy Director, PJSC
PhosAgro
2017-present: Deputy CEO for Sales
and Marketing, PJSC PhosAgro
2017-present: Director for Marketing
and Development, PJSC PhosAgro
2013-present: Director of Business
Development, PJSC PhosAgro
2013-present: Chief Financial
Officer, PJSC PhosAgro
2012-2014: Chief Financial Officer,
CJSC PhosAgro AG
2011-2012: Head of Corporate
Finance, OJSC Uralkali
2010-2011: Financial Adviser to
Chief Executive Officer, OJSC
Silvinit
2005-2010: held various positions
from Chief Specialist to Chief
Financial Officer at LLC Mineral
Group
2003-2005: 1st Class Analyst
at Securities and Investments
Department, OJSC Silvinit
1998-2003: held various positions at
Belaruskali Production Association
2010-present: Deputy Chief
Executive Officer for Corporate and
Legal Matters, PJSC PhosAgro
2006-2011: Head of Legal
Department, CJSC PhosAgro AG
2005-2006: Deputy Chief
Executive Officer for Legal Affairs,
CJSC Lukoil-Neftekhim
2000-2005: Head of Legal
Department, Interkhimprom Group
2013-present: Human Resources
and Social Policy Director,
JSC PhosAgro-Cherepovets
(CJSC PhosAgro AG)
2011-2013: Human Resources
Director, CJSC PhosAgro AG
2009-2011: Human Resources
Director, CJSC Russian Standard
2008-2009: Personnel
Development Director, Metinvest
Ukraine
2005-2008: Human Resources
Director, Leman Commodities S.A.
1996-2005: held various positions
at British American Tobacco (UK,
Uzbekistan and Russia offices)
2011-2016: Director of Corporate
Finance and Investor Relations,
PJSC PhosAgro
2008-2011: Head of Corporate
Finance Division, OJSC PhosAgro
2003-2008: held various posts in
the finance block of OJSC PhosAgro
2012-present: Member of the Board
of Directors, PJSC PhosAgro
2012-2013: Adviser to the CEO,
OJSC PhosAgro
2012: Deputy CEO for Business
Development, CJSC PhosAgro AG
2009-2012: Chief Financial Officer,
CJSC PhosAgro AG
2008-2009: Deputy Chief Financial
Officer, CJSC PhosAgro AG
2003-2008: held various financial
management positions, GAZ Group
2002-2003: Auditor, Ernst & Young
1998-2002: Senior Consultant,
Arthur Andersen
2016-present: Deputy CEO for Sales
of the JSC PhosAgro-Cherepovets
representative office in Moscow
2016: Advisor to the CEO of
the JSC PhosAgro-Cherepovets
representative office in Moscow
2012-2016: CEO,
LLC PhosAgro-Region
2013-2015: Adviser to the Division
for Mineral Fertilizer Sales in
Eastern Europe and the CIS,
CJSC PhosAgro AG
2012: Deputy CEO for Human
Resources and Social Affairs, CJSC
PhosAgro AG
2011-2012: Deputy CEO for External
Communications and Information
Policy, CJSC PhosAgro AG
2010-2011: Director for External
Communications and Corporate
Relations, CJSC PhosAgro AG
2010: Director for organisational and
social issues, CJSC PhosAgro AG
2010: First Deputy CEO, CJSC
PhosAgro AG
Education
• Bachelor’s degree in Economics
with Honours from Belarus State
Economic University (Belarus)
• MBA in Finance from Nottingham
University Business School (UK)
• Graduate degree in Law from
the Lomonosov Moscow State
University (Russia)
• Bachelor of Science degree in
Business Management from
Nottingham Trent University (UK)
• Graduate degree in International
Economic Relations from
the Tashkent State University of
Economics (Uzbekistan)
• Graduated from the V. V.
• Graduated from the Moscow
• Graduated from the Moscow
Kuibyshev Moscow Engineering
and Construction Institute with
a degree Industrial and Civil
Construction. PhD in Economics
State Financial Academy under
the Russian Government with a
degree in Finance and Credit
State Financial Academy under
the Russian Government with a
degree in Finance and Credit
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CORPORATE GOVERNANCE
Sven Ombudstvedt
Chairman of the Board of Directors
Guiding PhosAgro’s strategic
performance
“
The Board of
Directors worked
with management
during 2016 to update
PhosAgro’s strategy
through 2020, while
also monitoring
progress against
the strategy and
implementation of
updated corporate
governance
standards.
“
OUR CORPORATE GOVERNANCE PRINCIPLES
PhosAgro has successfully advanced
key strategic projects like increasing
benefication capacity at Apatit, as well
as construction of new ammonia and
granulated urea lines at PhosAgro-
Cherepovets. The Company’s sales strategy
has also moved forwards, with the opening
of sales offices in key export markets and
expansion of domestic market share.
On the regulatory side, we continue
to develop our internal systems for health,
safety and environment, and are achieving
good results. This is an important issue
for the Board, as the legal and regulatory
environment where we operate is
developing.
Outside of Russia, PhosAgro is actively
engaged in discussions at the European
Union level regarding cadmium regulations
that are aimed at making phosphate-
based fertilizers safer, and the Company
successfully got anti-dumping duties
against urea from PhosAgro-Cherepovets
removed in the US.
The Board also engaged in a strategic
review, looking at PhosAgro’s development
through 2020 with a continued focus on
cost competitiveness, which will be helped
by higher volumes and more efficient
logistics and production.
I would like to thank the Board and
PhosAgro’s management for the hard work
that was put into building a responsible,
sustainable business in 2016, and all of
PhosAgro’s stakeholders for your continued
engagement with the Company.
Accountability
Equality
Responsibility
The Board of Directors is
accountable to PhosAgro’s
General Meeting of Shareholders,
and is responsible for:
PhosAgro’s corporate governance
system is designed to protect
shareholders’ rights and ensure
equal treatment of all shareholders.
• Formulating the Company’s
strategy
• Establishing and maintaining
systems that enable it
to monitor PhosAgro’s
performance
• Holding management
accountable for successful
implementation of the
Company’s strategy
PhosAgro values the rights
of all stakeholders and aims
to cooperate with a wide range of
individuals and institutions to find
ways to ensure the Company’s
financial stability and its successful,
sustainable development.
Transparency
We strive to ensure the
appropriate disclosure of
reliable information on all
significant issues related to our
operations, including financial
status, social and environmental
performance, operating results
and ownership.
How governance works at PhosAgro
Our Shareholders’ Meeting is the principal
forum through which the Company’s
shareholders take decisions on the most
significant issues affecting our business.
These include approving financial
statements and amending the Company’s
Charter and other internal documents.
The Board of Directors provides overall
guidance to the Company except in areas
that are the remit of the Shareholders’
Meeting. It sets targets and oversees their
implementation by the Management
Board and the Chief Executive Officer.
The Management Board and the Chief
Executive Officer manage the Company’s
day-to-day operations and implement the
strategy approved by the Board of Directors.
The General Shareholders’ Meeting
The General Shareholders’ Meeting is the
Company’s highest governing body and is
convened by the Board of Directors at least
once a year. The Annual General Meeting
is held between 1 March and 30 June each
year. Extraordinary General Meetings may
be convened by the Board of Directors on
its own initiative or at the request of the
Review Committee, the external auditor
or a shareholder owning individually
or together with other shareholders at
least 10% of the issued voting shares.
The General Shareholders’ Meeting has the
exclusive authority to take decisions on a
number of matters, including:
• implementation of amendments and
additions to the Company’s Charter, or
adoption of a new version of the Charter
as of the date established by the Board of
Directors. General Shareholders’ Meetings
are usually held in Russia (Moscow).
Our Board of Directors has been chaired
by an independent director since 2011.
It operates in accordance with the Law
on Joint Stock Companies, the Company’s
Charter, the Central Bank of Russia’s
recommended Corporate Governance Code,
guidelines of the UK Corporate Governance
Code and generally accepted good practice
in corporate governance.
• reorganisation or liquidation of the
Company
• election and removal of members of the
Board of Directors
• increases or reductions in the Company’s
authorised capital
• approval of the Company’s external
auditor
• approval of the Company’s annual
reports and financial statements
Key activities undertaken by the Board of
Directors in 2016 included:
• reviewing the Company’s operational
• distribution of profits, including payment
priorities for 2016
• using the KPI system to determine the
size of bonus payments for executives
and management in 2015
• monitoring risk management
performance
• approving PhosAgro’s updated Corporate
Secretary Policy
• approving PhosAgro’s Internal Audit
Policy
• ensuring compliance with the Company’s
Information Policy and determining the
Information Policy priorities for 2017
• approving PhosAgro’s Risk Management
Policy
• approving PhosAgro’s updated Corporate
Governance Code
• approving PhosAgro’s updated Insider
Information Policy
• updating the Company’s strategy to 2020
• determining the Company’s operational
priorities for 2017
• reviewing the Company’s budget
for 2017
of dividends
• payment of remuneration to the
members of the Board of Directors and
the Review Committee
Voting at a General Shareholders’ Meeting
is generally based on the principle of
one vote per ordinary share, with the
exception of the election of the Board of
Directors, which is done by cumulative
voting. According to the Law on Joint Stock
Companies, the quorum requirement for
a General Shareholders’ Meeting is that
shareholders (or their representatives)
accounting for more than 50% of the
issued voting shares must be present.
A General Shareholders’ Meeting may
be held in the form of a meeting or by
absentee ballot. All shareholders entitled
to participate in a General Shareholders’
Meeting are notified of the Meeting by
a notice sent by post or in person in
most cases no less than 20 days prior
to a Meeting. The list of persons entitled
to participate in a General Shareholders’
Meeting is compiled on the basis of data
in the Company’s register of shareholders
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PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION As of 31 December 2016, the Board of
Directors consisted of eight members,
three of whom were independent non-
executive directors (INEDs). The number of
directors and the membership of the Board
of Directors are determined by the General
Shareholders’ Meeting, with the term of
appointment being until the next Annual
General Shareholders’ Meeting is held.
When choosing Board members, it is of
paramount importance that the Company
find the right balance between professional
skills and experience, independence and
industry knowledge.
An independent director (candidate
to serve as an independent director) is a
person unrelated to:
• the Company
• a material shareholder of the Company
• a material counterparty of the Company
• a competitor of the Company
• the government (Russian Federation,
constituent entity of the Russian
Federation) or a municipality
The Board of Directors constantly aims
to improve its effectiveness and to comply
with the recommendations of the Bank of
Russia regarding corporate governance,
as well as internationally recognised
good practice in corporate governance.
The members of the Board of Directors
are elected at the Annual General
Shareholders’ Meeting by cumulative
voting. In 2016, the Board of Directors held
10 meetings covering a total of 87 issues.
Significant attention was paid to matters of
corporate governance.
Since 2012, systemic changes have been
and continue to be made to the legislation
governing shareholders. Amendments have
been made to Russia’s Civil Code, the Law
on Joint Stock Companies and the Law
on Securities Markets, as well as many
other pieces of legislation and related
regulations. Several new regulations
entered force in April 2014, including a new
Corporate Governance Code introduced
by the Central Bank of Russia. Some of
the requirements of the latter were also
included in the listing rules, which must
be followed for stocks to be included in
the quotation list, as well as to maintain a
given listing level.
Board
Audit
Committee
Strategy
Committee
Remuneration and
Human Resources
Committee
Risk Management
Committee
Environment
Health and Safety
Committee
Year
of Birth
Held
Attended Held
Attended Held
Attended Held
Attended Held
Attended Held
Attended
1982
10
1963
1960
1966
1961
1953
1971
1942
1975
10
10
10
10
10
4
10
6
10
9
10
10
10
10
4
10
6
2
2
2
2
4
4
4
4
4
4
4
4
4
4
4
4
2
2
3
3
3
3
3
3
4
4
4
2
2
4
2
2
Name
Andrey
A. Guryev
Igor
Antoshin
Andrey
G. Guryev
Sven
Ombudstvedt
Marcus
Rhodes
Ivan
Rodionov
Roman
Osipov
James
Rogers
Mikhail
Rybnikov
Issuers whose shares are included in
organised trading were given a period
of two years to bring their internal
documentation and corporate governance
structure into compliance with the listing
rules. The Central Bank of Russia also
requires issuers to include an annex
to their annual report certifying compliance
with the principles of the Central Bank of
Russia Code.
During 2015–2016, the Company reviewed
the internal documentation regulating
its operations, including the Company’s
Charter, the Shareholder Meeting Policy, the
Board of Directors’ Policy, four committee
policies, the Corporate Secretary Policy and
the Audit Policy. The corporate governance
structure was also updated, including the
structure of the Audit Department and of
the Risk Management Department, among
other changes. The final step in this process
was the Company’s Corporate Governance
Code, which the Board of Directors
approved in November 2016.
that took effect on 1 January 2017, primarily
concerning the regulation of transactions.
members of the Board of Directors who
have relevant experience and expertise in
the area of each Committee’s focus.
Based on committee recommendations,
the Board of Directors also reviewed
and approved other important corporate
governance documents in 2016, including:
the Risk Appetite Policy, the internal audit
and Internal Control Policy, the updated
Corporate Secretary Policy and the Insider
Information Policy.
The Board of Directors decided to engage
a third party, PricewaterhouseCoopers
Consulting, to conduct an independent
review of its activity to ensure absolute
compliance with the Corporate Governance
Code.
At its meeting in December, the Board
of Directors reviewed and approved the
updated strategy until 2020, the Company’s
consolidated budget for 2017 and the
operational priorities for 2017.
The Committees can also involve external
experts and consultants in their work.
The primary role of the Committees is
the preliminary consideration of the key
issues reserved for the Company’s Board of
Directors. The Committees are responsible
for ensuring that issues brought before
the Board have been subject to sufficient
review in order to ensure that the Directors
are able to cast their votes based on full
and accurate information. To achieve this,
Committee members maintain a regular
dialogue with management, the Company’s
external auditor and other advisers on the
issues that fall within their remit.
The Board of Directors reviewed the
updated Charter and recommended it for
approval by the General Shareholders’
Meeting to account for legislative changes
Board Committees
The Committees of the Board of Directors
are advisory and consultative bodies.
The Board Committees consist of current
List of transactions by members of the Board of Directors and the
Management Board to purchase or sell PhosAgro shares in 2016
IVAN RODIONOV
Type of transaction
Type of security
Number of securities
Date of transaction
Purchase
Global Depositary Receipts
14,500
12 July 2016
IGOR ANTOSHIN
Type of transaction
Type of security
Number of securities
Date of transaction
REPO
PJSC PhosAgro shares
2,489,540
21 December 2016
110
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PhosAgro Integrated Report 2016www.phosagro.comCorporate governance (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION Marcus Rhodes
Committee Chairman
“
PhosAgro continues
to introduce and
upgrade automated
systems to improve
the speed and
quality of its financial
reporting.
“
AUDIT COMMITTEE
Сommittee members
As of 31 December 2016, the Audit
Committee comprised:
The Committee’s remit includes:
• reviewing the IFRS financials for integrity
and transparency
Marcus Rhodes Committee Chairman,
Independent Non-executive Director of the
Board of Directors
• analysing financial reporting processes,
including carrying out regular reviews
and making recommendations
• recommending the Company’s external
auditor to the Board of Directors and
maintaining an ongoing relationship
with the external auditor
• analysing and supporting the internal
audit system and risk management
procedures, including drafting of
recommendations for their improvement
Sven Ombudstvedt Committee Member,
Independent Non-executive Director of the
Board of Directors
James Rogers Committee Member,
Independent Non-executive Director of the
Board of Directors
Key areas
The Audit Committee supervises the
Company’s financial and accounting
activities. It reviews and evaluates the
Company’s financial statements, which
are prepared by the Company and audited
by the Company’s external auditor.
According to the Statute of PhosAgro’s
Audit Committee, the Audit Committee
shall consist of not fewer than three
current members of the Board of Directors,
and shall be chaired by an independent
director.
Andrey A. Guryev
Committee Chairman
“
During 2016, we
undertook a strategic
review of PhosAgro’s
development plan
through 2020.
“
STRATEGY COMMITTEE
Сommittee members
As of 31 December 2016, the Audit
Committee comprised:
Andrey A. Guryev Committee Chairman,
Executive Director of the Board of
Directors
Andrey G. Guryev Committee Member,
Non-executive Director of the Board of
Directors
Mikhail Rybnikov Committee Member,
Executive Director of the Board of
Directors.
Key areas
Directs the development of the Company’s
strategy and related processes, including
management of the Company’s assets
and the review of major innovation and
investment programmes and projects.
The Committee’s remit includes:
• Monitoring and updating the Company’s
mid-term and long-term strategy, and
drafting policy as required
• Evaluating the development of the
Company’s subsidiaries, including
reviewing their strategies
• Making recommendations regarding the
Company’s M&A projects
• Analysing and making
recommendations regarding potential
strategic partnerships
The Audit Committee and the Company
continue to focus on optimising the
internal business processes involved
in preparation of PhosAgro’s financial
reporting. We aim to ensure accuracy and
completeness, while also speeding up
the process of collecting and verifying
data. Looking ahead to 2017, our aim is
to continue moving PhosAgro’s reporting
dates closer to those of global leaders in
transparency and disclosure.
Activities in 2016
During the reporting period, the Audit Committee held four meetings, in which matters covering
priority areas of the Company’s activity were considered. Considerable focus was placed on
improving internal audit procedures. In 2016, the Audit Committee focused on:
• making recommendations for, and
• futher improving the quality of the financial
monitoring the implementation of, OeBS
accounting and reporting preparation
Oracle v. 12.0
process, as confirmed by the Company’s
• establishing targets and monitoring the
auditors
implementation of the IFRS 2017 budget
• monitoring the implementation of the
Hyperion consolidated financial reporting
automation system
The Committee was pleased to note
successful implementation of all of
PhosAgro’s strategic goals for 2016, and
that the Company is on track to complete
key investment projects on schedule. We
are currently in the process of finalising
PhosAgro’s development strategy
through 2025, which is aimed at further
strengthening the Company’s leading
position in the global phosphate-based
fertilizer industry.
Activities in 2016
In 2016, the Strategy Committee held two meetings, where it focused on:
• identifying key strategic activities for 2016
• updating the Company’s strategy through
• reviewing the Committee’s work in 2015
2020
• reviewing implementation of strategy in
2016 and plans for 2017
• making investment and borrowing plans for
2017 and 2018
112
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PhosAgro Integrated Report 2016www.phosagro.comCorporate governance (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION AND HUMAN RESOURCES COMMITTEE
ENVIRONMENTAL, HEALTH AND SAFETY COMMITEE
Сommittee members
As of 31 December 2016, the Remuneration
and Human Resources Committee
comprised:
James Rogers Committee Chairman,
Independent Non-executive Director of the
Board of Directors
Sven Ombudstvedt Committee Member,
Independent Non-executive Director of the
Board of Directors
Marcus Rhodes Committee Member,
Independent Non-executive Director of the
Board of Directors
Key areas
The Remuneration and Human Resources
Committee’s Statute requires that the
Committee’s Chairman be an Independent
Non-executive Director on the Company’s
Board of Directors, and that the Chief
Executive Officer cannot be a member of
the Committee.
The Committee’s remit includes:
• developing of the Company’s policy in
relation to organising the activities and
motivation of the Board of Directors
• developing of the Human Resources
Policy in relation to the Company’s
senior management, and supervising its
implementation
“
Jim Rogers
Committee Chairman
“
We continue
to focus on ensuring
management KPIs
and remuneration
are aligned with
key stakeholder
interests.
“
Сommittee members
As of 31 December 2016, the
Environmental, Health and Safety
Committee comprised:
Igor Antoshin Committee Chairman,
Non-executive Director of the Board of
Directors
Andrey A. Guryev Committee Member,
Executive Director of the Board of Directors
Sven Ombudstvedt Committee Member,
Independent Non-executive Director of the
Board of Directors
Key areas
The Environmental, Health and Safety
Committee was formed to oversee the
Company’s activities in the areas of
environmental protection, efficient
use of natural resources and energy,
and occupational health and safety for
employees, including the avoidance of
industrial accidents, and to advise the
Board of Directors on such issues.
The Committee’s remit includes:
• ensuring the Company’s compliance
with legal and regulatory requirements
relating to environmental and health and
safety issues
• ensuring the Company’s development
and enforcement of policies, procedures
and practices beneficial to the protection
of the environment and the health
and safety of employees, contractors,
customers and the public
• evaluating the Company’s efficient
use of natural resources and energy,
enforcement of energy-saving and
resource-conservation activities
within the Company, and providing
recommendations for further
implementation and improvement of
these activities
• preventing industrial accidents, including
plans, programmes and processes
established by the Company to evaluate,
manage and decrease risks of industrial
accidents
• Improving conditions related to the
health and safety of the Company’s
employees, and enforcing policies for
decreasing and eliminating occupational
injuries
“
Igor Antoshin
Committee Chairman
We have implemented
best practice HSE
policies across PhosAgro
and have improved
performance in this area.
In 2016, the Committee reviewed the
Company’s HSE reports every quarter.
Special attention was paid to targeted
programmes and work schedules, as
well as to monitoring implementation.
Investments and target projects aimed
at reducing our environmental impact
were reviewed and evaluated. Changes
to environmental legislation were reviewed
for potential impacts on the Company’s
operations. The Committee surveyed and
evaluated management’s performance
with regards to environmental permits and
measures undertaken to address issues
identified during inspections.
In 2016, the Committee reviewed
management KPI and bonus policies
to ensure that they continued to align
management interests with those of key
stakeholders. The Committee also finalised
the headcount optimisation, which has
significantly streamlined PhosAgro’s
operations.
Activities in 2016
During the reporting period, the Remuneration and Human Resources Committee held four
meetings. The main issues considered by the Committee during 2016 were:
• analysis of implementation of the
• evaluation of the independence of
Company’s social programmes in 2015 and
candidates for the Board of Directors
priority areas of social policy in 2016
• evaluation of the work of the Board of
• evaluation of the performance of the Chief
Directors in 2016
Executive Officer and the Management
Board, recommendations for the Board of
Directors regarding their reappointment
• assessment of the headcount optimisation
programme at PhosAgro and its subsidiaries;
• review of the Human Resources Policy for
PhosAgro and its subsidiaries
In 2016, Committee members received
monthly reports containing up-to-date
information about: industrial injuries,
accidents and incidents; ongoing audits
by government agencies, results of
such audits, and corrective actions
recommended during the audits;
implementation of such measures as
internal audits, incident investigations,
special evaluations of labour conditions,
and the investigation and reporting of
occupational diseases; performance of
industrial analyses.
The Committee’s input has helped
to improve the quality and the scope of
reporting. This ensures a deeper and more
efficient review of HSE issues by both the
Committee and the Board of Directors.
Activities in 2016
During the reporting period, the Environmental, Health and Safety Committee held three
meetings, at which the following issues were covered:
• proposed changes to the Committee
• evaluation of the results of subsidiaries’
regulations in connection with new
work on compliance with environmental
requirements issued by the Moscow
regulations in 2015 and for the first nine
Exchange and the Russian Corporate
months of 2016
Governance Code
• evaluation of subsidiaries’ comprehensive
• review of PhosAgro’s integrated report
safety systems for handling hazardous
for 2015
cargoes (storage, loading and
• evaluation of the results of subsidiaries’
transportation)
work on compliance with workplace
• review of proposed changes to Russian
health and safety regulations for
Federation environmental protection
hazardous production sites in 2015 and for
legislation and analysis of possible effects
the first nine months of 2016
for the Company
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PhosAgro Integrated Report 2016www.phosagro.comCorporate governance (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK MANAGEMENT COMMITTEE
EXECUTIVE BODY
The Committee’s remit includes:
• evaluating the effectiveness of the
Company’s risk management system and
making recommendations regarding
improvements
• preparing recommendations for the
Company’s Board of Directors regarding:
– risk management methodology,
determining the Company’s most
material risks that require constant
monitoring and management,
and recommendations regarding
improvements to the unified risk
management system
– determining the Company’s risk
appetite and its risk tolerance
– changes and additions to PhosAgro’s
risk management policy
Сommittee members
As of 31 December 2016, the Risk
Management Committee comprised:
Ivan Rodionov Committee Chairman,
Non-executive Director of the Board of
Directors
Andrey A. Guryev Committee Member,
Executive Director of the Board of
Directors
Mikhail Rybnikov Committee Member,
Executive Director of the Board of
Directors
Key areas
The Risk Management Committee
was created in 2014 with the goal
of developing recommendations and
proposals for the Board of Directors and
other management bodies with regard
to identification and management of
material risks for the Company, as well as
improvements to, and further development
of, the Company’s risk management
systems.
Ivan Rodionov
Committee Chairman
“
The Committee
monitored the
implementation of
risk management
systems across
the enterprise, and
met several times
to analyse emerging
risks related
to events that took
place during the
year.
“
In 2016, the Committee continued
to develop and further improve its Risk
Management Policy, and to review our risk
analysis and risk tolerance in line with
the current market situation. Throughout
the year, the Board of Directors received
regular risk management updates.
Activities in 2016
• monitoring how PhosAgro’s key risks are
• providing recommendations
managed
to management on risk management
• considering PhosAgro’s risk appetite
policies and procedures
• review of PhosAgro’s key risks and updates
to its risk map
During the reporting period, the
Management Board held seven meetings,
at which it reviewed the Company’s
quarterly financial and operational
performance. It approved the 2016 budget
in March and the 2017 budget in December.
The Management Board also made
decisions to approve and amend the charity
budget.
Senior management
The Management Board effectively
represents PhosAgro’s senior management.
It oversees the day-to-day operations of the
Company and implements the Company’s
strategy.
The Chief Executive Officer
According to the Company’s Charter, the
Chief Executive Officer is appointed by the
Company’s Board of Directors for a period
of one year and may be dismissed by a
decision of the Board of Directors at any
time. The Company’s Corporate Governance
Code provides that the Chief Executive
Officer shall act in good faith and with
due diligence to further the interests of
the Company and its shareholders. All
issues related to the Company’s day-to-day
operations are within the authority and
responsibility of the Chief Executive Officer
except for those matters that are subject
to ratification by the General Shareholders’
Meeting, the Company’s Board of Directors
and/or the Management Board. The Chief
Executive Officer, together with the
Management Board, is responsible for
ensuring that the Company’s strategy and
the decisions of the General Shareholders’
Meeting and the Board of Directors are
implemented. In order to ensure efficient
corporate communications between the
Company’s Board of Directors and the
Chief Executive Officer, the Chief Executive
Officer submits regular quarterly reports
to the Board.
Some of the matters for which the Chief
Executive Officer is responsible are:
• deciding on all issues related to the
Company that do not fall within the
competence of the General Shareholders’
Meeting, the Board of Directors or the
Management Board
• representing the Company before all
federal and local authorities and in
meetings with organisations and entities
in Russia and abroad
• hiring and dismissing the Company’s
personnel
• carrying out all other activities and
legal steps required to be conducted on
behalf of the Company in accordance
with the Company’s Charter, decisions
of the Board of Directors and the
General Shareholders’ Meeting and/or in
accordance with current legislation
Andrey A. Guryev was the Company’s Chief
Executive Officer throughout 2016. For Mr
Guryev’s biographical details, please see the
“Board of Directors” section of this report.
Management Board
As of 31 December 2016, the Management
Board consisted of:
Andrey A. Guryev Chairman of the
Management Board
Mikhail Rybnikov Member of the
Management Board
Siroj Loikov Member of the Management
Board
Alexander Sharabaiko Member of the
Management Board
Alexei Sirotenko Member of the
Management Board
The matters that are within the
competence of the Management Board are
set out in the Charter, and include:
• reviewing, revising and approving of
PhosAgro’s quarterly and annual budgets
• developing PhosAgro’s capital
expenditure plans and strategy with
respect to any new business activities
• deciding to enter into, change or
terminate certain transactions related
to the disposal of securities and stakes in
other companies
• arranging the preparation and provision
of reports to the Board of Directors
on PhosAgro’s financial and operating
performance
• approving incentivisation and similar
documents that determine the
compensation and benefit policies for
PhosAgro employees
• electing and removing of the secretary
of the Management Board and his/her
powers
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PhosAgro Integrated Report 2016www.phosagro.comCorporate governance (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION Board and senior management
remuneration
Members of PhosAgro’s Board of
Directors may receive remuneration
and be compensated for expenses
incurred in the course of their duties in
accordance with decisions of the General
Shareholders’ Meeting. According to the
Company’s Corporate Governance Code,
the remuneration of the Board of Directors
shall be in line with current market
conditions and shall be at a level that
enables the Company to attract, motivate
and retain highly skilled professionals
to help drive the future growth and
performance of the business. At the same
time, the remuneration shall not exceed
the amount needed to achieve this.
In 2016, the total remuneration paid
to the Board of Directors of PhosAgro was
USD 800.0 thousand and RUB 9,247.1
thousand. The amount of remuneration and
additional compensation paid to the Chief
Executive Officer of PhosAgro is regulated
by a contract between the Chief Executive
Officer and the Company, which is signed
by the Company’s Board of Directors.
The total remuneration reflects the Chief
Executive Officer’s qualifications and takes
into account the particular contribution
of the Chief Executive Officer to the
Company’s financial results.
The remuneration paid by the Company
to the Chief Executive Officer and the four
other members of the Management Board
(who represent the Senior Management
Team) for their services to the Company
during the year ended 31 December
2016 was RUB 234.6 million in salary and
additional compensation.
The remuneration of the Company’s
senior managers consists of base salary,
which is paid monthly, plus additional
compensation, paid quarterly and annually.
Payment of additional compensation is
based on achieving the Company’s key
performance indicators and accomplishing
additional tasks and goals, as set by the
Board of Directors and Chief Executive
Officer for the reporting quarter or year.
The key performance indicators for each
individual senior manager are set by
period and mainly consist of indicators for
sustaining operational efficiency as well
as contributing to the achievement of
corporate growth and strategy.
Annual additional compensation is
calculated by adding percentages (as set
by the Board of Directors) of the Company’s
EBITDA for the reporting period.
Insider Information Policy
PhosAgro has instituted a well-defined
policy on insider information that is one of
the most important factors in ensuring that
the rights and interests of its shareholders
and investors are respected. The Company’s
principles are outlined in the Regulation
on Insider Information, which is available
on the website. An insider is a person who
has the right to access insider information
as part of his or her job description or in
line with an internal Company document,
a contract with the Company or a law
or regulatory requirement. PhosAgro’s
Internal Audit Department, which reports
to the Board of Directors, is responsible
for ensuring compliance with current laws
and regulations on insider information.
In 2016, the Board of Directors approved
a revised version of the policy to account
for changes in Russian legislation, as
well as the requirements of the European
Union’s newly enacted regulation aimed at
combating market manipulation.
PhosAgro controls insider activity by
placing restrictions on the use and
circulation of insider information. For
example, insiders may not pass on
information available to them to other
individuals except in cases expressly
provided for in current legislation and
the Company’s documents. The Corporate
Secretary’s office maintains lists of insiders
and notifies insiders of their inclusion
on these lists. The office gathers data on
possible or actual disclosures of insider
information and brings them to the
attention of the Company’s Board of
Directors. In the event that the Company
suffers a loss due to a breach of the Insider
Information Policy, the insider is required
to compensate the Company for any
damages.
Dividend Policy
PhosAgro’s Dividend Policy is based on the
following principles:
• shareholders’ interests are to be
balanced between the payment of
dividends and reinvestment of profit
into further development
• there is to be a transparent and
predictable dividend policy that is
attractive to investors
• the majority of profit is to be used for
reinvestment to support the Company’s
growth
A decision on the payment of a dividend,
its timing and the exact amount of such
a payment is subject to approval of the
General Shareholders’ Meeting, based on
recommendations provided by PhosAgro’s
Board of Directors. The Board of Directors’
recommendations depend primarily on
PhosAgro’s net profit under IFRS, while
other factors such as cash requirements
and financial position are also considered.
While formally the amount of dividend
payments is based on the Company’s net
profits for the first quarter, six months, nine
months and/or full year calculated under
Russian Accounting Standards (RAS), and
payments are made in relation to these
specific periods, the Board of Directors
bases its dividend decisions on the
Company’s IFRS results. A decision on the
payment of an interim dividend is made at
the General Shareholders’ Meeting within
three months of the end of the relevant
period. If the dividends are approved by the
General Shareholders’ Meeting, decisions
regarding ex-dividend dates are made
based on the recommendations of the
Board of Directors.
The ex-dividend date must be set between
10 and 20 days from the date of the
decision to pay dividends. Dividends must
be paid to registered shareholders who are
nominee shareholders that are professional
securities traders or fund managers within
10 working days from the ex-dividend
date. Other registered shareholders must
be paid within 25 working days after the
ex-dividend date. Holders of PhosAgro
GDRs are also entitled to receive dividends
in respect of shares underlying the GDRs,
subject to the terms of their depositary
agreements.
In determining the size of dividends to be
paid out, the Board of Directors will always
try to recommend dividend payments of
between 30% and 50% of the consolidated
profit for the year, calculated in accordance
with IFRS. Dividend payments in 2016
totalled nearly 50% of the Company’s net
profit for the period.
The Review Committee
The Review Committee may undertake
internal audit procedures either on its
own initiative, pursuant to a decision of
the General Shareholders’ Meeting or
the Board of Directors or at the request
of shareholders owning at least 10% of
the shares in the Company. The General
Shareholders’ Meeting elects the members
of the Review Committee for the period
until the next Annual General Shareholders’
Meeting. The Review Committee comprises
three members and is led by the Chairman
of the Review Committee. Members of the
Committee cannot be on the Company’s
Board of Directors at the same time, nor
can they hold positions in the Company’s
executive bodies.
Internal Audit Department
The responsibility for performing
internal audits of PhosAgro falls on
the Internal Audit Department. It is an
independent department within PhosAgro
that functionally reports to the Audit
Committee of the Board of Directors and
administratively reports to the CEO.
The Internal Audit Department is tasked
with improving the efficiency of business-
process management, internal control and
risk management systems of PhosAgro
and its subsidiaries by conducting an
independent and objective assessment
of their risk management, corporate
governance, information systems and
internal control, as well as other projects
that fall within the department’s scope as
required by the international internal audit
standards established by the Institute of
Internal Auditors.
In 2016, the Board of Directors
approved a new Internal Audit Policy
that was developed in compliance with
the corporate governance code, the
recommendations of the Central Bank of
Russia and the Moscow Exchange’s listing
rules. The policy outlines the Internal
Audit Department’s goals and tasks, the
rights and responsibilities of its staff, as
well as the conditions that guarantee its
operational independence.
The department has also been reorganised
into two functional units to comply with
the new policy:
• the internal audit function audits
the efficiency of business processes,
including the risk management and
internal control systems;
• the special projects function implements
bespoke projects, including research and
forensics.
New documents regulating the Internal
Audit Department have been confirmed
to reflect the reorganisation, including staff
job descriptions that have been developed
to comply with the internal auditor
professional standard.
In 2016, the department audited the
following business processes: capital
construction, domestic sales, energy
management, environmental compliance
and industrial safety. It also brought on
external consultants to help audit the risk
management system.
The Internal Audit Department’s plans
for 2017 include auditing the following
business processes: mining and refining,
fertilizer production, transportation
logistics, insider information and export
sales.
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PhosAgro Integrated Report 2016www.phosagro.comCorporate governance (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION INTERNAL CONTROL AND AUDIT
Internal control body
REVIEW
COMMITTEE
Appointed by
General Shareholders’
Meeting
Reports to
General Shareholders’
Meeting
Functions
AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
BOARD
OF DIRECTORS
Board
of Directors
Board
of Directors
General Shareholders’
Meeting
Shareholders
Prepares a report on the results of the Company’s
operations for the prior year ahead of the Annual
General Shareholders’ Meeting and gives its opinion
on whether the Company’s financial statements are
true and accurate.
Conducts internal audit procedures and ensures
compliance with Russian Accounting Standards
(RAS). Monitors compliance with current legislation,
the Company Charter and internal regulations.
Improves the efficiency and quality of the work of
the Board of Directors in the area of internal control.
Considers issues and provides recommendations to
the Board of Directors in areas like:
• internal and external audits
• the accuracy and efficiency of internal control
procedures
• management accounting and financial reporting
• risk management procedures and systems
• how risks are reflected in the Company’s
reporting
Supervises the Internal Audit Department.
Determines how the internal control system
operates and approves various actions and policies
relating to it.
Reports annually to the General Shareholders’
Meeting on the reliability and efficiency of
PhosAgro’s internal control system.
Approves the appointment and dismissal of
the Director of Internal Audit.
Internal control body
CHIEF
EXECUTIVE OFFICER
Appointed by
Board
of Directors
Reports to
Board
of Directors
Functions
INTERNAL
AUDIT DEPARTMENT
EXTERNAL
AUDITOR
Board
of Directors
General Shareholders’
Meeting
Functional:
Audit Committee
Audit Committee
Functioning of PhosAgro’s internal control system.
Implements internal control procedures and
ensures that they are put into practice.
Promptly informs the Board of Directors of any
significant risks faced by the Company or any major
weaknesses in the Company’s internal control
system.
Tells the Board what measures have been or will be
taken to address issues and results of these actions.
Provides an independent and objective assessment
of the Company’s internal control and risk
management systems.
Verifies the compliance, in terms of accuracy and
completeness, of the Company’s annual financial
statements with IFRS.
Assists top management in developing and
monitoring the implementation of procedures and
measures to improve the risk management, internal
control and corporate governance systems.
Coordinates with the Company’s external auditors
and other third parties.
Conducts internal audits of subsidiaries in line with
established procedures.
Prepares and presents information about
the internal audit function’s operations for the Board
of Directors, Audit Committee and General
Shareholders’ Meeting.
Verifies compliance of management and
employees with legislation and internal regulations
on insider information.
Inspects the Company’s financial and commercial
operations and its internal control systems.
Prepares a report that is submitted to the Audit
Committee at least once a year.
In case of a disagreement between the Company’s
management and the independent auditor,
the Audit Committee oversees the resolution of
the disagreement.
KPMG is currently PhosAgro’s external auditor.
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PhosAgro Integrated Report 2016www.phosagro.comCorporate governance (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION MANAGEMENT
RESPONSIBILITY
STATEMENT
The Company’s management hereby confirms that, to the best of its knowledge:
a. The financial statements prepared in
accordance with International Financial
Reporting Standards as issued by the
International Accounting Standards
Board give a true and fair view of the
assets, liabilities, financial position
and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole;
b. The management report includes a
fair review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
The consolidated financial statements for the year ended 31 December 2016 were
approved by the Company’s management on 21 March 2017.
Pre-approved by the Board of
Directors March 21, 2017
Approved by the Annual
General Meeting of
Shareholders May 30, 2017.
Andrey A. Guryev
Chairman of the Management Board and
Chief Executive Officer of PJSC PhosAgro
Andrey A. Guryev
Chairman of the Management
Board and Chief Executive
Officer of PJSC PhosAgro
122
PhosAgro Integrated Report 2016 CONSOLIDATED
FINANCIAL STATEMENTS
Contents
Auditors’ Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
1.
2.
3.
Background
Basis of preparation
Significant accounting policies
4. Determination of fair values
5.
6.
7.
Segment information
Revenues
Personnel costs
8. Cost of sales
9.
Administrative expenses
10.
Selling expenses
11. Other expenses, net
12. Finance income and finance costs
13.
Income tax expense
14. Property, plant and equipment
15.
Investments in associates
16. Deferred tax assets and liabilities
17. Other non-current assets
18. Other current investments
19.
Inventories
20. Trade and other receivables
21. Cash and cash equivalents
22. Equity
23. Earnings per share
24. Loans and borrowings
25. Defined benefit obligations
26.
Leases
27. Trade and other payables
28. Financial risk management
29. Commitments
30. Contingencies
31. Related party transactions
32. Significant subsidiaries
33. Events subsequent to the reporting date
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STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONwww.phosagro.com JSC “KPMG”
10 Presnenskaya Naberezhnaya Moscow, Russia 123112
Telephone
Fax
Internet
+7 (495) 937 4477
+7 (495) 937 4400/99
www.kpmg.ru
Independent Auditors’ Report
To the Shareholders and Board of Directors
PJSC “PhosAgro”
Opinion
We have audited the consolidated
financial statements of PJSC “PhosAgro”
(the “Company”) and its subsidiaries (the
“Group”), which comprise the consolidated
statement of financial position as at
31 December 2016, the consolidated
statements of profit or loss and other
comprehensive income, changes in equity
and cash flows for the year then ended, and
notes, comprising significant accounting
policies and other explanatory information.
In our opinion, the accompanying
consolidated financial statements
present fairly, in all material respects,
the consolidated financial position of the
Group as at 31 December 2016, and its
consolidated financial performance and its
consolidated cash flows for the year then
ended in accordance with International
Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance
with International Standards on Auditing
(ISAs). Our responsibilities under those
standards are further described in the
Auditors’ Responsibilities for the Audit of the
Consolidated Financial Statements section
of our report. We are independent of the
VALUATION OF DEFERRED TAX ASSETS
Please refer to the Note 16 in the consolidated financial
statements.
Group in accordance with the independence
requirements that are relevant to our audit
of the consolidated financial statements
in the Russian Federation and with the
International Ethics Standards Board for
Accountants’ Code of Ethics for Professional
Accountants (IESBA Code), and we have
fulfilled our other ethical responsibilities
in accordance with the requirements in the
Russian Federation and the IESBA Code.
We believe that the audit evidence we
have obtained is sufficient and appropriate
to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that,
in our professional judgment, were of most
significance in our audit of the consolidated
financial statements of the current period.
These matters were addressed in the
context of our audit of the consolidated
financial statements as a whole, and in
forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The key audit matter
The Group has recognised significant
deferred tax assets in respect of tax losses.
The recovery of the deferred tax assets
depends on achieving sufficient taxable
profits in the future.
Future taxable profits to be used for
utilisation of tax losses accumulated by the
Company mainly represent interest income
to be received by the Company on the loans
issued to the Group subsidiaries less interest
expense of the Company from financing.
The assessment of the potential to utilise
the tax losses is dependent on the forecast
profitability of the Group subsidiaries, the
amount of dividends to be distributed
to the Company, expected foreign currency
exchange and interest rates for loans to be
issued by the Company to Group subsidiaries
and financing to be received by the
Company.
There is inherent uncertainty involved
in forecasting timing and quantum of
future taxable profits, which support the
extent to which tax assets are recognised.
Therefore, this is the key judgmental area
our audit is concentrated on.
Audited entity: PJSC “PhosAgro”
Registration No. in the Unified State Register of Legal Entities 1027700190572.
Moscow, Russia
Independent auditor: JSC “KPMG”, a company incorporated under the Laws of the Russian Federation, a member firm
of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity.
Registration No. in the Unified State Register of Legal Entities 1027700125628.
Member of the Self-regulated organization of auditors “Russian Union of auditors” (Association). The Principal
Registration Number of the Entry in the Register of Auditors and Audit Organisations: No. 11603053203.
PJSC “PhosAgro”
Independent Auditors’ Report
Page 2
How the matter was addressed in our audit
Our audit procedures included the following:
We analysed the underlying methodology
and tested the mathematical accuracy of
the taxable profits forecast model used
to estimate the likelihood of the recovery of
deferred tax assets.
We evaluated the appropriateness of
management’s key assumptions and
estimates, in particular the likelihood of
generating sufficient future taxable profits
to support the recognition of deferred
tax assets, in reference to performance
trends and dividend capacity of the Group
subsidiaries.
We corroborated expected interest rates
for loans to be issued and financing
to be received by the Company to publicly
available market benchmarks.
Using KPMG tax specialist, we considered
the appropriateness of the application of
relevant tax legislation by the Group, in
relation to the utilisation of tax losses.
Other Information
Management is responsible for the
other information. The other information
comprises the information included in the
Annual Report but does not include the
consolidated financial statements and our
auditors’ report thereon. The Annual Report
is expected to be made available to us after
the date of this auditors’ report.
Our opinion on the consolidated financial
statements does not cover the other
information and we will not express any
form of assurance conclusion thereon.
In connection with our audit of the
consolidated financial statements,
our responsibility is to read the other
information identified above when it
becomes available and, in doing so, consider
whether the other information is materially
inconsistent with the consolidated financial
statements or our knowledge obtained
in the audit, or otherwise appears to be
materially misstated.
Responsibilities of Management and
Those Charged with Governance for the
Consolidated Financial Statements
Management is responsible for the
preparation and fair presentation of the
consolidated financial statements in
accordance with IFRS, and for such internal
control as management determines is
necessary to enable the preparation of
consolidated financial statements that are
free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial
statements, management is responsible for
assessing the Group’s ability to continue as
a going concern, disclosing, as applicable,
matters related to going concern
and using the going concern basis of
accounting unless management either
intends to liquidate the Group or to cease
operations, or has no realistic alternative but
to do so.
Those charged with governance are
responsible for overseeing the Group’s
financial reporting process.
Auditors’ Responsibilities for the Audit of
the Consolidated Financial Statements
Our objectives are to obtain reasonable
assurance about whether the consolidated
financial statements as a whole are free
from material misstatement, whether due
to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable
assurance is a high level of assurance, but
is not a guarantee that an audit conducted
in accordance with ISAs will always detect
a material misstatement when it exists.
Misstatements can arise from fraud or error
and are considered material if, individually
or in the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with ISAs,
we exercise professional judgment and
maintain professional skepticism throughout
the audit. We also:
• Identify and assess the risks of material
misstatement of the consolidated
financial statements, whether due
to fraud or error, design and perform
124
125
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resul-
ting in this independent auditors’ report is:
I.A. Yagnov
JSC “KPMG”
Moscow, Russia
24 March 2017
PJSC “PhosAgro”
Independent Auditors’ Report
Page 3
audit procedures responsive to those
risks, and obtain audit evidence that is
sufficient and appropriate to provide
a basis for our opinion. The risk of not
detecting a material misstatement
resulting from fraud is higher than for
one resulting from error, as fraud may
involve collusion, forgery, intentional
omissions, misrepresentations, or the
override of internal control;
• Obtain an understanding of internal
control relevant to the audit in order
to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the effectiveness of the Group’s
internal control;
• Evaluate the appropriateness of
accounting policies used and the
reasonableness of accounting estimates
and related disclosures made by
management;
• Conclude on the appropriateness of
management’s use of the going concern
basis of accounting and, based on the
audit evidence obtained, whether a
material uncertainty exists related
to events or conditions that may cast
significant doubt on the Group’s ability
to continue as a going concern. If we
conclude that a material uncertainty
exists, we are required to draw attention
in our auditors’ report to the related
disclosures in the consolidated financial
statements or, if such disclosures are
inadequate, to modify our opinion. Our
conclusions are based on the audit
evidence obtained up to the date of our
auditors’ report. However, future events
or conditions may cause the Group
to cease to continue as a going concern;
• Evaluate the overall presentation,
structure and content of the consolidated
financial statements, including
the disclosures, and whether the
consolidated financial statements
represent the underlying transactions
and events in a manner that achieves fair
presentation;
• Obtain sufficient appropriate audit
evidence regarding the financial
information of the entities or business
activities within the Group to express
an opinion on the consolidated financial
statements. We are responsible for the
direction, supervision and performance
of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with
governance regarding, among other matters,
the planned scope and timing of the audit
and significant audit findings, including any
significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with
governance with a statement that we have
complied with relevant ethical requirements
regarding independence, and communicate
with them all relationships and other
matters that may reasonably be thought
to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with those
charged with governance, we determine
those matters that were of most significance
in the audit of the consolidated financial
statements of the current period and are
therefore the key audit matters. We describe
these matters in our auditors’ report
unless law or regulation precludes public
disclosure about the matter or when, in
extremely rare circumstances, we determine
that a matter should not be communicated
in our report because the adverse
consequences of doing so would reasonably
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR 2016
RUB million
Revenues
Cost of sales
GROSS PROFIT
Administrative expenses
Selling expenses
Taxes, other than income tax
Other expenses, net
OPERATING PROFIT
Finance income
Finance costs
Foreign exchange gain/(loss), net
Share of profit/(loss) of associates
PROFIT BEFORE TAX
Income tax expense
PROFIT FOR THE YEAR
Attributable to:
• Non-controlling interests*
• Shareholders of the Parent
OTHER COMPREHENSIVE INCOME
Actuarial gains and losses, net of tax
Foreign currency translation difference
OTHER COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR
Note
6
8
9
10
11
12
12
28(b)
15
13
25
2016
187,742
(86,391)
101,351
(13,891)
(21,129)
(2,261)
(2,472)
61,598
909
(4,682)
16,962
140
74,927
(15,041)
59,886
2
59,884
(68)
(3,105)
(3,173)
2015
189,732
(83,064)
106,668
(12,184)
(17,751)
(1,994)
(1,408)
73,331
1,222
(6,093)
(22,178)
(59)
46,223
(9,787)
36,436
(6)
36,442
(4)
3,405
3,401
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
56,713
39,837
Attributable to:
• Non-controlling interests*
• Shareholders of the Parent
Basic and diluted earnings per share (in RUB)
23
* non-controlling interests are the minority shareholders of the subsidiaries of PJSC “PhosAgro”
The consolidated financial statements were approved on 24 March 2017:
2
56,711
462
(6)
39,843
281
A.A. Guryev
Chief executive officer
A.F. Sharabaiko
Chief financial officer
126
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to, and forming part of, the
consolidated financial statements set out on pages 133 to 163.
127
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016
CONSOLIDATED STATEMENT OF CASH FLOWS FOR 2016
31 December 2016
31 December 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Note
RUB million
RUB million
ASSETS
Property, plant and equipment
Advances issued for property, plant and equipment
Intangible assets
Investments in associates
Deferred tax assets
Other non-current assets
Non-current assets
Other current investments
Inventories
Current income tax receivable
Trade and other receivables
Cash and cash equivalents
Current assets
TOTAL ASSETS
EQUITY
Share capital
Share premium
Retained earnings
Other reserves
Equity attributable to shareholders of the Parent
Equity attributable to non-controlling interests
TOTAL EQUITY
LIABILITIES
Loans and borrowings
Defined benefit obligations
Deferred tax liabilities
Non-current liabilities
Trade and other payables
Current income tax payable
Loans and borrowings
Derivative financial liabilities
Current liabilities
Note
14
15
16
17
18
19
20
21
22
24
25
16
27
24
154,713
120,952
4,684
1,165
816
5,110
2,226
7,424
566
810
5,901
2,822
168,714
138,475
3,282
19,934
339
29,674
7,261
60,490
229,204
372
7,494
74,932
5,486
88,284
137
88,421
98,239
767
4,600
103,606
22,803
237
14,137
-
37,177
4,902
17,814
453
25,511
29,347
78,027
216,502
372
7,494
43,460
8,659
59,985
213
60,198
105,565
424
3,677
109,666
17,011
491
28,947
189
46,638
Profit before tax
Adjustments for:
Depreciation and amortisation
Loss on disposal of property, plant and equipment and intangible assets
Finance income
Finance costs
Share of (profit)/loss of associates
Foreign exchange (gain)/loss, net
Operating profit before changes in working capital and provisions
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash flows from operations before income taxes and interest paid
Income tax paid
Finance costs paid
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Loans repaid/(issued), net
Acquisition of property, plant and equipment and intangible assets
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investments
Finance income received
Cash of Phosint Group at the date of acquisition
2016
74,927
8, 9, 10
10,767
11
12
12
15
614
(909)
4,682
(140)
(18,040)
71,901
(2,120)
(4,023)
3,019
68,777
(13,451)
(4,965)
50,361
253
(40,246)
270
1,277
432
-
2015
46,223
9,133
915
(1,222)
6,093
59
23,663
84,864
(5,287)
(6,116)
2,741
76,202
(7,488)
(5,453)
63,261
(151)
(42,668)
170
-
1,008
10,178
CASH FLOWS USED IN INVESTING ACTIVITIES
(38,014)
(31,463)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Dividends paid to shareholders of the Parent
Dividends paid to non-controlling interests
Payment of finance lease liabilities
Proceeds from/(payments for) settlement of derivatives, net
Acquisition of non-controlling interests
Other payments
Proceeds from contribution to charter capital of subsidiaries by non-controlling interests
22
34,149
(33,727)
(27,974)
(9)
(1,951)
127
(218)
(243)
-
46,376
(62,041)
(18,130)
-
(1,905)
(1,590)
-
(154)
71
TOTAL EQUITY AND LIABILITIES
229,204
216,502
CASH FLOWS USED IN FINANCING ACTIVITIES
(29,846)
(37,373)
NET DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Effect of exchange rates fluctuations
CASH AND CASH EQUIVALENTS AT 31 DECEMBER
21
(17,499)
29,347
(4,587)
7,261
(5,575)
30,687
4,235
29,347
128
The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated
financial statements set out on pages 133 to 163.
The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out
on pages 133 to 163.
129
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR 2016
RUB million
Attributable to shareholders of the Parent
Share capital
Share
premium
Retained
earnings
Actuarial
gains and
losses
Foreign
currency
translation
reserve
Attributable
to non-
controlling
interests
Total
BALANCE AT 1 JANUARY
2015
372
7,494
22,708
(312)
5,570
149
35,981
Total comprehensive income for the year
Profit for the year
Actuarial gains and losses, net of tax
Foreign currency translation
difference
-
-
-
-
Transactions with owners recognised directly in equity
Dividends to shareholders of
the Parent
Additional contribution to charter
capital of subsidiaries
Other
-
-
-
-
-
-
-
-
-
-
-
-
36,442
-
-
36,442
(15,540)
-
(150)
(15,690)
-
(4)
-
(4)
-
-
-
-
-
-
3,405
3,405
-
-
-
-
(6)
-
-
(6)
(1)
71
-
70
36,436
(4)
3,405
39,837
(15,541)
71
(150)
(15,620)
BALANCE AT 31 DECEMBER
2015
372
7,494
43,460
(316)
8,975
213
60,198
BALANCE AT 1 JANUARY
2016
372
7,494
43,460
(316)
8,975
213
60,198
Total comprehensive income for the year
Profit for the year
Actuarial gains and losses, net of tax
Foreign currency translation
difference
-
-
-
-
Transactions with owners recognised directly in equity
Dividends to shareholders of
the Parent, note 22
Acquisition of non-controlling
interests without a change in control
Other
-
-
-
-
-
-
-
-
-
-
-
-
59,884
-
-
59,884
(27,974)
(149)
(289)
(28,412)
-
(68)
-
(68)
-
-
-
-
-
-
(3,105)
(3,105)
-
-
-
-
2
-
-
2
(9)
(69)
-
(78)
59,886
(68)
(3,105)
56,713
(27,983)
(218)
(289)
(28,490)
BALANCE AT 31 DECEMBER
2016
372
7,494
74,932
(384)
5,870
137
88,421
1. Background
2. Basis of preparation
(a)Organisation and operations
PJSC “PhosAgro” (the “Company” or the
“Parent”) and its subsidiaries (together
referred to as the “Group”) comprise
Russian legal entities and foreign trading
subsidiaries. The Company was registered
in October 2001. The Company’s location is
Leninsky prospekt 55/1 building 1, Moscow,
Russian Federation, 119333.
The Group’s principal activity is production
of apatite concentrate and mineral fertilisers
at plants located in the cities of Kirovsk
(Murmansk region), Cherepovets (Vologda
region), Balakovo (Saratov region) and
Volkhov (Leningrad region), and their
distribution across the Russian Federation
and abroad.
The Company’s key shareholders are several
Cyprus entities holding approximately 20%
of the Company’s ordinary shares each.
The majority of the shares of the Company
are ultimately owned by trusts, where the
economic beneficiary is Mr. Andrey G. Guryev
and his family members.
(b) Russian business environment
The Group’s operations are primarily
located in the Russian Federation.
Consequently, the Group is exposed
to the economic and financial conditions
of the Russian Federation which display
characteristics of an emerging market.
The legal, tax and regulatory frameworks
continue development, but are subject
to varying interpretations and frequent
changes which together with other legal
and fiscal impediments contribute to the
challenges faced by entities operating in
the Russian Federation. The consolidated
financial statements reflect management’s
assessment of the impact of the Russian
business environment on the operations
and the financial position of the Group.
The future business environment may differ
from management’s assessment.
(a) Statement of compliance
These consolidated financial statements
have been prepared in accordance with
International Financial Reporting Standards
(“IFRS”) as issued by the International
Accounting Standards Board.
The Group additionally prepares IFRS
consolidated financial statements in the
Russian language in accordance with the
Federal Law No. 208-FZ On consolidated
financial reporting
(b) Basis of measurement
The consolidated financial statements are
prepared on the historical cost basis except
that investments available-for-sale and
derivative financial instruments are stated
at fair value
rate of RUB 27.7487 for USD 1. Equity
items arising during the year are
recognised at the exchange rate ruling at
the date of transaction;
• The resulting foreign exchange
difference is recognised in other
comprehensive income.
The translation from EUR into RUB, where
applicable, was performed as follows:
• Assets and liabilities as at 31 December
2016 were translated at the closing
exchange rate of RUB 63.8111 for EUR
1 (31 December 2015: RUB 79.6972 for
EUR 1);
• Profit and loss items were translated at
the average exchange rate for 2016 of
RUB 74.2310 for EUR 1. (for 2015: RUB
67.7767 for EUR 1);
(c) Functional currency
The national currency of the Russian
Federation is the Russian Rouble (“RUB”),
which is the functional currency of the
Parent and its subsidiaries, except for foreign
trading subsidiaries, where the functional
currency is USD.
• Equity items, which were recognised at
the date of adoption of IFRS, 1 January
2005, were translated at the exchange
rate of RUB 37.8409 for EUR 1. Equity
items arising during the year are
recognised at the exchange rate ruling at
the date of transaction;
(d) Presentation currency
These consolidated financial statements are
presented in RUB. All financial information
presented in RUB has been rounded to the
nearest million, except per share amounts.
The translation from USD into RUB, where
applicable, was performed as follows:
• Assets and liabilities as at 31 December
2016 were translated at the closing
exchange rate of RUB 60.6569 for USD
1 (31 December 2015: RUB 72.8827 for
USD 1);
• Profit and loss items were translated at
the average exchange rate for 2016 of
RUB 67.0349 for USD 1. (for 2015: RUB
60.9579 for USD 1);
• Equity items, which were recognised at
the date of adoption of IFRS, 1 January
2005, were translated at the exchange
• The resulting foreign exchange
difference is recognised in other
comprehensive income.
(e) Use of estimates and judgments
The preparation of consolidated financial
statements in conformity with IFRS requires
management to make judgments, estimates
and assumptions that affect the application
of accounting policies and the reported
amounts of assets, liabilities, income and
expenses. Actual results may differ from
those estimates.
Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions
to accounting estimates are recognised
in the period in which the estimates are
revised and in any future periods affected.
Information about critical assumptions and
estimation uncertainties that have the most
significant effect on the amounts recognised
130
The consolidated statement of changes in equity is to be read in conjunction with the notes to, and forming
part of, the consolidated financial statements set out on pages 133 to 163.
131
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
in the consolidated financial statements is
included in the following notes:
• note 3(c)(iv) – estimated useful lives of
fixed assets;
• note 16 – recognition of deferred tax
assets: availability of future taxable
profit against which carry-forward tax
losses can be used;
• note 18 – recognition of bad debt
provision on promissory notes:
uncertainties associated with the mutual
court claims filed by the Group and the
bank.
3. Significant accounting
policies
The accounting policies set out below have
been applied consistently to all periods
presented in these consolidated financial
statements
(a) Basis of consolidation
(I) Subsidiaries
Subsidiaries are entities controlled by the
Group. The Group controls an entity when
it is exposed to, or has rights to, variable
returns from its involvement with the
entity and has the ability to affect those
returns through its power over the entity.
The financial statements of subsidiaries
are included in the consolidated financial
statements from the date that control
commences until the date that control
ceases. The accounting policies of
subsidiaries have been changed when
necessary to align them with the policies
adopted by the Group.
(II) Loss of control
Upon the loss of control, the Group
derecognises the assets and liabilities of
the subsidiary, any non-controlling interests
and the other components of equity related
to the subsidiary. Any surplus or deficit
arising on the loss of control is recognised
in profit or loss. If the Group retains any
interest in the previous subsidiary, then
such interest is measured at fair value at
the date that control is lost. Subsequently
it is accounted for as an equity-accounted
investee or as an available-for-sale financial
asset depending on the level of influence
retained
(III) Acquisitions and disposals of non-
controlling interests
Any difference between the consideration
paid to acquire a non-controlling interest,
and the carrying amount of that non-
controlling interest, is recognised in equity.
Any difference between the consideration
received from disposal of a portion of a
Group’s interest in the subsidiary and the
carrying amount of that portion, including
attributable goodwill, is recognised in equity.
(IV) Associates
Associates are those enterprises in which
the Group has significant influence, but not
control, over the financial and operating
policies. The consolidated financial
statements include the Group’s share of
the total recognised gains and losses of
associates on an equity accounted basis,
from the date that significant influence
effectively commences until the date that
significant influence effectively ceases.
When the Group’s share of losses exceeds
the Group’s interest in the associate, that
interest is reduced to nil and recognition
of further losses is discontinued except
to the extent that the Group has incurred
obligations in respect of the associate.
(V) Transactions eliminated on consolidation
Intra-group balances and transactions,
and any unrealised gains arising from
intra-group transactions, are eliminated
in preparing the consolidated financial
statements. Unrealised gains arising from
transactions with associates and jointly
controlled enterprises are eliminated
to the extent of the Group’s interest in the
enterprise. Unrealised gains resulting from
transactions with associates are eliminated
against the investment in the associate.
Unrealised losses are eliminated in the
same way as unrealised gains except that
they are only eliminated to the extent that
there is no evidence of impairment.
(b) Foreign currencies
Transactions in foreign currencies are
translated to RUB at the foreign exchange
rate ruling at the date of the transaction.
Monetary assets and liabilities denominated
in foreign currencies at the reporting
date are translated to RUB at the foreign
exchange rate ruling at that date. Non-
monetary assets and liabilities denominated
in foreign currencies that are stated at
historical cost are translated to RUB at the
foreign exchange rate ruling at the date of
the transaction. Non-monetary assets and
liabilities denominated in foreign currencies
that are stated at fair value are translated
to RUB at the foreign exchange rate ruling
at the dates the fair values were determined.
Foreign exchange differences arising on
translation are recognised in the profit or
loss.
(c) Property, plant and equipment
(I) Owned assets
Property, plant and equipment is stated at
cost less accumulated depreciation and
impairment losses. The cost of property,
plant and equipment at the date of
transition to IFRS was determined by
reference to its fair value at that date
(“deemed cost”) as determined by an
independent appraiser.
Cost includes expenditure that is directly
attributable to the acquisition of the asset.
The cost of self-constructed assets includes
the cost of materials and direct labour, any
other costs directly attributable to bringing
the asset to a working condition for their
intended use, the costs of dismantling and
removing the items and restoring the site
on which they are located, and capitalised
borrowing costs. Purchased software that is
integral to the functionality of the related
equipment is capitalised as part of that
equipment.
Where an item of property, plant and
equipment comprises major components
having different useful lives, they are
accounted for as separate items of property,
plant and equipment.
Buildings
Plant and equipment
12-17 years
4-15 years
Fixtures and fittings
3-6 years
(II) Leased assets
Leases under which the Group assumes
substantially all the risks and rewards of
ownership are classified as finance leases.
Plant and equipment acquired by way of
finance lease is stated at an amount equal
to the lower of its fair value and the present
value of the minimum lease payments at
inception of the lease, less accumulated
depreciation and impairment losses.
(III) Subsequent expenditure
Expenses in connection with ordinary
maintenance and repairs are recognised in
the statement of profit or loss as they are
incurred.
Expenses in connection with periodic
maintenance on property, plant and
equipment are recognised as assets and
depreciated on a straight-line basis over the
period until the next periodic maintenance,
provided the criteria for capitalizing such
items have been met.
Expenses incurred in connection with major
replacements and renewals that materially
extend the life of property, plant and
equipment are capitalised and depreciated
on a systematic basis.
(IV) Depreciation
Depreciation is charged to the profit and
loss on a straight-line basis over the
estimated useful lives of the individual
assets. Depreciation commences on the
month following the month of acquisition
or, in respect of internally constructed
assets, from the month following the month
an asset is completed and ready for use.
Land is not depreciated.
The estimated useful lives as determined
when adopting IFRS (1 January 2005) are as
follows:
Tangible fixed assets acquired after the date
of adoption of IFRS, are depreciated over the
following useful lives:
Buildings
Plant and equipment
10-60 лет
5-35 лет
Fixtures and fittings
2-25 лет
(d) Intangible assets
(I) Research and development
Expenditure on research activities,
undertaken with the prospect of gaining
new scientific or technical knowledge and
understanding, is recognised in the profit
and loss as an expense as incurred.
Expenditure on development activities,
whereby research findings are applied to a
plan or design for the production of new
or substantially improved products and
processes, is capitalised if the product or
process is technically and commercially
feasible and the Group has sufficient
resources to complete development.
The expenditure capitalised includes the
cost of materials, direct labour and an
appropriate proportion of overheads. Other
development expenditure is recognised
in the profit and loss as an expense
as incurred. Capitalised development
expenditure is stated at cost less
accumulated amortisation and impairment
losses.
(II) Other intangible assets
Other intangible assets acquired by the
Group are represented by Oracle software,
which has finite useful life and is stated
at cost less accumulated amortisation and
impairment losses
(III) Amortisation
Intangible assets, other than goodwill, are
amortised on a straight-line basis over their
estimated useful lives from the date the
asset is available for use. The estimated
useful lives are 3 – 10 years.
(e) Investments
Non-derivative financial instruments
Non-derivative financial instruments
comprise investments in equity and debt
securities, trade and other receivables, cash
and cash equivalents, loans and borrowings,
and trade and other payables.
Non-derivative financial instruments are
recognised initially at fair value plus, for
instruments not at fair value through profit
or loss, any directly attributable transaction
costs. Subsequent to initial recognition
non-derivative financial instruments are
measured as described below.
Held-to-maturity investments: If the Group
has the positive intent and ability to hold
debt instruments to maturity, then they
are classified as held-to-maturity. Held-
to-maturity investments are measured at
amortised cost using the effective interest
method, less any impairment losses.
Available-for-sale financial assets:
The Group’s investments in equity securities
and certain debt securities are classified
as available-for-sale financial assets.
Subsequent to initial recognition, they are
measured at fair value and changes therein,
other than impairment losses (see note
3(i)), and foreign exchange gains and losses
on available-for-sale monetary items, are
recognised directly in other comprehensive
income. When an investment is
derecognised, the cumulative gain or loss in
other comprehensive income is transferred
to the profit or loss.
Other: Other non-derivative financial
instruments are measured at amortised cost
using the effective interest method, less any
impairment losses. Investments in equity
securities that are not quoted on a stock
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Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com exchange and where fair value cannot be
estimated on a reasonable basis by other
means are stated at cost less impairment
losses
Derivative financial instruments
The Group from time to time buys
derivative financial instruments to manage
its exposure to foreign currency risk. All
derivatives are recognised on the balance
sheet at fair value. Derivatives are not
designated as hedging instruments.
Derivatives are initially recognised at fair
value on the date a derivative contract
is entered into and are subsequently
remeasured at their fair value with the
changes in fair value recognised in profit
and loss.
(f) Inventories
Inventories are stated at the lower of cost
and net realisable value. Net realisable
value is the estimated selling price in
the ordinary course of business, less the
estimated costs of completion and selling
expenses.
The cost of inventories is based on the
weighted average principle and includes
expenditure incurred in acquiring the
inventories and bringing them to their
existing location and condition. In the case
of manufactured inventories and work in
progress, cost includes an appropriate share
of overheads based on normal operating
capacity
(g) Trade and other receivables
Trade and other receivables are stated at
cost less impairment losses.
(h)Cash and cash equivalents
Cash and cash equivalents comprise cash
balances and call deposits. Bank overdrafts
that are repayable on demand and form
an integral part of the Group’s cash
management are included as a component
of cash and cash equivalents for the purpose
of the consolidated statement of cash flows.
(I) Impairment
Financial assets
A financial asset not carried at fair value
through profit or loss is assessed at each
reporting date to determine whether there
is any objective evidence that it is impaired.
A financial asset is impaired if objective
evidence indicates that a loss event has
occurred after the initial recognition of the
asset, and that the loss event had a negative
effect on the estimated future cash flows of
that asset that can be estimated reliably.
Objective evidence that financial assets
(including equity securities) are impaired can
include default or delinquency by a debtor,
restructuring of an amount due to the Group
on terms that the Group would not consider
otherwise, indications that a debtor or issuer
will enter bankruptcy, the disappearance of
an active market for a security. In addition,
for an investment in an equity security, a
significant or prolonged decline in its fair
value below its cost is objective evidence of
impairment.
The Group considers all individually
significant receivables and held-to-
maturity investment securities for specific
impairment.
An impairment loss in respect of a financial
asset measured at amortised cost is
calculated as the difference between its
carrying amount, and the present value of
the estimated future cash flows discounted
at the asset’s original effective interest
rate. Losses are recognised in profit or loss
and reflected in an allowance account
against receivables. Interest on the impaired
asset continues to be recognised through
the unwinding of the discount. When a
subsequent event causes the amount of
impairment loss to decrease, the decrease in
impairment loss is reversed through profit
or loss.
Impairment losses on available-for-sale
investment securities are recognised by
transferring the cumulative loss that has
been recognised in other comprehensive
income, and presented in the fair
value reserve in equity, to profit or loss.
The cumulative loss that is removed
from other comprehensive income and
recognised in profit or loss is the difference
between the acquisition cost, net of any
principal repayment and amortisation, and
the current fair value, less any impairment
loss previously recognised in profit or
loss. Changes in impairment provisions
attributable to time value are reflected as a
component of interest income.
If, in a subsequent period, the fair value
of an impaired available-for-sale debt
security increases and the increase can be
related objectively to an event occurring
after the impairment loss was recognised
in profit or loss, then the impairment loss
is reversed, with the amount of the reversal
recognised in profit or loss. However, any
subsequent recovery in the fair value of an
impaired available-for-sale equity security is
recognised in other comprehensive income.
Non-financial assets
The carrying amounts of the Group’s non-
financial assets, other than inventories
and deferred tax assets, are reviewed at
each reporting date to determine whether
there is any indication of impairment. If
any such indication exists, then the asset’s
recoverable amount is estimated.
The recoverable amount of an asset or cash-
generating unit is the greater of its value
in use and its fair value less costs to sell. In
assessing value in use, the estimated future
cash flows are discounted to their present
value using a pre-tax discount rate that
reflects current market assessments of the
time value of money and the risks specific
to the asset. For the purpose of impairment
testing, assets are grouped together into the
smallest group of assets that generates
cash inflows from continuing use that are
largely independent of the cash inflows of
other assets or groups of assets (the “cash-
generating unit”).
An impairment loss is recognised if the
carrying amount of an asset or its cash-
generating unit exceeds its recoverable
amount. Impairment losses are recognised
in the profit and loss. Impairment losses
recognised in respect of cash-generating
units are allocated first to reduce the
carrying amount of any goodwill allocated
to the units, if any, and then to reduce the
carrying amount of the other assets in the
unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill
is not reversed. In respect of other assets,
impairment losses recognised in prior
periods are assessed at each reporting
date for any indications that the loss
has decreased or no longer exists. An
impairment loss is reversed if there has
been a change in the estimates used
to determine the recoverable amount. An
impairment loss is reversed only to the
extent that the asset’s carrying amount does
not exceed the carrying amount that would
have been determined, net of depreciation
or amortisation, if no impairment loss had
been recognised.
(j) Share capital
(I) Repurchase of share capital
When share capital recognised as equity
is repurchased, the amount of the
consideration paid, including directly
attributable costs, is deducted from equity.
(II) Dividends
Dividends are recognised as a liability in the
period in which they are declared
(k) Loans and borrowings
Loans and borrowings are recognised
initially at fair value less any directly
attributable transaction costs. Subsequent
to initial recognition, loans and borrowings
are stated at amortised cost with any
difference between initial value and
redemption value being recognised in
the profit and loss over the period of the
borrowings on an effective interest basis.
(l) Employee benefits
(I) Pension plans
The Group’s net obligation in respect of
defined benefit post-employment plans,
including pension plans, is calculated
separately for each plan by estimating the
amount of future benefit that employees
have earned in return for their service in
the current and prior periods. That benefit is
discounted to determine its present value,
and the fair value of any plan assets, if any,
is deducted. The discount rate is the yield
at the reporting date on government bonds
that have maturity dates approximating
the terms of the Group’s obligations.
The calculation is performed using the
projected unit credit method.
When the benefits of a plan are improved,
the portion of the increased benefit relating
to past service by employees is recognised
immediately as an expense in the profit
and loss. To the extent the benefits vest
immediately, the expense is recognised
immediately in the profit and loss.
All actuarial gains and losses are recognised
in full as they arise in other comprehensive
income.
(II) Long-term service benefits other than
pensions
The Group’s net obligation in respect of
long-term service benefits, other than
pension plans, is the amount of future
benefits that employees have earned in
return for their service in the current and
prior periods. The obligation is calculated
using the projected unit credit method
and is discounted to its present value
and the fair value of any related assets is
deducted. The discount rate is the yield at
the reporting date on government bonds
that have maturity dates approximating the
terms of the Group’s obligations. All actuarial
gains and losses are recognised in full as
they arise in other comprehensive income.
(III) State pension fund
The Group makes contributions for the
benefit of employees to Russia’s State
pension fund. The contributions are
expensed as incurred.
(m) Provisions
A provision is recognised when the Group
has a legal or constructive obligation as
a result of a past event, and it is probable
that an outflow of economic benefits will be
required to settle the obligation. If the effect
is material, provisions are determined by
discounting the expected future cash flows
at a pre-tax rate that reflects current market
assessments of the time value of money and,
where appropriate, the risks specific to the
liability.
(n) Trade and other payables
Trade and other payables are stated at
amortised cost.
(o) Income tax
Income tax expense comprises current
and deferred tax. Income tax expense is
recognised in profit and loss except to the
extent that it relates to items recognised
in other comprehensive income, in which
case it is recognised in other comprehensive
income.
Current tax is the expected tax payable
on the taxable income for the year, using
tax rates enacted or substantively enacted
at the reporting date, and any adjustment
to tax payable in respect of previous years.
Deferred tax is recognised using the balance
sheet method, providing for temporary
differences between the carrying amounts
of assets and liabilities for financial
reporting purposes and the amounts used
for taxation purposes. Deferred tax is not
recognised for the following temporary
differences: the initial recognition of assets
or liabilities in a transaction that is not
a business combination and that affects
neither accounting nor taxable profit, and
differences relating to investments in
subsidiaries to the extent that it is probable
that they will not reverse in the foreseeable
future. In addition, deferred tax is not
recognised for taxable temporary differences
arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates
that are expected to be applied to the
temporary differences when they reverse,
based on the laws that have been enacted
or substantively enacted by the reporting
date. Deferred tax assets and liabilities are
offset if there is a legally enforceable right
to offset current tax assets and liabilities,
and they relate to income taxes levied by
the same tax authority on the same taxable
entity, or on different tax entities, but they
intend to settle current tax liabilities and
assets on a net basis or their tax assets and
liabilities will be realised simultaneously.
A deferred tax asset is recognised to the
extent that it is probable that future taxable
profits will be available against which
temporary difference can be utilised.
Deferred tax assets are reviewed at each
reporting date and are reduced to the extent
134
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Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com that it is no longer probable that the related
tax benefit will be realised.
(p) Revenues
Revenue from the sale of goods is measured
at the fair value of the consideration
received or receivable, net of returns and
allowances, trade discounts and volume
rebates. Revenue is recognised when the
significant risks and rewards of ownership
have been transferred to the buyer,
recovery of the consideration is probable,
the associated costs and possible return of
goods can be estimated reliably, and there
is no continuing management involvement
with the goods.
Transfers of risks and rewards vary
depending on the individual terms of
the contract of sale. Transfer may occur
when the product is dispatched from the
Group companies’ warehouses (mainly for
domestic dispatches) or upon loading the
goods onto the relevant carrier or upon the
delivery to the destination point defined by
the customer.
Where the Group acts in the capacity of
an agent rather than as the principal in a
transaction, the revenue recognised is the
net amount of commission earned by the
Group.
Revenue from services rendered is
recognised in the profit or loss in
proportion to the stage of completion of the
transaction at the reporting date. The stage
of completion is assessed by reference
to surveys of work performed.
(q) Finance income and costs
Finance income comprises interest income
on funds invested (including available-
for-sale financial assets), dividend income,
gains on the disposal of available-for-
sale financial assets and changes in the
fair value of financial assets at fair value
through profit or loss, and foreign currency
gains. Interest income is recognised as it
accrues in profit or loss, using the effective
interest method. Dividend income is
recognised in profit or loss on the date
that the Group’s right to receive payment is
established.
Finance costs comprise interest expense
on borrowings, foreign currency losses,
changes in the fair value of financial assets
at fair value through profit or loss and
impairment losses recognised on financial
assets. Borrowing costs that are not directly
attributable to the acquisition, construction
or production of a qualifying asset are
recognised in profit or loss using the
effective interest method.
Foreign currency gains and losses are
reported on a net basis.
(r) Overburden removal expenditure
In open pit apatite rock mining operations,
it is necessary to remove the overburden
and other waste in order to access the
economically recoverable resources.
Stripping costs incurred during the pre-
production phase of the open pit mine are
capitalised as the cost of the development
of the mining property and amortised over
the life of the mine.
According to the Group’s approach
to stripping, the ore, which becomes
accessible after the overburden removal,
is extracted within three months.
Therefore, the stripping ratio (volume of
overburden removed over the volume of
resources extracted) is expected to stay
relatively constant over the future periods
and stripping costs incurred during
the production phase of the open pit mine
are recognised in the profit or loss as
incurred.
(s) Other expenses
(I) Operating leases
Payments made under operating leases
are recognised in the profit and loss on a
straight-line basis over the term of the lease.
Lease incentives received are recognised in
the profit or loss as an integral part of the
total lease payments made.
(II) Social expenditure
To the extent that the Group’s contributions
to social programs benefit the community
at large and are not restricted to the Group’s
employees, they are recognised in the profit
or loss as incurred.
(t) Earnings per share
The Group presents basic and diluted
earnings per share (“EPS”) data for its
ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable
to ordinary shareholders of the Company by
the weighted average number of ordinary
shares outstanding during the period,
adjusted for own shares held.
If the number of ordinary shares outstanding
increases/(decreases) as a result of a share
split/(reverse share split), the calculation of
the EPS for all periods presented is adjusted
retrospectively.
Diluted EPS is determined by adjusting
the profit or loss attributable to ordinary
shareholders and the weighted average
number of ordinary shares outstanding,
adjusted for own shares held, for the effects
of all dilutive potential ordinary shares,
which comprise convertible notes and share
options granted to employees
(u) Segment reporting
An operating segment is a component of the
Group that engages in business activities
from which it may earn revenues and incur
expenses, including revenues and expenses
that relate to transactions with any of the
Group’s other components. All operating
segments’ operating results are reviewed
regularly by the CEO to make decisions
about resources to be allocated to the
segment and assess its performance, and
for which discrete financial information is
available.
Segment results that are reported to the
CEO include items directly attributable
to a segment as well as those that can be
allocated on a reasonable basis. Unallocated
items comprise mainly corporate assets,
related head office expenses and Group’s
associates.
Segment capital expenditure is the total
cost incurred during the year to acquire
property, plant and equipment, and
intangible assets other than goodwill.
(v) Adoption of new and revised standards
and interpretations
No new standards and amendments became
effective for the Group from 1 January 2016.
1 January 2017 with early adoption
permitted.
(w) New standards and interpretations not
yet adopted
A number of new standards, amendments
to standards and interpretations are not
yet effective as at 31 December 2016, and
have not been applied in preparing these
consolidated financial statements:
• IFRS 9 Financial Instruments is
intended to replace IAS 39 Financial
Instruments: Recognition and
Measurement. The standard introduces
new classification and measurement
requirements, a single forward-looking
“expected loss” impairment model and
a substantially-reformed approach
to hedge accounting. Effective for
annual periods beginning on or after
1 January 2018 with early adoption
permitted;
• IFRS 15 Revenue from contracts
with customers outlines a single
comprehensive model for entities
to use in accounting for revenue from
contracts with customers. Effective for
annual periods beginning on or after
1 January 2018 with early adoption
permitted;
• IFRS 16 Leases outlines a single lessee
accounting model and requires to bring
most leases on-balance sheet. Effective
for annual periods beginning on or after
1 January 2019 with early adoption
permitted if IFRS 15 is also applied at or
before the date of initial application of
IFRS 16;
• Amendments to IAS 12 Income Taxes
clarify the accounting for deferred tax
assets for unrealised losses on debt
instruments measured at fair value.
Effective for annual periods beginning
on or after 1 January 2017 with early
adoption permitted;
• Amendments to IAS 7 Statement of
Cash Flows requires entities to provide
disclosures that enable investors
to evaluate changes in liabilities arising
from financing activities, including
changes arising from cash flows
and non-cash changes. Effective for
annual periods beginning on or after
The Group is currently assessing the impact
of these new and amended standards on
the consolidated financial statements and
plans to adopt these pronouncements when
they become effective.
4. Determination of fair
values
A number of the Group’s accounting policies
and disclosures require the determination
of fair value, for both financial and non-
financial assets and liabilities. Fair values
have been determined for measurement
and / or disclosure purposes based on the
methods described in 4(a) to 4(с). When
applicable, further information about the
assumptions made in determining fair
values is disclosed in the notes specific
to that asset or liability.
(a) Investments in equity and debt
securities
The fair value of held-to-maturity
investments and available-for-sale
financial assets is determined by reference
to their quoted bid price at the reporting
date. The fair value of held-to-maturity
investments is determined for disclosure
purposes only.
For non-quoted investments the fair value,
if reliably measurable, is determined using
valuation models.
(b) Trade and other receivables
The fair value of trade and other receivables
is estimated as the present value of future
cash flows, discounted at the market rate of
interest at the reporting date.
(c) Non-derivative financial liabilities
Fair value, which is determined for
disclosure purposes, is calculated based on
the present value of future principal and
interest cash flows, discounted at the market
rate of interest at the reporting date. For
finance leases the market rate of interest
is determined by reference to similar lease
agreements.
136
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Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com 5. Segment information
The Group has two reportable segments,
as described below, which are the Group’s
strategic business units. The strategic
business units offer different products,
and are managed separately because they
require different technology and marketing
strategies. The following summary describes
the operations in each of the Group’s
reportable segments:
• Phosphate-based products segment
includes mainly production
and distribution of ammophos,
diammoniumphosphate, sodium
tripolyphosphate and other phosphate
based and complex (NPK) fertilisers on
the factories located in Cherepovets,
Balakovo and Volkhov, and production
and distribution of apatite concentrate
extracted from the apatite-nepheline ore,
which is mined and processed in Kirovsk;
• Nitrogen-based products segment
includes mainly production and
distribution of ammonia, ammonium
nitrate and urea on the factory located in
Cherepovets.
Certain assets, revenue and expenses are not
allocated to any particular segment and are,
therefore, included in the “other operations”
column. None of these operations meet
any of the quantitative thresholds for
determining reportable segments.
Information regarding the results of each
reportable segment is included below.
Performance is measured based on gross
profit, as included in internal management
reports that are reviewed by the Group’s
CEO.
Segment information as at 31 December 2016 and for the year then ended is as follows:
RUB million
PHOSPHATE-
BASED
PRODUCTS
NITROGEN-
BASED
PRODUCTS
OTHER
OPERATIONS
Segment revenue and profitability
168,136
18,829
777
Segment external revenues, thereof:
Export
Domestic
Cost of goods sold
Gross segment profit
Certain items of profit or loss
Amortisation and depreciation
Total non-current segment assets
Additions to non-current assets
110,458
57,678
(74,667)
93,469
(8,095)
91,880
23,791
14,264
4,565
(11,025)
7,804
(2,328)
60,240
20,967
-
777
(699)
78
(344)
3,758
533
TOTAL
187,742
124,722
63,020
(86,391)
101,351
(10,767)
155,878
45,291
Segment information of the Group as at 31 December 2015 and for the
year then ended is as follows:
RUB million
PHOSPHATE-
BASED
PRODUCTS
NITROGEN-
BASED
PRODUCTS
OTHER
OPERATIONS
Segment revenue and profitability
167,430
21,574
728
Segment external revenues, thereof:
Export
Domestic
Cost of goods sold
Gross segment profit
Certain items of profit or loss
Amortisation and depreciation
Total non-current segment assets
Additions to non-current assets
120,873
46,557
(70,344)
97,086
(7,022)
76,090
17,913
17,984
3,590
(12,063)
9,511
(1,890)
41,992
25,025
-
728
(657)
71
(221)
3,436
1,255
TOTAL
189,732
138,857
50,875
(83,064)
106,668
(9,133)
121,518
44,193
The analysis of export revenue by regions is as
follows:
RUB million
6. Revenues
RUB million
Europe
North and South America
CIS
Asia
India
Africa
2016
46,738
32,992
15,883
12,462
10,280
6,367
2015
47,303
44,430
10,740
5,724
18,185
12,475
Sales of chemical fertilisers
Sales of apatite concentrate
Sales of sodium tripolyphosphate
Sales of nepheline concentrate
Sales of ammonium
Other sales
2016
146,369
26,037
4,839
825
75
9,597
2015
154,312
19,155
5,803
737
115
9,610
124,722
138,857
187,742
189,732
7. Personnel costs
RUB million
2016
2015
Cost of sales
(10,784)
(10,155)
Administrative expenses
Selling expenses
(7,882)
(511)
(6,784)
(373)
(19,177)
(17,312)
138
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Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com 8. Cost of sales
RUB million
11. Other expenses, net
RUB million
Materials and services
(25,746)
(22,905)
Social expenditures
2016
2015
Salaries and social contributions
(10,784)
(10,155)
Depreciation
Natural gas
Potash
Sulphur and sulphuric acid
Ammonia
Electricity
Chemical fertilisers and other
products for resale
Ammonium sulphate
Fuel
Heating energy
Other items
Change in stock of WIP and finished
goods
(9,377)
(8,084)
(7,104)
(6,065)
(5,801)
(4,462)
(4,254)
(2,547)
(2,299)
(676)
(42)
850
(8,057)
(7,484)
(7,559)
(8,385)
(8,190)
(3,927)
(4,091)
(2,176)
(2,865)
(718)
(23)
3,471
9. Administrative expenses
RUB million
2016
Salaries and social contributions
Professional services
Depreciation and amortisation
Other
(7,882)
(1,555)
(798)
(3,656)
2015
(6,784)
(2,003)
(606)
(2,791)
Loss on disposal of property, plant
and equipment and intangible assets
(Increase)/decrease in provision for
inventory obsolescence
Increase in provision for bad debt
Fines and penalties received
Other income, net
2016
(2,081)
(614)
(151)
(85)
268
191
2015
(1,821)
(915)
161
(41)
956
252
(2,472)
(1,408)
12. Finance income and finance costs
RUB million
2016
2015
Interest income
Gain from operations with derivative
financial instruments
Unwind of discount of financial
assets
Finance income
Interest expense
Loss from operations with derivative
financial instruments
Bank fees
Other finance costs
479
210
95
125
909
(4,365)
-
(315)
(2)
933
-
128
161
1,222
(5,198)
(310)
(277)
(308)
Finance costs
(4,682)
(6,093)
(86,391)
(83,064)
Other finance income
13. Income tax expense
RUB million
The Company’s applicable corporate income tax rate is
20% (2015: 20%)
Current tax expense
Origination and reversal of temporary
differences, including change in
unrecognised assets
2016
(13,311)
2015
(9,879)
(1,730)
92
(15,041)
(9,787)
Reconciliation of effective tax rate:
Profit before tax
2016
74,927
Income tax at applicable tax rate
(14,985)
Reversal of income tax on intra-
group dividends
Under provided in respect of prior
years
Unrecognised tax liability/(asset) on
profit/(loss) from associates
Non-deductible items
Change in unrecognised deferred
tax assets
Effect of tax rates in foreign
jurisdictions
Reduction in tax rate
-
76
28
(697)
(15)
28
524
%
100
(20)
-
-
-
(1)
-
-
1
2015
46,223
(9,245)
399
(250)
(12)
(638)
-
(41)
-
%
100
(20)
1
(1)
-
(1)
-
-
-
(13,891)
(12,184)
NET FINANCE COSTS
(3,773)
(4,871)
(15,041)
(20)
(9,787)
(21)
10. Selling expenses
RUB million
Freight, port and stevedoring
expenses
Russian Railways infrastructure tariff
and operators’ fees
Materials and services
Depreciation
Salaries and social contributions
2016
(9,358)
(8,169)
(2,499)
(592)
(511)
2015
(9,185)
(6,099)
(1,624)
(470)
(373)
(21,129)
(17,751)
140
141
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com 14. Property, plant and equipment
RUB million
COST
Land and buildings
Plant and
equipment
Fixtures and fittings
Construction in
progress
Total
At 1 January 2015
Additions
Consolidation of Phosint Group
Transfers
Disposals
At 1 January 2016
Additions
Transfers
Disposals
At 31 December 2016
ACCUMULATED DEPRECIATION
25,663
10
-
5,392
(244)
30,821
-
14,674
(616)
44,879
67,061
741
747
8,574
(2,411)
74,712
248
10,441
(1,232)
84,169
5,373
1,544
-
-
(168)
6,749
1,696
-
(148)
8,297
31,212
41,898
-
(13,966)
(644)
58,500
43,347
(25,115)
(409)
76,323
129,309
44,193
747
-
(3,467)
170,782
45,291
-
(2,405)
213,668
Land and buildings
Plant and
equipment
Fixtures and fittings
Construction in
progress
Total
At 1 January 2015
Depreciation charge
Disposals
At 1 January 2016
Depreciation charge
Disposals
(6,564)
(1,434)
75
(7,923)
(1,983)
269
(33,044)
(3,615)
-
(6,778)
2,162
(37,660)
(7,669)
1,157
(777)
145
(4,247)
(1,027)
128
At 31 December 2016
(9,637)
(44,172)
(5,146)
Net book value at 1 January 2015
Net book value at 1 January 2016
19,099
22,898
Net book value at 31 December 2016
35,242
34,017
37,052
39,997
1,758
2,502
3,151
-
-
-
-
-
-
31,212
58,500
76,323
(43,223)
(8,989)
2,382
(49,830)
(10,679)
1,554
(58,955)
86,086
120,952
154,713
15. Investments in associates
RUB million
The movement in the balance of
investments in associates is as follows:
Carrying values of the Group’s
investments in associates are as follows:
2016
2015
31 DECEMBER
2016
31 DECEMBER
2015
Balance at 1 January
Share in profit/(loss) for the year
Dividends accrued
Foreign currency translation
difference
Consolidation of Phosint Limited
Balance at 31 December
810
140
(47)
(87)
-
816
12,975
(59)
-
1,941
(14,047)
810
Summary financial information for associates is as follows:
JSC Khibinskaya Teplovaya
Kompaniya
LLC PHOSAGRO-UKRAINE
JSC Giproruda
OJSC Soligalichskiy izvestkovyi
kombinat
386
312
69
49
816
400
245
116
49
810
2016
Total assets
Total liabilities
Net assets
Revenue
JSC Khibinskaya Teplovaya Kompaniya
LLC PHOSAGRO-UKRAINE
JSC Giproruda
OJSC Soligalichskiy izvestkovyi kombinat
2,376
2,247
326
299
5,248
(1,655)
(1,465)
(201)
(81)
721
782
125
218
699
9,496
102
483
(3,402)
1,846
10,780
2015
Total assets
Total liabilities
Net assets
Revenue
JSC Khibinskaya Teplovaya Kompaniya
LLC PHOSAGRO-UKRAINE
JSC Giproruda
OJSC Soligalichskiy izvestkovyi kombinat
2,550
1,398
884
242
(1,800)
(780)
(407)
(49)
750
618
477
193
5,074
(3,036)
2,038
545
5,959
130
555
7,189
(Loss)/profit for
the year
(29)
386
(16)
43
384
(Loss)/profit for
the year
(77)
416
103
10
452
As at 31 December 2016, the balance
of the construction in progress account
includes the accumulated costs related
to the construction of ammonia plant in
the amount of RUB 34,222 million and urea
plant in the amount of RUB 11,925 million
in Cherepovets, as well as underground
mine extension in the amount
RUB of 6,113 million, the development of
Rasvumchorrskiy mine in the amount of
RUB 4,163 million and the construction
apatit-nepheline beneficiation plant in the
amount of RUB 3,853 million in Kirovsk.
(a) Leasing
Plant and equipment with the carrying value
of RUB 5,778 million (31 December 2015:
RUB 6,008 million) is leased under various
finance lease agreements, see note 26(a).
142
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Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
16. Deferred tax assets and
liabilities
(a) Recognised deferred tax assets and
liabilities
Deferred tax assets and liabilities are
attributable to the following items:
RUB million
2016
Assets
Liabilities
Net
Property, plant and equipment
Other long-term assets
Current assets
Liabilities
Tax loss carry-forwards
Unrecognised deferred tax assets
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
27
17
822
1,238
4,682
(36)
6,750
(1,640)
5,110
(5,688)
(5,661)
(31)
(488)
(33)
-
-
(6,240)
1,640
(4,600)
(14)
334
1,205
4,682
(36)
510
-
510
2015
Assets
7
85
958
1,566
5,298
(21)
7,893
(1,992)
5,901
Liabilities
Net
(5,235)
(5,228)
(19)
(405)
(10)
-
-
(5,669)
1,992
(3,677)
66
553
1,556
5,298
(21)
2,224
-
2,224
for loans to be issued or obtained by the
Company and expected foreign currency
rates.
As at 31 December 2016, no deferred tax
liability for taxable temporary differences
of RUB 29,869 million has been recognised
(31 December 2015: no deferred tax liability
for deductible taxable temporary differences
of RUB 29,090 million), either because the
Parent can control the timing of reversal of
the temporary differences and it is probable
that the temporary differences will not
reverse in the foreseeable future, or because
the applicable tax rate is expected to be 0%.
The deferred tax assets on tax loss carry-
forwards relate to the Russian entities. Due
to recent amendments to the Russian tax
legislation, starting from 1 January 2017,
tax losses for Russian tax purposes carried
forward existing as at 31 December 2016 do
not expire.
Management has developed a tax
strategy to utilise the tax losses above.
In assessing the recoverability of the tax
losses, management considers a forecast
of future taxable profits of the Company
(the “forecast”) and the Group’s tax position.
The forecast is reviewed at each reporting
date to ensure that the related tax benefit
will be realised. Future taxable profits are
expected to be generated from an excess
of interest income on loans, to be issued by
the Company to the Group subsidiaries, over
interest expense on loans and borrowings,
currently held or to be obtained by the
Company. When developing the forecast,
management has evaluated profitability and
dividend capacity of the Group subsidiaries,
and considered expected rates of interest
(b) Movement in temporary
differences during the year
RUB million
2016
Property, plant and equipment
Other long-term assets
Current assets
Liabilities
Tax loss carry-forwards
Unrecognised deferred tax assets
NET TAX ASSETS/(LIABILITIES)
2015
Property, plant and equipment
Other long-term assets
Current assets
Liabilities
Tax loss carry-forwards
Unrecognised deferred tax assets
NET TAX ASSETS
31 December
Recognised in profit
or loss
Recognised in other
comprehensive income
1 January
(5,661)
(14)
334
1,205
4,682
(36)
510
(433)
(80)
(219)
(367)
(616)
(15)
(1,730)
-
-
-
16
-
-
16
(5,228)
66
553
1,556
5,298
(21)
2,224
31 December
Recognised in profit
or loss
Recognised in other
comprehensive income
1 January
(5,228)
66
553
1,556
5,298
(21)
2,224
25
151
26
(63)
(51)
4
92
-
-
-
1
-
-
1
(5,253)
(85)
527
1,618
5,349
(25)
2,131
144
145
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
17. Other non-current assets
RUB million
31 DECEMBER
2016
31 DECEMBER
2015
Financial assets available-for-sale, at cost
Loans issued to related parties, at amortised cost
Loans issued to third parties, at amortised cost
Financial assets available-for-sale, at fair value
Loans issued to employees, at amortised cost
Loans issued to associates, at amortised cost
Finance lease receivable
Other long-term receivables
595
330
266
138
103
40
-
754
596
862
248
81
133
-
13
889
19. Inventories
RUB million
Raw materials and spare parts
7,586
6,561
31 DECEMBER
2016
31 DECEMBER
2015
Finished goods:
Chemical fertilisers
Apatite concentrate
Work-in-progress:
Apatite-nepheline ore
Chemical fertilisers and other products
Other goods for resale
Chemical fertilisers for resale, purchased from
the third parties
Provision for obsolescence
8,274
219
1,329
1,296
173
1,238
(181)
7,664
299
790
1,643
45
842
(30)
2,226
2,822
19,934
17,814
18. Other current investments
RUB million
31 DECEMBER
2016
31 DECEMBER
2015
Investments in debt securities, at amortised cost
4,656
Financial assets available-for-sale, at fair value
Loans issued to related parties, at amortised cost
Loans issued to third parties, at amortised cost
Loans issued to employees, at amortised cost
Interest receivable
Loans issued to associates, at amortised cost
Provision for doubtful accounts
424
218
162
115
35
-
(2,328)
3,282
5,671
1,636
-
183
114
27
68
(2,797)
4,902
As at 31 December 2016 and 31 December
2015 the Group held debt securities issued
by entities affiliated to a bank, which at the
end of 2014 went into a financial recovery
procedure, monitored by the Russian
Deposit Insurance Agency, finalised in June
2015. Taking into account the uncertainties
associated with the mutual court claims
filed by the Group and the bank, the Group
recognised a provision of 50% of the
nominal value of the debt securities in the
amount of RUB 2,328 million (31 December
2015: RUB 2,797 million).
20. Trade and other receivables
RUB million
31 DECEMBER
2016
31 DECEMBER
2015
Trade accounts receivable
Taxes receivable
Advances issued
Other receivables
Deferred expenses
Receivables from employees
Finance lease receivable
Provision for doubtful accounts
12,770
11,932
4,693
513
229
36
-
(499)
29,674
The movements in provision for doubtful accounts are as follows:
Balance at 1 January
Foreign currency translation
difference
Disposal of provision through trade
receivables
Increase in provision for bad debt
Balance at 31 December
2016
(527)
67
46
(85)
(499)
11,368
9,429
4,462
582
164
21
12
(527)
25,511
2015
(534)
(91)
139
(41)
(527)
See note 28(c) for the analysis of
overdue trade accounts receivable.
146
147
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
21. Cash and cash equivalents
RUB million
31 DECEMBER
2016
31 DECEMBER
2015
4,860
2,395
6
7,261
18,900
10,441
6
29,347
Cash in bank
Call deposits
Petty cash
22. Equity
(a) Share capital
TOTAL DIVIDENDS APPROVED DURING THE REPORTING PERIOD
Proposed by the Board
of Directors in
Approved by
shareholders in
Amount per share RUB
Amount of dividends
RUB million
November 2015
January 2016
March 2016
May 2016
May 2016
July 2016
August 2016
October 2016
63
57
63
33
8,159
7,382
8,159
4,274
27,974
(c) Dividends
In accordance with Russian legislation the
Company’s distributable reserves are limited
to the balance of accumulated retained
earnings as recorded in the Company’s
statutory financial statements prepared
in accordance with Russian Accounting
Principles. As at 31 December 2016, the
Company had cumulative retained earnings
of RUB 37,046 million (31 December 2015:
RUB 31,857 million).
NUMBER OF SHARES UNLESS OTHERWISE STATED
ORDINARY SHARES
TOTAL DIVIDENDS APPROVED SUBSEQUENT TO THE REPORTING DATE
Shares on issue at 31 December 2016, RUB 2.5 par value
129,500,000
Shares authorised for additional issue at 31 December 2016, RUB
2.5 par value
994,977,080
Shares on issue at 31 December 2015, RUB 2.5 par value
129,500,000
Shares authorised for additional issue at 31 December 2015, RUB
2.5 par value
994,977,080
(b) Dividend policy
The Company expects to distribute cash
dividends in the future and expects the
amount of such dividends to be between 30
and 50 per cent of the Group’s consolidated
profit calculated in accordance with
IFRS attributable to shareholders of PJSC
“PhosAgro”, adjusted by unrealised foreign
exchange gain/(loss).
Whether the Company will pay dividends
and the timing and exact amount of such
dividends will be subject to the approval
of the recommendation made by the Board
of Directors at the General Shareholders’
Meeting and will depend on a variety of
factors, including the Company’s earnings,
cash requirements, financial condition
and other factors deemed relevant
by the Board of Directors in making
their recommendation to the General
Shareholders’ Meeting.
Proposed by the Board
of Directors in
Approved by
shareholders in
Amount per share RUB
Amount of dividends
RUB million
November 2016
January 2017
March 2017
To be approved
in May 2017
39
30
5,051
3,885
8,936
2016
2015
23. Earnings per share
Weighted average number of ordinary shares in issue
129,500,000
129,500,000
Profit for the year attributable to shareholders of the Parent,
RUB million
59,884
36,442
Basic and diluted earnings per share, RUB
462
281
Basic earnings per share are calculated
based on the weighted average number of
ordinary shares outstanding during the year.
Basic and diluted earnings per share are the
same, as there is no effect of dilution.
148
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Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
Contractual interest rate
Year of maturity
31 December 2016
31 December 2015
Contractual interest rate
Year of maturity
31 December 2016
31 December 2015
NON-CURRENT LOANS AND
BORROWINGS
RUB million
24. Loans and borrowings
This note provides information about the
contractual terms of the Group’s loans and
borrowings. For more information about
the finance leases, see note 26(a). For more
information about the Group’s exposure
to foreign currency risk, interest rate risk and
liquidity risk, see note 28.
CURRENT LOANS
AND BORROWINGS
Unsecured bank loans:
RUB-denominated
EUR-denominated
USD-denominated
USD-denominated
USD-denominated
Unsecured letters of credit issued by banks:
EUR-denominated
EUR-denominated
EUR-denominated
5.75%-12.95%
0.21%
LIBOR(1M)+1.18%-3.35%
LIBOR(3M)+3%
LIBOR(6M)+1.05%
EURIBOR(3M)+1.10%
EURIBOR(6M)+1.10%-1.15%
EURIBOR(12M)+1.10%-1.1 5%
Unsecured loans from related parties:
RUB-denominated
9%-17%
Unsecured loans from other companies:
RUB-denominated
EUR-denominated
Finance lease liabilities:
12%
LIBOR(1M)+1.50%
3,000
1,861
4,221
-
1,336
952
-
326
-
9
-
6,500
-
11,783
3,644
-
-
317
2,982
29
-
438
EUR-denominated
1.17%-14.77% 1
1,680
2,351
Interest payable:
RUB-denominated
EUR-denominated
9
743
14,137
3
900
28,947
Unsecured bank loans:
RUB-denominated
EUR-denominated
USD-denominated
USD-denominated
USD-denominated
USD-denominated
11.50%-12.65%
2020-2021
EURIBOR(6M)+2.15%
2027
LIBOR(1M)+1.18%-3.35%
2018-2020
LIBOR(3M)+2.85%
LIBOR(6M)+1.05%
4.17%
2020
2021
2027
2019
2017
2019
Unsecured letters of credit issued by banks:
EUR-denominated
EUR-denominated
EUR-denominated
EURIBOR(6M)+1.1%-1.18%
EURIBOR(12M)+1.1%-1.15%
1.79%
Unsecured loans from other companies:
USD-denominated
LIBOR(12M)+1.25%
2018
4,000
3,031
21,028
15,021
7,967
13,955
485
-
-
614
3,000
-
38,506
-
8,700
13,051
185
1,329
104
742
Loan participation notes:
USD-denominated
Finance lease liabilities:
USD-denominated
4.204% 2
2018
30,308
36,400
3.8%-12.55% 1
2018-2021
1,830
98,239
3,548
105,565
112,376
134,512
1 Contractual interest rate on financial
2 In February 2013, the Company’s
lease agreements consists of:
SPV issued a USD 500 million
-interest rate and fees to a lessor;
5-year Eurobond with a coupon rate
-insurance of property;
of 4.204%, which is listed on the
-property tax (for lease agreements
Irish Stock Exchange, with the fair
concluded since 2013 property tax is
value at the reporting date of RUB
excluded from the interest rate).
31,337 million (31 December 2015:
RUB 36,405 million).
150
151
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
25. Defined benefit obligations
RUB million
31 DECEMBER
2016
31 DECEMBER
2015
Pension obligations, long-term
535
Post-retirement obligations other than pensions
232
767
345
79
424
Defined benefit pension plans relate
to three subsidiaries of the Group: JSC
“Apatit”, JSC “PhosAgro-Cherepovets” and JSC
“Metachem”. The plans stipulate payment
of a fixed amount of monthly pension to all
retired employees, who have a specified
period of service in the entities. The pension
increases with the increase of the service
period. The pension is paid over the
remaining life of the pensioners. In addition,
there is a defined benefit plan other than
the pension plan in JSC “Apatit”. This defined
benefit plan stipulates payment of a lump
sum to employees who have a specified
period of service in JSC “Apatit” upon their
retirement. All defined benefit plans are
unfunded. The movement in the present
value of the defined benefit obligations is
as follows:
Defined benefit obligations at 1 January 2015
Benefits paid
Current service costs and interest
Past service credit
Actuarial gain in other comprehensive income 3
Defined benefit obligations at 1 January 2016
Benefits paid
Current service costs and interest
Past service credit
Actuarial loss in other comprehensive income 1
DEFINED BENEFIT OBLIGATIONS AT 31 DECEMBER 2016
RUB
MILLION
453
(99)
72
(7)
5
424
(73)
57
275
84
767
The key actuarial assumptions used in
measurement of the defined benefit
obligations are as follows:
31 DECEMBER
2016
31 DECEMBER
2015
Discount rate
Future pension increases
8.5%
4.5%
9.6%
5.4%
3 The related deferred tax benefit of RUB
16 million (2015: deferred tax expense
of RUB 1 million) is recognised in other
comprehensive income, see note 16(b)
152
26. Leases
(a) Finance leases
LLC “PhosAgro-Trans”, a Group subsidiary,
has entered into several agreements
to lease 2,750 railway wagons. Other Group
subsidiaries also have entered into lease
agreements in 2014 and 2015. At the end of
the lease term, the ownership for the leased
assets will be transferred to the lessee.
2016
RUB million
Less than one year
Between one and five
years
2015
RUB million
Minimum lease
payments
1,900
1,994
3,894
Interest
Principal
220
164
384
1,680
1,830
3,510
Minimum lease
payments
Interest
Principal
Less than one year
Between one and five
years
2,760
3,857
More than five years
135
6,752
409
441
3
853
2,351
3,416
132
5,899
RUB million
Less than one year
Between one and five years
31 DECEMBER
2016
31 DECEMBER
2015
208
244
452
62
168
230
31 DECEMBER
2016
31 DECEMBER
2015
6,060
5,574
5,203
3,409
1,231
1,167
159
3,282
4,763
3,901
2,617
1,394
873
181
22,803
17,011
(b) Operating leases
During 2015-2016, LLC “PhosAgro-Trans”,
a group subsidiary, entered into several
operating lease agreements to rent railway
wagons. The rent payments for 2016, which
are recorded in the cost of sales, amounted
to RUB 240 million (2015: RUB 278 million).
The non-cancellable operating lease rentals
are payable as follows:
27. Trade and other payables
RUB million
Payable for property, plant and equipment
Trade accounts payable
Advances received
Taxes payable
Accruals
Payables to employees
Other payables
153
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com
The Group uses from time to time derivative
financial instruments in order to manage
its exposure to currency risk. The Group
implemented a natural hedge approach
(policy) aiming at reducing its exposure
to foreign currency risk by means of
borrowing in the same currencies in which
sales agreements are denominated.
The Group has the following foreign-
currency-denominated financial assets and
liabilities:
28. Financial risk management
(a) Overview
In the normal course of its operations, the
Group has exposure to market, credit and
liquidity risks.
This note presents information about the
Group’s exposure to each of the above
risks, the Group’s objectives, policies and
processes for measuring and managing
risk, and the Group’s management of
capital. Further quantitative disclosures are
included throughout these consolidated
financial statements.
The Board of Directors has overall
responsibility for the establishment and
oversight of the Group’s risk management
framework. The Group’s risk management
policies are established to identify and
analyse the risks faced by the Group, to set
appropriate risk limits and controls, and
to monitor risks and adherence to limits.
Risk management policies and systems are
reviewed regularly to reflect changes in
market conditions and the Group’s activities.
(b) Market risk
Market risk is the risk that changes in
market prices, such as foreign exchange
rates, interest rates and equity prices will
affect the Group’s income or the value
of its holdings of financial instruments.
The objective of market risk management
is to manage and control market risk
exposures within acceptable parameters,
while optimising the return
Foreign currency risk
The Group is exposed to currency risk on
sales, purchases and borrowings that are
denominated in a currency other than the
respective functional currencies of Group
entities. The currencies giving rise to this
risk are primarily USD and EUR.
In respect of monetary assets and liabilities
denominated in foreign currencies, the
Group ensures that its net exposure is kept
to an acceptable level by buying or selling
foreign currencies at spot rates when
necessary to address short-term imbalances.
31 DECEMBER 2016
RUB million
31 DECEMBER 2015
RUB million
USD denominated
EUR denominated
USD denominated
EUR denominated
Non-current assets
Non-current investments
330
Current assets
Receivables
Current investments
Cash and cash equivalents
Non-current liabilities
Loans and borrowings
Current liabilities
Payables
Loans and borrowings
-
4
-
2
862
1,403
5
7,538
-
1
-
298
1,517
218
2,033
(90,108)
(3,516)
(100,205)
(1,618)
(1,227)
(7,944)
(95,181)
(719)
(3,139)
(7,370)
(1,951)
(18,588)
(110,936)
(358)
(3,299)
(4,976)
whether it believes that a fixed or variable
rate would be more favourable to the Group
over the expected period until maturity.
The interest rate profile of the Group’s
interest-bearing financial instruments is as
follows:
Management estimate that a 10%
strengthening/(weakening) of RUB against
USD and EUR, based on the Group’s
exposure as at the reporting date would
have increased/(decreased) the Group’s
profit for the year by RUB 10,255 million,
before any tax effect (2015: would have
increased/(decreased) the Group’s profit
for the year by RUB 11,591 million). This
analysis assumes that all other variables,
in particular interest rates, remain
constant. The analysis is performed on the
same basis for 2015.
The foreign exchange gain recognised
in profit or loss of RUB 16,962 million
and the foreign exchange loss of RUB
22,178 million for the comparative
period resulted from the appreciation
of the Russian Rouble against major
currencies during the reporting period and
its devaluation during the comparative
period. In addition, the net assets of the
Group’s foreign subsidiaries denominated
in USD amount to RUB 12,454 million as
at the reporting date (31 December 2015:
RUB 14,655 million).
Interest rate risk
Interest rate risk is the risk that changes
in interest rates will adversely impact the
financial results of the Group. Management
does not have a formal policy of determining
how much of the Group’s exposure should
be to fixed or variable rates. However, at
the time of raising new loans or borrowings
management uses its judgment to decide
RUB million
Fixed rate instruments
Long-term loans issued, at amortised cost
Long-term loans issued to related parties, at amortised cost
Investments in debt securities, at amortised cost, net of provision
Finance lease receivable
Short-term deposits
Financial assets available-for-sale, at fair value
Short-term loans issued to related parties, at amortised cost
Short-term loans issued to associates, at amortised cost
Short-term loans issued, at amortised cost
Long-term borrowings
Short-term borrowings
Variable rate instruments
Long-term borrowings
Short-term borrowings
At 31 December 2016, a 1% increase/
(decrease) in LIBOR/EURIBOR would have
decreased/(increased) the Group’s profit
or loss and equity by RUB 550 million (31
December 2015: RUB 686 million).
31 DECEMBER
2016
31 DECEMBER
2015
369
330
2,328
-
2,395
424
218
-
277
(50,093)
(6,550)
(50,302)
(48,146)
(6,835)
(54,981)
381
862
2,874
25
10,441
1,636
-
68
297
(56,103)
(8,880)
(48,399)
(49,462)
(19,164)
(68,626)
154
155
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com (c) Credit risk
Credit risk is the risk of financial loss
to the Group if a customer or counterparty
to a financial instrument fails to meet its
contractual obligations, and arises from the
Group’s receivables from customers, loans
issued to related parties, current and non-
current financial assets and cash and cash
equivalents.
Trade and other receivables
The Group’s exposure to credit risk is
influenced mainly by the individual specific
characteristics of each customer. The general
characteristics of the Group’s customer base,
including the default risk of the industry and
country, in which customers operate, has less
of an influence on credit risk.
Management has established a credit policy
under which each new customer is analysed
individually for creditworthiness before
the Group’s standard payment and delivery
terms and conditions are offered. The Group’s
review includes external ratings, when
available, and in some cases bank references.
Purchase limits are established for each
customer, which represent the maximum
amount of outstanding receivables; these
limits are reviewed quarterly. Customers
that fail to meet the Group’s benchmark
creditworthiness may transact with the
Group only on a prepayment basis.
The majority of the Group’s customers have
been transacting with the Group for several
years, and losses have occurred infrequently.
In monitoring customer credit risk,
customers are grouped according to their
credit characteristics. Trade and other
receivables relate mainly to the Group’s
wholesale customers.
The Group does not require collateral in
respect of trade and other receivables,
except for new customers who are required
to work on a prepayment basis or present an
acceptable bank guarantee or set up letter of
credit with an acceptable bank.
The Group establishes an allowance for
impairment that represents its estimate
of incurred losses in respect of trade and
other receivables and investments. The main
components of this allowance are a specific
loss component that relates to individually
significant exposures, and a collective loss
component established for groups of similar
assets in respect of losses that have been
incurred but not yet identified. The collective
loss allowance is determined based on
historical data of payment statistics for
similar financial assets.
The analysis of overdue trade accounts
receivable is as follows:
Not past due
Past due 0-90 days
Past due 91-180 days
Past due 181-365 days
More than one year
31 DECEMBER
2016
31 DECEMBER
2015
RUB million
RUB million
10,695
795
452
302
526
8,624
1,789
215
205
535
12,770
11,368
Current and non-current financial assets
The Group lends money to related parties,
who have good credit standing. Based on
the prior experience, management believes
that there is no significant credit risk in
respect of related party loans.
As at 31 December 2016 and 31 December
2015 the Group held promissory notes
issued by an entity affiliated to a bank,
which at the end of 2014 went into a
financial recovery procedure, monitored
by the Russian Deposit Insurance Agency,
finalised in June 2015. Taking into account
the uncertainties associated with the
outcome of this procedure and mutual court
claims filed by the Group and the bank, the
Group recognised a provision of 50% of the
nominal value of the promissory notes in the
amount of RUB 2,328 million (31 December
2015: RUB 2,797 million)
liquidity to meet its liabilities when due,
under both normal and stressed conditions,
without incurring unacceptable losses or
risking damage to the Group’s reputation.
Typically the Group ensures that it has
sufficient cash on demand to meet expected
operational expenses for a period of 30
days, including the servicing of financial
obligations; this excludes the potential
impact of extreme circumstances that
cannot reasonably be predicted, such as
natural disasters. In addition, the Group
maintains several lines of credit in various
Russian and international banks.
The table below illustrates the contractual
maturities of financial liabilities, including
interest payments, which are converted
at the closing exchange rates, where
applicable:
Guarantees
The Group considers that financial
guarantee contracts entered into by the
Group to guarantee the indebtedness of
other parties are insurance arrangements,
and accounts for them as such. In this
respect, the Group treats the guarantee
contract as a contingent liability until such
time as it becomes probable that the Group
will be required to make a payment under
the guarantee.
The Group’s policy is to provide financial
guarantees only to the subsidiaries or
related parties.
(d) Liquidity risk
Liquidity risk is the risk that the Group will
not be able to meet its financial obligations
as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as
possible, that it will always have sufficient
156
157
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com 31 DECEMBER 2016
RUB million
Unsecured bank
loans
Unsecured
loans from other
companies
Secured finance
leases
Loan participation
notes
Trade and other
payables
Financial guarantees
issued for associates
and related parties
Carrying
value
Contractual
cash flows
0-1 year
1-2 years
2-3 years
3-4 years
4-5 years
> 5 years
75,420
84,790
12,975
18,682
21,433
13,690
2,915
15,095
623
668
43
625
-
Unsecured letters of
credit
1,763
1,782
1,288
Interest payable
752
752
752
5
-
3,510
3,894
1,900
1,032
30,308
31,787
1,263
30,524
13,024
13,024
13,024
-
-
-
-
-
-
-
226
112
-
-
-
-
-
-
-
-
-
-
489
-
624
-
-
1,667
2,291
344
380
485
458
528
96
127,067
138,988
31,589
51,248
23,031
14,374
3,555
15,191
31 DECEMBER 2015
RUB million
Carrying
value
Contractual
cash flows
0-1 year
1-2 years
2-3 years
3-4 years
4-5 years
> 5 years
Unsecured bank loans 85,184
95,401
25,480
24,053
16,459
10,333
4,601
14,475
Unsecured loans from
other companies
1,180
Unsecured loans from
related parties
29
1,221
34
460
34
14
-
Unsecured letters of
credit
4,917
4,980
3,351
1,522
Interest payable
903
903
903
-
747
-
2
-
Secured finance leases 5,899
6,752
2,760
1,574
1,259
Loan participation
notes
Trade and other
payables
Financial guarantees
issued for associates
and related parties
36,400
39,758
1,523
1,518
36,717
9,620
9,620
9,620
-
1,795
2,637
301
345
-
393
-
-
105
-
754
-
-
-
-
-
-
-
-
-
-
270
135
-
-
-
-
516
458
624
145,927
161,306
44,432
29,026
55,577
11,708
5,329
15,234
30. Contingencies
(e) Capital management
The Board’s policy is to maintain a strong
capital base so as to maintain investor,
creditor and market confidence and
to sustain future development of the
business. The Board of Directors monitors
the return on capital invested and the level
of dividends to shareholders.
(a) Litigation
The Group has a number of small
claims and litigations relating to regular
business activities and small fiscal claims.
Management believes that none of these
claims, individually or in aggregate, will
have a material adverse impact on the
Group.
(c) Environmental contingencies
The environmental legislation, currently
effective in the Russian Federation, is
relatively new and characterised by frequent
changes, official pronouncements and
court decisions, which are often unclear,
contradictory and subject to varying
interpretation by different authorities.
The Group is involved in chemical
production, which is inherently exposed
to significant environmental risks.
The Group companies record environmental
obligations as they become probable and
reliably measurable. The Group companies
are parties to different litigations with
the Russian environmental authorities.
The management believes that based on
its interpretations of applicable Russian
legislation, official pronouncements and
court decisions no provision is required for
environmental obligations. However, the
interpretations of the relevant authorities
could differ from management’s position
and the effect on these consolidated
financial statements, if the authorities were
successful in enforcing their interpretations,
could be significant.
There were no changes in the Board’s
approach to capital management during the
year.
The Company and its subsidiaries are
subject to externally imposed capital
requirements including the statutory
requirements of the country of their
domicile and the bank covenants
(f) Fair values
Unless stated otherwise, management
believes that the fair value of the Group’s
financial assets and liabilities approximates
their carrying amounts.
29. Commitments
The Group has entered into contracts
to purchase plant and equipment for
RUB 16,609 million (31 December 2015:
RUB 35,854 million).
(b) Taxation contingencies
The taxation system in the Russian
Federation continues to evolve and is
characterised by frequent changes in
legislation, official pronouncements and
court decisions, which are sometimes
contradictory and subject to varying
interpretation by different tax authorities.
Taxes are subject to review and investigation
by a number of authorities, which have
the authority to impose severe fines,
penalties and interest charges. A tax year
generally remains open for review by the
tax authorities during the three subsequent
calendar years; however, under certain
circumstances a tax year may remain open
longer. Recent events within the Russian
Federation suggest that the tax authorities
are taking a more assertive and substance-
based position in their interpretation and
enforcement of tax legislation.
These circumstances may create tax risks in
the Russian Federation that are substantially
more significant than in other countries.
Management believes that it has provided
adequately for tax liabilities based on its
interpretations of applicable Russian tax
legislation, official pronouncements and
court decisions. However, the interpretations
of the relevant authorities could differ
and the effect on these consolidated
financial statements, if the authorities were
successful in enforcing their interpretations,
could be significant.
158
159
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com 31. Related party transactions
(a) Transactions and balances with associates
(I) Transactions with associates
(b) Transactions and balances with other related parties
(I) Transactions with other related parties
2016
2015
RUB million
RUB million
2016
2015
RUB million
RUB million
Sales of goods and services
Interest income
Dividends income
Purchases of goods and services
7,849
11
47
(467)
5,382
114
-
(492)
Sales of goods and services
Interest income
Purchases of goods and services
1,238
48
(1,359)
965
36
(919)
(II) Balances with associates
(II) Balances with other related parties
31 DECEMBER
2016
31 DECEMBER
2015
31 DECEMBER
2016
31 DECEMBER
2015
RUB million
RUB million
RUB million
RUB million
Trade and other receivables 968
Long-term loans issued, at
amortised cost
40
Short-term loans issued, at
amortised cost
-
Trade and other payables
(30)
595
-
68
(22)
Long-term loans issued, at
amortised cost
Short-term loans issued, at
amortised cost
330
218
Trade and other receivables
2
Trade and other payables
(115)
Short-term loans
received
-
862
-
5
(358)
(29)
(III) Financial guarantees
The Group issued financial guarantees
to banks on behalf of associates amounting
to RUB 1,580 million
(31 December 2015 RUB 1,661 million).
(III) Financial guarantees
The Group issued financial guarantees
to banks on behalf of related parties
amounting to RUB 87 million
(31 December 2015: RUB 134 million).
The balances and transactions with
related parties are usually unsecured and
denominated in RUB
(c) Key management remuneration
The remuneration of the Board of Directors
and 13 members of key management
personnel amounted to RUB 892 million
(2015: RUB 535 million).
32. Significant subsidiaries
Subsidiary
Country of incorporation
31 December 2016
Effective ownership (rounded)
31 December 2015
Effective ownership
(rounded)
Apatit, JSC (including Balakovo branch)
PhosAgro-Cherepovets, JSC
Metachem, JSC
NIUIF, OJSC
PhosAgro-Trans, LLC
PhosAgro-Region, LLC
PhosAgro-Belgorod, LLC
PhosAgro-Don, LLC
PhosAgro-Kuban, LLC
PhosAgro-Kursk, LLC
PhosAgro-Lipetsk, LLC
PhosAgro-Oryol, LLC
PhosAgro-Stavropol, LLC
PhosAgro-Volga, LLC
PhosAgro-SeveroZapad, LLC
PhosAgro-Tambov, LLC
Trading house PhosAgro, LLC
Phosint Trading Limited
Phosagro Asia Pte Ltd
PhosAgro Trading SA
Phosint Limited
PhosAgro Chartering SA
PhosAgro Baltic Sp.z o.o.
PhosAgro Deutschland GmbH
PhosAgro France SAS
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Cyprus
Singapore
Switzerland
Cyprus
Switzerland
Poland
Germany
France
100%
100%
100%
94%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97.6%
95%
95%
95%
95%
95%
100%
100%
100%
94%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97.6%
95%
95%
-
-
-
33. Events subsequent to the reporting date
In March 2017, the Board of Directors proposed paying a dividend of RUB 30 per ordinary share. The total amount of proposed dividends
was RUB 3,885 million, see note 22.
160
161
Financial Statements (continued)STRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONPhosAgro Integrated Report 2016www.phosagro.com SHAREHOLDER INFORMATION
Share capital
PhosAgro’s authorised capital as of
31 December 2016 is RUB 323,750,000,
consisting of 129,500,000 ordinary shares
with a par value of RUB 2.5 per share.
Stock exchanges
PhosAgro’s shares are traded on the
A1 quotation list of the Moscow
Exchange under the symbol PHOR
(ISIN: RU000A0JRKT8).
Global Depositary Receipts (three GDRs
represent one share) are traded in the
Main Market of the London Stock Exchange
under the symbol PHOR.
SHAREHOLDER STRUCTURE OF PHOSAGRO AS OF 31 DECEMBER 2016
Name
Number of shares
Share, %
ADORABELLA LIMITED
DUBBERSON HOLDINGS LIMITED
CHLODWIG ENTERPRISES LIMITED
CARRANITA HOLDINGS LIMITED
VINDEMIATRIX TRADING LIMITED
Vladimir Litvinenko
Evgeniya Guryeva
Other shareholders ***
TOTAL
29,716,162
8,639,705
29,151,400
4,028,519
3,726,814
18,823,850
6,235,960
29 ,177,590
22.95
6.67
22.51
3.11
2.88
14.54
4.82
22.53
129,500,000
100.00
*** Other shareholders includes shares held as part of a REPO transaction undertaken by Igor Antoshin
on 21.12.2016 involving 2,489,540 shares, or 1.92% of the Company’s total issued shares.
Other ownership information
as of 31 December 2016
According to the information available
to the Company, the shares of Chlodwig
Enterprises Limited and Adorabella
Limited are ultimately held on trust
where the economic beneficiaries are Mr
Andrey Guryev and members of his family.
Based on information available to the
Company Mr Igor Antoshin has the right
to indirectly control 100% of the votes on
the voting shares of Dubberson Holdings
Limited, Carranita Holdings Limited, and
Vindemiatrix Trading Limited.
Up to date information about PhosAgro’s
ownership structure is available on the
Company’s website: www.phosagro.com/
investors/capital.
Regulation S GDRS
CUSIP number: 71922G209
ISIN: US71922G2093
Common code: 065008939
SEDOL: 0B62QPJ1
RIC: PHOSq.L
Rule 144A GDRS
CUSIP number: 71922G100
ISIN: US71922G1004
Common code: 065008939
SEDOL: 0B5N6Z48
RIC: GBB5N6Z48.L
Citigroup Global Markets Deutschland AG acts as
the depositary for the Company’s GDR Programme.
SHARE PERFORMANCE IN 2016:
PhosAgro GDR
Traded volume,
GDR mln
High
15.55
10.7
Low
12
9
6
3
0
162
Price,
USD/GDR
15.25
20
15
10
5
0
Year-end price
Trading volume:
108.25
MILLION GDRS
PhosAgro Local Shares
Traded Volume in Local Shares,
RUB, thousand
40
30
20
10
0
High
2,945
Low
2,225
Price,
RUB/ local share
3,500
3,000
2,599
2,500
2,000
Source: Bloomberg
Year-end price
Trading volume:
2.05
1,500
MILLION GDRS
163
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
DIVIDENDS
SOURCE: UNALLOCATED NET INCOME AS OF 31 DECEMBER 2015 AND 31 MARCH 2016
Dividends accrued
AGM/EGM date
Dividend cut-off date
Amount of dividend per
ordinary share/ GDR
(RUB)
Amount of accrued
dividends (RUB bln)
4Q 2015
1Q 2016
2Q 2016
3Q 2016
31/05/2016
29/07/2016
03/10/2016
16/01/2017
11/06/2016
10/08/2016
14/10/2016
27/01/2017
57/19
63/21
33/11
39/13
7.4
8.2
4.3
5.1
Dividends
Dividends accrued in 2016 were paid in
full. On 21 March 2017, PhosAgro’s Board
of Directors recommended a final 2016
dividend of RUB 30 per share (RUB 10 per
depositary receipt), or RUB 3.9 billion in
total. If approved by the Annual General
Meeting of Shareholders (the “AGM”) on 30
May 2017, this will bring PhosAgro’s payout
ratio to 50% of net profit, demonstrating
our commitment to the Company’s dividend
policy and to upholding the promises made
to shareholders during the IPO and SPO.
In 2016, PhosAgro acted as a tax agent
when it paid out dividends to the accounts
of organisations that own shares as listed
in the Russian share register. The Company
calculated and withheld tax on those
dividends and remitted the amount of tax
to the relevant authorities. Dividends paid
out to shareholders were net of the amount
of the tax deducted. The withholding
tax rate depends on the status of the
shareholder, in accordance with the
information that the shareholder provides.
PhosAgro also took into account any double
taxation treaties and, where appropriate,
made tax payments in accordance with the
provisions of the relevant treaty.
Due to changes in Russian Federation law
related to the payment of dividends that
came into effect on 1 January 2015, existing
or potential PhosAgro shareholders
and holders of the Company’s GDRs are
advised to consult their tax advisers for
tax implications with regards to dividend
payments. The refund of a previously
withheld tax on income paid to foreign
organisations in respect of which the
Russian Federation’s international treaties
regulating taxation matters or for which
a specific article provides for a special
taxation regime, shall be performed by the
tax authority at the place of registration of
the tax agent within three years from the
end of the tax period in which the income
was paid.
Information disclosure
PhosAgro strictly follows the requirements
imposed by Russian securities regulations,
as well as rules for the companies traded
on the LSE, in its information disclosure
and filings. The Company publicly discloses
all required information to shareholders
and investors in a timely manner through
authorised newswires, the corporate
website www.phosagro.com, and via
PhosAgro’s official disclosure page on the
Interfax portal http://www.e-disclosure.ru/
portal/company.aspx?id=573
PhosAgro Integrated Report 2016www.phosagro.comSTRATEGIC REPORTCORPORATE RESPONSIBILITY REPORTCORPORATE GOVERNANCE REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GLOSSARY
Abbrevations
Industry terms
GDR or depositary receipt
Global Depositary Receipt
bln
Billion
km
Kilometres
kt
Thousand metric tonnes
mln
Million
mln t
Million tonnes
MW
Megawatt
RUB
Russian rouble
t
Metric tonne = 1,000 kg
ths
Thousand
CFR
Cost and Freight — an Incoterms rule.
CFR means that the seller must pay the
costs and freight to bring goods to the port
of destination, including customs costs
for exporting the goods. The buyer pays
to insure the goods. Risk is transferred
to the buyer once the goods are loaded on
the vessel. Maritime transport only.
FOB
Free on Board — an Incoterms rule.
The seller must load goods on board the
vessel nominated by the buyer; costs for
delivery of the goods on board of the
vessel are the responsibility of the seller.
USD
United States dollars
Ammonia
A colourless combustible gas with the
chemical formula NH3. Ammonia is a
compound of nitrogen and hydrogen, and is
primarily used in the production of mineral
fertilizers and a wide variety of nitrogen-
containing organic and inorganic chemicals.
Ammonium nitrate or AN
A nitrogen fertilizer with a nitrogen content
of approximately 34%, produced by reacting
nitric acid (an intermediate chemical
feedstock produced from ammonia) with
ammonia (AN).
NP
(Ammonium nitrate-based fertilizers)
Complex ammonium nitrate-based fertilizer
with phosphorus content. Liquid complex
fertilizers or APP liquid phosphate- and
nitrogen-based fertilizer.
Apatite
A group of phosphate minerals (phosphate
ore), usually referring to hydroxylapatite,
fluorapatite and chlorapatite with the
chemical formula Ca5(PO4)3(OH, F, Cl).
Apatite is the world’s major source of
phosphorus, found as variously coloured,
glassy crystals, masses or nodules.
The phosphorus content of apatite is
traditionally expressed as phosphorus
pentoxide (P2O5).
Apatite-nepheline ore
Ore containing minerals of apatite and
nepheline.
By-product
Material, other than the principal product,
that is generated as a consequence of an
industrial process.
Concentrate
Material that is the result of beneficiation
of an ore and which has a higher
concentration of mineral values than
the mineral values originally contained
in the ore. Concentrates are produced in
beneficiation plants.
Crushing
A mechanical method of reducing the size
of rock.
Deposit
An area of reserves identified by surface
mapping, drilling or development.
Diammonium phosphate or DAP
A type of multi-nutrient fertilizer
containing nitrogen and phosphorous.
Production of DAP is based on the
neutralisation of phosphoric acid by
ammonia with subsequent drying and
granulating.
Downstream
The processing of apatite concentrate,
natural gas, sulphur and potash into usable
products such as mineral fertilizer,
industrial and feed phosphates.
Drillhole
A circular hole made in rock, often in
conjunction with a core barrel, in order
to obtain a core sample.
EBITDA
Calculated as operating profit adjusted for
depreciation and amortisation.
Emission
Pollution discharged into the atmosphere
from smokestacks, other vents at
commercial or industrial facilities and from
transportation exhaust systems.
End product
Commercial product other than those
used internally to produce other types of
commercial products. For PhosAgro, end
products are phosphate-based fertilizers,
nitrogen fertilizers, feed and industrial
phosphates, and sulphate of potash.
Exploration
The search for minerals. Prospecting,
sampling, mapping, diamond drilling and
other work involved in the search for
mineralisation.
Monocalcium phosphate or MCP
A type of feed phosphate with the highest
phosphorus digestibility and content.
P2O5 (phosphoric pentoxide)
A term used to express the content of
phosphorus in a substance.
Feed phosphates
Inorganic feed phosphates are a high-
quality phosphorus source for animal
feed. Most inorganic feed phosphates are
derived from phosphate rock, which is
chemically treated to make phosphorus
available for animals in the form of quality
feed phosphates. The main inorganic
feed phosphates are calcium, magnesium,
calcium-magnesium, ammonium and
sodium phosphates.
These phosphates are constant in
composition, low in impurities and
considered to be the best available sources
of phosphorus for animals. An adequate
supply of inorganic feed phosphates in
animal feed is essential for animals’ well-
being.
Grade of mineral fertilizer
The relative quality or percentage content
of useful components.
Key performance indicator (KPI)
Performance indicators of a division
(company) that help the Company
to evaluate the implementation of plans
and make decisions regarding management
remuneration.
K2O
Universal means of storage of potassium
(potash) in potassium-containing products.
MER or ‘minor element ratio’
The sum of the iron, aluminium and
magnesium content divided by the P2O5
content.
Monoammonium phosphate or MAP
A type of multi-nutrient fertilizer
containing nitrogen and phosphorous.
Production of MAP is based on the
neutralisation of phosphoric acid by
ammonia with subsequent drying and
granulating. Monoammonium phosphate
is often used in the blending of dry
agricultural fertilizers.
Nepheline
A mineral containing aluminium oxide
(Al2O3).
Phosphorous or P
One of the primary plant nutrients essential
for plant growth.
Netback price
Revenue net of costs associated with
shipping goods from the production site
to the buyer.
PKS
A multi-nutrient fertilizer containing
phosphorous, potassium and sulphur.
Nitrogen or N
One of the primary plant nutrients essential
for plant growth and a universal way of
storing nitrogen in nitrogen-containing
products.
NPK
A multi-nutrient fertilizer containing
nitrogen, phosphorus and potassium.
NPS
A multi-nutrient fertilizer containing
nitrogen, phosphorous and sulphur.
Open-pit mine
A mine working or excavation that is open
to the surface and where material is not
put back into the mined-out areas.
Phosphate rock
Phosphate rock (apatite concentrate or
phosphorus concentrate) is an imprecise
term that includes both unprocessed
phosphorus-containing ore and
beneficiated concentrates. Practically all
production of phosphate fertilizers is based
on phosphate rocks containing some form
of the mineral apatite.
Potash or K
One of the primary plant nutrients essential
for plant growth.
Rare earth elements/resources
A group of 15 elements with atomic
numbers ranging from 57 to 71: lanthanum,
cerium, praseodymium, neodymium,
promethium, samarium, europium,
gadolinium, terbium, dysprosium, holmium,
erbium, thulium, ytterbium and lutetium.
Sedimentary
Formed by the deposition of solid
fragmental material that originates from
the weathering of rocks and is transported
from a source to a site of deposition.
Shaft
A mine working (usually vertical) used
to transport miners, supplies, ore or
capping.
Sulphate of potash or SOP
A non-chloride potash fertilizer.
Sulphuric acid
A strong sulphur-based inorganic mineral
acid with the chemical formula H2SO4.
Phosphates
A salt or ester of phosphoric acid or
a fertilizer containing phosphorus
compounds.
Tailing
The fluid slurry that is left after treatment
and extraction of an economically
extracted mineral.
Phosphoric acid
Mineral (inorganic) acid having the
chemical formula H3PO4.
Trenches
Lines excavated to a predetermined depth
to establish the geological structure of a
deposit.
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An organic compound of carbon, nitrogen,
oxygen and hydrogen. It is the most
widely used and highest-concentration
nitrogen-based fertilizer formed by reacting
ammonia with carbon dioxide at a high
pressure.
Waste
Rock lacking sufficient grade and/or other
characteristics of ore to be economical.
Upstream
Extraction of solid, liquid and gaseous
resources from the earth using specialised
equipment.
The International Plant Nutrition Institute
(IPNI)
The IPNI is a global organisation with
initiatives addressing the world’s growing
need for food, fuel, fibre and feed.
Environmental assessment (EA)
A process where the breadth, depth and
type of analysis depend on the proposed
project. An EA evaluates a project’s
potential environmental risks and impacts
in its area of influence and identifies
ways to improve project design and
implementation by preventing, minimising,
mitigating or compensating for adverse
environmental impacts and by enhancing
positive impacts.
Waste water
Spent or used water from individual homes,
communities, farms or industries that
contains dissolved or suspended matter.
FAO
Food and Agriculture Organization of the
United Nations.
Other terms
Basel Convention
The Basel Convention on the Control of
Transboundary Movements of Hazardous
Wastes and their Disposal was adopted
on 22 March 1989 by the Conference of
Plenipotentiaries in Basel, Switzerland.
The overarching objective of the Basel
Convention is to protect human health
and the environment against the adverse
effects of hazardous wastes. Its scope of
application covers a wide range of wastes
defined as “hazardous wastes” based
on their origin and/or composition and
their characteristics, as well as two types
of wastes defined as “other wastes” —
household waste and incinerator ash.
The Department for Environment, Food
and Rural Affairs (Defra)
Defra is the government department
responsible for environmental protection,
food production and standards, agriculture,
fisheries and rural communities in the
United Kingdom.
Feasibility study
A comprehensive engineering estimate of
all costs, revenues, equipment requirements
and production levels likely to be achieved
if a mine is developed. The study is used
to determine the technical and economic
viability of a project and to support the
search for project financing.
Fertecon/Argus—FMB/CRU
Fertilizer Economic Market Analysis and
Consultancy, UK.
Group/Company/PhosAgro
Refers collectively to PJSC PhosAgro and its
subsidiaries.
Helsinki Convention
The Helsinki Convention was signed in
1974 by the then-seven Baltic coastal
states, and made all the sources of
pollution around the entire sea subject to a
single convention. The 1974 Convention
entered into force on 3 May 1980. A new
convention was signed in 1992 by all the
states bordering on the Baltic Sea and the
European Community in light of political
changes and developments in international
environmental and maritime law.
After ratification, the Convention
entered into force on 17 January 2000.
The Convention covers the whole of the
Baltic Sea area, including inland waters
as well as the water of the sea itself and
the seabed. Measures are also taken in the
whole catchment area of the Baltic Sea
to reduce land-based pollution.
IFA
International Fertilizer Association, France.
ISO
International Organization for
Standardization, the world’s largest
standards development organisation.
Between 1947 and the present day, the
ISO has published more than 19,000
international standards, ranging from
standards for activities such as agriculture
and construction through mechanical
engineering and medical devices
to the newest information technology
developments.
LSE
London Stock Exchange.
Moscow Exchange
Russia’s MICEX and RTS stock exchanges
were merged into one entity, MICEX—RTS,
in December 2011 and rebranded as the
Moscow Exchange in May 2012.
Risk assessment
Qualitative and quantitative evaluation
carried out in an effort to determine
the risk posed to human health or the
environment by the presence or potential
presence and use of specific pollutants.
Names of legal entities used
in this report
PJSC PhosAgro
PhosAgro
JSC PhosAgro-Cherepovets
PhosAgro-Cherepovets
JSC Apatit
Apatit
Balakovo branch of JSC Apatit
Balakovo branch of Apatit or BMF
JSC Metachem
Metachem
OJSC NIUIF
NIUIF
PhosAgro-Trans LLC
PhosAgro-Trans
PhosAgro-Region LLC
PhosAgro-Region
Mining and Chemical Engineering LLC
Mining and Chemical Engineering or MCE
Smart Bulk Terminal LLC
Smart Bulk Terminal
Phosagro Asia Pte Ltd
Phosagro Asia
Phosint Trading Limited
Phosint Trading
Data on ore reserves presented in this report are prepared on the
basis of:
• Data from the approved state register as of 01.01.2016;
• Data from Form 70-TP “Information on Mineral Extraction
During Production”, which contains data on mined volumes
(extracted from the subsoil) and losses during mining
(regulatory, actual, excess);
• Information on changes in reserves for the 2016reporting
period: mining, losses during mining, reserves remaining
at year end (as of 01/01/2017), reflected in the statistical
reporting form 5-GR “Information on the state of and changes
to solid mineral reserves”;
• Approved Rosnedra protocols for deposits.
Calculations and recalculations for approved reserves are
compliant with normative documents:
• Order No. 40 of the Ministry of Natural Resources of the
Russian Federation dated 7 March 1997 “On Approval
of Classifications of Mineral Reserves” (together with
“Classification of Reserves of Deposits and Potential Resources
of Solid Minerals”, “Classification of Currently Mined Reserves
and Forecast Groundwater Resources”);
• Order of the Ministry of Natural Resources of the Russian
Federation of 5 June 2007 No. 37-R “On Approval of
Methodological Recommendations for Application of
Classification of Reserves of Deposits and Potential Resources
of Solid Minerals”.
Ensuring the completeness of geological exploration, rational use
and preservation of subsoil is carried out in accordance with the
law Russian Federation law No. 2395-1 “On Subsoils” dated 21
February 1992.
The information in this Report related to mineral resources as of
1 January 2017 is based on information compiled by the Geology
Service Department of Apatit and authorised by Mr Sergey
Glubokiy, Chief Geologist of Apatit.
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Investor
Relations
PhosAgro
Legal Address
Contacts for employees and
potential employees
Alexander Seleznev
Head of Investor Relations
55/1 Leninsky Prospekt, bld. 1, Moscow
119333, Russia
Tel.: +7 495 231–3115
Email: ir@phosagro.ru
Tel.: +7 495 232–9689
Fax: +7 495 956–1902
Diana Sidelnikova
Head of Personnel Evaluation
and Development
Tel.: +7 820 259–3113
Email: dsidelnikova@phosagro.ru
Depositary
Citigroup Global Markets Deutschland AG
Frankfurter Welle Reuterweg 16
60323 Frankfurt, Germany
Contacts for media
Andrey Podkopalov
Director of Information Policy
Auditor
JSC KPMG
Naberezhnaya Tower Complex,
10 Presnenskaya Naberezhnaya
Moscow 123112, Russia
Tel.: +7 495 937 4477
Fax: +7 495 937 4400/99
Web: www.kpmg.ru
Registrar
OJSC Reestr
3, bldg. 2, Zubovskaya Ploschad,
Moscow 119021, Russia
Tel.: +7 495 617 0101
Fax: +7 495 680 8001
Email: reestr@aoreestr.ru
Web: www.aoreestr.ru
Tel.: +7 495 232–9689, ext. 26–51
Timur Belov
Head of Information Policy Division
Press Secretary
Tel.: +7 495 232–9689, ext. 26–52
Email: pr@phosagro.ru
Sam VanDerlip
International PR Adviser
Mobile (UK): +44-75-54-993-032
Tel. (Russia): +7 499 918–3134
Email: vanderlip@em-comms.com
Sustainability contacts
Anatoly Kutyrev
Chief Ecologist
Tel.: +7 495 231–2747
Email: akutyrev@phosagro.ru
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