NATURE AND AGRICULTURE:
FLOURISHING TOGETHER
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ABOUT THIS REPORT
The 2019 integrated Annual Report of PJSC PhosAgro (the Company, PhosAgro) provides
insight into the performance of parent company PhosAgro and its subsidiaries (jointly
referred to as “PhosAgro Group” or the “Group”). The key subsidiaries of the Group
and PhosAgro’s stake in these subsidiaries are presented in the Company’s 2019 IFRS
consolidated financial statements.
The report highlights how we integrate ESG principles into everything we do.
In the reporting year, the Company approved sustainable development as a key strategic
priority. The Board of Directors established a dedicated committee to strengthen
PhosAgro’s leadership in both sustainability and corporate governance.
To ensure compliance with the materiality principle and comparability with historical
data, the Sustainability Report section discloses data on Apatit, including its branches
and standalone business units, only. The disclosure does not include information
on other companies that are part of the group to which Apatit and PhosAgro belong.
The report was pre-approved by PhosAgro’s Board of Directors on 20 February 2020
(Minutes dated 21 February 2020) and the Annual General Shareholders’ Meeting
on _______________ (Minutes dated _______________). JSC KPMG audited the financial
statements, whilу JSC Deloitte and Touche CIS provided limited assurance in relation
to the sustainability data.
Chief Executive Officer
and Chairman of the Management Board
3
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CONTENTS
ABOUT THIS REPORT
2
COMPANY PROFILE
4
Our key advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Our business model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Our performance highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Case study navigator on UN SDGs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
STRATEGIC REPORT
20
Chairman’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CEO’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Business environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Sustainable growth opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Fertilizer Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Strategy 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
BUSINESS REVIEW
62
Operational review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SUSTAINABILITY REPORT
76
Management approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Environmental review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Health and safety review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
People development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Social investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Stakeholder engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Supply chain and procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
CORPORATE GOVERNANCE
154
Corporate governance framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Executive Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Corporate controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Remuneration report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
SHAREHOLDER AND INVESTOR INFORMATION
MANAGEMENT RESPONSIBILITY STATEMENT
188
193
STATEMENTS FINANCIAL
194
KPMG Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
ADDITIONAL INFORMATION
240
GRI Content Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
Independent assurance report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
Appendix 1.
Appendix 2.
Report on Compliance with the Principles
and Recommendations of the Corporate
Governance Code
The information regarding interested-party
transactions made by the Company in 2019
Annual Report | 2019 5
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PHOSAGRO IS THE LARGEST
SUPPLIER OF MINERAL
FERTILIZERS
IN THE RUSSIAN
MARKET
The Group’s principal activity is the production
of phosphate rock and mineral fertilizers at plants
located in the cities of Kirovsk (Murmansk Region),
Cherepovets (Vologda Region), Balakovo
(Saratov Region) and Volkhov (Leningrad Region)
and their distribution in Russia and abroad . Our parent
company, PJSC PhosAgro, was incorporated in October
2001 .
The Group’s operations are primarily located in Russia
and as such are exposed to the Russian domestic
economy and financial markets.
With the benefits of our production chain, we are able
to switch up to 50% of our phosphate production
from DAP/MAP to NPK, depending on the market
situation. Relying on a flexible sales model, PhosAgro
readily meets demand for environmentally friendly
and safe fertilizers from farmers around the world .
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Company profileAnnual Report | 2019
COMPANY PROFILE
39,552,663
(30.55%)
Other shareholders
OWNERSHIP
STRUCTURE
(Number of shares)
PHOSAGRO’S CREDIT RATINGS
Standard & Poor’s
Moody’s
BBB-
Outlook:
Stable
Affirmation date:
21 February 202 0
Baa3
Outlook:
Stable
Assignment date:
28 January 2018
32,176,662
(24.85%)
Adorabella Limited1
24,359,900
(18.81%)
Chlodwig Enterprises Limited1
27,174,815
(20.98%)
Vladimir Litvinenko
6,235,960
(4.82%)
Evgeniya Guryeva1
1 . 48 .47% — the shares of Evgeniya Guryeva, and shares of Adorabella Limited
and Chlodwig Enterprises Limited which were transferred to trusts where
the economic beneficiaries are Andrey Guryev and members of his family
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Fitch
BBB-
Outlook:
Stable
Assignment date:
9 February 2018
SHARES
Ticker
PHOR
PhosAgro’s shares and global depositary
receipts (GDRs) are traded on the Moscow
Exchange and the London Stock Exchange,
respectively.
The Company’s GDRs have been included
in the MSCI Russia (weight: 0.61%)
and MSCI Emerging Markets indexes.
BONDS
Borrower:
PJSC PhosAgro
Issuer:
PhosAgro Bond Funding Limited
Settlement date:
3 May 2017
Principal outstanding, USD:
500,000,000
Guarantors:
Apatit, PhosAgro-Cherepovets
Borrower:
PJSC PhosAgro
Issuer:
PhosAgro Bond Funding Limited
Settlement date:
24 January 2018
Principal outstanding, USD:
500,000,000
Guarantors:
Apatit
Company profileAnnual Report | 2019 OUR KEY
ADVANTAGES
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PhosAgro operates mining and processing
assets and boasts its own logistics
infrastructure, including two port terminals,
along with Russia’s biggest distribution network
for mineral fertilizers and feed phosphates. It
runs Russia’s only Scientific Research Institute
for Fertilizers and Insectofungicides (NIUIF).
67
regions across
Russia, supplies
to over 100 countries
POLAND
GERMANY
FRANCE
SWITZERLAND
SERBIA
KIROVSK
VOLKHOV
CHEREPOVETS
LITHUANIA
MOSCOW
NIZHNY
NOVGOROD
OREL
KURSK
TAMBOV
LIPETSK
BELGOROD
BALAKOVO
ROSTOV-ON-DON
KRASNODAR
STAVROPOL
CYPRUS
Summer Schools
on Green Chemistry
A joint project with the IUPAC
to support scholars from emerging
economies. In 2019, PhosAgro
and the University
of Dar es Salaam (Tanzania)
held sessions for participants
from over 40 countries.
International research to improve
the efficiency of mineral fertilizers
Collaboration with universities:
University of Milan, Adam
Mickiewicz University in Poznań,
Wageningen University & Research,
and Rothamsted Research.
The research outcomes are shared
with farmers from Brazil, Serbia,
Poland, Lithuania, Latvia, Estonia,
Russia, France, Germany, Italy
and other countries.
PhosAgro has its own
sales offices in Germany,
France, Switzerland,
Serbia, Poland, Lithuania,
Cyprus, Brazil, Argentina
and Singapore.
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UNIQUE
RESOURCE
BASE
A unique resource base with a mine
life of around 60 years
Lowest content of cadmium (below 1
mg / kg P2O5) and other heavy metals
as compared to apatite deposits
elsewhere
Closest peers by the lowest
cadmium content (mg Cd / kg P2O5)
>60
>60
>60
40-60
>60
>60
<1
PhosAgro (10 mtpa)
<20
<20
<2
<5
Foskor (2.0 mtpa)
Kropz (1.5 mtpa)
<1
>60
The initial limitations on the supply of fertilizers
with a cadmium content above 60 mg/kg
(adopted by the EU Regulation on 21 May 2019,
effective from 2022) are estimated to impact
12–15% of the European imports, with further
limitations to 40 mg/kg (possible in 2029)
affecting as much as 20–30%.
High-grade phosphate rock
with a P2O5 content of 39% or higher
Self-sufficiency in major inputs:
100% in phosphate rock,
90% in ammonia
and 90% in sulphuric acid
One of the highest gross margins
in the phosphate segment
EBITDA margin, %
PhosAgro
Closest
peers
9
15
10
30
32
25
27
25
31
23
20
20
20
50
OUR GLOBAL
OPERATIONS
PhosAgro is the largest supplier
of DAP/MAP and NPK fertilizers
in Russia, with a developed
domestic sales network and trading
offices in all key export markets.
It enjoys a strong market position
in the premium European market
and relies on a netback-driven sales
model with a global presence.
MANAGEMENT
COMPANIES
PhosAgro (Moscow)
PhosAgro-Region (Moscow)
MINING, PHOSPHATE ROCK
PROCESSING AND PRODUCTION
OPERATIONS
Apatit (Cherepovets)
and its branches in:
• Balakovo
• Volkhov
• Kirovsk
R&D
NIUIF (Cherepovets)
DISTRIBUTION
PhosAgro-Belgorod (Belgorod)
PhosAgro-Don (Rostov-on-Don)
PhosAgro-Kuban (Krasnodar)
PhosAgro-Kursk (Kursk)
PhosAgro-Lipetsk (Lipetsk)
PhosAgro-Orel (Orel)
PhosAgro-Stavropol (Stavropol)
PhosAgro-Volga (Nizhny Novgorod)
PhosAgro-SeveroZapad (Cherepovets)
PhosAgro-Tambov (Tambov)
Trading House PhosAgro (Cherepovets)
Phosint Trading Limited (Cyprus)
Phosint Limited (Cyprus)
Phosagro Asia Pte Ltd (Singapore)
PhosAgro Trading SA (Switzerland)
PhosAgro Logistics SA (Switzerland)
Phosagro Polska Sp.z o.o. (Poland)
Phosagro Deutschland GmbH (Germany)
Phosagro France SAS (France)
PhosAgro Balkans DOO (Serbia)
UAB PhosAgro Baltic (Lithuania)
SINGAPORE
2018
2019
Company profileAnnual Report | 2019 HIGH QUALITY STANDARDS
The Group’s production facilities have
ISO 9001:2015, ISO 14001:2015, OHSAS
18001, and GMP+ certifications that
attest to the high quality of our products
and management efficiency throughout
their life cycle.
Products exported to EU customers
have been registered pursuant
to Regulation (EC) No. 1907/2006
concerning the Registration, Evaluation
and Authorisation of Chemicals (REACH).
PhosAgro successfully passed a certification
audit for compliance with the IFA (International
Fertilizer Association) Protect and Sustain
standard conducted by SGS, the world’s leading
inspection, verification, testing and certification
company.
The Company’s processing facilities meet
the standards of the best available techniques.
NEW AMMONIA FACILITY
A new ammonia facility with a capacity of 760 ktpa and a granulated urea
production unit of 500 ktpa were launched in 2018. The new facilities meet
the best available techniques criteria laid out in the Russian Reference
Document ITS 2-2015 “Production of Ammonia, Mineral Fertilizers and Inorganic
Acids”. Ammonia is produced using an air-cooled process media technology,
which minimises water consumption, significantly reducing discharges
from the circulation cooling system. State-of-the-art technology of air pre-
heating before primary reforming means lower natural gas consumption and air
emissions, including greenhouse gases.
The new technology for granulated urea production involves the processing
of carbon dioxide associated with the conversion of natural gas as part
of ammonia production. This makes natural gas a complex feedstock,
with hydrogen and carbon used in ammonia and urea production, respectively.
Deeper processing of mineral feedstock results in lower carbon dioxide
emissions.
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SMART FERTILIZERS
The Company works to make sustainable agriculture a reality by enhancing fertilizer production
methods, improving properties and developing new grades of fertilizers, as well as taking part
in a number of international initiatives:
1
2
3
4
5
Moving from single products to integrated mineral plant nutrition solutions, which combine
several types of fertilizers, including bioadditives, in certain dosages that meet specific soil and climate
conditions and crop yield targets. The nutrition systems are tested at numerous field trial stations
featuring different soil and climate conditions in cooperation with the leading agricultural education
and research institutions.
Samoilov Scientific Research Institute for Fertilizers and Insectofungicides is part of PhosAgro Group.
It develops new fertilizer production technologies and formulas with prolonged effect, as well as slow-
and controlled-release fertilizers that can release nutrients at particular phases in line with plant demand.
Opening the Innovation Centre in 2019 to identify promising development areas and attract external
partners such as educational and research organisations, accelerators and innovation parks. The Centre
focuses on the projects to produce special purpose fertilizers, biostimulants and growth improving
additives.
Developing the Soil Doctor Testing Kit to be distributed in the countries participating in the programme
(5,000 farmers).
Supporting the Global Soil Laboratories Networks (GLOSOLAN) by developing research capacities
and strengthening the Regional Soil Laboratories Networks (RESOLAN). Introducing quality and safety
controls across key regional soil laboratories with a focus on fertilizer quality and safety.
WELL-BALANCED
CORPORATE
GOVERNANCE
Transparent ownership structure with over 30% of shares in free float.
Seven (70%) independent non-executive directors on the Board
of Directors.
Six Board committees meeting on a regular basis with five of them
chaired by independent directors.
In 2019, PhosAgro’s Board of Directors established a Sustainable
Development Committee at the initiative of Andrey Guryev, CEO,
unanimously approving Irina Bokova, an independent director,
as the head of the committee. As the Director-General of UNESCO
(2009–2017), she participated in the development of the UN Agenda
for Sustainable Development, so her highest level of expertise
will be a valuable asset helping PhosAgro meet its strategic goals.
Company profileAnnual Report | 2019 UPSTREAM BENEFICIATION
Company profile
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Average
P2O5 content
14.77%
Harmful
impurities
(the lowest compared to apatite
deposits elsewhere)
< 1 mg
Cd / kg P2O5
Apatite-nepheline
ore extracted
+7.9%
38.1
mln t
Recovery rate
for phosphate rock
91.6%
Production
of phosphate rock
(P2O5 content over 39%)
10.5
mln t
+3.9
Nepheline concentrate
produced
1.2
mln t
+22%
ORE
RESERVES
Reserves
(caterories A + B + C1)
of high-quality apatite-
nepheline ore from igneous
rock deposits
1,899
mln t
Reserves life
(at current
extraction
rates)
>50
years
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OUR BUSINESS MODEL
PhosAgro is a vertically integrated Russian company with assets spanning the entire
phosphate-based and nitogen fertilizer production chain, from mining to sales.
Self-sufficient in premium quality phosphate rock containing almost no harmful
impurities, the Company is uniquely positioned to produce some of the world’s finest
and purest mineral fertilizers.
The Group has two strategic business units (segments).
PHOSPHATE SEGMENT
The segment focuses mainly on the production and distribution
of ammophos, diammonium phosphate, sodium tripolyphosphate and other
phosphate-based and complex fertilizers at the sites located in Cherepovets,
Balakovo and Volkhov, and production and distribution of phosphate rock
extracted from the apatite-nepheline ore mined and processed in Kirovsk .
NITROGEN SEGMENT
The segment engages mainly
in the production and distribution
of ammonia, ammonium nitrate and urea
at the site located in Cherepovets .
PROCUREMENT
Cost of annual potash
consumption
Cost of annual sulphur
consumption
Cost of annual natural gas
consumption
13.7
RUB bln
8.1
RUB bln
12.6
RUB bln
S
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A
N
O
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T
U
B
I
R
T
S
I
D
3.2
+10.0%
2.8
+4.2%
M
A
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R
T
S
N
W
O
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PHOSPHATE-BASED
PRODUCTS
Phosphate rock
70.5%
intra-group sales
Phosphate-based fertilizers
Production volume
7.3 mln t
0.6
+53.6%
0.2
−10.4%
0.4
+3.3%
0.1
+38.9%
DAP/MAP
NPK
NPS
APP
MCP
PKS
3.2
+6.9%
2.8
−1.0%
NITROGEN-BASED
PRODUCTS
Ammonium nitrate (AN)
0.6 mln t
Urea
1.7 mln t
Ammonia
1.9 mln t
+6.3%
+5.9%
+3.4%
Gross profit margin
45%
11.3%
domestic
sales
18.0%
export
sales
Sales volume
7.3 mln t
+45.4%
0.6
−5.3%
0.2
0.4
+8.7%
0.08
+6.9%
Nepheline concentrate
1.2 mln t
Phosphate rock
3.3 mln t
0.5 mln t
1.7 mln t
+21.0%
+9.9%
−14.9%
+5.7%
OTHER
PRODUCTS
0.2 mln t
+1.8%
REVENUE
248.1
Total
RUB bln
Domestic market
Overseas market
66.0
201.2
RUB bln
135.2
6.8
31.1
37.9
RUB bln
7.9
1.1
9.0
RUB bln
S
R
E
D
L
O
H
E
K
A
T
S
INVESTMENT
AND FINANCE
COMMUNITY
Dividends
24.9
RUB bln
REGIONAL
AND MUNICIPAL
AUTHORITIES
Regional
and municipal budgets
13.6
RUB bln
EMPLOYEES
Social benefits package
94.3
RUB thousand
Average salary
87.2
RUB thousand
Training expenses
per employee
21.7
RUB thousand
COMMUNITY
Investment in regional
development and charity
programmes
2.9
RUB bln
BUSINESS PARTNERS
Procurement
90.2
RUB bln
Local
procurement
18.7
RUB bln
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OUR PERFORMANCE
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
The lowest leverage among
global and domestic peers.
One of the lowest DAP cash-cost producers globally
and in the first quartile for urea production.
Net debt/EBITDA ratio
Global MAP/DAP prices
vs current production costs
2019
2018
3,7x
1,7х
1,8х
3,0x
0
2
1
PhosAgro
Industry average
3
4
B
O
F
,
т
/
D
S
U
600
400
200
0
310+
290
195
0
5
10
15
20
35
DAP/MAP production, mt
25
30
40
45
50
55
RUB mln
Revenue
Sales profit
Net profit
Net profit, excl. FX effects
EBITDA
DAP, FOB Tampa
2013
2019
PhosAgro
2017
2018
2019
181,351
233,312
248,125
35,989
25,331
21,190
50,796
53,997
22,135
41,748
74,908
51,651
49,408
37,062
75,582
OPERATING HIGHLIGHTS
Strict cost control and operational efficiency improvements to drive lower costs
going forward through the following initiatives:
−1.3 RUB bln
< CAPEX 2020
Reducing in-house
logistics costs
Streamlining
the Company’s
spending on repairs
and maintenance
Assessing the impact
of rescheduled facility
commissioning
on performance indicators
+1.63%
−50 thousand tons
Increasing phosphate
rock output by stabilising
key equipment utilisation
rates
Reducing end-to-
end phosphate rock
losses in the production
of mineral fertilizers
Reducing unscheduled
equipment downtime
in the production
of mineral fertilizers
Стратегический
отчет
17
16
ENVIRONMENT
Material investments
into environmental
programmes
+9.4%
9.1
RUB bln
Unit emissions
0.888
kg/t
Unit effluents
−22%
4.7
m3/t
−15%
Share of recycled hazard
class 1–4 waste
34.5%
+7.7%
STAFF
(Apatit, including
its branches
and standalone
business units, only)
Average headcount
10,882
Turnover
7.3%
Engagement
57%
LTIFR (per 1 mln
hours worked)
0.75
REGIONS
Expenditures
on charitable
and social projects
1.5
RUB bln
One of the largest
taxpayers
in the regions
of our operation
(taxes paid in 2019)
13.6
RUB bln
102-13
CASE STUDY
NAVIGATOR
ON UN SDGs
The Sustainable Development Committee of PhosAgro’s
Board of Directors has evaluated the Company’s progress
in achieving UN SDGs
Page 84
Page 86
Page 88
Page 85
Page 87
Page 89
The Sustainable Development Committee assessed the Company’s
performance on 10 out of 17 UN SDGs, which are the key drivers for ensuring
environmental responsibility and preserving the planet for future
generations . As a producer of safe and pure fertilizers with no harmful
impurities, PhosAgro plays an important role in protecting consumer food
safety, good health and well-being (SDG 3), and maintaining responsible
production and consumption (SDG 12).
Apart from its domestic market, PhosAgro supplies essential crop nutrients
to farmers in more than 100 countries around the world, contributing
to global food security and addressing the world hunger challenge (SDG 2).
Our environmentally friendly fertilizers cause no harm to soils and prevent
them from being degraded, which is one of the key obstacles to fighting
hunger as 52% of farm soils are facing moderate or severe degradation .
Moreover, PhosAgro became the first Russian company chosen by the Food
and Agriculture Organisation of the United Nations (FAO) to run a global
initiative for soil protection .
We use a zero discharge production system at our facilities, which ensures that
no waste water is discharged into natural bodies of water (SDG 6). The Company
also strives to maximise recycling and the use of by-products (SDG 12).
As a result of regular investment in R&D, production expansion and upgrade
GREEN CLUB
In 2019, PhosAgro spearheaded
the creation of Green Club, an independent
association of producers and suppliers
of eco-friendly products that will be sold
under the Green One national brand.
The initiative will cover all parts
of the agricultural and food production
chain, including mineral fertilizer and crop
protection segments, agricultural
production and food industry and national
retailers, and will be joined by the heads
of the Standardisation Committee
on Organic Agricultural Products,
Feedstock and Food, the RSPP Agricultural
Commission, industry associations
and unions.
During the Green Club meeting, its
participants from the agrochemical
industry, agricultural holdings, retail
chains, unions and associations discussed
the promotion of the Green One label both
in Russia and globally.
The Green One brand will establish a legal
and regulatory framework for Russian
agricultural, food, agrochemicals,
pesticides and animal feed producers
to highlight environmental advantages
of their products and communicate them
to consumers. The initiative will foster
the use of high quality mineral fertilizers
to produce sustainable agricultural
products without additional costs.
As part of this effort, PhosAgro initiated
and all members of the Russian
Association of Fertilizer Producers
supported the adoption of ecolabels
for Russian-made mineral fertilizers, first
in kind in Russia.
Environmentally safe Russian-made
phosphate-based fertilizers, along
with a variety of agricultural products,
will be included in the national branded
segment of products with improved
environmental characteristics.
The initiative contemplates potential
harmonisation of Russian regulations
with the global green regulations,
including certification and labelling
of Russian products based on modern
European and international standards.
The registered owner of the ecolabel logo
is the Russian Association of Fertilizer
Producers.
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in line with the best available techniques (RUB 180
bln over the past five years) and allocation of RUB 2.5
bln annually to back educational, healthcare, sports,
youth and social programmes across its footprint,
PhosAgro ensures decent working conditions
and economic growth (SDG 8), supporting
sustainable cities and communities (SDG 11)
and quality education (SDG 4).
Together with UNESCO and IUPAC, PhosAgro has
initiated and run the Green Chemistry for Life
grant programme for young scientists working
in the field of chemistry. The programme supports
innovation (SDG 9) and helps build partnerships
to foster sustainable development (SDG 17).
Finally, our key priorities include restoring
and promoting sustainable use of terrestrial
ecosystems (SDG 15). To this end, PhosAgro
takes global-scale action, implementing a joint
project on sustainable soil management with FAO
and supporting its Global Soil Partnership .
102-12
102-13
GLOBAL RESEARCH
AND EDUCATIONAL
INITIATIVES
Task 2.A
Task 4.4
PhosAgro carries out joint agricultural
research with leading Russian and foreign
educational and research institutions
(University of Milan, Adam Mickiewicz
University in Poznań, Wageningen
University and Rothamsted Research)
to study the properties of mineral
fertilizers and ways to make their use
more efficient in order to produce enough
healthy food for the planet’s growing
population, preserve soil fertility
and purity, boost yields and ensure stable
agricultural production in a high-risk
farming environment. The research results
are used to provide recommendations
for the efficient and safe application
of mineral fertilizers.
The Company shares them with farmers
in Brazil, Serbia, Poland, Lithuania,
Latvia, Estonia, Russia, France,
Germany, Italy and other countries
as part of joint meetings, presentations,
demonstrations at local field days,
exhibitions and international conferences
on preservation of soil fertility,
and through publications in industry
and trade media and reports.
The Company has built strong partnerships with mining universities
in St Petersburg, Yekaterinburg, Magnitogorsk and Apatity,
and chemistry universities in Ivanovo and Cherepovets based
on bilateral agreements on internships, scholarships for the best
students, and the High-Potential Graduates programme.
As part of the PhosAgro College initiative, we provide targeted
funding to technical colleges to enhance their research base (new
equipment, educational programmes, VR capabilities, building
renovations), establish incentives for teachers and students,
offer career guidance to school students and promote
enrollment in the Murmansk Arctic State University in Kirovsk
and the Cherepovets College of Chemistry and Technology.
Task 4.B
In cooperation with the International Union of Pure and Applied
Chemistry (IUPAC), PhosAgro supports the participation of young
scientists from developing economies in Summer Schools on Green
Chemistry. In 2018, 80 young scholars and 20 world-class teachers
from 40 countries took part in the IUPAC Summer School at Ca’
Foscari University of Venice. In the same year, the Company provided
scholarships to 15 young researches from developing economies.
The project held its second Summer School on Green Chemistry
on 12–19 May 2019 at the University of Dar es Salaam in Tanzania.
Part of the Company’s contribution was used to fund grants
to talented young scientists from Africa.
Task 17.16
On 6 February 2019, PhosAgro joined
the Global Compact Network Russia.
Since January 2019, the Company has
been taking part in the two platforms
promoting responsible business
and eliminating issues that arise when
implementing the global goals – Business
Reporting on the SDGs and Health
is Everyone’s Business. In September
2019, PhosAgro was included in the LEAD,
a group of Global Compact participants
that have achieved the best results
in corporate social responsibility.
In order to support young scientists doing
research in line with the 12 Princliples
of Green Chemistry, PhosAgro implements
the Green Chemistry for Life project
in cooperation with UNESCO and IUPAC.
The Company is also an active member
of the Safer Phosphates alliance, whose
mission is to share knowledge and address
concerns about heavy metals that
are present in some phosphate-based
fertilizers.
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18
PhosAgro’s
international
initiatives
and programmes
Company profileAnnual Report | 2019 21
20
GREEN BRAND
OF RUSSIAN
FERTILIZERS
The exceptional purity of Russian
fertilizers is the cornerstone on which
the green brand is being built, ensuring
environmental safety all the way through
the value chain, from the feedstock
and technologies used by Russian
manufacturers to produce mineral
fertilizers and application techniques
to the sale of food products to end
consumers.
T
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Annual report | 2019Strategic report
CHAIRMAN’S
STATEMENT
to supply everything from protective equipment, medical supplies,
testing kits and other essentials to the communities where it operates .
By acting early and decisively, I am hopeful that PhosAgro management
has taken important steps that will minimise the potential impact
of COVID-19 on its operations .
In parallel to taking care of key stakeholders in local communities,
PhosAgro is cooperating with Russian and international organisations,
including the Russian Union of Industrialists and Entrepreneurs,
the Russian Fertilizer Producer Association and the International
Fertilizer Association to help ensure a coordinated response across
Russian and global industry . This kind of cooperation is key to keeping
supply chains running, especially for the crop nutrients that
are essential to support continued food production worldwide .
The Board and I commend the actions taken by the entire PhosAgro
team in response to this situation, and we hope that the benefits
will be felt by all of the company’s stakeholders .
DEAR SHAREHOLDERS,
PHOSAGRO’S RESPONSE TO COVID-19
NEW STRATEGIC PRIORITIES
I am happy to announce that, in 2019, we reached a new chapter
in the historical development of our Company . We approved our new
strategy to 2025, which sets the course to further strengthen
PhosAgro’s position as an industry leader in both operational
and financial terms, and from the point of view of non-financial
activities . Furthermore, the past year saw us celebrate record numbers
across a range of indicators and make important changes at the level
of the Board of Directions and corporate governance framework .
In addition, we made a major contribution to food safety and human
health around the globe .
After the end of the reporting period,
the COVID-19 virus has become a global
pandemic that is still developing as I write
this letter . I want to commend the rapid
response and leadership of PhosAgro’s
management in this situation . PhosAgro
was one of the first companies in Russia
to start introducing measures to combat
the spread of the virus among its employees,
and the Company has moved heaven and earth
The strategy to 2025, approved by the Board in spring of 2019, seeks
to further consolidate PhosAgro’s position as a producer of ecologically
friendly, phosphate-based fertilizers boasting some of the lowest cash
costs in the industry, as well as to step up the Company’s production
capacities, and ensure the long-term sustainability of the Company’s
business processes across the entire world . Both the Board of Directors
and I are convinced that this strategy will fuel PhosAgro’s future
growth. We believe it will create significant value for our shareholders,
as well as other stakeholders, from employees to farmers using
our fertilizers .
23
22
102-14
The strategy to 2025 assumes that
the expansion of the production capacities,
including production of fertilizers and feed
phosphates, will grow by around a quarter,
in comparison with 2018, reaching 11 .7
mt . The Company will continue to increase
sales of fertilizers in the strategic Russian
market, reaching 3 .7 mt . In Europe, sales will
rise from 1 .9 mt in 2018 to 3 .1 mt in 2025
driven by Phosagro’s competitive strengths
of environmentally safe fertilizers in the context
of EU’s tightening cadmium regulations
on fertilizers . Investments in capacity
maintenance, development and upgrades will
total nearly USD 3 bn by 2025 . The investments
in our three key projects alone are expected
to result in an EBITDA growth of approximately
USD 200 m, boost FCF, and further increase
our self-sufficiency in feedstock.
CORPORATE GOVERNANCE
IMPROVEMENTS
PhosAgro’s corporate governance improvement
strategy seeks to ensure that the interests
of all our key stakeholders are represented .
Since it became a public company, PhosAgro
has adhered to high corporate governance
and information transparency standards .
The Company always ensures that the majority
of directors on the Board are independent,
Annual report | 2019Strategic report 25
24
and, in the reporting year, we have taken a number of important steps
to continue this policy. These changes have affected me personally,
as I was elected to the position of the Chairman . It is a great honour
for me to be elected to this position of responsibility, and I am proud
to build on the work already done by the Board, and keep the pace set
by my predecessor, Sven Ombudstvedt . The creation of the Sustainable
Development Committee, headed by Irina Bokova, former Director-
General of UNESCO, has been another important decision . In view
of the Company’s role in supporting food security and its general
commitments, this decision is both appropriate and timely .
assessment . In the reporting year, we further
analysed the extent to which the Company
has implemented the recommendations
of the UK Corporate Governance Code approved
by the Financial Reporting Council in July 2018 .
This analysis allowed the Board to conclude that,
the Company’s current corporate governance
structure fully meets the Company’s today’s needs
and secures our shareholders’ capability to exercise
their rights .
The Company successfully completed its large-scale investment cycle
and has reaped the rewards: record high operational and financial
result once again indicate the effectiveness of the management team’s
decisions . The Company also gained the opportunity to provide a high
return on investment for PhosAgro investors . In Autumn 2019, the Board
approved a new dividend policy, which, in line with best practices, takes
into account the Company’s investment needs for future growth and pays
attention to existing social and charitable commitments in the regions
it operates in, and on the whole .
In 2019, PhosAgro continued to streamline its corporate structure .
In particular, Apatit was restructured by merging it with Metachem
and PhosAgro-Trans . The Volkhov branch of Apatit was established
at Metachem’s site and subdivisions of PhosAgro-Trans became part
of the logistical units of Apatit . These transformations are aimed
at further improving management efficiency and optimising business
processes, thereby strengthening PhosAgro’s competitive position
as a vertically integrated company . In addition, the management of Apatit,
the Company’s largest subsidiary, has been optimised . Its management
board has been dissolved, and it has improved transparency and reduced
the time it takes to make important operational decisions .
The Company’s commitment to best corporate governance practices is also
demonstrated by the fact that the Board of Directors annually assesses
compliance with the principles set out in the Corporate Governance
Code by the Bank of Russia on 10 April 2014 . For more information
on the implementation of these principles in 2019, see Appendix No .
1 of this report . It was reviewed and approved by the Board of Directors
as a standalone report . For the criteria of corporate governance quality, which
for some reason were not met or not fully met, the Board made a separate
FOCUS ON SUSTAINABLE DEVELOPMENT
The past year has been a confirmation
of the increasingly careful attention consumers
and state bodies from countries all across
the world pay to the quality and safety of food
products . PhosAgro’s products are used in more
than 100 countries . For us, joining the UN Global
Compact and taking the decision to actively
contribute to the achievement of the 10 UN
Sustainable Development Goals was therefore
a logical step .
Cadmium regulation is an important issue
regarding the quality and safety of food products .
During discussions in 2019, a number of strategic
decisions were made in this area . The EU resolved
to restrict the amount of cadmium in phosphate
fertilizers continent-wide . This move was
supported by the UN, which recommends that
all countries follow the EU’s example . The policy
will come into force in 2022 . These initiatives
will stimulate mineral fertilizer producers
from countries, where phosphate ore is low-
quality and not eco-friendly, to use the feedstock
purification technology. People both in the EU,
and in the world as a whole will benefit from these
restrictions . The high quality apatite-nepheline
ore we use in fertilizer production will definitely
help PhosAgro occupy an increasingly prominent
position in the global market .
The Company continued to tighten its partnerships with several
international organisations, such as UNESCO, IUPAC and FAO . We have
made progress on many joint programmes and projects, such as Green
Chemistry for Life, a global soil partnership with the FAO . Another example
is the sustainable soil management project IUPAC Summer School
on Green Chemistry . These projects will be the cornerstone for future
generations to make significant contributions to solving the most pressing
global issues – food security, healthy lifestyles and people’s well-being .
Last but not least, PhosAgro has become one of the main drivers behind
the creation of the Green Standard . This initiative is expected to stimulate
the production of eco-friendly Russian crops . The Company plans to make
the Green Standard the universally recognised global standard . The Green
Standard puts Russia at the forefront of a growing global movement
advocating for eco-friendly food and global agricultural security
to achieve the UN Sustainable Development Goals .
As Chairman of the Board, I can say that we are very proud
of the Company’s performance and its potential to create value for all
of our stakeholders in the coming years . I believe that our results in 2019
prove that we are on the right track, and that our successful teamwork
will help deliver impressive results going forward . Following a detailed
review of the Company’s business and its financial position, taking into
account the Company’s Strategy to 2025, the inherent risks in the industry
and the steps taken by the Company to manage these risks, the Board
of Directors has every reason to believe that the Company will, without any
reservations, be able to continue its operations and meet all its obligations
as they become due until at least 2025 .
Xavier R. Rolet
Chairman of the Board of Directors
Annual report | 2019Strategic report CEO’S
STATEMENT
27
26
102-14
DEAR SHAREHOLDERS,
PhosAgro is on track with its steady growth, unlocking its potential
developed during our last investment cycle, and continuously improves
production efficiency across all of its facilities . Vertical integration allows
for a high level of self-sufficiency in terms of our key feedstock . As a result,
PhosAgro has secured its status as one of the worldwide industry leaders .
This has made us feel comfortable and confident during a period when
many industry players were struggling to cope with low fertilizer prices
on the global market . 2019 saw exceptional results across several areas:
sustainable development, corporate governance, advances in strategic
initiatives, solid operational and financial results . This impressive progress
has allowed PhosAgro to pay dividends of RUB 24 .9 bn .
SUSTAINABLE DEVELOPMENT: OUR STRATEGIC PRIORITY
As worldwide attention is increasingly focused on the quality of food
products, overall health of the planet, joint efforts to solve global challenges,
and endeavours to bring about a sustainable future, the Company’s approach
to the sustainability principles is becoming more consistent and structured .
In this regard, 2019 was, without exaggeration, a breakthrough year
for PhosAgro. The Company not only strengthened its expertise in this field,
but also made significant progress towards solving global challenges
and creating prosperity for future generations . At the beginning of the year,
the Company approved its strategy to 2025, focusing on sustainable
development as a key priority . Long-term goals
are aligned with the strategy and harmonised
with the interests of a wide range of stakeholders
concerning HSE and community-related matters .
The Board of Directors established the Sustainable
Development Committee . This Committee
will be chaired by Irina Bokova, the former
Director-General of UNESCO . The appointment
of a leader boasting such experience and expertise
will help build up the Company’s sustainability
and corporate governance capabilities .
As one of the world’s leading mineral fertilizer
producers, we recognise our responsibility
to contribute to solving the most pressing issues
facing both current and future generations,
such as global food security . The logical next
step for us was to join the UN Global Compact
and contribute to the achievement of the 10 UN
Sustainable Development Goals .
In recent years, the Company has made consistent
efforts to put the issue of environmental
pollution by heavy metals, in particular cadmium,
on the global agenda, and we succeeded . Last
year, we achieved an important milestone –
regulation of mineral fertilizers containing a high
level of cadmium or other harmful impurities .
In May 2019, the EU resolved to restrict the amount
of cadmium in phosphate fertilizers continent-
wide . This historic move was supported by the UN,
which recommends that all countries follow
the EU’s example . The policy will come into
force in 2022 . The long-term consequences
of this decision will echo throughout the world,
and represent a considerable contribution
to ensuring the health of current and future
generations . PhosAgro, whose products meet
the strictest ecological safety requirements,
welcomes these decisions . The Company will
continue to improve its product offering and share
knowledge and experience with partners
from other countries, who are involved
in the global food production chain and committed
to the sustainable and holistic development
of our world .
In addition, the Company is one of the key players
developing and promoting the Green Standard
in Russia . Eco-friendly agricultural products,
which will include organic crops, food and mineral
fertilizers, will subsequently be exported
to international markets, providing high-quality
food to the whole world .
RECORD HIGH OPERATIONAL AND FINANCIAL RESULTS
Driven by the strategy to 2020, the Company has consistently demonstrated
record operational results in the challenging market environment . These
results translate into strong financial performance and growing dividends
for our shareholders .
In terms of production, we have hit all of our targets: we increased output, cut
costs and made further progress in improving our self-sufficiency in key raw
materials .
In 2019, fertilizer output stood at more than 9 .5 mt, precisely in line
with the Company’s guidance. This a record figure for the Company. Our
flexible sales policy helped us increase shipments to our core markets
in 2019 . Sales in the Russia and the CIS rose by over 10%, exceeding 3 mt,
while in Europe they expanded by 28% to over 2 .6 mt . As a result, these
markets accounted for more than 32% and 28% of our supplies, respectively .
Company revenue grew by 6 .3%, totalling USD 3 .8 bn . EBITDA rose by 0 .9%
to reach USD 1 .2 bln with an impressive EBITDA margin of 30 .5% . The robust
production capacity enabled by the strategy to 2020 allows the Company
to generate sustainable and high cash flow. This gives us the ability
to invest in development projects, reduce debt and pay generous dividends
to shareholders . In the past year, the Annual General Meeting approved
a new dividend policy, allocating more than 75% of FCF to dividends .
This step enhances the investment case of PhosAgro, resulting in a more
diverse portfolio of investors and facilitating future market cap growth .
Over the past year, we have also taken steps to strengthen the Company’s
financial position, with net debt to EBITDA ratio decreasing to 1.7x by the end
of the year . The revision of PhosAgro’s credit rating outlook to ‘stable’
is an important confirmation of the Company’s impressive performance.
Currently, the Company has investment-grade credit ratings from the three
rating agencies, with the stable outlook .
Annual report | 2019Strategic report 29
28
VERTICAL INTEGRATION
AND LOW PRODUCTION COSTS
OUTLOOK
It is already obvious that 2020 will be a stress test for individual industries
and the global economy as a whole . In these turbulent times, we need
to engage in a dialogue, creating joint efforts to find effective solutions
to these global challenges . Trading relationships and entrepreneurship
have intertwined our world more than ever . Leading Russian companies,
particularly PhosAgro, have the necessary capabilities, expertise
and experience to bring about a more holistic and sustainable world .
I would like to extend my gratitude to all of our stakeholders, first of all,
employees and contractors, who have contributed to delivering both
the 2025 strategy targets, and the impressive 2019 results . I am convinced
that we will go from strength to strength over the coming year .
Andrey A. Guryev,
Chief Executive Officer and Chairman of the Management Board.
Vertical integration is one of the most
important competitive advantages we possess .
The Company, as one of the leading global low-
cost fertilizer producers, continues to explore new
ways to leverage its strengths . Over the reporting
year, we managed to increase the output of key
raw materials and semi-finished products.
Alongside this, we managed to improve self-
sufficiency in key feedstock, bringing it to almost
90% for sulphuric acid and ammonia . Today, few
of the industry’s global players can boast the same
level of vertical integration as PhosAgro . Despite
the challenging market environment, where
market prices for some mineral fertilizers were
approaching productions costs, the Company
continued to stick to its targets and plans .
We successfully completed our previous
large-scale investment cycle in 2019: we put
on stream three major projects to increase
our self-sufficiency in feedstock. These
facilities were launched at the Cherepovets
site . The 135 ktpa nitric acid plant became
operational in the Q4 2019 . By the end of 2020,
we will be able to see a 25% growth in this type
of feedstock . The next facility to be launched,
a 300 ktpa new ammonium sulphate production
line, will also contribute to our self-sufficiency.
Previously, the Company had purchased all
feedstock on the market . These new facilities
meet 60% of our needs for this raw material .
We can now feel comfortable in the market
and reduce the purchasing price of the remaining
volume . The third project, a 1 .1 mt sulphuric
acid production line, is intended to replace
the volumes currently purchased from third
parties. We also increased our self-sufficiency
in nitric acid and benefited from additional energy
and environmental effects, as we use steam
from this facility .
COVID-19: THE IMPACT OF THE CORONAVIRUS PANDEMIC
ON THE GLOBAL FERTILIZER INDUSTRY
On 11 March 2020, the WHO announced the outbreak
of coronavirus disease (COVID-19) a pandemic.
The COVID-19 pandemic leads to increased uncertainty in most countries:
market demand is extremely volatile due to a slowdown in business activity,
while quarantine at ports of fertilizer loading and discharge and border
closures are disrupting supply chains .
Fertilizer producer shares fell by 20–50% y-o-y as investors flee to less
volatile assets .
Economists are reviewing economic growth forecasts, and most of them
expect a downturn and in some cases even a global recession, including
in the US, in 2020 .
Fertilizer demand was resilient at the start of the pandemic, but there
are many risks to factor in as uncertainties keep mounting, which will have
an adverse impact in the short run .
In many countries, fertilizers are on the list of strategic commodities, whose
supplies are prioritised during the quarantine period . It helps maintain
an overall balanced fertilizer market .
The situation is changing daily and it is impossible to predict what comes
next, even in the short term . In this turbulent environment, the Company
closely monitors changes in the fertilizer and related markets for agricultural
products, feedstock, energy, freight, etc . to make sure that all optimal
response scenarios have been taken into account .
Annual report | 2019Strategic report BUSINESS
ENVIRONMENT
31
30
TIGHTER ENVIRONMENTAL REGULATIONS IN EU
23 May 2019
June 2019
The EU announced more stringent requirements
for cadmium and other hazardous metals in mineral
fertilizers . Starting 2022, the EU bans phosphate fertilizers
with a cadmium content above 60 mg/kg and enables
green labelling of low-cadmium fertilizers (below 20 mg/
kg) . As part of this initiative, the French Agency for Food,
Environmental and Occupational Health & Safety (ANSES)
recommended limiting cadmium content in fertilizers
to 20 mg/kg of P2O5 at the national level .
The Food and Agriculture Organization of the United
Nations (FAO) has adopted the International Code
of Conduct for the Sustainable Use of Fertilizers designed
to enhance food safety, eliminate hunger and encourage
the production and use of pure fertilizers .
It recommends that governments around the world enact
legislation restricting the sale and application of fertilizers
containing heavy metals and other contaminants .
The Code calls on governments and fertilizer producers
to use clear labelling of fertilizers that should include
information on contaminants (including heavy metals)
and potential environmental and health impacts .
On top of that, the Code highlights the issue
of insufficient fertilizer application, which reduces plant
nutrients in the soil, damages soil and affects potential
yields. The Code brings to the global level efforts
to create a regulatory framework ensuring agriculture
safety and promoting its sustainable development,
mitigating risks to human health and negative impact
on the environment, and increasing food security .
RUSSIA’S REVISED
FOOD SECURITY DOCTRINE
ENVIRONMENTALLY FRIENDLY
PRODUCTS GAIN MOMENTUM IN RUSSIA
21 January 2020
20 February 2019
Russia’s President Vladimir Putin approved
the country’s revised Food Security Doctrine .
In addition to securing food independence,
and accessibility and affordability
of high-quality foods to every citizen nationwide,
from now on increasing food exports will be among
the doctrine’s targets . Besides, the doctrine
provides for boosting the yield of key crops
and fertility of agricultural land, sustainable use
of farm soils and for promoting land reclamation .
Competitive pricing is yet another factor to place
Russian eco-friendly agricultural products
at the centre of the global consumer market .
According to Russia’s Ministry of Agriculture,
the share of crops to be supplied under the Green
One national brand will account for 10–15% of all
agricultural exports by 2024 .
Russia’s President Vladimir Putin instructed the government
to create a protected domestic brand of environmentally
friendly, green products . The green label will bring together
organic farmers along with producers of organic food
and green fertilizers, provide a global competitive advantage
for Russian manufacturers, consolidate the country’s
position in lifting trade barriers and help develop a niche
of best-in-class green products .
The initiative contemplates potential harmonisation
of Russian regulations with the global green regulations,
including certification and labelling of Russian products
based on modern European and international standards .
Annual report | 2019Strategic report SUSTAINABLE GROWTH
OPPORTUNITIES
33
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LOW-COST POSITION
PhosAgro’s environmentally friendly fertilizers give the Russian agriculture
a unique competitive edge: low-cost of end products and exceptional safety .
The environmental safety of Russian fertilizers is the cornerstone on which
the green brand will be build, making it possible to control the safety
of green products all the way through the value chain, from the feedstock
used by Russian manufacturers to produce mineral fertilizers and animal
feed additives to the sale of food products to end consumers .
AGRICULTURE DIGITALISATION
PhosAgro and one of Russia’s leading developers of agricultural solutions,
entered into a cooperation agreement to design and implement digital
solutions for farmers . The agreement seeks to create and deploy
an integrated digital system, where a farmer has access to all tools for crop
monitoring and management throughout the season, from crop planning
to analysing agronomic efficiency of technologies based on the season’s
results .
BEST AVAILABLE TECHNIQUES (BAT)
In 2019, the Federal Agency on Technical Regulating and Metrology
(Rosstandart) approved a reference document for best available
techniques «Production of Ammonia, Mineral Fertilizers and Inorganic
Acids .
1
2
3
unit energy consumption and low unit emissions . The production process
for crystalline ammonium sulphate at Apatit (Cherepovets) is unique
to Russia . Ammonia emissions are in line with the BAT technological
indicators and on a par with other ammonium sulphate technologies
implemented in Russia .
ACID NEUTRALISATION WITH CALCIUM CARBONATE
Volkhov branch of Apatit employs a complex fertilizer production method
which is unique to Russia . The process involves neutralising a mixture
of phosphoric and sulphuric acids with calcium carbonate, mixing
the neutralised pulp with a nitrogen-containing component (for NPKS
fertilizers) and potassium chloride with subsequent granulation and drying
in DDG, classification of dried granules, and conditioning and cleaning
of waste gases . Harmful emissions meet the BAT technological requirements:
ammonia (NH3) – 2 .6 kg/t, nitrogen dioxide (NO2) – 0 .6 kg/t .
STRIPPING IN CO2 FLOW
Urea produced from liquid ammonia and gaseous carbon dioxide using
CO2 stripping technology from Stamicarbon (Netherlands) . Unreacted
NH3 and CO2 are extracted from the synthesis melt and condensed at high
pressure, yielding low-pressure steam suitable for utilisation . Unreacted
substances are removed at high pressure by blowing CO2 . The technology
reduces water content in the reused components, which improves synthesis
conditions and energy efficiency. The technology at Apatit is in line
with the BAT indicators for pollutant emissions .
HTAS TECHNOLOGY
PhosAgro launched an HTAS-based ammonia
facility with a capacity of up to 760 kt of NH3
per year at its Apatit site (Cherepovets) in 2017 .
Ammonia production from natural gas derives
from the catalytic steam reforming and steam/
air reforming processes that include a syngas
purification and treatment unit, with ammonia
synthesised at a pressure of 128 .7÷190 ATG
in the synthesis loop .
HTAS technology performs better than
the industry average by resource and energy
consumption, as well as by pollutant emission
per unit . The minimum resource and energy
consumption for HTAS, in terms of 1 t of products
are: natural gas – 955 nm3 (avg . – 1,050 nm3),
electricity – 20 kWh (avg . – 59 kWh) .
DCDA TECHNOLOGY
Volkhov, Balakovo and Cherepovets branches
of Apatit operate low- and high-capacity Double
Contact Double Absorption (DCDA) sulphuric
acid systems to minimise harmful emissions into
the atmosphere . Emissions from sulphuric acid
production at PhosAgro’s facilities are in line
with the levels associated with best available
techniques: SO2 – 1 .67 to 3 .3 kg / t 100% H2SO4,
sulphuric acid – 0 .15 kg / t 100% H2SO4 .
REACTION CRYSTALLISATION METHOD
Crystalline ammonium sulphate is produced
by neutralising sulphuric acid with gaseous
ammonia and crystallising ammonium sulphate
from the resulting solution in a vacuum
crystalliser . This technology boasts high capacity
per unit based on a modern highly automated
and manageable toolkit, as well as reduced
Annual report | 2019Strategic report FERTILIZER MARKET
OVERVIEW
NUTIRIENT DEMAND DRIVERS
THE GLOBAL ECONOMY
Rising international trade barriers and uncertainty
about further trade war escalation and geo-
political risks were a key reason for the global
manufacturing downturn that prevailed in 2019 .
Economic growth is likely to stabilise in mid-
2020, but the overall economic picture is worse
than had been expected at the start of the year .
The latest IMF forecast in October 2019 projected
annual GDP growth of 3 .0% higher year-on-year,
a 0 .3% downwards revision from its April 2019
forecast .
Emerging and advanced economies saw a slowing
of economic growth in 2019 . Political uncertainty
in large emerging markets – in particular,
Argentina, Iran, Turkey, and Venezuela – drove
significant distress, which weighed on growth. In India election uncertainty
combined with acute funding problems in the non-bank financial sector,
constrained lending to the real economy and growth . The retaliatory
trade conflict between the US and China has not had much of an impact
on headline growth rates of the two economies, because they have
protected their economies with domestic policy easing . Instead, the trade
war has adversely affected the export reliant economies of Europe.
Energy prices declined to an average of US$61 .78/bb in 2019 as record-
high crude oil production in the US outweighed the impact of OPEC supply
cuts . OPEC agreed some of these cuts, but involuntary cuts have played
a significant role too, including US sanctions on Iran, civil unrest in Venezuela
and war in Libya . Supply disruptions in Saudi Arabia, following attacks on key
refining sites in September, only briefly supported a 10% increase in crude
oil prices . Weaker demand prospects have also continued to weigh on energy
demand - coal and natural gas prices declined through the year due
to weaker demand prospects .
Performance of selected currencies of major phosphate importers, DAP/MAP imports in 2019 (prov.)
−18%
TURKEY
MEXICO
0%
THAILAND
0.4
0.5
0.7
4%
0.8
0.9
0.9
1.1
1.4
BANGLADESH
−1%
VIETNAM
−1%
ARGENTINA
CANADA
−3%
PAKISTAN
BRAZIL
−8%
INDIA
−4%
−71%
−24%
DAP/MAP imports, million tonnes product
Currency performance vs US$, %
4.6
5.7
Note: # reflects country’s position against rest of the world;
Data: CRU; IMF; Turkish Central Bank; Float Rates.
35
34
Policy-makers responded to the slowdown
in global economic growth with additional
stimulus . Most notable is the extent of monetary
policy easing throughout the world, which
worked to ease borrowing conditions and bolster
confidence. Some of the recent cuts will continue
to drive the stabilisation of growth in 2020 .
AGRICULTURAL MARKETS
Unprecedented weather conditions and African
Swine Fever (ASF) added to the intensifying
US-China trade conflict to impact agricultural
commodities in 2019 . Nonetheless, as of its
latest report in November 2019, the International
Grains Council (IGC) increased its global
grains production estimate for 2019/2020
to 2,157 million tonnes to reflect marginal year-
on-year growth .
The year began with record-high stock:use ratios
across multiple crops (e .g . rice; soybean; wheat),
resulting from weak global demand due to trade
barriers and a positive crop outlook . These factors
combined to apply downwards pressure on crop
prices . Favourable growing conditions in South
America and a record winter crop in Europe –
following a very dry 2018/19 season – further
pressured crop prices .
The wettest spring season on record and resulting planting delays for corn
and soybean crops in the US offered temporary price relief. Local currency
depreciation (e .g . Brazil; Argentina) maintained export competitiveness
and despite premiums into China, the Africa Swine Flu epidemic resulted
in the culling of 55% of Chinese hog herds and tempered Brazilian soybean
production . Global soybean production declined by 6% year-on-year to 341
million tonnes, whilst demand for substitute meats (e .g . broiler feed; layer
feed; aquaculture feed) only partially offset the impact of ASF on animal
feed grains . Further declines in soybean production failed to materialize,
as the intensification of hog production across China partially offset
the extensive culling of smallholder herds that use less compound feed .
US farmers planted more corn in response to low spring new-crop
soybean:corn price ratios, though further unfavourable weather towards
the harvest hampered production . Despite a 23% year-on-year growth
in corn yields across South America, further bad weather towards
the harvest reduced US output . A 21 million tonne decline in Chinese corn
production – basis government policy to substitute soybean import demand
with additional domestic production – tightened the corn market further
and supported prices in 2019, contributing to a 2% year-on-year decline
in global corn production of 1 .103 billion tonnes .
Conversely, global wheat production increased by nearly 4% year-on-year
to 762 million tonnes . Wheat prices remained under pressure for much
of 2019 as large producers – notably China and India – accumulated
inventories that combined, might carry into 2020 as the largest in history .
Selected Global wheat and grains production, mt
Wheat
761.8
733
761.6
Maize
1,091.4
1,131
1,102.8
Barley
Soybean
Rice
144.4
140.5
155.5
340.9
359.5
341.2
494.2
500.6
500.4
Recovery from prolonged hot/dry
conditions in Europe/CIS supported yields
Unprecedented weather reduced
harvested corn area
by 8.1% year-on-year in the US
In addition to cuts in the US-China soybean production –
basis trade conflict – ASF reduced Chinese demand tempered Brazilian output
17/18
18/19
19/20
Annual report | 2019Strategic report HIGH LEVEL NUTRIENT DEMAND REVIEW
Preliminary International Fertilizer Association
(IFA) figures, published in November 2019,
estimate combined nitrogen (N), phosphate (P)
and potassium (K) fertilizer demand at 190 .5
million tonnes nutrient for the 2018/19
season. This reflects 0.9% year-on-year growth
in fertilizer nutrient demand – N demand
by 0 .6%, P2O5 demand 1 .4% and K2O demand
by 0 .9% – reversing a two-year consecutive decline in fertilizer nutrient
demand globally .
Local currency depreciation for agricultural exporters in Latin America
and Russia, an election year in India where farmer votes weigh heavily
on politics, and a recovery in European markets were major demand
drivers. Combined, these factors offset reduced demand in China – where
government continues to support improved fertilizer efficiency – and the US,
where persistent adverse weather condition hampered consecutive sowing/
harvest seasons .
N, P and K fertilizer demand developments, mt (global demand)
09/10
97.0
16/17
106.4
17/18
106.5
18/19
107.1
IFA estimates that fertilizer demand reversed a two-year consecutive decline to reflect year-on-year growth across the macro-nutrients in 2018/19
42.4
28.2
46.3
45.3
46.0
37.4
37.0
37.4
Data: IFA
N
P2O5
K2O
HIGH LEVEL NUTRIENT SUPPLY REVIEW
Growth in combined fertilizer and industrial
demand for macronutrients (N, P and K)
supported a 1 .2% year-on-year increase in 2019
production at 254 million tonnes nutrient .
Fertilizer demand accounted for 183 million
tonnes nutrient in 2019 equivalent to 78%
of global macronutrient output, marginally lower
(−0.3%) than in 2018.
Mixed supply trends categorized major fertilizer
raw materials . Ammonia production increased
by 2 .1% year-on-year, with increased output
from Russia, the US, Indonesia, and China .
Following a year of negative growth in 2018, rock
phosphate supply remained flat year-on-year
at 207 million tonnes . Potash production declined
by 5% year-on-year, totalling 40 .9 million tonnes
K2O, following two-consecutive years of growth .
Urea production increased by 2 .4% year-on-
year to 176 million tonnes . Continued supply
growth from Russia, the United States and across
south/south-eastern Asia largely supported
operating rates averaging 85% globally . Despite
tightening environmental restrictions that
mostly contributed to three consecutive years of declining output in China,
domestic urea supply recovered .
Processed phosphates (i .e . DAP/MAP/NPS/TSP) production increased to 74
million tonnes product (35 .6 million tonnes P2O5), mostly driven by growth
in MAP output and a 9% year-on-year recovery in DAP production, notably
from the ramping up of new low-cost supply in Morocco and Saudi Arabia .
Muriate of Potash (MOP) production declined by 6% year-on-year
to 65 million tonnes product, following two consecutive years of growth
and weak demand fundamentals, driven by reduced imports demand
and consequently lower export-focused supply .
FOCUS ON PHOSPHATE FERTILIZER MARKETS IN 2019
Phosphate Fertilizer supply
Global phosphate nutrient demand was marginally lower (0 .2%)
at 46.2 million tonnes P2O5 in 2019 . Supply growth slowed to 0 .4% year-on-
year to 49 .3 million tonnes P2O5 over the same period .
Phosphates production across North America continued its chronic
decline, in 2019 by around 16% lower year-on-year to an estimated
11.6 million tonnes (DAP/MAP/NPS). The idling of Plant City (United States)
and the closure of Redwater (Canada) resulted in larger and competitive
traded volumes from suppliers that hoped to benefit from premiums
into North America . However, low demand, basis from erratic weather
and resulting skipped applications and logistical constraints, pushed
37
36
inventories higher and pressured the market .
By year-end, further supply curtailments –
this time in Faustina (United States) – were
necessary to attempt to balance the market
to halt price declines approaching 2020 . Morocco
and China also contributed to such production
curtailments over this period .
Following some of the highest DAP imports
in recent history in 2018, DAP imports to India
declined by 9% year-on-year to an estimated
5 .7 million tonnes . These volumes, comfortably
above 2017 levels, combined with a 31% year-
on-year increase in domestic DAP production
at 3 .4 million tonnes, pushed inventories to nearly
7 .0 million tonnes by August 2019 . Competitive
DAP pricing in particular supported very attractive
margins for retailers, but low phosphoric acid
prices also encouraged domestic supply and (less
so, but still) healthy margins .
Despite issues from 2018 passing into early 2019, commercial operating
rates in Saudi Arabia steadily ramped up through the year, supporting a 36%
year-on-year growth in production to an estimated 4 .6 million tonnes (DAP/
MAP). India remained the largest sink for traded Saudi phosphates, reflected
in a 20% year-on-year increase in exports at 2 .4 million tonnes . However,
a low-cost position supported exports into deep-sea markets like the United
States (from 90,000 tonnes to 230,000 tonnes) and Brazil, (from 650,000
tonnes to 900,000 tonnes) respectively .
Reduced DAP exports to India and lower MAP exports to Latin America
– during continued decline in domestic demand, set up a difficult
year for Chinese producers . Nonetheless, the domestic spring season
proceeded better than previous expectations – in part aided by improved
logistical reach owing to efficient implementation of new railways/roads
to reduce traffic and improve delivery times of commodities. Inventory
build and a switch towards greater NP production in place of declining
DAP sales resulted in Chinese phosphates production flat year-on-year
at an estimated 12.6 million tonnes (DAP/MAP/NPS). Despite implementing
regular cuts through the year, most of which were never fully implemented,
the consolidation of Kailin and Wengfu in the 6+2 producer group did result
in more discipline towards the end of the year .
Phosphate fertilizer production
growth – index, 2010 = 100
P2O5 demand growth – regional index, 2010 = 100
DAP
MAP
NP
NPK
TSP
108
104
102
129
127
130
118
124
120
128
135
124
111
108
104
2017
2018
2019
NORTH AMERICA
LATIN AMERICA
EUROPE &
CENTRAL ASIA
SOUTHERN ASIA
EASTERN/-
SOUTH-
EASTERN ASIA
RoW
118
122
103
133
134
124
140
119
127
92
103
92
102
102
101
146
125
125
2017
2018
2019
Data: Fertecon.
Annual report | 2019Strategic report Phosphate Fertilizer demand
and pricing, January 3rd 2020 = 100
the strong premiums DAP fob Tampa enjoyed over all other benchmarks
in 2018 as it fell from its highest levels of USD418/t in January down
to USD268/t by year-end .
100
90
80
70
60
50
40
The state of the US market resulted in re-directed trade flows to Latin
America, in particular Brazil, where MAP imports increased by 14% to almost
4 .3 million tonnes product . Declining prices on MAP from highs of USD436/t
cfr Brazil in January and high crop pricing – particularly on soybean, driven
by the escalating US-China trade conflict – supported attractive fertilizer
affordability in Brazil. A three-year high in MAP affordability for Brazilian
farmers was insufficient to balance for declining demand in the rest
of Latin America, where total P2O5 demand declined by 8% year-on-year
to an estimated 6 .8 million tonnes . During a period of widespread political
instability – resulting in depreciating currencies and higher crop input
costs – drought and low cash-crop prices reduced demand in much of Latin
America . Considering this and structural oversupply, MAP cfr Brazil prices
touched lows of USD280/t by year-end .
03.01.2019
30.05.2019
19.12.2019
Brazil – barter ratio, #60kg soybean bags per tonne MAP
DAP cfr INDIA
MAP cfr BRAZIL
DAP/MAP fob barge NOLA
DAP fca GHENT
Data: Argus, CRU Fertilizer Week, Fertecon, ICIS, Infofert, Profercy
European markets already showed signs
of weakness towards the end of 2018
and this trend continued – though muted – into
early 2019, demonstrated through hesitance
from traders booking volumes for spring
application . Poor harvests, regulatory
changes (notably in Germany) and logistical
constraints all combined to pressure prices,
but volumes continued moving, even though
in increasingly smaller quantities . Annual
P2O5 demand recorded a marginal year-on-
year decline of 1% to an estimated 3 .9 million
tonnes and it was competition for market share
by suppliers already facing oversupply in other
markets .
Erratic weather during both spring and autumn
application periods significantly reduced
phosphate demand in North America,
particularly the United States where P2O5
demand declined by an estimated 18% year-on-
year to just below 4 .4 million tonnes . Skipped
application, whether because of delayed
fieldwork or restricted logistics opportunities,
and competitive import line-ups resulted
in an oversupplied market . This eroded
25
20
15
10
01.01.2017
01.05.2018
01.12.2019
BARTER RATIO PARANAGUA BASIS
AFFORDABLE 21 BAGS
Data: AgroLink, Argus, CRU Fertilizer Week, Fertecon, ICIS, Profercy
Inventory build across southern Asia, reaching nearly 7 .0 million tonnes
DAP in India during August, pressured prices from highs of USD414/t
cfr India year beginning down to USD296/t cfr India by year-end . Whilst
demand did not deplete stock positions across Pakistan much, an excellent
monsoon season supported DAP inventory liquidation of almost 3 .0Mt DAP
across India from August through December . This during a period where
import line-ups continued building and domestic production ramped
up as phosphoric acid prices declined for a fourth consecutive quarter
and supported very good margins for DAP retailers . However, in switching
to DAP production for margin capture, NPK production fell considerably
and resultantly across the year total P2O5 demand in India declined by around
9% year-on-year to 6 .4 million tonnes .
39
38
India – selected phosphate imports, P2O5 share
2010
1,831
2017
2,237
2018
2,475
2019
1,996
2,547
2,338
2,329
2,450
2,127
2,932
1,774
3,603
ROCK
MGA
DAP
Data: Fertecon, IFA.
Elsewhere in Asia, the spring ploughing season
in China performed better than expected, though
still down on previous years . Generally, domestic
demand continues to soften as government policy
to reduce fertilizer application growth persists
and farmers implement more efficient fertilizer
application techniques . Whilst the easing of NPK
export tariffs provided some relief to domestic
suppliers, this market accounted for most
of the 2% year-on-year decline in Chinese P2O5
demand estimated at 12 .3 million tonnes .
Following four consecutive years of P2O5 demand
growth in Africa, an NPK import ban in Nigeria
and drought in Southern Africa resulted
in reduced NPK and MAP demand respectively .
Resultantly, P2O5 demand declined by 13% year-
on-year to an estimated 1 .6 million tonnes .
DAP/MAP – raw material price
developments,
index (100 = January 3rd 2019)
120
100
80
60
40
20
03.01.2019
30.05.2019
19.12.2019
AMMONIA fob BLACK SEA
PHOSPHORIC ACID cfr INDIA
PHOSPHATE ROCK fob MOROCCO 68-72% BPL
SULPHUR fob MIDDLE EAST
Data: CRU Fertilizer Week.
Phosphate rock market Review
Marketable rock phosphate production remained flat year-on-year
at an estimated 207 million tonnes in 2019 . Generally, the ramping up
of low-cost integrated downstream capacity across mostly the Middle
East and North Africa balanced for lower demand from a combination
of downstream capacity closures and curtailments, which weighed more
heavily on traded rock phosphate volumes . There were also reductions
in production from China (due to declining downstream demand and high
inventory carryover), the United States (due to downstream idling)
and Morocco (due to trade flow redirection). The traded market, however,
declined by 3%year-on-year to an estimated 30 million tonnes, as increased
availability from previously less prevalent participants (e .g . Syria; Togo;
Jordan – for diverse reasons) failed to offset increased captive consumption
from large exporters to drive downstream sales .
Given no significant availability restriction, rock phosphate prices typically
follow phosphoric acid and fertilizer prices with some delay . This precisely
occurred in Q1 as prices averaged USD90/t fob Morocco (69-72% BPL) basis,
marginally higher quarter-on-quarter and unaffected by softer downstream
prices. The fact that even the idling of beneficiation operations at three
mines in Brazil from late Q1 – for tailings dam safety procedures following
the Vale Brumadinho disaster in February 2019 – resulted in no price reaction
demonstrated how oversupply in downstream markets could substitute
in the form of imports instead .
It was only in Q3, by when mines in Brazil were operating at commercial
utilisation rates once again, that rock phosphate prices finally corrected
downwards to USD79/t fob Morocco (69-72% BPL) basis . This decline
also reflected how much protection rock phosphate prices had received
in the form of demand from SSP producers with exposure to significant
weakness in sulphur markets provided price support . The idling
of downstream capacity in the United States during Q4 – and other
production curtailments in Morocco and China, as well as continued declines
in downstream phosphate prices – further pressured rock phosphate pricing
approaching 2020 .
Annual report | 2019Strategic report Rock Phosphate – global production & trade, mt
2010
2017
2018
2019
2019
2019
30
31
32
28
30
31
177
176
177
172
171
163
Trade
Production
Latent capacity
88
86
79
88
83
55
OTHER FERTILIZERS
Urea
Urea demand increased by 0 .5% year-on-
year to an estimated 171 .2 million tonnes .
Nonetheless, prices came under increasing
pressure through the year as demand growth
slowed and production increased, basis
increased urea production cost cuts owing
to natural gas surplus . Rather than supporting
the market, US sanctions were deflationary
as Iranian exports continue to sell at a large
discount .
A recovery that began in mid-2017 and lifted urea
prices to USD334/t fob Middle East in October
2018 ran out of steam in early 2019 as poor
growing condition across the US Midwest
hampered early spring demand . An early Indian
tender announcement in January offered
temporary price support, but an underwhelming
515,000 tonne award resulted in more price
pressure . Demand elsewhere was piecemeal,
during a period where dry condition across much of the larger European
economies – and tightening restrictions on nitrogen use efficiency
– that slowed buying . Furthermore, newly commissioned capacity –
in Turkmenistan and Azerbaijan – entered the market in Q1 .
Despite seasonal demand increments through Q2 – notably the ramping up
of Indian import demand ahead of the rabi season, but also spot demand
across Latin America – macroeconomic headwinds and deflationary energy
markets, amid continued oversupply in natural gas markets, combined
to significantly reduce production costs at the margin. Chinese exports
initially pulled back, but RMB devaluation – owing mostly to the escalating
US-China trade conflict – and cheaper coal amid an easing of environmental
policy restrictions supported a recovery in Chinese urea production
and almost doubled year-on-year by year-end exports . Most of the growth
in Chinese exports were directed to India, where imports increased
significantly to 8.8 million tonnes.
Sustained low gas prices on EU hubs through the summer months
revitalized marginal Black Sea production, in particular from Ukraine where
exports – previously absent – reached 120-150,000 tonnes per month
by Q4. Sanctions barely affected Iranian export volumes, which were roughly
flat year-on-year, but prices came under pressure owing to discounts of up
to USD60/t – notably in Brazil and Turkey (Mediterranean) .
41
40
the Baltic Sea held over the Black Sea . Low phosphate prices resulted
in ammoniated phosphate production curtailments in key ammonia import
markets such as the United States, Morocco and China . Furthermore, poor
weather in both direct application seasons further restricted demand
in the United States, lowering ammonia imports by 14% year-on-year
in 2019 . United States ammonia imports declined for a fourth consecutive
year, which, along with difficulties in securing gas contracts, contributed
to the closure of 285ktpa of capacity in Trinidad .
Potash
IFA estimates a 6% year-on-year decline in global MOP deliveries for 2019
at around 65Mt after two consecutive years of growth and resulting high-
carryover . Demand was robust throughout much of H1 2019 - demonstrated
by largely flat pricing, despite weaker crop fundamentals - before a marked
slowdown during H2 2019, which accelerated spot price declines . Despite
the belated settlement of the Indian supply contract in October - agreed
only USD10/t lower at USD280/t cfr - the conspicuous absence of a Chinese
contract left the market without a price floor approaching the close
of the year . Resultantly, spot prices continued falling across key import
markets .
With record high MOP port inventories in China, and little sign
of an impending agreement, most major producers implemented voluntary
production cuts in H2 2019, removing potentially as much as 3Mt of planned
output . The one positive story throughout 2019 was the Brazilian market
where high soybean exports encouraged strong MOP consumption .
However, with suppliers increasingly competing for volumes, coupled
with a weakening local currency, by the end of 2019 Brazilian import prices
had wiped out all gains made the prior year . New supply from Russian
producer EuroChem also became more prominent in 2019, compounding
the intensified competition that placed more downwards pressure to pricing
already falling due to the absence of signed Chinese contract volumes .
Ammonia
IFA estimates a 0 .6% year-on-year increase
in global ammonia demand at 144 .8Mt for 2019,
as new supply added further pressure to a market
already stressed by poor United States demand .
Resultantly, the balance moved further into
surplus, at around 11 .1Mt .
Price declines prevailed through most of the first
three quarters of 2019, as global benchmarks
reflected a supply surplus. This resulted in average
annual prices declining by USD60-65/t across
both west and east of Suez benchmarks .
Advanced maintenance programs across
the Middle East and North Africa, due to low
pricing, halted price declines from July-August
and prevented many marginal Russian producers
touching the floor.
Increased competition to capture European gas
demand between United States LNG suppliers
and Russian pipeline exports pushed the TTF gas
price down to a record low of USD3 .10/MMBtu
in September . These lower energy prices across
most markets prevented a repeat of 2018 plant
shutdowns . Despite a 15% year-on-year decrease
in the Chinese anthracite coal price in 2019,
the incentive to import ammonia remained
strong . The arbitrage opportunity to import
ammonia over domestic supply in coastal areas
averaged USD150/t in 2019, which supported
imports exceeding 1 .0Mt in 2019, with port
storage infrastructure becoming one of the main
bottlenecks to even higher imports .
The commissioning of new merchant capacity
at EuroChem’s Kingisepp plant in Russia slightly
shifted trade dynamics . More exports originated
from lower-cost Baltic exporters and eroded
the historical premium in fob prices, which
Annual report | 2019Strategic report Годовой отчет | 2019
43
42
Priority
focus areas
STRATEGY 2025
103
2019 was a record-breaking year for our upstream, midstream
and downstream businesses, in which we met all the targets
of the Strategy to 2020 ahead of the schedule. This outstanding
performance was largely driven by the production processes
upgrade harnessing the best available techniques (BAT). Since
2013, our output has added more than 60%, rising from 5.9 mt
to 9.5 mt of fertilizers and feed phosphate and strengthening
our foothold in the domestic and international markets.
In March 2019, the Company approved its Strategy to 2025.
By 2025
OUR TOP
PRIORITY
IS EFFECTIVE
PRODUCTION GROWTH
DRIVEN BY NATURAL,
ORGANIC CAPACITY
EXPANSION.
5
2
0
2
Y
G
E
T
A
R
T
S
Digitalisation
The new strategy assumes the development
of digital technologies in agriculture to boost
crop yields and quality in the near term .
Under the new five-year plan, the Company
intends to further enhance its competitive
strengths remaining the world’s leading supplier
of environmentally friendly phosphate fertilizers
for farmers, while also expanding its involvement
in programmes designed to protect human
health and the environment, ensure food
security and combat soil degradation as a way
to show an example of a harmonious approach
to strategic development .
Sales in Russia and Europe
The Marketing Strategy to 2025 further
strengthens PhosAgro’s foothold in the Russian
market, and also in the premium export
markets . Compared to 2018, by 2025 fertilizer
sales in Russia and in Europe may grow 1 .5
and 1 .6 times, respectively . The share of exports
will be maintained at a level of at least 90%, in no
small part thanks to the efforts of ten foreign
trading companies opened in all key sales regions .
Environmental safety
An additional competitive advantage that PhosAgro will leverage
to increase its share in priority sales markets and offer market premium
will be the environmental safety of its phosphate fertilizers for people
and soils, as the EU looks all set to tighten regulations for fertilizers
with a high content of cadmium and other heavy metals . Starting this year,
PhosAgro’s fertilizers will be marketed under an ecolabel in line with the EU
regulations . In addition, along with a variety of agricultural products, they
will be included in a country branded segment of products with improved
environmental characteristics .
The Company leaves open the possibility of foreign regulators removing
the import duties and customs factors that are currently being applied
to pure fertilizers . The Argentinian and Brazilian authorities have already
exempted Russian environmentally friendly phosphate fertilizers from import
duties . Under this scenario, the Company could potentially earn up to USD
100 mln depending on the prevailing market conditions .
Balanced dividend policy
Without compromising its investment programmes designed to ensure
a stable cash flow in the future, the Company will continue to pay attractive
dividends and stay focused on charitable and social programmes to build
a pool of highly skilled engineers and promote initiatives in the realm
of education, corporate housing, healthcare, youth policy and sports
support, along with production ecology and research .
STRATEGY TO 2025
KEY PRIORITIES
In the new strategic cycle we plan to build new high-tech production facilities
and boost fertilizer output by more than a quarter (27.5%) vs 2018. This can
only be achieved through long-term investments in both capacity expansion
and infrastructure development projects. The new strategy lays significant emphasis
on the construction of a new predominantly export-focused plant with a capacity
of 840 kt in the Leningrad Region, as well as the upgrade of production facilities
in the Saratov Region to enable manufacturing of NPK(S) fertilizers and increase total
fertilizer and feed phosphate output from 2.3 mt in 2019 to 3.4 mt in 2024, while also
considerably boosting the share of domestic supplies (from 34% to 60%).
+1.1mt to the Russian and CIS marketsFertilizer output+27.5%New production facility in the Volkhov branch840 ktpaTotal production of fertilizers and feed phosphates by the Balakovo branch3.3mtStrategic report
Key
targets
STRATEGY TO 2025:
KEY TARGETS
Fertilizer and feed phosphate
production, mln t
Phosphate rock production, mln t
2018
9.0
2019E
9.5
Target
for 2025
11.7
Key markets, mln t
Russia&CIS
2018
2.6
2019E
2.9
2025E
3.7
+ 30%
growth
+ 5%
CAGR
2018
7.1
2019E
7.3
Target
for 2025
8.4
3.0
3.2
10.1
10.5
+ 10%
growth
2.6
11.1
Internal consumption
Sales to 3rd parties
Europe
2018
2.0
2019E
2.7
2025E
3.1
N&S America
2018
3.1
2019E
2.5
2025E
3.5
OPERATIONAL AND BUSINESS EFFICIENCY1
Comfort level
ND/EBITDA
CapEx/EBITDA
ratio below
1.0-1.5x
0.5
p.a.
Expected effect
on EBITDA1 USD
from investment projects
200+
mln
1 . Subject to macro condition changes
Source: PhosAgro
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PRODUCTION
GROWTH
Expanding fertilizer and feed phosphate capacities by 25% to 11.7 mt by 2025, primarily by launching
new capacities at Balakovo Branch of Apatit (+1.2 mtpa).
Forecast increase in fertilizer (excluding feed phosphates) production by 2025,
by production site, mt
Branches
2018
2019
2025
Key drivers
Expected
production
growth
Volkhov
0.17
0.19
0.84
0.72 • Reducing current NPK production: –100 kt;
Balakovo
1.75
1.91
2.91
1.16 • Engaging in NPK production for domestic sales (favourable logistics):
• New MAP capacities, including low-nitrogen grades (for Latin
America): +800 kt;
• Engaging in water soluble MAP (key component of water soluble NPK)
production: +43 kt.
Cherepovets
6.69
7.04
7.31
+1,400 kt;
• Engaging in the production of NPS, including grades containing
elemental sulphur: +300 kt;
• Reducing standard MAP production: –900 kt;
• Production of granulated ammonium sulphate: 360 kt;
0.62 • New ammonium sulphate capacities (the main feedstock
to produce NPK/NPS – for internal use) +300 kt;
• Debottlenecking NP/NPK/NPS capacity: +500 kt;
• Ramping up ammonium nitrate capacity: +140 kt.
Total
8.61
9.15
11.11
2.50
Forecast increase in fertilizer (excluding feed phosphates) production by 2025,
by product type, mt
Product
2018
2019
2025
Key drivers
Expected
production
growth
AS
0.00
0.00
0.36
0.36 • New capacities at Apatit in Cherepovets (+300 kt) –
AN
Urea
APP
NPS, PKS
0.53
1.59
0.20
0.42
0.57
1.68
0.19
0.74
0.67
1.59
0.21
0.69
feedstock for NPK/NPS
• New capacities to produce a premium granulated product
at the Balakovo Branch of Apatit +360 kt
0.14 • Ramping up ammonium nitrate capacity (Cherepovets): +140 kt.
0,00
0.01
0.27 • Engaging in the production of NPS, including grades containing elemental
sulphur (Balakovo): +300 kt;
NPK
2.87
2.84
4.29
1.41 • Engaging in NPK production for domestic sales (Balakovo, favourable
logistics): +1,400 kt;
DAP/MAP
2.98
3.20
3.30
0.32 • New MAP capacities, including low-nitrogen grades (Volkhov, for Latin
America): +800 kt;
• Reducing standard MAP production (Balakovo): –900 kt;
• Debottlenecking NP/NPK/NPS capacities (Cherepovets): +500 kt.
Total
8.61
9.15
11.11
2.50
Annual report | 2019Strategic report
PROJECTS IN
THE PIPELINE
OF STRATEGY TO 2025
To boost production, the Company has launched a large-scale investment programme.
The investments will focus on efficient and flexible hi-tech facilities based on the best
available techniques, including the advanced solutions offered by Samoilov Scientific
Research Institute for Fertilizers and Insectofungicides (NIUIF), one of the world’s leading
specialised R&D centres, as well as a variety of other digital and innovative solutions.
The green light will only be given to projects with an IRR of above 20%.
Targets by key assets
Volkhov branch
development
Balakovo branch
development
Launch MAP production mainly
for export markets
Launch NPK(S) production mainly
for the domestic and European
markets
2021
2022
+840 kt of fertilizers
+1,100 kt of fertilizers
Cherepovets site
development
GOALS
Increase nitrogen fertilizer output,
launch manufacturing of semi-
finished products to ensure food
security
DEADLINE
2019–2020
KEY TARGETS
+1,100 kt of sulphuric acid
+150 kt of ammonium nitrate
+300 kt of ammonium sulphate
+2.3 mt of additional rail
infrastructure capacity
CAPEX, USD MLN USD
389
430
EBITDA impact per year, USD mln
60+
90+
WACC, %
11
NPV, USD mln
265
IRR, %
20+
11
173
20
240
50+
11
143
20
PROJECTS IN THE
PIPELINE
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POTENTIAL PROJECTS
CURRENTLY UNDER EFFICIENCY
EVALUATION
may get a go-ahead as early as 2022 subject
to their high IRR (20%+), compliance with the BAT
and sustainability criteria along with the debt/
EBITDA target, and a comfortable net debt / EBITDA
covenant headroom:
Ramp-up of ammonium production
Production of purified phosphoric acid (PPA)
as the key feedstock for further processing into
environmentally safe phosphates
Proprietary facility to manufacture potassium
and sodium salts using the internally produced
nepheline concentrate
The investments in the three
key projects alone are expected
to bring about an EBITDA
increase of no less than USD
200 mln, boost FCF, and ensure
a consistently high level
of self-sufficiency in feedstock
for growing production volumes.
The net debt / EBITDA
ratio will be maintained
at a comfortable level of 1.0–1.5x.
CAPEX breakdown1, USD mln
Projects to support existing capacity
Investment projects
2019E
210
2020E
220
2021E
250
2022-25 p.a.
~250
364
335
280
~100
574
555
530
Source: PhosAgro
Cost of running
investment projects
in 2022–2025:
Potential projects under review
that match the Company’s
investing principles:
IRR 20%+;
significant business model fit;
ESG compliance;
best available techniques;
comfortable covenants;
target CAPEX to revenue ratio.
CAPEX
Cost of running investment
projects in 2019–2025:
USD 1,1 bln
Cost of supporting existing capacity
in 2019–2025:
USD 1,7 bln
Effect from the three
key investment projects2:
> USD 200+ mln
Project IRR:
>20%
(WACC – 11%)
1 . CAPEX is calculated
at the exchange rate
of RUB 65 per USD .
2 . Subject to adjustment
in case of changes
in the macroeconomic
environment .
Annual report | 2019Strategic report
Key
targets
102-6
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INCREASING SALES IN PRIORITY
MARKETS
PhosAgro’s strategic goal is to increase sales in its strategic markets:
to 3.7 mt in Russia and CIS, to 3.5 mt in North and South America,
and to 3.1 mt in Europe by 2025, by strengthening its position
as a producer of fertilizers with minimum heavy metal impurities amid
toughening of the EU cadmium regulations.
3.7
(32%)
2.6
(30%)
Sales breakdown, mln t
3.1
(26%)
2.0
(22%)
25
0
2
018
2
3.5
(30%)
3.1
36%
N&S America
Europe
Russia & CIS
Other
Data: Argus, Fertecon, CRU/FW, PhosAgro 1.
Only DAP/MAP, NPK(S), Urea and AN
1.2
(13%)
1.4
(12%)
49
48
increase product offering from 39 fertilizer
grades in 2018 to 50 by 2025, including new
highly effective grades with bioadditives.
To deliver on this goal, the Company plans to:
expand its network of regional sales offices,
set up new partnerships, and promote
its products, including through “green”
labelling, which has been allowed
under the new EU rules
1 2Premium to Indian netback
prices, USD/t, FOB, Baltic
2013
80
40
Phosphate-based fertilizer
sales margin by region
0
2013
2016
2019
Europe
L. America
Sales growth in North and South
America to
3.5mt.
The cumulative effect
from the Marketing Strategy
to 2025 is estimated at
125
USD mln per year1 (net of special
and innovative fertilizers)
2014
2015
2016
2017
2018
2019
DAP, W. Europe, fob, netback
MAP, Brazil, fob, netback
DAP, fob, Nola (USA), netback
DAP India, fob, netback
1 . effect based on McKinsey estimates
Annual report | 2019Strategic report
Increasing
sales
Key
targets
DOMESTIC MARKET
INTERNATIONAL MARKETS
INCREASING THE SHARE OF INNOVATIVE PRODUCTS
51
50
Retain the current market share
in phosphate and complex fertilizers,
increase sales in the nitrogen segment
Enter the related products segment
(CPA, seeds, feed additives), if the pilot
is successful
Develop the service model and distribute
agricultural equipment, if the pilot
is successful
Potential effect of developing the service
model on EBITDA: USD 40–150 mln per year1
Identify priority markets based
on the Company’s potential competitive
advantages, market liquidity, and netbacks
Maintain direct sales at no less than 90%
Ensure considerable growth in Eastern Europe
and the Balkans. Achieve slight increase
in sales in the Western European market
(France, Germany). Open new offices, lease
warehouses, engage in proactive agricultural
marketing
Grow sales in Latin America in line
with the market growth, consider options
of diversifying distribution channels in Brazil,
establish partnerships with local distributors,
launch agricultural sites, lease warehouses
Ensure presence in the spot markets
in North America, Africa, and Asia
Potential effect on EBITDA –
USD 85 mln per year1
Flexibility of production lines enables the Company to switch between all
types of fertilizers quickly and cost efficiently, and to fully meet demand
for the highest-margin complex fertilizer grades.
Change in the product structure of the premium segment, kt
2019
2,197
377
198
3,475
3,205
9,452
2025
2,620
472
210
4,967
3,303
11,572
N-based
MCP
APP
NPK, NPS, PKS
DAP MAP
Phosphate fertilizer margins, 2019
Increase the share of special and innovative fertilizers (UAN with micronutrients, urea
with inhibitor, tailored complex and water-soluble fertilizers)
Launched the Research and Innovations Centre with legal form and operational model finalised
Explore the biostimulants segment, create pipeline of ideas for further consideration
Roadmap for the strategy to increase sales:
the Russian and CIS market
EXPAND IN-HOUSE STORAGE AND LOGISTICS CAPACITIES
Increase the number of fertilizer storage facilities to 40
Improve the warehouse technology infrastructure
(capex of over RUB 2 bln) through 2022
BOOST SALES OF LIQUID FERTILIZERS
Expand storage capacity for liquid fertilizers
Provide agronomic services for liquid fertilizer customers
INCREASE SALES OF THIRD-PARTY
AND ASSOCIATED PRODUCTS
Create associated product lines for fertilizer buyers
(seeds, CPAs, bioadditives, etc.)
Build compaction facilities
ENSURE DIGITALISATION OF SALES
AND CUSTOMER SERVICES
Implement RFID technology for big bag tagging
Develop e-services for customers
>650
kt
Storage capacity
500
kt sold
Precision
farming
Liquid fertiliser
storage capacity
62
kt
3.7mt
1,000
2,000
3,000
4,000
5,000
6,000
P-fertilizers sales, kt
NPS
NPK
DAP
MAP
1 . effect based on McKinsey estimates
DEVELOP AGRONOMIC SUPPORT
AND CONSULTING SERVICES
Promote sales of high-performance and high-margin fertilizer
grades
Arable land coverage
>100
k ha.
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Key
targets
BOOSTING LOGISTICS
EFFICIENCY
The Company plans to focus on expanding the capacity of its own rail
infrastructure, growing and upgrading the railcar fleet to reduce transport
costs, developing the port infrastructure, and streamlining the distribution
of commodity flows between ports.
53
52
Logistics development milestones
2019
2020
2021
2022
Completion of rolling
stock acquisition
Development
of river transport
(the 2025 shipment
target of 1,000 ktpa
with an effect of RUB
80 mln per year)
Revamp of the Kriolit
station with connection
to the October Railway’s
Nelazskoye station
Start of end-product
transshipment
at the Vistino and Lavna
terminals
Construction of a track
at the Volkhovstroy II
station of the October
Railway
Development
of rail infrastructure
at the Balakovo Branch
of Apatit
Goods turnover, mtpa
30
28
26
24
22
20
24.0
2017
+10%
25.1
26.0
EXPANDING RAILCAR FLEET
An increase in the share of in-house mineral hoppers will help the Company substantially cut
the share of third-party rolling stock and reduce operating transport costs associated with delivery
(use of third-party cars is 40% more expensive than operation of in-house rolling stock).
2018
2019
+4,237
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S
Captive railcar fleet structure,
‘000 units
Hopper car1,
‘000 units
2017
3.4
2018
3.8
3.2
2.9
5.6
6.2
12.2
12.2
2017
2.2
12.9
12.9
2018
2.4
3.1
2.8
2.8
3.4
8.1
8.6
2019
5.9
3.0
5.8
14.7
2019
4.4
2.4
2.8
9.5
Own railcars
Leasing
3rd parties
Own railcars
Leasing
3rd parties
1 . Calculated based on 70 t per cargo .
Source: PhosAgro
2019 saw the successful completion of a move
to merge the Group’s production and logistics
assets into one legal entity – JSC Apatit. These
organisational changes are designed to improve
the Company’s overall efficiency and business
process management.
6,224
8,861
10,461
2018
2019
2021
with the total number
of tank cars for molten
sulphur reaching
520units
Mineral hoppers
1,500
Gondola cars
530
PhosAgro
and United Wagon
Company signed
a contract to supply
56 additional tank
cars for molten
sulphur
Tank cars
607
Gondola cars
250
Mineral hoppers
1,000
Tank cars
350
2019
2020
2021
2022
The main reason behind the purchase of tanks for liquid
sulphur is the necessity to guarantee continuity and safety
of these indispensable feedstock supplies and optimise
associated transportation costs .
Cost-cutting was also the main rationale behind the decision
to buy gondola cars, as they offer significant benefits for transport
operations within a distance of 500 km and streamline deliveries
to the Baltic states .
Annual report | 2019Strategic report
Key
targets
DEVELOPING
RAIL INFRASTRUCTURE
DEVELOPING PORT INFRASTRUCTURE
Once completed, the initiatives included in the port strategy will provide Apatit with access
to transshipment capacities up until 2030 and help significantly reduce selling expenses associated
with the transportation of export supplies:
55
54
Maximum rail infrastructure throughput
mtpa
Apatit
14.3
+2.3
16.6
Revamp of the Kriolit station with connection
to the October Railway’s Nelazskoye station
Project costs:
2.47 RUB bln
Volkhov Branch
1.6
+2.4
4.0
Construction of a track at the Volkhovstroy II
station of the October Railway
Project costs:
2.9 RUB bln
Balakovo Branch
6.0
+4.0
10.0
Development of rail infrastructure
at the Balakovo Branch of Apatit
Project costs:
385 RUB mln
2019
2020
2021
2022
2023
2024
2025
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1 2 3
Memoranda of cooperation
signed with the future port
terminals of Vistino and Lavna
A long-term contract (up to 2022)
signed with the European Sulphur
Terminal (EST) to transship 2 mtpa
of fertilizers
Increase in transshipment
volumes at the Kotka terminal
to 1.5 mtpa from 2023
2023
The cumulative six-
year economic effect
(from 2023 to 2028)
from the redistribution
of cargo flows
to the terminals of Vistino
and Lavna is estimated
USD 150 mln.
150USD mln
2028
Ust-Luga
Murmansk
PhosAgro and Ultramar, a Russian freight
forwarder shipping mineral fertilizers
in containers, signed a long-term contract
on the transshipment of PhosAgro’s
mineral fertilizers through a new
terminal at Ust-Luga. The transshipment
of PhosAgro’s products through
the Ultramar terminal is scheduled to begin
in the second half of 2020.
PhosAgro signed a memorandum
of cooperation with Infotech Baltika
concerning the construction of a specialised
marine terminal for the transshipment
of mineral fertilizers and apatite
concentrate at the seaport of Murmansk.
The ability of the terminal, which is currently
under construction, to receive large Panamax-
class vessels will improve the economic
efficiency of sea transportation through
the northern territories, while the proximity
of the terminal to the Company’s production
assets will streamline the railway logistics
for transshipments. The new port capacities
will handle approximately 3.5 mtpa
of fertilizers.
Annual report | 2019Strategic report
Key
targets
SUSTAINABILITY
PROGRAMMES
ENVIRONMENTAL
PROGRAMME
GOALS TO 2025
PERSONNEL
DEVELOPMENT
PROGRAMME
GOALS TO 2025
HEALTH
AND SAFETY
GOALS TO 2025
57
56
The Company
is a member of the Safer
Phosphates alliance,
which seeks to address
the issues of environmental
contamination by heavy
metals.
5
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1
2
3
4
Reducing unit pollutant
emissions by
5%
(to 0.996 kg/t for end
and semi-finished products)
Reducing unit GHG emissions by
10%
(to 142 kg of СО2 equivalent per tonne
of end and semi-finished products)
Reducing unit effluents by
20%
(to 4.8 m3/t for end
and semi-finished products)
Increasing the share
of recycled and decontaminated
hazard class 1–4 waste to
40%
1
2
Raising employee
satisfaction and loyalty to
65%
Increasing the average annual
number of training hours per
employee by
50%
annually
of incidents by
10%
workplace injuries by
1Reducing
2Reducing the number
3
Improving health
and safety
management
system and culture
10%
each year
Annual report | 2019Strategic report
RISKS AFFECTING
THE STRATEGY
STRATEGY 2025
59
58
Description
Management
Risks
Description
Management
Risks
1.
Strategic
planning
Risks
102-11
2.
Social
3.
HR
Risk associated
with the adoption
of an incorrect
strategic decision
and ensuing
management
decisions, resulting
from an erroneous
assessment
of internal
and external factors
that have an impact
on the Company’s
prospects
for development
and its ability
to achieve strategic
objectives
Risk of an adverse
social environment
in the regions
of operation
PhosAgro has successfully implemented all key projects under its Strategy
to 2020, with the Board of Directors approving a strategy to 2025 in March
2019 to identify key growth areas.
The Company actively monitors both internal and external factors that could
impact the strategy. PhosAgro also takes a systematic approach to assessing
the potential costs and benefits of new strategic projects to facilitate
and improve the decision-making process.
In 2019, the Company approved a resource development programme to 2035.
With its commitment to the principles of partnership and cooperation between
private business and the government, the Company runs a number of social
programmes on a voluntary basis. Social projects are designed, among
other things, to support local authorities in promoting sports and culture,
and enhancing the public utilities and opportunities for growth in the cities
where the Company operates. Sustainable development in the regions
of operation is one of the key goals the Company pursues in its community
activities.
Developments
and decisions related
to the hiring, development
and retention
of employees
PhosAgro runs independent and joint programmes seeking to attract
young talents, including those from other regions, develop employee skills
and enhance motivation as a way to improve retention and productivity.
In 2019, the first graduates of PhosAgro Classes completed higher education
and started to work for the Company.
4.
Production
Technical/
industrial disruptors
of production
processes
5.
Health
and safety
Risks associated
with injuries,
occupational
illnesses, accidents
and incidents
at hazardous
production facilities,
and non-compliance
with statutory
requirements
in the realm of health
and safety
PhosAgro seeks to ensure uninterrupted operation of machinery and reduce
unscheduled equipment downtime. To that end, the Company invests
in the construction and upgrade of equipment and carries out preventative
maintenance and major overhauls by relying on backup equipment
and a reserve pool of components, accessories and spare parts. The Company’s
insurance programme covers the risk of production disruptions.
PhosAgro enforces health and safety in workplaces in line with applicable
laws and best global practices. To that end, the Company trains staff in health
and safety and regularly checks their knowledge, promotes safety culture,
and makes sure that all contractors adhere to the health and safety standards.
In addition, safety audits and inspections ensure compliance with applicable
regulations and OHSAS 18001 requirements. Tasks and measures to reduce
the corresponding risks in various Company’s activities are defined
in the strategy in the field of industrial safety and labor protection.
5
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S
6.
Environment
Risks of potential
environmental
damage resulting
from the Company's
operations
7.
Project
8.
Business
processes
and systems
9.
Tax
Risks associated
with delays
and budget overruns
in construction
and upgrade projects,
along with failure
to deliver project
efficiency targets
Inefficiency
or disruption
of the Company’s
business processes,
including risks related
to counterparties
and supply chain
Potential
claims lodged
by tax authorities
in response
to the Company’s
failure to correctly
file tax returns or pay
taxes in due time
PhosAgro conducts regular analysis and assessment of its impact
on the environment. The environmental impact is mitigated through
the upgrade of treatment and warehousing facilities and the implementation
of energy efficiency programmes. The Company partners with the UNESCO
and the International Union of Pure and Applied Chemistry (IUPAC) to provide
research grants as part of the Green Chemistry for Life project seeking
to protect the environment and human health through energy efficient
processes and environmentally friendly technologies based on innovative
solutions. PhosAgro’s investment projects harness the best available techniques
to reduce unit feedstock and energy costs while also cutting unit emissions
of regulated substances. The Company discloses its environmental impact
mitigation goals and performance in line with applicable laws and as part
of the Carbon Disclosure Project (since 2019).
PhosAgro strives to adhere to approved project budgets and schedules
and to take a unified implementation approach leveraging a variety of project
management tools. All projects go through a multi-step review and approval
process. For large-scale and strategically important projects, dedicated project
management offices are set up. The Company regularly monitors progress
against project budgets and deadlines.
PhosAgro seeks to maximise efficiency of all its business processes and systems.
Business process efficiency reviews are conducted on a regular basis to identify
potential bottlenecks and develop and implement efficiency improvement
initiatives.
The Company strives to minimise the risk of disruptions in supplies of key raw
materials to its production facilities. To that end, PhosAgro uses multi-stage
tender procedures and enters into long-term contracts with its most reliable
suppliers.
The Company also monitors its IT infrastructure on an ongoing basis and carries
out a number of initiatives to mitigate risks associated with business process
disruptions caused by technological factors or cyberattacks.
PhosAgro complies with tax laws of the countries where it operates.
The Company tracks all changes (including the planned ones) in tax
laws, analyses the law enforcement practices, and seeks clarifications
from the government on taxes. In addition, law and accountancy firms
are engaged to advise on the administration of applicable tax laws.
Annual report | 2019Strategic report
61
60
Risks
15.
Credit
16.
Currency
17.
Commodity
Description
Management
Financial losses
caused by the failure
of buyers, commercial
contractors
and other financial
counterparties
to fulfil their financial
obligations
to the Company in full
and on time
Financial
losses arising
from unfavourable
changes
in FX with respect
to the Company’s
base currency
Losses associated
with unfavourable
changes
in the market prices
for mineral fertilizers
and other products
or a hike in prices
for key feedstock
and equipment sourced
by the Company
PhosAgro has approved policies on managing credit risks to institutionalise
a number of credit risk mitigation techniques, including deliveries against full
or partial prepayments with full or partial insurance of credit risks, use of letters
of credit, and factoring (securitisation) of accounts receivable.
Providing advance payments to suppliers and contractors is only considered
after the counterparties have proved their reliability or after they have offered
adequate bank guarantees for advance payments that exceed approved internal
limits. The Company partners with banks, financial organisations and insurance
companies that boast a high level of financial stability and meet the criteria set
out in the Company’s treasury policy.
PhosAgro monitors all covenants under the existing loan agreements
on an ongoing basis.
In the context of oil price volatility and fluctuations of the rouble exchange rate
against major international currencies, the Company seeks to align the currency
breakdown of its debt financing with the FX structure of its sales. As of now,
most of PhosAgro’s debt is denominated in US dollars as a natural hedge
against predominantly USD-denominated sales. The Company carefully tracks
analyst forecasts and factors that may influence the rouble exchange rate
against major currencies. If need be, PhosAgro can hedge its FX positions either
fully or partially.
In the context of heightened price volatility in the core product markets,
PhosAgro takes consistent steps to optimise its sales structure in terms
of the fertilizer grade offering and regional sales focus as a way to maximise
the Company’s margins. PhosAgro also continues to increase the share of sales
to end consumers, improve production efficiency and offer its customers
add-on services such as packaging, blending and storage.
PhosAgro has offices in Buenos Aires (Argentina), Belgrade (Serbia), Hamburg
(Germany), Bayonne (France), Zug (Switzerland), Limassol (Cyprus), Vilnius
(Lithuania), Warsaw (Poland), São Paulo (Brazil) and Singapore. With a foothold
firmly established in the priority export markets, the Company can respond
more quickly to changes in the market demand and customer needs.
To reduce its feedstock and equipment expenses, PhosAgro invites multiple
suppliers to take part in tenders, enters into long-term supply contracts
and develops lasting relationships with its suppliers.
Risks
Description
Management
10.
Information
security
11.
Economic
security
12.
Regulatory
13.
Corruption
14.
Reputation
Losses incurred
on the Company’s
property and assets
as a result of unauthorised
access to its
information systems
or disclosure
of confidential data
Losses incurred
on the Company’s
property and assets
as a result of economic
crimes committed
by employees or third
parties, including
fraud and theft
Untimely receipt/
extension of licences;
legislative changes
that might bring
about higher cost
of doing business,
restrictive policies
by regulators,
weaker equity story
of the Company and/
or transformation
of the competitive
landscape
Losses resulting
from non-compliance
or inadequate
compliance
with applicable anti-
corruption laws
by the Company or its
employees (penalties
levied against
the Company by state
authorities and other
damages)
Damage caused
to the Company’s
business reputation
as a result
of unauthorised
disclosure
of information
about the Company’s
operations, financial
results, senior
management, etc.
in the mass media
or employees’ neglect
of business ethics
PhosAgro implements a number of initiatives to prevent unauthorised access
to its information systems and disclosure of confidential data. A wide variety
of technical and software solutions, including those based on encryption,
are used to control access to information resources and systems. Access
rights are granted to specific user groups. There is a clear definition
of what constitutes confidential information and how it should be handled.
The Company undertakes regular audits to ensure strict compliance
with the Company’s confidentiality policy.
The Company takes steps to prevent potential damage to its property
and assets as a result of economic law infringements, including by introducing
access authorisations to the Company’s administrative and production
facilities, clearly differentiating between responsibilities as part of contract
or transaction execution, vetting counterparties before signing a contract,
and putting in place a dedicated hotline. Moreover, additional checks
are undertaken by a variety of the Company’s functions.
PhosAgro is in full compliance with applicable laws. To make sure it gets timely
updates on potential legislative changes, the Company closely tracks initiatives
of legislators, the government and regulators, and takes part in discussing
of such initiatives and drafting relevant recommendations in partnership
with professional associations. The Company prepares and submits documents
in due time to receive or extend licences required for its business.
PhosAgro makes sure its facilities and partners fully comply with applicable
anti-corruption laws. To that end, it provides training in combating corruption
and administrating the anti-corruption law, and promotes zero tolerance
towards corruption among the Company’s employees and partners. Among
other things, the Company has approved the Anti-Fraud and Anti-Corruption
Policy, the Code of Ethics, and the Regulations on Conflict of Interest.
Starting from 2019, the Company’s counterparties are obliged to declare
their compliance with anti-corruption laws.
The Company is a member of the Anti-Corruption Charter of Russian Business.
In its operations, PhosAgro demonstrates commitment to transparency
by disclosing all relevant material facts and circumstances. The Company has
adopted an information policy and a media engagement policy. Information
about the Company is available on its website and in the mass media. PhosAgro
provides comments in response to media enquiries and regularly monitors
coverage in both Russian and international media.
To protect its business reputation, the Company has approved
the Code of Ethics setting out unified rules for PhosAgro’s employees based
on the principles of integrity, good judgement, fair play and partnership
and designed to support the Company’s success.
Risks
5
2
0
2
Y
G
E
T
A
R
T
S
Annual report | 2019Strategic report
63
62
HITTING
ANOTHER
RECORD
In 2019, we saw our performance improve not only
in terms of numbers, but in terms of quality
too . Apart from boosting production, reducing
costs, increasing self-sufficiency in all feedstock,
and bringing down transportation costs, we made
a number of qualitative advances by expanding
our product range and, most importantly,
achieving a higher recovery rate .
W
E
I
V
E
R
S
S
E
N
I
S
U
B
Annual report | 2019Business review
OPERATIONAL
REVIEW
In 2019, PhosAgro continued its steady growth, delivering record high operating results
on the back of previous investment cycle projects. With stable demand in our key markets,
the Company was able to increase output across its production facilities, while a balanced
approach to maintenance works helped offset the seasonality in end-product shipments.
As a result, PhosAgro’s fertilizer production hit a record high of 9.5 mt, fully meeting
our target.
Mikhail Rybnikov
First Deputy CEO of PhosAgro
Fertilizer production, kt
2019
9,522
2018
8,975
2017
8,338
2016
7,399
2015
6,750
2014
5,998
In 2019, fertilizer output increased by 6 .1% vs
a year ago . By moving some of the overhauls
and renovations to the low-demand season
for fertilizers, we managed to significantly ramp up
production across our facilities . The modernisation
of some sites in Cherepovets and Balakovo,
completed in late 2018, also contributed
to the output growth .
The rise in fertilizer production was supported
by output growth in feedstock, including
phosphate rock, ammonia, sulphuric
and phosphoric acids . This helped us maintain self-
sufficiency in key raw materials and secure a cost
advantage for higher competitiveness in global
markets .
PhosAgro has been consistently increasing
fertilizer output since it hit 6 mt in 2014 .
Over the six years, the Company has increased
production by an impressive 59% . Today,
PhosAgro manufactures more than 50 grades
65
64
of mineral fertilizers for different soils and climates. PhosAgro’s business
is based on high-performing assets . In Apatity, PhosAgro develops deposits
of apatite-nepheline ore, unique for its high nutrient content and low content
of potentially hazardous heavy metals, such as cadmium . Through investment
in mining efficiency we steadily reduced our development and manufacturing
costs, while the Company’s vertically-integrated structure ensured that
our fertilizers had no heavy metals or other harmful impurities .
Our flexible sales policy helped us increase shipments to our priority markets
in 2019 . Sales in the Russian and CIS market rose by over 10%, exceeding
3 mt, while in Europe they expanded by 28% to over 2 .6 mt . As a result, these
markets accounted for more than 32% and 28% of shipments, respectively .
In total, sales in 2019 grew by 7 .1% .
Overall, we were able to boost production, reduce costs, increase self-
sufficiency in all feedstocks (ammonia, sulphuric acid, and ammonium
sulphate), and bring down transportation costs . Beyond improving these
essential quantitative indicators, we also registered major qualitative
achievements by expanding our product range and, most importantly,
boosting nutrient recovery .
In 2020, we plan to continue strengthening our position as a leading low-cost
producer through our key investment projects . Leveraging the best available
techniques to increase operational efficiency and reduce production costs
remains our priority .
6.1%
increase in fertilizer production
in 2019 compared to 2018
7.1%
increase in fertilizer and feed
phosphate sales in 2019
compared to 2018
>50
fertilizer grades produced
by the Group
58.7%
increase in fertilizer
production since 2014
Annual report | 2019Business review PHOSPHATE SEGMENT – UPSTREAM
(SDGS 3 AND 12)
Apatit’s Kirovsk Branch mines, beneficiates and processes apatite-nepheline
ore into phosphate rock and nepheline concentrate .
Phosphate rock is processed by Apatit in Cherepovets and its branches
in Balakovo and Volkhov . Apatit manufactures both phosphate and nitrogen
fertilizers . In addition to phosphate-based fertilizers, its Balakovo branch
makes feed monocalcium phosphate (MCP), while the Volkhov branch
specialises in such complex fertilizer grades as PKS, NPKS and NPK,
and industrial phosphates, including sodium tripolyphosphate (STPP) .
Upstream
In 2019, Apatit’s Kirovsk branch mined 38 .05 mt of apatite-nepheline
ore and produced 10 .51 mt of phosphate rock, representing an increase
of 4 .4%,or 0 .44 mt, on the previous year and a record high for the past
25 years .
Internal phosphate rock consumption was at 69%, or 7 .3 mt, vs 71%,
or 7 .1 mt, in 2018, while sales to customers in Russia and abroad accounted
for 15% and 16%, respectively, vs 11% and 18% a year ago .
Outlook
4.4%
increase in phosphate rock
production in 2019 compared
to 2018
10.5
mt
of phosphate rock produced
in 2019
We expect a number of major investment projects to help us achieve
consistent cost reduction in the upstream segment . These embrace
efforts to re-equip the main shaft No. 1 and implement an in-pit crushing
and conveying (IPCC) system at the Vostochny mine .
We will continue to optimise processing volumes and improve the quality
of our low-cost phosphate rock, expecting to increase its output
from the current 10 .5 mt to over 11 mt .
20.5%
increase in nepheline
concentrate production
in 2019 compared to 2018
67
66
Production volume, kt
2018
986
2019
1,188
+20.5%
Sales volume, kt
2018
982
2019
1,190
+21.0%
Nepheline
concentrate
10,067
10,507
+4.4%
2,946
3,256
+9.9%
Phosphate
rock
PhosAgro ore reserves as of 1 January 2020
Deposit
Kukisvumchorr
Yukspor
Apatitovy Cirque
Rasvumchorr Plateau
Koashva
Njorkpahk
Yolitovy otrog
TOTAL
Balance reserves, kt
(А + В + С1)
Average P2O5
content
377,662
473,361
96,756
310,454
587,667
55,599
134
1,898,633
14.18%
14.06%
14.03%
13.05%
16.88%
13.46%
19.40%
14.77%
The introduction of remote drilling
at PhosAgro’s underground mines
in the Murmansk Region has
brought about a 20% boost in rig
efficiency due to shorter downtime
between the shifts and significant
improvement of occupational safety
during the underground works.
Remote underground drilling
is the future of mining. An operator
can manage several drilling rigs
from an above-ground control
centre. PhosAgro currently owns
ten such rigs, with more to come
in the future.
Licences
Mining licence
Kirovsky
mine
Vostochny
mine
Kukisvumchorr and Yukspor
deposits
Koashva deposit
Njorkpahk deposit
Rasvumchorrsky
mine
Apatitovy Cirque and Rasvumchorr
Plateau deposits
Tsentralny
mine
Rasvumchorr Plateau
deposit
Geological survey, exploration and mining licenses
Plot Plateau
Iyolitovy otrog deposit
31 December 2025
31 December 2038
31 December 2063
1 January 2024
31 December 2020
14 December 2040
1 February 2024
Annual report | 2019Business review PHOSPHATE SEGMENT – DOWNSTREAM
(SDG 3, 12)
Performance
In 2019, PhosAgro’s output of phosphate-based fertilizers was up by 6 .1%
y-o-y to 7 .3 mt . The growth was due to several factors . First, the completion
of investment projects to modernise key production capacities in Cherepovets
and Balakovo helped to boost the output of basic semi-finished products
(sulphuric and phosphoric acid) and mineral fertilizers. Second, efforts
to reduce the number of major overhauls and eliminate downtime, resulted
in a significant increase in working time. Finally, production flexibility post
modernisation helped expand the fertilizer range, among other things
by adding less concentrated grades, and switch from one grade to another
with virtually no downtime .
Sales of phosphate-based fertilizers went up by 9 .4% y-o-y to 7 .3 mt .
The European market showed the strongest growth (+28 .6%), with shipments
to the CIS and Russia steadily trending upward, as well (+16 .1% and +13 .9%,
respectively) .
6.1%
increase in production
of phosphate-based fertilizers
compared to 2018
9.4%
increase in sales of phosphate-
based fertilizers compared
to 2018
The approved production plan
for 2020
7.3
mt
69
68
Phosphate-based fertilizer and MCP production, kt
2018
2,995
2019
3,202.9
+6.9%
2,799
2,770.4
−1.0%
419
216
356
643.8
193.4
367.7
67
93
6,852
7,271
+53.6%
−10.4%
+3.3%
+38.9%
+6.1%
Phosphate-based fertilizer and MCP sales, kt
2,664.4
2,775.7
+4.2%
NPK
423.5
209.4
347.2
77.6
6,634.7
616
198.4
377.4
+45.4%
−5.3%
+8.7%
82.9
+6.9%
NPS
APP
MCP
PKS
7,255
+9.4%
Total
2018
2,912.6
2019
3,204.6
+10%
DAP/MAP
Outlook
We continue with our efforts to increase fertilizer
production and enhance self-sufficiency
in key feedstock to ensure sustainable growth
and strengthen our cost leadership among global
peers. We expect to benefit from the completion
of several major investment projects that will
allow us to increase self-sufficiency in key
inputs and achieve sustainable cost savings
in our upstream operations . These include a 135 kt
nitric acid plant, a 300 kt ammonium sulphate
plant, and a 1 .1 mt sulphuric acid production
line, intended to replace the volumes currently
purchased from third parties .
As part of this effort, we plan to achieve a 100%
self-sufficiency in phosphate rock, an 80% self-
sufficiency in ammonia, and a 91% self-sufficiency
in sulphuric acid .
In 2019, we launched a project to build a modern facility for making
phosphate-based fertilizers, and a power plant at Apatit’s Volkhov
branch.
Due in 2023, it will be financed from both the Company’s own
resources and borrowed funds and is estimated to cost around
RUB 27 bn.
The project includes construction of an 800 ktpa sulphuric acid
facility, a facility to produce over 840 ktpa of mineral fertilizers,
including more than 40 ktpa of water-soluble MAP, liquid ammonia
and end-product warehouses, and a 25 MW combined heat
and power plant. In addition, wet-process phosphoric acid units
will be upgraded to reach a capacity of 500 ktpa.
According to PhosAgro’s CEO Andrey Guryev, this initiative is a key
element of PhosAgro Group’s Strategy to 2025. Essentially,
it involves building a new complex that will boost the Group’s
phosphate rock processing capacity by 1 mtpa (the Volkhov
branch currently can process 300 ktpa) and increase the output
of phosphate-based fertilizers – a high-margin category thanks
to the branch’s logistic strengths.
This investment project is set to embrace best available
technologies, as well as solutions developed by major Russian
and global companies and institutes, including the NIUIF, Russia’s
only and one of Europe’s leading agrochemical research institutes.
Construction and installation will be performed by Russian
contractors.
Annual report | 2019Business review NITROGEN SEGMENT
(SDGS 3 AND 12)
71
70
DISTRIBUTION AND SALES
Our sales strategy for a period until 2020 focused on transitioning
to direct sales . This task has been successfully accomplished . Currently,
90% of all products are sold under direct sales contracts through our own
distribution network . This is an impressive result, especially compared
with 2013, when only about half of all products were sold directly .
Over these years, we have opened offices in various countries worldwide.
PhosAgro has established presence on almost every continent and will
continue to increase its sales in the target markets – Russia, Europe,
and North and South America .
We also focus on reducing our logistic and transportation costs .
We rely on our distribution network operator PhosAgro-
Region to supply fertilizers to agricultural regions across
Russia, but what’s more, it now runs the industry’s first
tracking system for mineral fertilizers to reduce customer’s
expenses, with an online agronomic support service also
in the pipeline. Digital technology makes the Company
more efficient and offers useful tools for greater flexibility
and competitiveness.
Our nitrogen segment is represented by Apatit, a producer specialising
in ammonia, ammonium nitrate, and both granulated and prilled urea .
Production of nitrogen-based
fertilizers grew by 6.0% to
Nitrogen-based fertilizer production, kt
Performance and outlook
Our production growth plans also cover the nitrogen segment . In late
2019, we launched a new nitric acid line in Cherepovets, which will allow
us to use our ammonium nitrate capacities more efficiently and ramp up
production of nitrogen-based fertilizers by 4% to over 2,340 kt in 2020 .
2.3
mt
2018
1,590
2019
1,684.1
+5.9%
Nitrogen-based fertilizer sales, kt
Sales of nitrogen-based fertilizers
increased by 0.1% to
2.2
mt
2018
1,600.3
2019
1,690.9
+5.7%
Urea
533
566.4
+6.3%
595.3
506.4
−14.9%
Ammonium
nitrate
2,123
2,250.5
+6.0%
2,195.6
2,197.3
+0.1%
Total
Annual report | 2019Business review FINANCIAL
PERFORMANCE
In 2019, PhosAgro confirmed its status as one of the world’s most efficient producers
of phosphate-based fertilizers. Despite the unfavourable pricing environment, our key
financial indicators are on a steady growth path with revenue up by 6.3% y-o-y to RUB
248 bln and cost of sales adding 9.9% y-o-y to reach RUB 136 bln. EBITDA margin remains
at a robust 30.5%.
Alexander Sharabaiko,
Deputy CEO for Finance
and International Projects
2019 was a challenging year for the fertilizer market .
Prices for our products came under pressure
throughout the year due to adverse weather
conditions in key sales markets, as well as increased
global supply amid stable demand . As a result,
prices for phosphate-based fertilizers reached
near-record lows at the end of the year .
Despite the challenging pricing environment,
PhosAgro was able to increase sales volumes
and revenue by 7 .1% and 6 .3% y-o-y,
respectively . Our strong revenue growth was
driven by a balanced approach to investment
and maintenance, high levels of self-
sufficiency in key inputs, a flexible sales policy
and the exceptional quality of our own ore .
As a result, the Company’s EBITDA exceeded RUB
75 bln in 2019, with an EBITDA margin of 30 .5% .
Free cash flow increased by almost 40% y-o-y
to more than RUB 28 bln .
Strong financial performance meant PhosAgro
was able not only to fully self-finance its annual
capex programme but also to improve debt ratios .
At the end of 2019, net debt stood at RUB 132 bln,
while the net debt/EBITDA ratio improved to 1 .7x
(compared with 1 .8x at the end of 2018) .
Our excellent financial performance and comfortable debt level enabled
us to pay out respectable dividends . Based on 2019 results, the Company will
pay out dividends of RUB 24 .9 bln, which corresponds to 88% of its free cash
flow for the year.
Since the beginning of 2020, we have seen a considerable recovery in prices
for phosphate-based fertilizers amid the approaching spring season,
production cutbacks announced by a number of major players and the relative
accessibility of fertilizers . There is also a risk of reduced fertilizer supply
from China .
The recovery in prices, combined with an anticipated increase in demand
in markets where the Company has strong positions (Russia, Eastern Europe
and Latin America) position us well to expect increased sales volumes while
maintaining high levels of profitability.
In 2019, PhosAgro’s revenue went up by 6 .3% y-o-y to RUB 248 .1 bln, mainly
driven by a 7 .0% increase in fertilizer sales y-o-y . However, revenue growth
was slowed by phosphate-based fertilizer price correction that continued
throughout the year .
During the year, fertilizers were mainly exported to regions with the best
pricing environment compared to the North American market, where
prolonged adverse weather conditions led to an increase in fertilizer stockpiles .
As at the end of 2019, PhosAgro increased deliveries to the Russian and CIS
markets (up 11% y-o-y), as well as the European market (up 28% y-o-y) .
This growth was strongly supported by a well-developed distribution system
and a favourable pricing balance between agricultural products and fertilizers .
73
72
Revenue breakdown by key products, RUB mln
Item
DAP/MAP
NPK(S)
Phosphate rock
Nitrogen fertilizers
2018
2019
Change
y-o-y, %
77.9
60.9
22.1
37.0
77.9
68.4
25.8
37.9
0.1
12.3
16.7
2.3
FY 2019 financial and operational highlights,
RUB mln or %
Gross profit in 2019 increased by 2.4% y-o-y
and amounted to RUB 111 .9 bln (USD 1 .7 bln),
with a gross profit margin of 45%, down from 47%
in 2018. Gross profit and gross profit margin
in the phosphate-based and nitrogen fertilizer
segments changed as follows:
• Gross profit for phosphate-based fertilizers
increased by 2 .4% to RUB 90 .2 bln (USD 1 .4 bln),
while the gross profit margin decreased to 45%
(from 47% in 2018) as global prices dropped
to a 13-year minimum in 4Q 2019 .
• Gross profit for the nitrogen segment grew
by 3 .4% and stood at RUB 21 .3 bln (USD
329 mln), with a gross profit margin of 56%,
unchanged y-o-y .
EBITDA for FY 2019 increased by 0 .9% y-o-y to RUB
75 .6 bln (USD 1 .2 bln) . EBITDA growth for the year
was weaker due to record low prices in 4Q 2019,
resulting in a 39 .7% y-o-y decrease in EBITDA
for 4Q 2019 to RUB 11 .2 bln (USD 176 mln) .
Despite this, EBITDA margin for FY 2019 remained
a robust 30 .5% .
Net profit adjusted for non-cash FX items for 2019
declined by 11 .2% y-o-y to RUB 37 .1 bln (USD
573 mln).
Revenue
EBITDA
EBITDA margin
Net profit
Adjusted net profit
In 2019, net operating cash flow increased
by 19 .9% to RUB 71 .6 bln (USD 1 .1 bln), partly due
to more efficient management of working capital.
Net debt
ND/LTM EBITDA
Sales, kt
Capital expenditure in 2019 amounted to RUB
36 .0 bln (USD 555 mln), excluding capitalised
repairs, which corresponds to 48% of EBITDA
for the reporting period .
Phosphate-based fertilizers
Nitrogen fertilizers
Total sales
2018
2019
Change
y-o-y, %
233,312
248,125
74,908
75,582
32.1
22,135
41,748
30.5
49,408
37,062
31
December
2018
31
December
2019
6.3
0.9
123.2
−11.2
135,330
131,583
−2.8
1.81х
2018
6,636
2,203
8,839
1.74х
2019
7,258
2,197
9,455
Change
y-o-y, %
9.4
−0.3
7.0
Annual report | 2019Business review Strong financial performance meant PhosAgro was able
not only to fully self-finance its annual capex programme
but also to improve debt ratios.
• a 33.7% y-o-y increase in potash costs to RUB 13.7 bln (USD 211 mln)
mainly due to higher purchase prices for potassium compared
to the previous year;
• a 4 .4% y-o-y increase in natural gas expenses to RUB 12 .6 bln (USD 195
mln) as a result of 3 .7% y-o-y growth in ammonia production and higher
sales of nitrogen fertilizers;
• an 18 .6% y-o-y rise in costs for ammonium sulphate to RUB 3 .6 bln (USD
55 mln) mainly due to an increase in the production of fertilizer grades
containing sulphate;
• a reduction in costs for sulphur and sulphuric acid limited the increase
in raw materials expenses . These costs decreased by 14 .2% y-o-y to RUB
9 .2 bln (USD 142 mln) mainly due to lower prices for sulphur and sulphuric
acid .
Electricity costs rose by 13 .3% y-o-y and stood at RUB 6 .2 bln (USD 196 mln)
mainly due to a nationwide programme to modernise the electricity industry
(CDA 2), which led to a 15 .0% y-o-y increase in the purchase price .
Administrative expenses for 2019 went up by 15 .5% y-o-y and amounted
to RUB 16 .5 bln (USD 255 mln), driven mainly by a 17 .6% increase in expenses
for salaries and social contributions to RUB 9 .3 bln (USD 144 mln) .
In 2019, selling expenses showed a 9 .3% y-o-y growth and stood at RUB
38.1 bln (USD 589 mln). The main factors behind the growth were:
• a 10 .4% y-o-y increase in expenses on Russian Railways services
and operators’ fees to RUB 11 .4 bln (USD 177 mln) on the back of an overall
sales growth and higher railway tariffs;
• a 2 .9% y-o-y increase in freight, port and stevedoring expenses to RUB
18.3 bln (USD 283 mln), mainly due to higher freight tariffs;
• a 36 .4% y-o-y increase in spending on customs duties to RUB 1 .9 bln
(USD 29 mln) reflecting changes in the delivery terms to the European
market .
The net debt/EBITDA ratio improved from 1 .8x
to 1.7x as at 31 December 2019, reflecting EBITDA
growth and the appreciation of the rouble against
the US dollar in 2019 . As at 31 December 2019, net
debt amounted to RUB 131 .6 bln (USD 2 .1 bln) .
In 2019, cost of sales went up by 9 .9% y-o-y
to RUB 136 .2 bln (USD 2 .1 bln), mainly due to rising
potash prices, as well as an accelerated increase
in phosphate rock and fertilizer production .
Other contributors included one-off payroll
and electricity expenses .
Costs for materials and services in 2019 rose
by 10 .5% y-o-y and amounted to RUB 41 .2 bln
(USD 637 mln) as a result of:
• a 12 .6% increase in the cost of phosphate rock
transportation to RUB 8.6 bln (USD 133 mln)
as a result of higher production volumes
and a 4% rise in railway tariffs;
• a 6 .7% y-o-y increase in repair expenses to RUB
10.1 bln (USD 156 mln) driven by cost inflation
during the year and expansion of production
capacities following the completion
of the Company’s long-term investment
programme at the end of 2018;
• a 39 .8% y-o-y increase in drilling and blasting
expenses to RUB 2 .3 bln (USD 36 mln) due
to accelerated mine development .
In 2019, costs for raw materials went up by 7 .3%
y-o-y to RUB 43 .2 bln (USD 667 mln) driven by:
75.6
RUB bln
EBITDA
28.3
RUB bln
Free cash flow
36
RUB bln
capex in 2019
Cost of sales, RUB mln
Depreciation and amortisation
Materials and services
• Phosphate rock transportation
• Repair expenses
• Drilling and blasting
• Other
Raw materials
• Ammonia
• Sulphur and sulphuric acid
• Potassium chloride
• Natural gas
• Ammonium sulphate
Salaries and social contributions
Electricity
Fuel
Products for resale
Total
2018
18,936
37,306
7,671
9,485
1,662
18,488
40,226
4,195
10,682
10,238
12,096
3,015
11,760
5,474
4,019
6,287
2019
21,368
41,221
8,641
10,119
2,323
20,138
43,155
4,095
9,165
13,691
12,627
3,577
12,744
6,204
4,849
6,683
124,008
136,224
Direct economic value generated and distributed, RUB mln
Item
Stakeholder
Direct economic value generated
Revenue from sales
Revenue from other sales
Revenue from financial investments
Revenue from sale of assets
Economic value distributed
Operating expenses, including:
Wide range of stakeholders
Suppliers and contractors
Wages and other payments to employees
Employees
Social expenses
Payments to providers of capital
Shareholders and creditors
Payments to shareholders
Payments to creditors
Tax expenses and other payments to government
Government
Including income tax expense
Economic value retained
20181
233,759
223,982
9 330
447
0
−206,785
−175,846
−21,924
−2,139
−13,598
−5,385
−11,956
−8,487
26,974
75
74
Change, %
12.8
10.5
12.6
6.7
39.8
8.9
7.3
−2.4
−14.2
33.7
4.4
18.6
8.4
13.3
20.7
6.3
9.9
2019
249,583
239,130
8,995
1,458
0
−243,077
−194,090
−24,706
−2,807
−32,244
−4,635
−12,108
−9,724
6,506
201-1
1 . The 2018 numbers in this table differ from those disclosed in the same table in the 2018 Report due to the adjustments made to both 2018 accounts
and calculation methods .
Annual report | 2019Business review 77
76
PHOSAGRO’S STRATEGY
BUILDS UPON
SUSTAINABILITY
PRINCIPLES
AS ONE OF ITS
KEY ELEMENTS
The Company’s commitment to sustainability principles is one
of the key elements of its Strategy to 2025 . The application
of these principles at the Board of Directors level is overseen
by a dedicated committee headed by independent director
Irina Bokova .
To deliver long-term benefits to all stakeholders, we strive
to maximise the value we create not only from the commercial,
but also from the environmental and social perspectives .
We are a responsible producer of mineral fertilizers used in more
than 100 countries across the globe . All of our efforts are geared
to creating a long-term positive effect on communities .
Alongside our corporate values, including our concern
for the environment and careful use of natural resources, fair competition,
dialogue, compliance, stewardship and effectiveness, the 10 Sustainable
Development Goals that the Company supports help inform our sustainability
policies . These values are supported and agreed by the management
and implemented across the Group .
T
R
O
P
E
R
Y
T
I
L
I
B
A
N
A
T
S
U
S
I
Annual report | 2019
Material topics identified by stakeholders in a survey on the materiality
of various aspects of the Company’s operations
79
78
102-44
102-46
102-47
MANAGEMENT APPROACH
Board
of Directors
Sustainable
Development
Committee
(established in 2019)1
Chief Executive Officer
Sustainable Development
department
Functional units
(Environment, Health
and Safety, HR, Energy,
Anti-Corruption)
102-53
102-42
MATERIAL TOPICS
The Company takes feedback from stakeholders
on the completeness, objectivity and materiality
of the information disclosed in its sustainability
reports into careful consideration . Any
questions or recommendations can be emailed
to ir@phosagro .ru .
In 2019, PhosAgro’s working group on sustainable
development conducted a benchmark analysis
and made a list of material topics . After a multi-
stage selection process and many rounds
of discussions with stakeholders, the Board
of Directors aproved the final materiality matrix.
To facilitate dialogue and ensure that information is transparent and clearly
communicated to all stakeholders and to select material topics to be
disclosed in non-financial reports, the Company took steps to identify its
key stakeholders based on its economic, environmental and social impacts .
The representatives of each of the five groups of key stakeholders (employees
and trade unions; shareholders; investors; government authorities, local
communities) received requests to identify those aspects of the Company’s
operations that are most important to them . Their response and assessment
conducted by the working group helped identify the most important aspects
used as a basis for the materiality matrix .
Topic
ECONOMIC PERFORMANCE
Direct economic value generated and distributed
Financial implications and other risks and opportunities due to climate change
Defined benefit plan obligations and other retirement plans
Financial assistance received from government
MARKET PRESENCE
Ratios of standard entry level wage by gender compared to local minimum wage
Proportion of senior management hired from the local community
INDIRECT ECONOMIC IMPACTS
Infrastructure investments and services supported
Significant indirect economic impacts
PROCUREMENT PRACTICES
Proportion of spending on local suppliers
ANTI-CORRUPTION
Operations assessed for risks related to corruption
Communication and training about anti-corruption policies and procedures
Confirmed incidents of corruption and actions taken
ENERGY
Energy consumption within the organisation
Energy consumption outside of the organisation
Energy intensity
Reduction of energy consumption
Materiality matrix
302
202
404
205
402
410
415
412
401
403
306
303 305
203
307
204
413
417
304
Indicator
201
Economic performance
202 Market presence
203
204
Indirect economic impacts
Procurement practices
205 Anti-corruption
302
Energy
303 Water and effluents
304
305
306
307
401
402
Biodiversity
Emissions
Effluents and waste
Environmental compliance
Employment
Labour/management relations
403 Occupational health and safety
404
410
Training and education
Security practices
412 Human rights assessment
413
415
Local communities
Public policy
417 Marketing and labelling
1 .
In 2019, PhosAgro’s Board of Directors established a Sustainable Development Committee as was proposed by CEO Andrey Guryev
201
Reductions in energy requirements of products and services
WATER AND EFFLUENTS
Interactions with water as a shared resource
Management of water discharge related impacts
Water withdrawal
Water discharge
Water consumption
BIODIVERSITY
Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high
biodiversity value outside protected areas
Significant impacts of activities, products, and services on biodiversity
Habitats protected or restored
IUCN Red List species and national conservation list species with habitats in areas affected
by operations
EMISSIONS
Direct GHG emissions
Energy indirect GHG emissions
Other indirect GHG emissions
GHG emissions intensity
Reduction of GHG emissions
Emissions of ozone-depleting substances
Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air emissions
Not
important
Important
Very
important
1
4
2
3
5
4
6
2
5
3
2
2
1
1
1
1
2
4
2
2
3
1
2
4
INTERNAL SCORINGKEY STAKEHOLDER OPINION102030405060708090102030405060708090Annual report | 2019Sustainability report
Topic
EFFLUENTS AND WASTE
Water discharge by quality and destination
Waste by type and disposal method
Significant spills
Transport of hazardous waste
Water bodies affected by water discharges and/or runoff
ENVIRONMENTAL COMPLIANCE
Non-compliance with environmental laws and regulations
EMPLOYMENT
New employee hires and employee turnover
Benefits provided to full-time employees that are not provided to temporary or part-time
employees
Parental leave
LABOUR/MANAGEMENT RELATIONS
Minimum notice periods regarding operational changes
OCCUPATIONAL HEALTH AND SAFETY
Occupational health and safety management system
Hazard identification, risk assessment, and incident investigation
Occupational health services
Worker participation, consultation, and communication on occupational health and safety
Worker training on occupational health and safety
Promotion of worker health
Prevention and mitigation of occupational health and safety impacts directly linked by business
relationships
Workers covered by an occupational health and safety management system
Work-related injuries
Work-related ill health
TRAINING AND EDUCATION
Average hours of training per year per employee
Programmes for upgrading employee skills and transition assistance programmes
Percentage of employees receiving regular performance and career development reviews
SECURITY PRACTICES
Security personnel trained in human rights policies or procedures
HUMAN RIGHTS ASSESSMENT
Operations that have been subject to human rights reviews or impact assessments
Employee training on human rights policies or procedures
Significant investment agreements and contracts that include human rights clauses or that
underwent human rights screening
LOCAL COMMUNITIES
Operations with local community engagement, impact assessments, and development
programmes
Operations with significant actual and potential negative impacts on local communities
PUBLIC POLICY
Political contributions
MARKETING AND LABELLING
Requirements for product and service information and labelling
Incidents of non-compliance concerning product and service information and labelling
Incidents of non-compliance concerning marketing communications
Not
important
Important
Very
important
LETTER FROM IRINA BOKOVA, CHAIR OF THE BOARD
OF DIRECTORS’ SUSTAINABLE DEVELOPMENT
COMMITTEE
81
80
102-14
1
1
1
2
2
4
1
1
4
4
5
5
3
2
3
4
5
3
4
3
2
4
2
2
1
4
1
3
Taking global responsibility is an absolute necessity for any global company .
It is not just a buzzword . And it is more than just a statement for us, as these
principles are part and parcel of our development strategy and current
business activities . We have demonstrated our commitment by establishing
the Board of Directors’ Sustainable Development Committee, which I have
the honour to chair . We are analysing the UN Sustainable Development Goals
(SDGs) and are set to monitor their implementation going forward .
It is obvious that SDGs are global in nature and are relevant to all countries,
people, institutions, companies, etc . It is also clear that they receive attention
from investors and consumers of our products, as people want to enjoy a clean
environment and expect companies to supply safe foods and products .
PhosAgro is fully aware of this and strongly supports the sustainability
principles, also as an active member of the UN Global Compact,
the international initiative to promote socially responsible and sustainable
policies in business .
Out of 17 SDGs, we have selected ten and work to support their achievement,
while also focusing on 21 targets set by these goals .
PhosAgro’s inclusion in the list of 36 Global Compact LEAD companies,
coupled with increased investments from ESG funds, attest to efficient
SDG integration into the Company’s operations and to the transparency
of our sustainability disclosures .
The way we treat ESG principles is becoming
increasingly consistent and structured, as this topic
is of interest not only to our investors, who need
to understand our strategy and aspirations,
but also to a wide range of other stakeholders .
PhosAgro is a global-scale company
and a worldwide supplier. Joining efforts
with our partners, we strive to achieve these goals .
OUR SUSTAINABILITY PRIORITIES
1
2
3
4
5
Sustained growth
to ensure high
productivity
and efficiency
in every single aspect
of our operations
Maintaining
strict health
and safety requirements,
and attaining zero
injuries through
a world-class safety
culture
Mitigating
environmental
impact associated
with the Company’s
production activities
Contributing
to the UN Sustainable
Development
Goals
Maintaining reliable
partnerships with local
communities across
the Company’s footprint
and promoting
dialogue with all
stakeholders, taking
their interests into
account in decision-
making processes
Annual report | 2019Sustainability report
83
82
102-16
FOCUS AREAS
Economic
Environmental
Social
• Paying taxes and other charges to regional
and federal governments
• Offering economic opportunities
for local suppliers and encouraging
the development of local partners
• Maintaining financial sustainability at all
times
• Managing business in accordance
with legal requirements and business
integrity principles
• Reducing waste, emissions and pollutant
discharges and resource usage on a per-
unit basis by investing in new and more
efficient technologies
• Assisting regional and local authorities
in creating modern social infrastructure
across our footprint
• Developing and implementing projects
• Complying with social responsibility
for children and youth
principles and maintaining a meaningful
dialogue with local stakeholders
about our environmental impact
• Preserving natural eco-systems
and nature sites across the Company’s
geographies, ensuring sustainable use
of natural resources, and implementing
programmes to restore environmental
capacity.
• Supporting vulnerable groups
• Ensuring stable employment and creating
a safe working environment
• Creating opportunities for full-fledged
work, training and becoming part
of a professional team
• Protecting human rights
CORPORATE DOCUMENTS GOVERNING SUSTAINABLE DEVELOPMENT-RELATED
ACTIVITIES
PhosAgro has a wide range of internal standards and policies, which govern its approach to sustainable development management
and provide the necessary governance to ensure the Company’s sustainable development .
Health, safety and environment
HR and economic stability
• Quality, environmental and industrial
safety policy
• Environmental safety policy
• Quality management system standard
concerning production and consumption
waste management
• Occupational health and safety
management system certificate OHSAS
18001
• Quality management system certificates
ISO 9001 and 14001
• Hotline regulations
• Code of Ethics
• Anti-fraud and anti-corruption policy
• Personnel management policy
• Modern Slavery Act Transparency
statement
Stakeholder and local community
engagement
• Charity policy
• Government relations policy
• Procurement Policy
Annual report | 2019Sustainability report 102-12
102-13
CONTRIBUTION
TO THE SDGS
As a supplier of essential
crop nutrients to farmers
in more than 100 countries
around the world, PhosAgro
plays an important role
in supporting global food
security. Contributing
to the UN Sustainable
Development Goals
in several areas, we recognise
the importance of all 17 SDGs
and focus on ten of them.
For more detailed information
about the projects, see page 142
in the Stakeholder Engagement
section and the Sustainability section
on the Company’s official website.
Zero Hunger
TARGETS
1. By 2030, ensure sustainable food production systems and implement
resilient agricultural practices that increase productivity and production,
that help maintain ecosystems, that strengthen capacity for adaptation
to climate change, extreme weather, drought, flooding and other disasters
and that progressively improve land and soil quality .
2. Increase investment, including through enhanced international
cooperation, in rural infrastructure, agricultural research and extension
services, technology development and plant and livestock gene banks
in order to enhance agricultural productive capacity in developing
countries, in particular least developed countries .
MEASURES BEING TAKEN BY THE COMPANY
1. The Samoilov Scientific Research Institute for Fertilizers
and Insectofungicides (part of PhosAgro Group) and PhosAgro’s
in-house Innovation Centre implement projects aimed at improving
the efficiency of mineral fertilizers produced by the Company, and reducing
the environmental impact of both their production and use .
2. PhosAgro carries out joint agricultural research with leading Russian
and foreign educational and research institutions to study the properties
of mineral fertilizers and ways to make their use more efficient in order
to produce enough healthy food for the planet’s growing population,
preserve soil fertility and purity, boost yields and ensure stable agricultural
production in a high-risk farming environment .
PROGRESS IN 2019
1. We are implementing a two-step dihydrate-hemihydrate process
for the production of wet-process phosphoric acid at our facilities,
and a technology for integrated treatment of by-products . The Company
has also launched the production of PKS and NPKS fertilizers .
2. We completed all the trials scheduled for 2019 in partnership with leading
research institutions such as SGS, DLG Group, ABS Foundation, MT
Foundation, Agricola 2000, and other organisations in Europe and Latin
America . More than 80 trials were conducted on 14 popular crops .
3. In 2019, PhosAgro successfully held 15 field days across Russia, Poland,
and France .
85
84
Ensure healthy lives and promote well-being for all at all ages
TARGETS
1. Achieve universal health coverage, including
financial risk protection, access to quality
essential health-care services and access
to safe, effective, quality and affordable
essential medicines and vaccines for all .
2. By 2030, substantially reduce the number
of deaths and illnesses from hazardous
chemicals and air, water and soil pollution
and contamination .
MEASURES BEING TAKEN
BY THE COMPANY
1. PhosAgro supports the Bakulev National
Medical Research Centre of Cardiovascular
Surgery by investing in research on diagnosing
and treating cardiovascular diseases,
and advanced unplanned surgery . The Company
runs the Health and Leisure and Improvement
of Working Conditions social programmes for its
employees .
Our another large-scale social initiative
is the Educated and Healthy Children of Russia
(DROZD) project . As part of our partnership
with local and regional administrations, we provide funding to healthcare
facilities across our footprint .
2. PhosAgro is also a member of the Safer Phosphates alliance, whose
mission is to share knowledge and address concerns about heavy metals
that are present in some phosphate-based fertilizers .
PROGRESS IN 2019
1. As part of the DROZD Village programme, a new gym has been opened
in Kormezhka village, Balakovsky District, Saratov Region . The project was
jointly funded by PhosAgro (RUB 300,000) and the local government (RUB
250,000) .
In 2019, the number of children attending DROZD courses increased
by 10 .5% to 5,861 .
2. We updated the design of the Company’s website for the Safer
Phosphates programme, improved navigation and optimised messaging .
The website content was updated to reflect the recent developments
in connection with the ongoing debates around cadmium in the European
Union . It now includes information from the partners of the Safer
Phosphates programme and regular updates available via social media .
Annual report | 2019Sustainability report 87
86
Quality Education
Clean Water and Sanitation
TARGETS
MEASURES BEING TAKEN BY THE COMPANY
TARGETS
MEASURES BEING TAKEN BY THE COMPANY
1. By 2030, ensure that all girls and boys
complete free, equitable and quality primary
and secondary education leading to relevant
and effective learning outcomes.
2. By 2030, substantially increase the number
of youth and adults who have relevant
skills, including technical and vocational
skills, for employment, decent jobs
and entrepreneurship .
3. By 2020, substantially expand globally
the number of scholarships for enrolment
in higher education, including vocational
training and information and communications
technology, technical, engineering
and scientific programmes, in developed
countries and other developing countries .
1. We implement the PhosAgro Schools project aimed at providing school
students with career guidance, expanding their knowledge, sharing
experience and enhancing the quality of education .
2. The Company has built strong partnerships with Russia’s key mining
universities based on bilateral agreements on internships, scholarships
for the best students, and the High-Potential Graduates programme .
As part of the PhosAgro College initiative, we provide targeted funding
to technical colleges to enhance their research base, supply them
with necessary equipment, establish incentives for teachers and students,
and offer career guidance.
3. In cooperation with the International Union of Pure and Applied
Chemistry (IUPAC), PhosAgro supports the participation of young scientists
from developing economies in Summer Schools on Green Chemistry .
PROGRESS IN 2019
1. PhosAgro Classes Fest in Sochi brought together 140 students
from specialised classes created by PhosAgro in communities where
it operates . A special playground was installed in Kindergarten No . 70
in Balakovo to help children learn road safety rules .
2. From the inception of PhosAgro Classes to the end of 2019, the total
spend on refurbishment, repair, installation of new computer hardware
and laboratory equipment in the schools of Cherepovets, Balakovo, Kirovsk
and Volkhov exceeded RUB 410 mln .
3. In 2019, the second Summer School on Green Chemistry was held
at the University of Dar es Salaam in Tanzania . Part of the Company’s
contribution was used to fund grants for talented young scientists
from Africa .
1. By 2030, improve water quality by reducing
pollution, eliminating dumping and minimising
release of hazardous chemicals and materials,
halving the proportion of untreated wastewater
and substantially increasing recycling and safe
reuse globally .
2. By 2020, protect and restore water-related
ecosystems, including mountains, forests,
wetlands, rivers, aquifers and lakes .
1. PhosAgro Group takes part in the Rehabilitation of the Volga River
national project .
The Volkhov Branch of Apatit has implemented a closed-loop wastewater
treatment system at its facilities to prevent the discharge of effluents into
the Volkhov River .
The Kirovsk Branch of Apatit takes active measures under the programme
to reduce discharge and improve wastewater quality .
2. The Company supports the release of juvenile fish species into water
bodies and tree planting initiatives .
PROGRESS IN 2019
1. As part of the production upgrade, PhosAgro approved the initiative
aimed at optimising water use by Apatit in Cherepovets . The programme
looks to ensure efficient water use from surface water sources and reduce
waste water discharge .
2. 150,000 fingerlings of sterlet, salmon, carp and silver carp were
released into rivers and water reservoirs in 2019 as part of the programme
for the reproduction of aquatic bioresources .
Annual report | 2019Sustainability report 89
88
Decent Work and Economic Growth
TARGETS
1. Achieve higher levels of economic
productivity through diversification,
technological upgrading and innovation,
including through a focus on high-value added
and labour-intensive sectors .
2. Promote development-oriented
policies that support productive activities,
decent job creation, entrepreneurship,
creativity and innovation, and encourage
the formalisation and growth of micro-, small-
and medium-sized enterprises, including
through access to financial services.
3. By 2030, devise and implement policies
to promote sustainable tourism that creates
jobs and promotes local culture and products .
and staff training, as well as running efficiency improvement programmes
and streamlining business processes .
Every year from 2013 to 2019, we increased our labour productivity
by some 18% .
2. Apatit (Cherepovets) expects that production development investment
projects implemented at its Kirovsk, Volkhov and Balakovo branches will
create more than 500 new jobs for highly qualified employees by 2025. It
also carries out a number of social programmes focused on healthcare,
improvement of working environment, housing and social benefits to ensure
decent working conditions .
3. The Company supports the Bolshoi Vudyavr project and the upgrade
of the Khibini Airport, which will be a new growth area for the economies
of the Apatity and Kirovsk regions . By making investments in the ski resort,
we support small and medium-sized service, trade and hotel businesses
in the region .
MEASURES BEING TAKEN
BY THE COMPANY
PROGRESS IN 2019
1. Being a leader in terms of labour productivity
growth, the Company strives to push it even
further by introducing new technologies
1. In 2013–2019 our labour productivity increased by an impressive 160%
at PhosAgro’s Kirovsk production site and by 170% at other Group’s assets
2. In 2019, 100 new jobs were created at Apatit’s Vostochny mine, including
self-propelled machine operators, truck drivers, and support staff.
3. In 2019, the Company invested over RUB 800 mln in the Khibini Airport
and Tirvas Sanatorium infrastructure. In five years, the aggregate tourist flow
has seen a more than 300% rise, exceeding 175,000 people in 2019.
Industry, Innovation and Infrastructure
TARGETS
MEASURES BEING TAKEN BY THE COMPANY
1. By 2030, upgrade infrastructure
and retrofit industries to make them
sustainable, with increased resource-use
efficiency and greater adoption of clean
and environmentally sound technologies
and industrial processes, with all countries
taking action in accordance with their respective
capabilities .
2. Enhance scientific research, upgrade
the technological capabilities of industrial
sectors in all countries, in particular developing
countries, including, by 2030, encouraging
innovation and substantially increasing
the number of research and development
workers per 1 mln people and public and private
research and development spending .
1. PhosAgro has successfully implemented its Strategy 2020, the largest
investment programme in the Group’s history, resulting in 1 .5x production
expansion and reaching an output of up to 9 .5 mln t of fertilizers and feed
phosphates over the past five years. All the new facilities fully comply
with the most stringent environmental laws and regulations in both Russia
and Europe .
2. The Samoilov Scientific Research Institute for Fertilizers
and Insectofungicides (NIUIF), Russia’s only and one of Europe’s leading
agrochemical research institutes, is part of PhosAgro Group . We support
research aiming to develop green chemistry technologies, including those
related to crop nutrients production .
PROGRESS IN 2019
1.PhosAgro, together with the Saratov National Research University,
showcased the results of successful application of phosphogypsum
in road construction over many years during the 5th Innovations in Road
Construction International Forum in Sochi .
2. In 2019, we partnered with UNESCO to run the International Year
of the Periodic Table of Chemical Elements .
We also supported the All-Russian Mendeleev Chemical Students
Competition and the Mendeleev Congress on General and Applied
Chemistry. The Company organised field conferences at the trial station
of AgroGard’s Orel branch, and also held field days.
Annual report | 2019Sustainability report 91
90
Sustainable Cities and Communities
Responsible Consumption and Production
TARGETS
By 2030, ensure access for all to adequate,
safe and affordable housing and basic services
and upgrade slums .
MEASURES BEING TAKEN BY THE COMPANY
We ensure comfortable living environment for our employees
and their families, as well as for the rest of local population across
our footprint, investing in housing construction and social infrastructure
development .
We are supporting a project for the development of Bolshoi Vudyavr Ski
Resort and the upgrade of the Khibini Airport in Kirovsk and Apatity .
As part of our cooperation with the Murmansk Region Administration
and in accordance with the partnership agreement for 2017–2019,
PhosAgro provides co-funding totalling RUB 700 mln for social
infrastructure projects and events .
PROGRESS IN 2019
A multi-storey residential building in Kirovsk and several buildings
in Cherepovets were constructed under the corporate housing programme .
In Volkhov and Balakovo, the Company’s employees are offered subsidised
mortgage loans . The number of apartments provided to the employees
as part of the corporate housing programme has exceeded 2,500 by 2019 .
TARGETS
1. By 2020, achieve the environmentally sound
management of chemicals and all wastes
throughout their life cycle, in accordance
with agreed international frameworks,
and significantly reduce their release to air,
water and soil in order to minimise their adverse
impacts on human health and the environment .
2. By 2030, substantially reduce waste
generation through prevention, reduction,
recycling and reuse .
3. Encourage companies, especially large
and transnational companies, to adopt
sustainable practices and to integrate
sustainability information into their reporting
cycle .
MEASURES BEING TAKEN BY THE COMPANY
1. NIUIF (part of the Group) is developing a technology for the integrated
treatment to recycle waste from wet-process phosphoric acid production into
ammonium sulphate .
As part of the Green Chemistry for Life, a project implemented jointly
with UNESCO, PhosAgro launched a grant programme to support research
on phosphogypsum processing .
2. We allocate substantial funds to projects aiming to prevent generation
of waste or recycle it in an efficient manner.
3. We employ production technologies that help preserve non-renewable
resources . PhosAgro possesses power generation facilities of its own
with a total capacity of 210 MW, covering more than 40% of the Group’s
energy needs .
PROGRESS IN 2019
1. In partnership with UNESCO and the International Union of Pure
and Applied Chemistry (IUPAC), the Company provided grants to young
experts engaged in research and development in green chemistry . One
of the grants, which was awarded for the third time, aims to support research
in phosphogypsum recycling and reuse .
2. In 2019, we continued the re-equipment of aluminium fluoride production
to use all the fluorine extracted as a result of phosphate rock processing
and reduce the amount of solid waste . We have launched a multi-purpose
waste management facility as part of Ecoprom project at our site in Kirovsk .
3. The Group has completed a large-scale investment project, a cutting edge
granulated urea and ammonia production unit in Cherepovets, Vologda
Region, an example of energy efficiency and sustainable use of natural
resources .
Annual report | 2019Sustainability report
93
92
Life on Land
TARGETS
1. By 2030, combat desertification, restore
degraded land and soil, including land affected
by desertification, drought and floods, and strive
to achieve a land degradation-neutral world .
2. Take urgent and significant action to reduce
the degradation of natural habitats, halt
the loss of biodiversity and, by 2020, protect
and prevent the extinction of threatened
species .
MEASURES BEING TAKEN BY THE COMPANY
TARGETS
MEASURES BEING TAKEN BY THE COMPANY
Partnerships for the Goals
1. The Company and the Food and Agriculture Organisation of the United
Nations (FAO) are jointly running an initiative to promote efficient soil
management solutions .
Under the initiative, Regional Soil Laboratories Networks (RESOLAN)
are created and consolidated into Global Soil Laboratories Networks
(GLOSOLAN) across Latin America, Asia, Africa, and Middle East . PhosAgro
plays a key role in the project as the Group is developing a unified global
framework to promote technology and know-how in sustainable land use
and agriculture .
2. PhosAgro Group takes part in a programme for studying and protecting
the Amur tiger population .
PROGRESS IN 2019
1. The Development of Sustainable Soil Management project was launched
in January 2019. Its first stage is focused on designing the Soil Doctor
Testing Kit to be distributed in the countries participating in the programme
(5,000 farmers) .
2. The Company spent RUB 10 mln on projects under the cooperation
agreement for studying and protecting the Amur tiger population .
Enhance the global partnership for sustainable
development, complemented by multi-
stakeholder partnerships that mobilise
and share knowledge, expertise, technology
and financial resources, to support
the achievement of the sustainable
development goals in all countries, in particular
developing countries .
Together with UNESCO and IUPAC, PhosAgro has initiated and run
the Green Chemistry for Life grant programme for young scientists doing
research in line with the 12 Principles of Green Chemistry .
Safer phosphates is an initiative established by PhosAgro in partnership
with other fertilizer producers to share knowledge and address concerns
about heavy metals that are present in some phosphate-based fertilizers .
As an active member of the International Fertilizer Association (IFA),
PhosAgro contributes to many of its projects .
PROGRESS IN 2019
On 6 February 2019, PhosAgro joined the Global Compact Network
Russia . Since January 2019, the Company has been taking part in the two
platforms promoting responsible business and eliminating issues that arise
when implementing the global goals – Business Reporting on the SDGs
and Health is Everyone’s Business . In September 2019, PhosAgro was
included in the LEAD, a group of Global Compact participants that have
achieved the best results in corporate social responsibility .
Annual report | 2019Sustainability report
102-12
KEY EVENTS
In September 2019, PhosAgro was listed among 30
UN Global Compact LEAD companies.
The Global Compact is the UN’s largest initiative
to encourage private companies worldwide to adopt
sustainable and socially responsible policies. PhosAgro joined
in as an active participant of this international initiative
in November 2018. Over the last 15 years, the Global
Compact brought together over 10,000 businesses from 170
countries. Inclusion in the LEAD group serves as a recognition
of our outstanding achievements in corporate social
responsibility and highlights our strong commitment to these
principles.
95
94
PhosAgro joined the European Sustainable
Phosphorus Platform (ESPP).
We are the first fertilizer company with production sites
outside the European Union to join ESPP.
This is a logical step towards integrating PhosAgro into
the international community. It offers an opportunity to share
knowledge and technology, collaborate in addressing
pressing issues facing humanity, and build a constructive
dialogue with regulators and national governments, which
is of particular importance against the backdrop of the world
community’s increasing attention to food safety and human
health.
PhosAgro Group
and UNESCO agreed to extend
their cooperation on the Green
Chemistry for Life programme
until 2022.
This is a perfect example
of an international initiative
to support young chemists.
The programme runs in 93
countries worldwide and covers
almost all continents.
Annual report | 2019Sustainability report 97
96
ENVIRONMENTAL
REVIEW
GOALS TO 2025
Reduction of unit GHG emissions (to 142
kg of СО2 equivalent per tonne)
by 10%
Reduction of unit effluents (to 4.8 m3
per tonne of products)
by 20%
Reduction of unit pollutant emissions
(to 0.996 kg per tonne of products)
by 5%
Increase in the share of recycled
and decontaminated hazard class 1–4
waste
to 40%
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
Annual report | 2019Sustainability report MANAGEMENT APPROACH
Effective environmental management
is a key factor that impacts
PhosAgro’s ability to meet its
strategic goal of becoming a socially
responsible business.
PhosAgro strives to develop its extensive
resource base and produce fertilizers in a safe
and eco-friendly manner, thus contributing
to the sustainable agricultural development
worldwide . We have put in place environmental
management practices that ensure our compliance
with applicable regulations and help us reduce
the impact of our operations on the environment .
Committed to continuous improvement
in this area .
99
98
PhosAgro signed an agreement
with the Russian Ministry
of Natural Resources
and Environment, Federal Service
for Supervision over Natural
Resources Management
and the Vologda region
government to run a Clean Air
nationwide initiative as part
of the Environment national
project.
KEY FOCUS AREAS OF THE ENVIRONMENTAL STRATEGY
1 . Reduce environmental impact
2 . Preserve natural eco-systems
3 . Continue improving environmental management
ENVIRONMENTAL OBLIGATIONS
1 . Minimise environmental risks at all stages of investment projects
and along the production chain
2 . Use the best available techniques and environmental monitoring solutions
in the regions of operation
3 . Take steps to prevent climate change and save resources
4 . Comply with environmental laws
5 . Hold all partners in the supply chain responsible for their environmental
impact
6 . Raise the staff environmental awareness
7 . Preserve biodiversity, natural landscapes and habitats across
the Company’s footprint
ENVIRONMENTAL COMPLIANCE
PhosAgro complies with environmental laws . All our facilities that have
an adverse environmental impact are included in dedicated state registers,
with relevant categories assigned to them . We have all necessary permits
in place for every facility .
103
8 . When developing new sites, take measures
to reduce the area disturbed as a result
of operating and other activities, protect
wildlife migration routes, freshwater
ecosystems and spawning streams
9 . Make sure no activities take place in specially
protected natural areas or conservation areas,
traditional territories of indigenous peoples,
natural world heritage sites, and wetlands
of international importance (the Ramsar List)
10 . Communicate and foster dialogue
with all stakeholders involved in environmental
protection, stage public discussions of design
documents for future facilities
Annual report | 2019Sustainability report 101
100
MANAGEMENT AND REPORTING
Apatit’s management system embraces key
management levels and all production stages,
from development to product release . It also
standardises requirements for production
management, which influences the quality
and competitiveness of products, environmental
safety, etc .
By implementing a consistent approach in line
with international environmental standards,
the subsidiary contributes greatly to its own
and the Company’s environmental performance
and sustainable development .
Treating the enterprise’s operations as a set
of processes can optimise internal and external
interactions and boost its efficiency. Compliance
with environmental standards is achieved
by continuously monitoring the quality of raw
materials, preventing critical excesses at all stages
of production, constantly measuring production
parameters, monitoring and automating
the process and conducting express analysis
of the operating environment . We systemically
monitor, measure and evaluate our environmental
performance, while also assessing the efforts
to prevent repeated and potential inconsistencies .
This helps us identify and control environmental
issues, determine risks and opportunities, develop
and implement risk management and response
initiatives .
The journey of phosphate-based fertilizers, our main product, begins
at the mines of Apatit’s Kirovsk branch on the Kola Peninsula where
we extract unique apatite-nepheline ore containing almost no harmful
impurities . 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 .
Technological processes involved in producing ammonia, mineral fertilizers
and inorganic acids and those used in the production of mineral fertilizers
correspond to the best available techniques used in the Russian Federation
and can reduce any adverse impact on the environment, cut down water
consumption and improve both energy and resource efficiency.
At all stages of production, we take the following steps to measure
the environmental impact: monitoring of atmospheric emissions
at the source, monitoring of the air near sanitary protection zones,
monitoring of waste-water discharge into bodies of water, monitoring
and keeping records on areas used to store production and consumption
wastes for all of the Company’s assets, including the activities of contractors .
Monitoring is carried out on the basis of dedicated programmes in effect
at every one of the Company’s production assets . The results are submitted
to the local bodies for state environmental monitoring (Rosprirodnadzor)
in the regions where the Company operates . In case of deviations
from the norms, the Company develops corrective measures . The monitoring
results serve as a basis in making investment decisions and financial
planning for initiatives aimed at reducing the impact of production
operations. They also help assess the achieved effects.
The Company has also introduced environmental safety requirements
for contractors and suppliers of services, making them available at all of its
tender sites .
The distribution of responsibility and authority
within the environmental management system
is governed by regulatory documents, including
internal standards, regulations on structural
units, job descriptions, production SOPs, etc .
These documents set requirements for various
operations and workplace safety .
PhosAgro’s management receives weekly updates on all ongoing
environmental issues, with quarterly reports also submitted to the Chairman
of the Environmental, Health and Safety Committee of the Board
of Directors . The Board of Directors receives quarterly updates on any
expenses or payments made to compensate for environmental impact .
In addition, the directors review annual and semi-annual reports
on environmental protection initiatives and environmental performance .
103-2
ENVIRONMENTAL MANAGEMENT
The Company’s Board of Directors defines
the Company’s environmental policy
and sets strategic goals to ensure environmental
protection and reduce the negative impact of its
operations . General management, organisation
and coordination of efforts to continuously enhance
environmental management are the responsibility
of Apatit’s Department of Ecology and Environmental
Management . To honour its commitment
to the ongoing environmental improvement,
the Company has established dedicated monitoring
and management functions at its subsidiaries
and their branches, and designated officers in charge
locally .
Production units, which have the greatest
environmental impact, have introduced a procedure
for identifying and assessing risks and opportunities .
Based on the results, we develop measures to bring
risks pertaining to significant environmental aspects
to an acceptable level .
Managers and experts responsible for making
operational and other decisions that may adversely
affect the environment take a specially designed
training course in environmental safety . Only
specially trained employees are cleared to handle
class 1–4 waste .
We continuously monitor the impact of our operations to ensure compliance
with applicable environmental standards . This helps us identify and control
environmental issues, determine risks and opportunities, develop and implement
risk management and response initiatives . Environmental risk management
is subject to regular assessment by the Board of Directors . The assessment serves
as a basis for updating risk factors and their descriptions, and for developing new
policies and initiatives .
To confirm its compliance with ISO 14001 and IFA Protect and Sustain standard,
the environmental management framework undergoes scheduled independent
audits .
The facilities have also put in place a procedure to manage internal audits .
Every year, they develop internal audit programmes taking into account
the environmental significance of the reviewed processes, changes affecting
the facility and previous audit outcomes . The audits provide input data
for the management to analyse environmental management efficiency.
Improvement areas are identified through monitoring, measurement, review
and assessment of environmental indicators and the performance of obligations,
environmental management audits and management analysis . As part
of improvements, including measures to manage and close gaps, we take
the required corrective actions based on the relevant operating procedures .
Spending on environmental protection, RUB mln
Total
Operating costs of environmental protection (form 4-OS)
Investments in fixed assets aimed at environmental protection and sustainable use of natural
resources (form 18-KS)
Environmental impact payments
Environmental fines and damages
Investments in fixed assets aimed at environmental protection (excluded from Form 18-KS)
2017
5,089.6
3,578.7
1,312.6
149.5
0.5
48.4
2018
8,210.0
4,587.7
986.3
2019
9,059.5
4,351.9
4,221.9
156.3
165.3
0.6
0.79/2.12
2,479.1
317.5
The reporting year saw an increase in environmental spending driven by growing investments in fixed assets aimed at environmental protection.
An emergency caused damage to a water body, which was compensated on a voluntary basis.
Environmental impact payments, RUB mln
2.902
2018
2019
156.342
165.277
Waste
Aquatic environment
Atmosphere
Limit
Over-limit
Standard
permissible
discharge
Temporarily
permitted
discharge
Over-limit
Maximum
permissible
emissions
Temporarily
permitted
emissions
over-limit
payments
Share
of over-
limit in total
payments
2018
140.615
1.326
1.225
9.066
0.836
2.534
0.000
0.740
2.902 (1.86% share of over-limit
in total payments)
2019
157.88
0
1.644
3.286
0
2.467
0.000
0.000
0.000 (no over-limit payments)
Annual report | 2019Sustainability report
103
102
PERMITS AND CERTIFICATES
The Company’s production sites hold all necessary licences and permits
related to environmental protection .
We pass audits in accordance with ISO 9001:2015, ISO 14001:2015,
OHSAS 18001, and GMP+ to ascertain the efficiency of our product life-
cycle management .
We also undertake regular internal and external audits to assess
our compliance and obtain certification. Every year, we successfully
confirm our adherence to international standards. When developing
exposure scenarios, we assess risks and prepare internationally accepted
safety data sheets and recommendations in accordance with Regulation
(EC) No. 1272/2008 on classification, labelling and packaging
of substances and mixtures, and Regulation (EC) No . 1907/2006
concerning the registration, evaluation, authorisation and restriction
of chemicals (REACH) .
LEGISLATIVE AND ADMINISTRATIVE
FRAMEWORK
None of PhosAgro’s enterprises use ozone-
depleting substances in the production process .
A small amount (not more than 250 kg/year)
of carbon tetrachloride (CCl 4) is used in laboratory
testing .
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.
ENVIRONMENTALLY RESPONSIBLE PROCUREMENT POLICY
As a socially and environmentally responsible business, PhosAgro Group
checks its potential suppliers for compliance with relevant requirements .
The Company takes the following steps to make sure all sourced inputs
and materials are eco-friendly:
Incoming quality control
The list of industrial and technical products subject to incoming control
is made on a daily basis . All supplies undergo quality testing . If needed,
the Company may request third-party centres to perform sample testing
within their scope of certification.
Contractor and supplier compliance
• Requests for safety data sheets, technical quality control reports,
certificates of quality management compliance with ISO 9001:2011 (ISO
9001:2008, EAEU technical regulations, MSDS) to assure product quality
• Requirements to employ materials and equipment compliant
with Russian quality standards (rules and regulations), certified
by manufacturers and permitted for use in Russia
• Requirements to comply with applicable regulations on freight storage
and transport by road and rail
Additional checks
The Company’s experts perform additional checks
and assessments of potential suppliers if required
for a specific tender. They may include a request
to confirm the availability of production capacities
and technologies, staff qualifications, licences,
certificates, including ISO ones, and technical audit
reports . An executive responsible for environmental
management recommends an appropriate
solution with regard to environmental safety .
In 2019, the Company conducted random audits of suppliers,
while also being checked, as a supplier, by third parties
for compliance with social responsibility and environmental
standards.
In 2020, we will publish a formalised list of social
and environmental indicators, which along with financial ones
will serve as supplier eligibility criteria.
Annual report | 2019Sustainability report 105
104
103
2019 HIGHLIGHTS
EMISSIONS INTO THE ATMOSPHERE
PhosAgro’s emissions management system seeks
to comply with national air pollution regulations,
ensure air quality in sanitary protection areas near
production sites, and upgrade the Company’s
capacities using the best available techniques .
PhosAgro’s strategic goal is to achieve a 5%
reduction in pollutant emissions per tonne
by 2025 .
To deliver on this target, in November 2019, the Board of Directors’ Sustainable
Development Committee approved a list of initiatives designed to contribue
to achieving the objective . In particular, the Company:
1 . implements environmental programmes under the nationwide Clean Air
initiative in line with the Comprehensive Plan to Reduce Pollutant Emissions
in Cherepovets approved by the Deputy Prime Minister of Russia on 28
December 2018;
1 .1 . upgrades the SK-600/3 sulphuric acid facility to decrease sulphur
dioxide emissions by 0 .892 kt, with RUB 315,177,000 spent in 2019
and RUB 2,710,719,000 for the entire project implementation period;
1 .2 . deploys new tailing gas pre-heating equipment for the UKL-7 plants
to reduce atmospheric emissions by 0 .105 kt, with RUB 9,417,000
spent in 2019 .
2 . upgrades equipment at the Volkhov branch to reduce pollutant emissions,
including absorption system upgrade at the second site, and introduction
of absorption acidification systems at three sites of the mineral fertilizer
production unit .
3 . takes measures to prevent dust emissions from tailings at the Kirovsk
branch .
Pollutant emissions, kg/t1
2017
1.131
2018
1.048
2019
0.888
Emissions of NOx, SOx and other major pollutants, t
Kirovsk branch of Apatit
2017
5,512.8
2,192.9
732,8
2,402.5
245,6
0,1
2018
5,752.8
3,326.0
792,1
1,760.1
24,5
0,1
2019
3,734.1
3,458.3
477,6
1,534.8
16,1
0,1
Balakovo branch of Apatit
2017
451,0
4,156.7
858,3
742,5
2,6
344,2
542,2
2018
410,7
4,115.2
836,6
737,7
2,6
337,9
509,8
2019
410,8
4,293,7
782,8
724,1
2,6
339,9
448,5
Volkhov branch of Apatit
2017
639,7
202,8
150,0
362,1
0
0,01
56,7
2018
622,0
155,0
65,0
323,0
0
3,0
48,0
2019
610,4
161,7
73,3
149,8
0
3,4
163,9
Apatit
2017
1,334.4
4,886.0
855,0
2,684.6
1,0
125,7
3001,2
2018
1,043.3
3,764.4
1,221.8
2,980.1
145,2
5,4
3241,9
2019
1,356.3
3,297.4
1,476.3
2,309.2
37,8
2,8
3009,1
11,086.7
11,656.1
9,221,1
7,097.5
6,950.4
7,002.4
1,411.5
1,216.5
1,162.5
12,887.8
12,402.2
11,488.9
The Group takes part
in the nationwide Clean Air
initiative, which aims to drastically
reduce air pollution in major
industrial cities.
Total
2017
7,938.0
2018
7,828.5
11,438.5
11,361.1
2,596.1
6,191.7
3,6
715,5
3,600.2
2,915.6
5,801.2
147,8
371,3
3,799.8
2019
6,111.7
11,211.1
2,809.9
4,717.9
40,4
362,3
3,621.5
305-7
32,483.6
32,225.2
28,874.8
Solids
Sulphur dioxide
Carbon monoxide
Nitrogen oxides (NOX as NO2)
Hydrocarbons(w/o VOCs)
Volatile organic compounds (VOCs)
Other gaseous and liquid pollutants
1 . Tonnes of finished and semi-finished products
In 2019, gross pollutant emissions, including NOx and SO2, were down across the Group . The reduction was due to the measures
implemented by the Company and the favourable weather conditions .
Annual report | 2019Sustainability report 103
305-1
305-4
GREENHOUSE GASES
The Group is committed to tackling greenhouse
gas emissions and climate change . .
GHG emissions1, kg/t2
2015
125.34
2016
141.47
2017
145.95
2018
157.97
2019
143.27
PhosAgro’s strategic goal in this area was approved by the Sustainable
Development Committee of the Board of Directors in November 2019
and envisioned achieving the level of 142 kg of CO2 equivalent per tonne
of finished and semi-finished products by 2025.
To deliver on this objective the Company is implementing a number of projects
• elaborates a low carbon transition strategy and plan;
• develops an action plan for the low carbon transition strategy;
• defines GHG emission targets;
• conducts climate change scenario analysis;
• works out a plan for engagement with members of the value chain
and the engagement assessment framework .
The deadline is set for Q3 2020 .
PhosAgro takes part
in the Carbon Disclosure Project
(CDP) to reduce greenhouse gas
emissions. The Company received
a C score for its first submission to CDP
made in July 2019.
Greenhouse gas emissions
Apatit
Total GHG emissions, t
2017
3,354,121
2018
3,995,830
2019
3,746,069
Balakovo branch
of Apatit
Volkhov branch
of Apatit
Kirovsk branch
of Apatit
164,299
103,538
569,194
157,886
118,396
583,144
152,632
121,325
636,303
GHG emissions per unit of output, kg/t2
2017
272.432
2018
295.235
2019
261.915
30.718
183.86
28.427
181.497
25.650
197.368
54.244
53.042
54.702
Total
4,191,152
4,855,256
4,656,329
145.948
157.973
143.272
1 . Greenhouse gas emissions are given in СО2 equivalent . The calculation includes the following list of gases: СО2, СН4, NO2 .
2 . Tonnes of finished and semi-finished products
1 . Tonnes of finished and semi-finished products
Total
Kirovsk branch
Balakovo branch
Volkhov branch
Cherepovets
107
106
Share of recycled and decontaminated hazard class
1–4 waste, %
103
2017
26.3
2018
26.8
2019
34.5
We place major emphasis on safe operation of tailings, which are special
hydraulic structures and equipment for storage and disposal of mineral
processing wastes .
Based on the safety requirements for hydraulic structures approved
by the Federal Service for Environmental, Technological and Nuclear Oversight
(Rostekhnadzor) in 2018, the Company’s tailings have the highest safety
level . This means that they fully meet the design requirements and applicable
rules and regulations . The state of structures and foundations corresponds
to the requirements . The tailings are operated in accordance with existing
industrial safety laws and regulations as well as instructions of supervisory
bodies .
WASTE
Waste management is an integral part
of PhosAgro’s comprehensive environmental
management system .
Our strategic goal to 2025 is to increase the share
of recycled and decontaminated hazard class 1–4
waste to 40% .
To achieve the targets, the Company
is implementing a number of initiatives approved
in November 2019 by the Board of Directors'
Sustainable Development Committee:
1 . upgrading the aluminium fluoride plant
at the Cherepovets site to ensure the use of all
the fluorine extracted as part of phosphate
rock processing; reduce lime consumption
in treating effluents; and decrease the amount
of solid waste generation with RUB 9,761,000
spent in 2019;
2 . at the Kirovsk branch, we have launched
waste disposal and decontamination facilities,
including the UDT-1 thermal treatment facility
and the thermal waste decontamination unit
with high-temperature burning of exhaust
gases; the project will contribute to elimination
of waste disposal sites and make possible
the recycling of all kinds of waste (tires, railway
sleepers, and timber) belonging to PhosAgro
and other companies in the region .
Waste generation, kg/t1
Total
Kirovsk branch
Balakovo branch
Volkhov branch
Cherepovets
2013
4.566
10.845
0.828
0.005
0.454
2014
3.456
8.333
0.869
0.005
0.462
2015
3.578
8.881
0.725
0.004
0.470
2016
3.653
8.950
0.881
0.004
0.483
Waste generation (hazard class 1–4), kg/t1
2017
3.152
7.615
0.898
0.004
0.472
2017
8.871
0.308
2018
3.225
8.042
0.884
0.005
0.428
2018
5.779
0.632
2019
3.466
8.710
0.894
0.002
0.421
2019
6.113
0.635
2013
2014
159.467
169.423
3.684
2.991
2015
6.970
0.896
2016
10.978
0.458
828.231
868.426
24.579
29.498
28.951
22.239
19.495
1.382
10.205
1.631
7.791
0.881
4.763
0.616
12.203
0.925
7.810
0.913
3.441
2.187
5.168
Annual report | 2019Sustainability report Waste, t
WATER
Waste water discharge, m3/t1
303-4
109
108
Reused
Landfilled
Third party
Third-party
recycled
Third-party
decontaminated
Third-party
landfilled
Third-party
stored
Third-party
processed
Kirovsk branch of Apatit
2017
2018
2019
29,633,656.5
50,252,148.4
21,274,068
67,117,451
19,656,977
81,635,022.6
21,526.6
16,933.2
15,665.9
Balakovo branch of Apatit
22,312
4,780,492.2
11,649.7
2017
2018
2019
6,099
4,898,612.7
16,580.3
5,302,285.7
Volkhov branch of Apatit
2017
2018
2019
Apatit
2017
2018
2019
Total
2017
2018
2019
–
–
–
–
–
–
3,013,524.1
2,778,641.4
2,970,411.4
2,767,144.9
3,195,192.6
2,856,356.6
32,669,492.5
57,811,281.9
24,250,578.5
74,783,208.5
22,868,749.9
89,793,664.9
306-2
9,879.1
4,720.5
1,490.1
115.5
43.9
18,469.3
12,984.1
17,266.3
53,135.8
39,911.9
37,696.5
340.1
9.8
165.9
1.7
26.4
4.5
0.3
0.4
0.3
457.2
39.6
100.6
799.3
76.2
271.4
2,606.7
5,279.8
4,197.1
222.3
372
257
652.9
603.7
1,345
134.4
–
125.7
3,616.3
6,255.5
5,924.8
–
–
–
–
–
–
–
–
0.7
–
–
0.7
0
–
–
–
1,381.5
2,906.1
–
1,998.9
–
–
–
–
–
3,380.5
2,906.1
Production growth has resulted in increased waste disposal .
Waste generation by hazard class, t
Total
I class
II class
III class
IV class
V class
Kirovsk branch of Apatit
2018
2019
88,413,741.67
101,313,438.09
Balakovo branch of Apatit
2018
2019
4,909,840.64
5,321,693.716
Volkhov branch of Apatit
2018
2019
2,718.53
1,389.20
Apatit in Cherepovets
2018
2019
Total
2018
2019
5,798,521.75
6,020,722.293
99,124,822.59
112,657,243.30
0.24
0.494
2.074
2.091
0.425
0.3
4.741
4.751
7.48
7.636
0
9.039
0.048
0.555
0
0
1.252
1.17
1.3
10.764
237.414
334.52
38.027
8.453
0
0
981.185
1,595.652
1,256.626
1,938.625
6,710.49
88,406,793.53
7,047.985
101,306,046.05
123,472.40
4,786,328.10
116,008.999
5,205,673.618
594.9
1,345
2,123.20
43.90
45,581.40
72,323.84
5,751,953.20
5,946,796.88
176,359.19
98,947,198.03
196,725.824
112,458,560.4
Our waste water management approach is focused
on maximum reuse of water through closed-loop
water recycling system and proper treatment
of effluents discharged into water bodies
in addition to continuous monitoring of water
bodies in the regions of operation and aquatic life
recovery .
The Company’s strategic goal is to reduce waste
water discharge per tonne of output by 20%
compared to 2018 .
To deliver on our targets, PhosAgro implements
a variety of programmes approved by the Board
of Directors› Sustainable Development Committee
in November 2019, including:
1 . the Optimisation of Water Use by Apatit
in Cherepovets During Production Upgrade
in 2020–2025 – a targeted programme
with RUB 176 m in funding for phase 1 only;
2 . the Discharge Reduction and Effluent Quality
Improvement at the Kirovsk Branch of Apatit
in 2019–2020 – a targeted programme which
includes construction of a chemicals dosing
facility to treat effluents from the ANBP-2
tailings .
2017
7.476
Pollutant discharge, kg/t2
2016
1.3
2017
1.0
2018
6.039
2018
0.8
2019
4.684
2019
0.614
Treated effluents (reused in the production cycle),
mln m3
103
303-1
TOTAL
Kirovsk branch of Apatit
Balakovo branch of Apatit
Volkhov branch of Apatit
Apatit (Cherepovets site)
Water consumption, ths m3
TOTAL
Kirovsk branch of Apatit
Balakovo branch of Apatit
Volkhov branch of Apatit
Apatit (Cherepovets site)
1 . Excluding supplies to third parties
2 . Tonnes of finished and semi-finished products
2018
221.98
202.83
9.36
1.62
8.16
2018
34,510
9,864
7,632
1,936
15,078
2019
238.87
219.52
9.52
1.07
8.77
2019
33,763
5,563
8,256
2,168
17,776
303-5
The Company’s strategic goal
is to reduce waste water discharge per
tonne of output by 20% from 2018
to 2025 to achieve 4.8 m3 per tonne
of finished and semi-finished products.
The relevant steps towards this goal
were approved by the Sustainable
Development Committee of the Board
of Directors in November 2019.
Annual report | 2019Sustainability report PhosAgro supports aquatic life recovery .
303-2
Number of fish released into water bodies in the regions of operation as part
of environmental protection initiatives in 2019
Total water discharge by source and by site, ths m3
Indicator
Kirovsk Branch
of Apatit
Apatit
(Cherepovets)
Balakovo
Branch
of Apatit
Volkhov Branch
of Apatit
Total
111
110
303-4
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
Cherepovets site
Balakovo branch of Apatit
Kirovsk branch of Apatit
Water discharge into surface waters
Aquatic life
species
Juvenile carp
Juvenile carp
Juvenile silver
carp
Quantity
6,500
30,000
25,000
Water body
Gorky Reservoir
Volgograd Reservoir
Sterlet
yearling
84,353
Sukhona
River
Juvenile Atlantic salmon (2 yrs)
2,130
Umba River
Water discharge in 2019, mln m3
Waste water discharge
Discharged without treatment (% of total
water discharge)
Kirovsk
branch
of Apatit
137.4
2.6
Balakovo
branch
of Apatit
Volkhov
branch
of Apatit
Apatit
Total
0
0
0
0
14.8
0
152.2
2
303-3
Total water withdrawal by source, ths m3
Indicator
Kirovsk Branch
of Apatit
Apatit
(Cherepovets)
Balakovo
Branch
of Apatit
Volkhov Branch
of Apatit
Total
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
Surface water
Total water withdrawal
from surface sources, including:
144,920 111,106
22,110
24,291
7,201
7,619
2,069
2,163 176,300 145,179
process water
28,741
27,596
19,387
21,161
7,201
7,619
1,861
1,940
57,191
58,315
drinking water (internal use)
drinking water
(for supplies to third parties)
mining water
drainage water
rainwater
Ground water
Water withdrawal
from ground-water sources:
0
0
0
0
111,213
79,933
4,965
3,577
935
498
0
0
885
466
0
0
0
0
1,290
1,779
0
0
0
0
0
0
0
0
0
0
0
0
0
0
208
0
0
935
498
885
466
0 111,213
79,933
0
223
4,965
1,498
3,577
2,002
2,196
1964
0
0
742
879
0
0
2,938
2,842
Water received from third party suppliers
Total water received from third
party suppliers, including:
process water received
from suppliers
water from municipal supply
(internal use)
water from municipal supply (for
supplies to third parties)
waste water from other waste-
water discharge systems
37,129
32,334
7,661
9,572
18,367
19,016
7,125
8,530
9,263
7,824
457
560
0
0
9,500
5,494
23
56
34
448
0
0
0
0
0
0
0
0
0
0
138
177
44,927
42,082
0
0
25,491
27,546
138
177
9,857
8,560
0
0
0
0
23
34
9,556
5,943
Total water discharge into
surface waters:
mining water
drainage water
waste water from other waste-
water discharge systems
Supplies to third parties
Total water supplies to third
parties:
waste water to the public
water discharge system (after
use)
waste water to the public
water discharge system
(unused)
water supplies to third parties
from surface sources
water supplies to third parties
from municipal sources
171,787
137,386
13,694
14,837
111,213
79933
4,965
9,500
3577
5,494
0
0
0
0
0
0
0
0
0
0
0
0
0
0
141
0
0
0
0
0
0
0
185,621
152,223
111,213
79,933
4,965
9,500
3,577
5,494
2,595
2,455
999
1,251
312
242
129
171
4,035
4,118
2,595
2,455
422
302
312
242
129
171
3,458
3,170
0
0
0
0
0
0
56
448
498
466
23
34
0
0
0
0
0
0
0
0
0
0
0
0
56
448
498
466
23
34
TOTAL
174,382 139,841
14,692
16,087
312
242
270
171 189,656 156,341
ENERGY EFFICIENCY
To compensate for the energy intensive nature
of our business, at PhosAgro we are constantly
seeking ways to improve productivity and use
resources more efficiently. Crucial to this effort
is gaining a thorough understanding of how
we consume energy .
To this end, the Company focuses its work
in the following key areas:
•
• expanding our own power-generation
increasing energy efficiency;
•
capacities;
recycling waste to generate heat by using
exhaust gases from gas turbines to produce
steam;
• optimising energy use from different
sources .
In 2019, PhosAgro’s
production facilities were
40.2%
self-sufficient in electricity.
We continued our work
to increase efficiency across
the Group’s production
sites.
PhosAgro energy consumption in 2019
Electricity,
ths kWh
Natural gas,
mln m3
Liquefied
natural
gas, t
Heat
energy,
ths Gcal
Fuel,
ths tons
Diesel,
ths tons
Total cost,
RUB bln
Total consumption
own generation
purchased
Consumption per tonne
of output
3,735
1,500
2,235
0.115
2,704
3,135
0.083
0.096
11,331
10,924
407
0.349
154
47
0.005
0.001
103
302-1
306-1
302-1
302-3
TOTAL
184,246 145,404
29,770
33,863
7,944
8,498
2,206
2,339 224,166 190,104
Cost, RUB bln
10.286
12.058
0.091
10.74
2.54
2.100
37.810
Annual report | 2019Sustainability report PhosAgro energy consumption in 20181
KEY EVENTS IN 2019
113
112
Electricity,
ths kWh
Natural gas,
mln m3
Liquefied
natural
gas, t
Heat
energy,
ths Gcal
Fuel,
ths tons
Diesel,
ths tons
Total cost,
RUB bln
Total consumption
Own generation
Purchased
Consumption per tonne
of output
3,651
1,485
2,166
0.119
2,667
2,705
0.087
0.088
10,968
10,580
388
0.357
148
40
0.005
0.001
Cost, RUB bln
8.919
11.470
0.076
10.00
2.20
1.769
34.436
302-4
REDUCTION IN ELECTRICITY CONSUMPTION
Our programmes
Facility. Project
Effect
Project costs
Project Deadlines
Kirovsk
Upgrade of the lighting system
to LED at ANBP-3 of Apatit’s
Kirovsk Branch
The project helped achieve a 0.505 MW reduction
in electric capacity used for industrial lighting at ANBP-3
of Apatit’s Kirovsk Branch compared to 2018, which
accounts for around 0.3% of total consumption.
Cherepovets
Launch of SK 3300 sulphuric
acid production plant
Balakovo. Kirovsk
Construction of a 100 kW solar
power station
Volkhov
Construction of a thermal
power station with a 34 MW
high-efficiency electric turbine
and a water treatment system
at Apatit’s Volkhov Branch
The new SK 3300 plant produces enough process steam
to ensure full generating capacity utilisation at Apatit’s
thermal power station, which, in turn, leads to lower
natural gas consumption by its boilers.
The solar power station pilot running at two production
sites of the holding company is geared towards assessing
the potential of renewable solar energy and the viability
of a further scale-up.
The utilisation by the thermal power station at Apatit’s
Volkhov Branch of the process steam that is a by-product
of the sulphuric acid production plant will help solve
the problem of supplying all of the site’s consumers
with low-grade steam and significantly reduce the need
for the purchase of electricity from third-party power
distribution companies.
RUB 0.082 bln
RUB 10.5 bln
RUB 0.01 bln
RUB 3 bln
Q4
2019
Q1
2020
Q3
2020
Q2
2021
PhosAgro joined
the Carbon Disclosure Project (CDP),
an international initiative to reduce
greenhouse gas emissions.
A report on PhosAgro’s climate change initiatives in 2019 drafted
and submitted via’s CDP’s online response system. "C" score received.
Work started to draft the Company’s GHG reduction strategy to 2020
and 2030 along with the regulations on monitoring GHG emissions,
and the GHG reduction action plan.
PhosAgro backed the landmark EU
decision to put a cap on phosphate
fertilizers with high cadmium
content from 2022
and introduce voluntary "Low Cd Content" labelling for fertilizers
with a cadmium content of less than 20 mg/kg. We also supported
the initiative by the Food and Agriculture Organization of the United
Nations (FAO) to enshrine in the International Code of Conduct
for the Sustainable Use of Fertilizers recommendations to governments
worldwide to introduce restrictions on fertilizers with a high content
of toxic impurities.
KEY PROJECTS
Environmental impact reduction
UPGRADE OF THE SK-600/3
SULPHURIC ACID PLANT AT APATIT
(CHEREPOVETS) IN 2018–2019
as part of the nationwide Clean Air initiative .
Environmental effect:
Sulphur dioxide emissions from source
0614 down by
39.49%,
or 892 t compared with 2017
Investments in the project totalled
2.7
RUB bln.
SO2 emissions, kg/t
before upgrade
after upgrade
level set in the Best Available
Technique guidelines
(ITS2-2015)
1.540
0.785
2.615
1 . The heat and electricity data provided in the Company’s 2018 annual report may differ from those disclosed in this table because the Company harmonised
calculation methods for power consumption across all its production assets in the reporting year .
Annual report | 2019Sustainability report 115
114
403
HEALTH
AND SAFETY
REVIEW
GOALS TO 2025
reduce workplace injuries
by 10%
annually
reduce the number of incidents
by 10%
annually
improve the health and safety
management system and culture
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
TARGETED PROGRAMMES
TO ACHIEVE OUR STRATEGIC GOALS
Improving safety of working at heights
Use of LOTO system
Improving gas safety
Improving transport safety
Identifying and managing production process risks
Developing gas and mine rescue, fire-fighting and prevention activities
Annual report | 2019Sustainability report 103
403-6
INTEGRATED HSE MANAGEMENT SYSTEM
We view the life and health
of our people as our top priority.
As part of our commitment,
we focus on creating a safe
and healthy working environment
for our employees, contractors
and suppliers. We also make
it an essential component
of our sustainability strategy.
MANAGEMENT APPROACH
We place a great emphasis on making our health
and safety system compliant with applicable
laws and the highest international standards . We
carefully monitor and seek to implement the best
practices in this area .
On top of that, we are consistently improving
our safety culture, employee responsibility
and awareness, hazard identification procedures
and danger prevention measures by putting
managers at all levels in charge and applying
the most advanced health and safety techniques .
Our mission is to continuously identify and reduce
health and safety threats to our employees,
contractors and visitors to the Company’s sites .
Our aim is to completely eliminate fatalities, take
a leading position in terms of key health and safety
indicators, and achieve the highest standards
in this domain .
In 2019, we continued to enhance our health
and safety performance to help the Company
fulfil its strategy. We define relevant goals
and objectives, both strategic and operational,
based on huge volumes of data derived
from internal and external audits, inspections,
incident investigations, and employee feedback .
We have adopted a Health and Safety Strategy, which defines key focus areas
and initiatives to reduce the risks associated with various operations .
The Strategy focuses on the following key areas:
reduce workplace injuries (by 10% annually)
•
reduce the number of incidents (by 10% annually)
•
improve the health and safety management system and culture .
•
To achieve these goals, we run the following targeted programmes:
•
Improving the safety of working at heights (theoretical course, drills
in the Vysota (Height) training centre and with mobile simulators)
• Use of the LOTO system (auxiliary safety equipment)
•
•
•
• Developing gas and mine rescue, fire-fighting and prevention activities.
Improving gas safety
Improving transport safety
Identifying and managing production process risks
Health and safety management principles
Fortifying health and safety is one of our key priorities and an essential component
of our sustainability strategy . Without healthy, motivated and engaged employees
working in safe conditions, we would not be able to move forward and develop
our operations, introduce innovations and build strong relationships with local
communities and stakeholders . This is why we are fully committed to creating
a safe and healthy working environment and improving our health and safety
practices .
internal investigations of all incidents;
At PhosAgro, we use management techniques that proved to be effective
in many companies . These include:
•
• prequalification of contractors to assess their level of compliance;
• health and safety training for employees;
• PPE matrices .
Apatit employees enjoy additional healthcare benefits, including access
to gyms and swimming pools located both on-site and in town . At its facilities,
the company organises various sports activities, such as futsal, volleyball, etc .,
and offers its personnel health resort treatment.
As part of healthcare initiatives, staff canteens provide nutrition according
to Diet No . 10 targeting patients with cardiovascular diseases .
The company uses corporate media, information stands, lectures
and brochures to distribute information on all its initiatives .
117
116
Health and safety management system
We pay special attention to making our health
and safety system compliant with applicable
laws and the highest international standards .
To this end, we have introduced a multi-tier health
and safety (OHS) management system involving
managers of all levels . Following the introduction
of a public scrutiny mechanism in 2019, OHS
management now involves dedicated officers
and employees of all business units .
Our executives together with blue- and white-
collar staff take OHS training as required
by the national laws, as well as additional safety
training .
The Company has introduced a system of audits and inspections to ensure
compliance with statutory requirements and corporate standards . Apatit,
our largest enterprise, is certified for compliance with OHSAS 18001.
403-1
403-8
An integral part of our OHS management system is the Health and Safety
Committee, which makes it possible for operational and non-operational
managers and employees to take part in relevant activities .
In its work, the Committee relies on the principles of social partnership .
Its members interact with the Company’s executive body responsible for health
and safety, state supervisory bodies overseeing compliance with Russian
health and safety laws, other government’s watchdogs, and the Company’s
trade union .
1
Health and safety management system
Organisational unit
Key responsibilities
Board of Directors
Environmental, Health
and Safety Committee
Management Board
Management
• Sets strategic priorities and policies
• Holds management accountable for health and safety monitoring
403-3
and performance
• Receives quarterly reports on health and safety performance
• Defines and oversees the health and safety policy
• Reviews all on-site incidents involving people and machinery
on a weekly basis
• Supervises OHS management functions across the Group’s
companies to implement OHS policies and strategies
• Collects data and prepares OHS reports for the Management Board
OHS Department
and the Health and Safety Committee
Operations
Heads of production sites
Operational OHS staff
Local OHS management
functions
• Cooperates with external consultants to implement the best
practices of OHS management
• Conducts audits and inspections at the Company’s sites
• Oversee OHS policies and strategies at respective production sites
• Develop and implement response measures following internal
and external audits and accident investigations
• Monitor the site’s compliance with OHS regulations and corporate
standards
• Develop targeted programmes, conduct training and stage
•
initiatives
Interact with relevant regulatory authorities on behalf of the site
and facilitate inspections
• Conduct internal inspections and audits and present analytical
reports to the local management
1 . For more information on PhosAgro’s OHS system, see Apatit’s Industrial Safety Policy Statement and Quality, Environmental and OHS Policy .
Annual report | 2019Sustainability report 403-2
The Company’s operations are regulated
by the Russian health and safety laws, as well as:
• health and safety SOPs at the facility (shop)
level;
• production SOPs;
• worker health and safety instructions;
• corporate standards;
• process regulations;
• accident management action plans, etc .
To improve OHS efficiency, automate
and streamline the relevant processes, we have
successfully introduced Safety and Instructions
(Shift Assignments) management systems .
In line with statutory requirements, the Company
is subject to external audits by Russian
regulatory authorities, including Federal Service
for the Supervision of Environment, Technology
and Nuclear Management (Rostekhnadzor),
State Labour Inspectorate, Federal Service
for Surveillance on Consumer Rights Protection
and Human Wellbeing (Rospotrebnadzor),
and the Ministry for Civil Defense, Emergencies
and Elimination of Consequences of Natural
Disasters (EMERCOM) . We may also engage
consulting companies to conduct additional
external audits, or organise them as part
of a special assessment of workplace conditions .
We also run internal audits conducted by our OHS
Department, managers and employees exercising
production H&S control . The results of all internal
and external assessments and audits are recorded
in the Safety and Instructions (Shift Assignments)
management systems and serve as the basis
for analysis, gap identification and elimination
monitoring . The Company has a procedure
in which information about incidents is transmitted
from eyewitnesses to the supervisors in charge
and from those supervisors to the dispatcher
of the respective enterprise . Next, the company
manager transmits information on the established
list using text messages and phone calls .
Industrial accidents and incidents are then
investigated in accordance with legislative
requirements and procedures for conducting
internal investigations in order to determine
the root causes. The Company encourages its staff
to disclose information on the potential sources
of danger to employee health and life .
403-7
Performance monitoring and measurement are key
prerequisites for achieving sustainable long-term
results in line with our OHS strategy .
By introducing Safety and Instructions (Shift Assignments)
management systems, we achieved the following goals
and objectives:
GOALS
•
• Cut down administrative expenses related to the safety of employees
Improve the manageability of employees and equipment safety
and equipment
• Obtain reliable and complete information about the safety
of employees and equipment
OBJECTIVES
• Centralised health and safety (industrial and fire safety) management
• Faster collection, processing and analysis of employee
and equipment safety data
• Real-time reporting across the Group, including reports
to government authorities
• 24/7 access to information about every employee and site
Risks
We perform risk assessment and identify material risks using our own
methodology. Following hazard identification and risk assessment, the unit’s
OHS officer compiles a list of local occupational risks, which is then used
as a basis for the Company’s list of material occupational risks .
Risk assessment takes into account the following aspects:
• degree of personnel exposure;
•
•
• compliance with the applicable regulatory and other OHS requirements .
impact on personnel;
frequency of occurrence;
The list of material occupational risks is available on our intranet site . We
update the lists of hazards and risks to factor in new inputs .
Emergency response procedures
At our sites, we have introduced the following emergency response
and prevention measures compliant with the Russian laws:
• accident management action plans for all hazardous industrial facilities
•
in line with the Russian regulatory requirements;
training sessions, test alerts for different scenarios, and emergency
response exercises, with EMERCOM and other services also taking part;
• Apatit’s programme for developing gas and mine rescue fire-fighting
and prevention activities for 2019–2021 (approved and ongoing) .
119
118
Road traffic safety
In 2019, we carried on with our efforts to ensure safety of passenger and cargo
transportation, focusing, among other things, on bus transportation
of our employees .
403-4
403-5
403-8
The steps taken include:
• GPS and GLONASS speed detection;
• monitoring compliance with safety rules for passenger pick-up / drop-off
•
at Apatit and its branches;
introducing speed limits and installing speed cameras at the most dangerous
sections of the bus routes .
On top of that, we pay due attention to the safety of passenger transportation
on-site .
• We introduced uniform parking rules at Apatit and its branches to prevent
vehicle reversing accidents .
• The use of safety belts is mandatory for drivers and passengers when on-site .
• Road safety regulations are now part of the introductory safety briefing
for our employees and contractors .
• We organised a training session on safe bus driving for drivers involved
in employee transportation .
Health and safety training programmes
PhosAgro Education Centre organises OHS
training, including industrial safety pre-
certification sessions, and drills in the Vysota
training centre, to develop employee hands-on
knowledge and skills .
All our employees, from managers to blue-collar
staff, receive health and safety briefing and training
as required by the Russian laws . On top of that,
we offer a number of additional in-house courses.
job permits for electrical works,
Additional (thematic) training courses:
• safe operation of conveyors,
•
• safe detection and elimination of misfires
in the pit face of the Vostochny mine,
• signals used in underground blasting,
• briefing methodology, and others.
To improve the OHS training and remind employees
about workplace safety, PhosAgro Education Centre
developed animated videos on the following topics:
• movement of heavy-duty dump trucks along
service roads of the Vostochny mine in adverse
winter conditions;
re-railing a derailed locomotive or railcar;
response to misfires in the pit faces;
•
•
• safe operation of conveyors;
• moving around the site;
• cargo handling;
• safe behaviour in the vicinity of mine vehicles
with various technical, design and operational
characteristics .
197
employees
attended workshops and hands-on
training sessions in 2019
Annual report | 2019Sustainability report 403-9
2019 HIGHLIGHTS1
Accidents
Kirovsk branch of Apatit
Apatit
Balakovo branch
of Apatit
Volkhov branch
of Apatit
KEY PROJECTS
Apatit’s programme for the development of gas and mine rescue, fire-fighting
and prevention activities for 2019–2021
121
120
2015
2016
2017
2018
2019
8
8
2
2
5
Apatit and its branches
2015
10
2016
2017
2018
2019
8
5
4
9
2
1
1
1
1
3
4
1
2
1
2
4
1
1
3
1
1
1
1
1
1
1
minor injuries
major injuries
fatalities
LTIFR per 1 million hours in 2019
LTIFR
Apatit
Kirovsk branch of Apatit
Balakovo branch of Apatit
Volkhov branch of Apatit
0.56
1.12
0.48
0
Lost time injury frequency rate
(LTIFR per 1 million working
hours) in 2019
Total:
Apatit
Kirovsk branch of Apatit
Balakovo branch of Apatit
Volkhov branch of Apatit
0.75
In 2019, 50% of accidents involving employees
were due to falling from height or getting injured
while moving .
The total number of man-hours used in LTIFR calculation is 18,567,299 .61
and does not include the man-hours worked by contractor employees .
Starting 2020, the Company plans to broaden the reporting scope
and calculate LTIFR for contractor employees as well .
KEY EVENTS
In February 2019, Cherepovets hosted a health and safety conference for the Company’s managers
and OHS officers to discuss relevant initiatives.
PhosAgro delegation took part in the Russian Health and Safety Week, an international event
to discuss and present the latest occupational health and safety trends, development prospects,
and workplace healthcare initiatives. The event’s organiser was the Russian Ministry of Labour
and Social Protection.
The reporting year saw a public scrutiny system come into action. It involves OHS and employees
of units and contractors.
The system envisages the following measures:
•
implementation of an emergency notification system for hazardous situations and the actions
of the Company's and contractors' employees;
• engagement of all employees in safety management;
• creating a safe working environment.
1 . Based on the data on Apatit in-house staff (including standalone business units) and its branches
The program focuses on:
•
improving training facilities and equipment of gas/mine rescue and fire-
fighting units;
• enhancing the quality of hands-on training for young hires;
• ensuring compliance with gas, mine and fire rescue regulations
and personnel training;
re-equipping gas/mine rescue and fire-fighting units.
•
The programme’s budget is
236.95
mln RUB
Achievements of 2019:
• Relevant units’ headcount increased.
– Branches’ fire and gas rescue squads are fully staffed
• Special equipment and machinery purchased
– Avtospectr Mobicom 2811DB – 02 emergency vehicles
– Lada Largus vehicle
– GAZ emergency vehicle
– KAMAZ ATs 4.0-40 fire truck
– MSA Auer GmbH AirMaXX breathing apparatuses
– A fire-fighting and rescue simulator unparalleled in Russia.
– The simulator is designed for drilling basic gas rescue and gas hazardous
operations along with some other types of emergency activities, including
search, rescue and fire extinguishing ones, operations in a confined space
and at height, and the evacuation of the injured by specially equipped
rescue teams as part of emergency response
• Renovation of the gas rescue building completed at the Volkhov branch
• Personnel training carried out
– 103 employees (100% of the required number) passed certification
to perform emergency rescue operations, including:
– fire-fighting and emergency response supervision – 30 employees
– search and rescue operations – 31 employees
– fire-fighting rescue operations – 31 employees
– gas rescue operations – 72 employees
In 2019, the spending amounted
to
123.93
mln RUB
Annual report | 2019Sustainability report 123
122
PEOPLE
DEVELOPMENT
GOALS TO 2025:
Raising employee satisfaction
and loyalty
to 65%
Increasing average annual
training hours per employee
by 50%
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS:
WE SEEK TO DELIVER
ON OUR TARGETS BY RUNNING
THE FOLLOWING PROGRAMMES:
Implementing a remedial action plan based on employee
survey results
Developing and implementing e-learning modules on blue-
collar jobs, occupational safety, and managerial skills
Developing and implementing online training courses
on personal competencies
Developing a system of corporate libraries, guidelines,
and knowledge management at large
Annual report | 2019Sustainability report 125
124
Recruitment
Our innovative recruitment process relies
on the continuous monitoring of the labour market
in Russia and beyond for skilled staff and efficient
managers with experience at leading global
companies, determined to excel in their roles
and be one step ahead of the curve .
PhosAgro seeks to attract skilled staff and efficient
managers and provide opportunities to fully unlock
their potential .
We believe in the value of enduring relationships
and reward long serving employees’ loyalty
and commitment, while also looking to attract
and recruit young talent .
Our talent attraction and recruitment priorities:
• We cooperate with schools across our footprint to create a favourable
environment for improving educational standards and providing targeted
career guidance to final-year students.
• We cooperate with technical colleges in our regions of operation
to create a pipeline of skilled employees with relevant competencies who
are competitive in the labour market, understand related professions,
and have what it takes to pursue career opportunities .
• We cooperate with universities to fill the most relevant jobs by attracting
and retaining talented graduates .
If two or more candidates qualify for a job, we are more likely to pick the one
who is either:
• a young talented professional (a programme for attracting, mentoring
and training high-potential university graduates); or
• an employee included in our Talent Pool (a programme for those looking
to develop professional and managerial competencies for career growth) .
Employee loyalty and satisfaction index, %
Average annual training hours
per employee (excluding paid
educational leave hours)
80
70
60
50
40
30
20
10
0
123
65
160
140
120
100
80
60
40
20
0
2013
2014
2015
2016
2017
2018
2019
2025
(Goal)
2014
2015
2016
2017
2018
2019
2025
(Goal)
103
INTEGRATED HR MANAGEMENT FRAMEWORK
Our HR management principles
As part of our employee value proposition, we offer:
• a chance to work for one of the world’s largest companies;
• competitive and fair pay;
• professional and creative growth opportunities;
• a selection of training and retraining programmes;
• a discrimination-free working environment;
• a range of social benefits, and employee support and health programmes;
• a compelling employer brand;
• a comprehensive incentive programme aligned with the Company’s goals;
• a framework for assessing each employee’s individual contributions;
• a fair and robust framework for assessing people development;
• equitable remuneration and performance rewards .
In keeping with our commitment to generally accepted ethical business
standards, we pay special attention to developing, implementing
and overseeing employee social security programmes .
PhosAgro relies on talented,
professional, and committed
employees sharing
our corporate values.
They are the backbone
of our success.
In November 2019, the Board of Directors approved a new version
of the Company’s Personnel Management Policy, introducing additional
guarantees to protect human rights, ensure zero discrimination, and prevent
child and forced labour . It also approved a transparency statement
under the UK Modern Slavery Act .
We believe that a robust performance management system that covers
all levels – from individual employees to the Company as a whole – is key
to PhosAgro’s continued growth in line with its goals and vision .
> 5,000
employees received additional
human rights and corporate ethics
training in 2019, which is set
to continue in 2020
Annual report | 2019Sustainability report Non-discrimination policy
and human rights
PhosAgro is committed to respecting employees’
human rights as required by the ILO Declaration
on Fundamental Principles and Rights at Work,
including zero discrimination, not using child
or forced labour, respecting their right to exercise
freedom of association and collective bargaining,
and creating a safe and favourable working
environment for its and its subcontractors’
employees .
PhosAgro appreciates
and encourages diversity among
its employees. We maintain
our commitment to an equal
opportunities policy and do
not tolerate any discrimination
or privacy violations in respect
of our employees.
Our goal is to keep our working environment free
from restrictions based on nationality, gender, age,
faith or other grounds as required by the applicable
laws . Any decisions regarding promotion, hiring,
remuneration or benefits are based solely
on the employee’s qualifications, performance,
skills and experience .
We expect our employees to treat their colleagues
and everybody else, including customers, suppliers
and other stakeholders, with due professionalism,
respect and fairness .
We consider unacceptable any restriction
of employee rights or freedoms, whether
at workplace or in any other job-related
environment .
Open communication channels
Access to multiple communication and feedback channels within
the Company allows our employees to resolve employment and other job-
related issues . Some of the formats are Q&As in the corporate newspaper,
and town-hall meetings for staff and management.
Any employee or other stakeholder can use PhosAgro’s whistle-blower
hotline to report human rights violations or discrimination of any nature
or to communicate any other issues or concerns related to employer-
employee relationships .
Code of Ethics
PhosAgro adopted a Code of Ethics in 2014 and updated it in 2018 . It applies
to all employees and is the Company’s primary document for promoting
its corporate culture . The Code clearly outlines all basic requirements
for Company employees and establishes rules and regulations for individual
and collective behaviour within the Company . It covers all professional
and business relationships, both at PhosAgro and with business partners
and other external parties . Commitment to these principles consolidates
the values of our Company to ensure that all our employees take pride
in their work and are keen to communicate with colleagues, feel comfortable
in a team and can grow both professionally and personally . They help
PhosAgro to avoid unjustified risks, maintain long-term business growth,
strengthen our position in the Russian and foreign markets, and increase
the Company’s value .
127
126
2019 HIGHLIGHTS1
HR metrics
In 2019, the Company’s headcount (at Apatit and its branches)
averaged 10,882 .
Most PhosAgro employees work on a full-time (99 .93%)
and permanent (94 .18%) basis .
Company's headcount by region, people1
Saratov
region
1,178
Murmansk
region
5,023
Company’s average headcount for 2019
Average overall headcount
of PhosAgro companies
17,484
people2
10,882
Moscow
region
95
Leningrad
region
817
102-7
102-8
Vologda
region
3,769
Employees by gender and age, %1
Employees by category, %1
Men
Women
Men
Women
Below 25
Below 25
25–34
25–34
35–44
35–44
45–55
45–55
Above 55
Above 55
Men
3.1
22.3
21.6
12.5
3.1
Employees by education, %1
Secondary
Higher
Higher (unfinished)
Secondary vocational
Basic vocational
Women
1.9
11
13.3
9.2
2.1
13.1
49.0
0.4
17.0
20.6
Blue-collar workers
White-collar workers
Executives
Men
40.8
11.5
10.3
Women
17.4
17.0
3.1
Key personnel turnover indicators, people1
401-1
2017
1,985
2018
1,720
2019
2,274
1,791
1,699
Turnover
5.6%
6.0%
1,610
7.3%
New hires
Leavers
1 . To ensure compliance with the materiality principle and comparability with historical data, the data is disclosed only on Apatit, including its branches
and standalone business units . The disclosure does not include information on other companies that are part of the group to which Apatit and PhosAgro belong .
Starting with the 2020 reports, the scope of disclosure will cover all of PhosAgro Group employees .
2 . Employees of all companies that are part of the group to which Apatit and PhosAgro belong .
Annual report | 2019Sustainability report Average monthly pay, RUB
2013
44,979
2014
50,296
2015
61,495
2016
74,888
2017
76,526
2018
80,672
2019
87,191
129
128
PEOPLE DEVELOPMENT
Incentives and rewards
Our robust system of rewards is aligned
with the Company’s performance and motivates all
employees to improve their performance in order
to achieve our business goals .
It ensures:
• decent pay;
•
implementation of incentive programmes
using a transparent system of KPIs to calculate
managerial rewards;
implementation of incentive programmes
for blue-collar target delivery;
•
202-1
• availability of financial and non-financial
rewards;
• better quality of life and more creative
opportunities for employees along
with development of urban communities across
the Company’s footprint,
• availability of benefits for certain employee
categories;
• adherence to global best practices on benefit
packages .
Ratios between the standard entry-level
wage and the established minimum wage
in the Company’s primary regions of operation,
including gender differentiation
Region
Saratov region
Murmansk region
Moscow region
Leningrad region
Vologda region
Men
1.84
1.31
4.31
2.13
1.90
Women
1.82
1.21
3.36
2.23
1.59
202-2
103
Staff and senior management (N–N-2) hired from the local community1 at locations
of significant operations as at 31 December 2019, %
Share of staff hired from the local community
in total headcount
Share of senior management hired from the local community
in total headcount
94.5
87.5
89.0
91.8
96.8
92.9
Vologda region
Leningrad region
Moscow region
Murmansk region
Saratov region
Average
57.1
33.3
92.3
57.1
44.4
58.5
The Company’s key (significant) regions
of operation are the Murmansk, Vologda,
Leningrad and Saratov regions . Our aim is to work
in line with their interests . As a major contributor to the local economies
and one of the largest taxpayers in these regions, PhosAgro makes
a significant impact on their social development, while also helping to preserve
their environment .
Social benefits
Our sustainable development is closely linked
to improving the well-being of our employees .
The Group's social policy is implemented through
targeted programmes and seeks to enhance
individual and team motivation, while also
providing our people with a competitive social
package .
Our major social programmes:
Health and Leisure
The programme aims to strengthen our people’s health, prevent occupational
diseases, ensure a full rehabilitation and boost performance through healthy
nutrition, recreation and fitness.
401-2
Improvement of Working Conditions
The programme aims to enhance labour productivity and operating culture,
increase safety, optimise workplaces and streamline the approach to arranging
working and amenity areas .
Corporate Housing Programme
The programme aims to improve living conditions of employees to attract
and retain skilled talent and incentivise them to better their performance .
Social Benefits
The programme aims to ensure sustainable labour relations and social security
and covers employee incentives and financial aid.
Social expenses, RUB mln
Financial aid to employees
48.29
41.35
41.83
Recreation, rehabilitation, health resort treatment and VHI
389.9
Improvement of working conditions
364.84
371.86
326.61
Corporate housing programme
76.52
68.02
100.26
Other social benefits and guarantees
231.303
238.162
Corporate and cultural events
152.014
150.776
121.554
385.76
134.47
259.2
1 . Employees hired from local communities are those whose registration address matches the region where the company (branch, standalone business unit)
of their employment is located .
2019 budget
2019 actual
2020 budget
Support of the trade union (special purpose funding and bonuses)
163.616
164.169
171.308
Annual report | 2019Sustainability report 201-3
Coverage of defined benefit pension plan obligations, RUB mln
Current value of employee benefit obligations
(private benefit coverage for newly retiring employees)
Retirement-related obligations
(other than employee benefit obligations)
Actual pension payments,
2019
Vologda region
Leningrad region
Murmansk region
Saratov region
Total
• Payment of retirement benefits
• Merit benefit plans
• Financial aid to retired former employees
• Payment of retirement benefits
• Merit benefit plans
• Financial aid to retired former employees
• Payment of retirement benefits
• Merit benefit plans
• Financial aid to retired former employees
• Payment of retirement benefits
• Merit benefit plans
• Financial aid to retired former employees
• Payment of retirement benefits
• Merit benefit plans
• Financial aid to retired former employees
10.95
16.57
17.68
0.71
0
2.41
32.53
0
30.80
0.81
0
2.17
45.00
16.57
53.06
Total
45.20
2.98
63.33
2.98
114.49
401-3
Return to work and retention rates of employees who took parental leave, by gender, people
Number of employees
on maternity leave
and parental leave
as at 31 December 2019
Number of employees
on maternity leave
and parental leave
between 1 January 2019
and 31 December 2019
Number of employees who
returned to work after
maternity leave and parental
leave between 1 January 2019
and 31 December 2019
men
women
men
women
men
women
0
5
0
0
1
22
143
2
32
189
0
6
0
0
1
41
191
4
44
263
0
0
0
0
0
14
45
2
11
64
Saratov region
Murmansk region
Moscow region
Leningrad region
Vologda region
131
130
We use our PhosAgro Education Centre to help our staff prepare for both
external (legislative/regulatory) and internal (related to optimisation, changes
to production or business processes) changes . The Centre helps run our long-
term HR initiatives, such as PhosAgro Classes, High-Potential Graduates
and the Talent Pool programme, and it holds competitions for professional
skills .
404-2
PhosAgro relies on its Talent Pool initiative as a means of identifying
talented staff with the potential to expand their roles and step into senior
positions, and it provides additional training to help them achieve these
goals . The programme includes management training courses on personal
and business skills such as decision-making, leadership and delegation,
conflict management, project management, communication skills and staff
mentoring .
In 2019, we started building a talent pool for senior executive roles
and launched comprehensive training programmes in partnership
with Skolkovo Moscow School of Management and International
Management Institute LINK (the UK’s Open University) . The programmes
help current and future managers expand their thinking, learn about new
tools and approaches and put the best fitting ones into practice. More than
60 heads of business units completed the training course, including classroom
modules, self-study using a variety of materials, and project-based learning
under the mentorship of experienced business coaches .
>60
managers
improved their professional skills in 2019
by completing courses in Russia’s leading
business schools
Our focus on training
and developing our people also
helps us hedge against a potential
shortage of talent at all levels.
Our corporate training framework relies
on the following principles:
• clear alignment with the Company’s strategy;
• assessing and prioritising actual training needs
of various staff categories;
• planning, coordination, quality and efficiency
•
audit;
introducing the most advanced and efficient
tools from an economic and methodological
perspective;
• developing new formats;
• using an individual approach to young talent;
• proactively identifying and developing new
leaders to succeed current ones .
Retraining 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
PhosAgro’s long-term viability . Our focus
on training and developing our people also helps
us hedge against a potential shortage of talent
in the future . One aspect of this that we prioritise
is including schools, universities and our own
staff programmes in our recruitment and training
initiatives .
103
Training and evaluation
We seek to attract skilled staff and efficient
managers and provide opportunities to fully
unlock their potential . Our focus on training
and developing our people also helps us hedge
against a potential shortage of talent at all
levels . We are introducing the best educational
and development practices, creating
professional competency models, expanding
online and distance learning opportunities and automating the entire HR
management cycle to support PhosAgro’s transformation into a completely
new self-learning organisation . We strive to develop our internal
communications, and make our training and assessment services as friendly
and accessible as possible . There is a talent pool programme in place
to encourage our people to grow professionally . We rely on a talent pipeline
of staff with the potential to take on leadership and/or more technically
challenging roles to ensure PhosAgro’s long-term viability .
Number of attendances of professional training courses
2017
397
1,360
2,910
5,133
9,800
2018
487
1,469
1,309
3,548
6,813
2019
552
2,393
2,771
8,769
Volkhov branch
Balakovo branch
Kirovsk branch
Apatit
14,485
Annual report | 2019Sustainability report 404-1
Total number of training hours
2017
2018
2019
(excl.
educational
leave)
Average training
hours per employee
in 2019 (excl.
educational leave)
2019
(incl.
educational
leave)
Average training
hours per employee
in 2019 (incl.
educational leave)
Volkhov branch of Apatit
Balakovo branch of Apatit
29,753
82,558
30,145
81,399
Kirovsk branch of Apatit
425,829
313,125
Apatit
Total
425,829
367,138
963,969
791,807
1,004,014
41,533
92,531
365,680
504,270
53.02
78.52
72.82
129.36
92.26
50,445
108,443
414,104
566,134
1,139,126
64.40
92.03
82.46
145.23
104.68
Training expenses, RUB
Training expenses
2017
153,389,970
2018
170 ,505,002
2019
236,089,189
2019
272,898,951
including educational leaves
Training expenses per employee
2017
14,604
2018
16,064
2019
21,695
2019
25,078
including educational leaves
Personnel evaluation
To assess HR management and make efficient
decisions, we continuously monitor relevant
metrics and analyse the structure of staff costs, labour productivity, along
with the performance of social, training and other programmes .
404-3
Employees evaluated in 2019, people
Kirovsk branch
of Apatit
Apatit
Balakovo branch
of Apatit
Volkhov branch
of Apatit
Men
212
89
16
317
Executives
White-collar workers
Blue-collar workers
Total by gender
Total
Evaluated personnel, %
Women
Men
Women
Men
Women
Men
Women
10
23
3
36
52
64
18
134
3
43
6
52
4
2
6
353
7,03
186
4,77
0
6
0,51
10
17
11
38
1
10
1
12
50
6,38
133
132
KEY PROJECTS (SDG 4)
Investing in future talent
PhosAgro Classes and PhosAgro Schools
Launched in 2013, PhosAgro Classes
are part of the Company’s education and training
programme to build a future talent pipeline
by supporting young people in their journey
through school and university education
to employment . The project covers 10th and 11th
graders in five schools across the Company’s
footprint and offers them advanced programmes
in physics, chemistry, mathematics and computer
science . On top of that, the PhosAgro Classes
curriculum includes economics, management,
ethics, leadership, career planning and other
disciplines .
The project is run under social and economic
partnership agreements between PhosAgro
and local authorities, with similar arrangements
made with participating schools:
• Vologda region: in Cherepovets, the project
partners are Secondary School No . 10, which
offers advanced programmes in all relevant
subject areas, and Education Centre No . 29;
• Leningrad region: in Volkhov, the project partner
is School No . 1;
• Saratov region: in Balakovo, the project partner
is Secondary School No . 25;
• Murmansk region: in Kirovsk, the project partner
•
is Secondary School No . 5;
in Apatity, the project partner is Secondary
School No . 15 .
During the first stage, we improved the facilities and equipment available
at the schools covered by the project . This included newly launched subject-
specific classrooms equipped with interactive whiteboards, multimedia
devices, tablets and other tools, along with cutting-edge lab equipment
and other advanced IT technology now available to students and teachers .
Since 2013, the Company has invested over RUB 400 mln in PhosAgro Classes,
including RUB 250 mln spent on renovations and equipment .
The benefits of PhosAgro Classes include a comprehensive career guidance
programme, an opportunity to learn from teachers with advanced
qualifications, and guest lectures by university academics. The course also
features subject-specific festivals and workshops, university tours, and site
visits to production facilities .
In 2018, taking the success of PhosAgro Classes further, we expanded
the project scope to include all grades in the supported schools, not just
final-year students, launching PhosAgro Schools. They provide career-
related learning as early as in primary school and rely on greater funding
from PhosAgro, with PhosAgro Classes still enjoying popularity among both
students and parents as one of our key educational and career guidance
projects .
In December 2019, Balakovo-based Secondary School No . 25 saw
the opening of an R&D lab launched as part of the PhosAgro Sсhools project .
The lab provides career exploration opportunities in the fields related
to PhosAgro’s operations, while using R&D to excite the students’ interest
in engineering and technical professions . It uses the STEAM education
model to integrate science, technology, engineering, arts and mathematics
as part of interdisciplinary learning . Its classrooms provide a learning space
for students doing research in chemistry, mathematics, technology, robotics,
computer science, modelling and design .
Students at PhosAgro Schools take part in the Career Guidance programme
led by PhosAgro experts, who support their research and development efforts
in the fields relevant to the Company’s operations.
Annual report | 2019Sustainability report
2019 highlights
2019 was a milestone year for our educational
programme, with the first graduates of PhosAgro
Classes since their launch in 2013 getting
their university degrees and joining the Group .
In September 2019, a total of nine former
PhosAgro Classes students joined the Group
as employees, including five in Cherepovets,
two in Balakovo and one in Volkhov and Kirovsk
each . All of them will pursue engineering careers,
having demonstrated a high level of qualification
from their first days on the job . We expect to hire
27, 40 and 45 former PhosAgro Classes students
in 2020, 2021 and 2022 respectively .
125 of 126 PhosAgro Classes 2019 graduates have
been admitted to higher educational institutions,
with the St Petersburg Mining University enjoying
the most popularity among them (26 graduates) .
Technical courses were selected by 98 graduates,
with 38 of them to study disciplines relevant
to PhosAgro . Since 2015, a total of 575 graduates
of PhosAgro Classes have been enrolled in higher
educational institutions, with technical careers
gaining more traction among them every year .
In September 2019, 130 new students started
their 10th grade programme at PhosAgro Classes,
marking the seventh admission round since
the project launch . .
Collaboration with technical colleges
Since 2013, as part of its focus on nurturing talent
from secondary schools to employment, PhosAgro
has partnered with technical colleges across its
footprint, including:
• Kirovsk branch of the Murmansk Arctic State
In 2019, the first graduates of PhoAgro Classes
joined the Group.
PhosAgro also supports a regional Training Centre at the Cherepovets College
of Chemistry and Technology that offers express programmes in chemistry
and associated fields to nurture talent for most in-demand jobs.
Collaboration with universities
We maintain strong relationships with universities as part of our commitment
to improving access to quality education and supporting academic research .
Ivanovo State University of Chemistry and Technology;
To this end, PhosAgro has signed agreements with the following higher
educational institutions::
• St Petersburg Mining University;
• Lomonosov Moscow State University;
•
• Cherepovets State University;
• Mendeleev University of Chemical Technology of Russia;
• St Petersburg State Institute of Technology;
• Murmansk Arctic State University;
• other regional universities .
As part of collaboration with universities, PhosAgro:
• sponsors advanced training for graduates of PhosAgro Classes in the fields
relevant to PhosAgro (subject to their commitment to future employment
at the Company);
• offers scholarships to the most talented students (based on exam results);
invites students to see the industry in practice at one of the Group’s many
•
companies;
University (Kirovsk, Murmansk region);
• offers students a job in one of the Company’s popular specialisations after
• Cherepovets College of Chemistry
they graduate . .
and Technology (Cherepovets, Vologda region) .
These joint efforts cover:
• setting up testing grounds and labs for students
to acquire hands-on experience using real
equipment;
internship programmes at PhosAgro’s facilities
with highly-qualified mentors;
•
• undergraduate and graduate thesis research;
• sports, educational and research initiatives,
competitions, Olympiads .
High-Potential Graduates
We build upon the foundation laid by PhosAgro Classes and PhosAgro
Schools 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 we assign them a mentor upon
their arrival at the Company .
The programme’s key tasks are to build a talent pool for key positions within
the Company and to identify career paths for young talented professionals
to prepare future executives .
135
134
57
people
recruited by PhosAgro in 2019
through the High-Potential Graduates
programme.
In 2019, PhosAgro recruited 57 young specialists
through the High-Potential Graduates programme .
This brought to 341 the total number of graduates
who have joined the Company through
this programme since its inception in 2012 .
A total of 250 of these employees are still
with PhosAgro today, pursuing careers
in mineralogy, geology, hydraulic engineering,
chemistry, thermal energy and electricity
production, rail transport, open-pit
and underground mining, and mine surveying .
Of the programme participants still employed at PhosAgro as at December
2019, a total of 18% had received promotions and/or had been included
in our talent pool . Many of them had successfully completed the projects
assigned to them upon recruitment .
INTERNATIONAL PROJECTS
Collaboration with the International Union of Pure and Applied
Chemistry (IUPAC): Summer Schools on Green Chemistry
Since 2018, PhosAgro has been a general partner of IUPAC’s Summer
Schools on Green Chemistry providing scholarships to young researches
from developing economies . Over the course of two years, our total spending
to support this project exceeded USD 30,000 .
The second PhosAgro-supported Summer School on Green Chemistry
operated in May 2019 at the University of Dar es Salaam in Tanzania as part
of the International Year of the Periodic Table . The Company contributed
more than USD 10,000 to the school’s scholarship fund . The 2019 Summer
School drew a broad audience of young scholars from emerging and transition
economies . Of the 50 grant winners, 35 represented African countries .
The third IUPAC Summer School on Green Chemistry to be supported
by PhosAgro is scheduled to open in July 2020 and will follow up
on the outcomes of a symposium called Chemistry Addressing the UN-17
Sustainable Development Goals and held during the IUPAC Congress in July
2019 .
PHOSAGRO WON TWO PRIZES AT THE 2019 AWARDS FOR RUSSIAN
LEADERS IN CORPORATE PHILANTHROPY ADVANCING
SUSTAINABLE DEVELOPMENT
Two of the Group’s projects – PhosAgro Schools and Summer Schools on Green Chemistry – were honoured
at the 2019 Awards for Russian Leaders in Corporate Philanthropy Advancing Sustainable Development.
The Awards are organised by the Donors Forum (a coalition of major grantmakers in Russia), the global audit
and advisory services provider PwC, and the business newspaper Vedomosti to recognise the best charitable
programmes and to promote corporate philanthropy in the business community and the broader society.
The PhosAgro Schools project won a second prize for the Best Corporate Social Investment Programme Targeted
at Local Communities in Line With the Business Strategy and Sustainability Agenda – a category supported
by the Russian Union of Industrialists and Entrepreneurs, while the Summer Schools on Green Chemistry won
a third prize for the Best Partnership Programme Advancing Sustainable Development.
Overall, the Group ranked 22nd on the list of 40 Russian Leaders in Corporate Philanthropy, with a total of 65
major companies competing for the Awards in 2019.
“We are confident about the success of PhosAgro Schools and Summer Schools on Green Chemistry and are happy
that the experts have appreciated them highly,” said Siroj Loikov, Deputy CEO of PhosAgro. “PhosAgro Schools
successfully address the shortage of qualified workforce to operate state-of-the-art facilities, while Summer
Schools promote Green Chemistry and support young scientists from around the world.”
Annual report | 2019Sustainability report 103
413
SOCIAL
INVESTMENT
We seek to help the regions
where we operate to achieve
sustainable growth, and contribute
to the development of local
communities through our value
chain, employment opportunities,
infrastructure improvements
and social investment programmes.
To achieve our goal, we have outlined three key
focus areas:
• Collaborating with regional and local
government authorities to create modern social
infrastructure (by providing new equipment
to healthcare facilities, assisting in utilities
development, building new and renovating
existing sports and recreation facilities, etc .)
across our geographies
• Developing and implementing projects
for children and young people with a focus
on education, career guidance, technology
and engineering teaching, extra-curriculum
education, cultural heritage and healthy
lifestyle
for local communities, while also encouraging diverse and sustainable local
economies .
Through our work, we have a significant impact on the development of local
communities and society at large . Therefore, we must recognise that
we have a duty to mitigate any negative impact and to support sustainable
growth and development . Through the proactive and strategic involvement
of stakeholders and communities, we can achieve a level of development that
serves the interests of our local communities .
The Company carries out charitable activities based on public benefit priorities
and opportunities to partner with regional and local government authorities,
local communities and non-governmental organisations, educational
institutions and other stakeholders .
The Company’s charitable activities are carried out in line with its bylaws,
the Federal Law On Charitable Activities and Charitable Organisations,
and the Federal Law on Advertising .
Applicable Company bylaws:
• Codes of Ethics of Apatit and PhosAgro;
• Codes of Ethics of all companies managed by Apatit;
• Policies on Charitable Activities of PhosAgro, Apatit and the companies
managed by Apatit;
• Rules for the Provision of Charitable Assistance by Apatit and the Companies
Managed by Apatit;
• Providing support to vulnerable groups in terms
of access to healthcare services, development
opportunities and the aid they need
• Regulations on Business Unit Interaction and Document Execution
for the Provision of Charitable Assistance by Apatit and the Companies
Managed by Apatit .
MANAGEMENT APPROACH
Our operations make a meaningful
contribution to the national economy and local
communities where we operate . PhosAgro's
goal is to understand and manage the impact
that we make and to create sustainable benefits
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136
MANAGEMENT FRAMEWORK FOR CHARITABLE ACTIVITIES
Group level
Management Board and CEO
Deputy CEO
Office for External Communications
Company level
Government Relations Department, Information
Policy Department, HR and Social Policy
Department (responsible for community
investments of the Group companies)
Within the limits of the charity and sponsorship budgets of the Group
companies
Social Development Departments of the Group
companies
Commissions for Social Issues and Charity
at the Group companies
Within the limits of funds allocated to the CEOs of the Group
companies
• The Management Board reviews and approves the company's
annual charity budget and adjusts it as necessary
• The CEO decides on the necessity and appropriateness
of the Company’s participation in individual charity
projects and programmes, prepares relevant materials
for the Management Board, and supervises work
on the company’s draft annual charity budget
• Leadership and coordination of activities related to charity,
sponsorship and community investment
• Coordination of community projects and programmes
• Raising the need for developing new bylaws
• Administering all information on ongoing projects
• Arranging public hearings and opinion surveys
• Process management, etc.
• Coordination of counterparty relations
• Project and programme management
• Proposals to revise projects and programmes
• Administrative support through the project management
system:
– contract approval
– transfer of funds
– verification of beneficiary reports
• Review of new applications
• Project paperwork and document verification, proposals
concerning the provision of support within the limits of funds
allocated to the Group companies
Annual report | 2019Sustainability report The budget for charitable projects is set
annually as part of the overall budgeting process
and is approved by the Company’s Management
Board .
In line with the Company’s Policy on Charitable
Activities, the main criteria for selecting projects
are as follows:
• a project should aim to provide support
to particular population groups, community
organisations or charitable foundations;
• a project should not contradict the principles
or requirements of the Company’s policies
or other bylaws;
• a project should not constitute a disguised
payment for any service, act, omission,
connivance, patronage, empowerment
or provision of other unlawful benefits provided
to the Company and/or its partners .
New projects are considered by the Company’s
Management Board in accordance
with the procedure established by internal
regulations .
PRIORITY AREAS FOR SOCIAL PROJECTS
By identifying priority areas, the Company is able to ensure that its funding
will have maximum impact and benefit.
• Providing social support and protection, such as financial support to low-
income households; social integration of the unemployed, people
with disabilities, and other persons
• Promoting the patriotic, spiritual and moral upbringing of children
and adolescents
• Supporting activities to prevent illness, protect public health,
and promote health and physiological wellbeing
• Ensuring protection and conservation of buildings, sites and territories
of historical, religious, cultural or environmental significance, including
burial sites
• Promoting activities in the fields of education, science, culture, art
and spiritual growth
• Promoting volunteering
COMMUNITY INVESTMENT PROGRAMMES
The majority of programmes are run in partnership with regional and local
authorities as the government is the most reliable partner .
Some projects are implemented through independent non-profit
organisations set up by government authorities and the Company .
Every year, the Management Board reviews
the results of charitable activities and decides
on whether or not to continue supporting
a programme or a project .
At present, the planning horizon for charitable activities spans from one
to two years . Each programme or project is overseen by a responsible
manager assigned by internal regulations of the Group companies as all
the Group’s programmes are rolled out across the regions of our operation .
The following activities are carried out to evaluate the efficiency
of programmes and projects:
• opinion surveys among external professional experts (beneficiaries
and representatives of the civil society and government bodies, including
local authorities);
internal opinion surveys among the Company’s executives of various
levels and employees;
•
• evaluation of programmes and projects by managers in terms
of their benefit and impact on the beneficiaries;
• public hearings in the cities where the Company operates;
• annual review of the results of charitable activities at a meeting
of the Company’s Management Board .
New projects may be proposed for consideration
in the following way:
• upon proposal of the Company experts
with a view to creating favourable conditions
in the cities where the Company operates
(qualified personnel training, support
for veterans’ organisations, development
of green spaces, animal conservation, etc .);
following public hearings;
•
• based on agreements with regional and local
government authorities;
• based on social surveys;
•
following successful meetings between
Company executives and representatives
of community organisations .
Funding for new projects is subject to approval
by the Management Board . The availability
of partners (regional and local government
authorities, non-profit organisations, etc.)
plays an essential role in decision-making .
The Company has set up its own office for external
communications which is in charge of charitable
activities administration .
OUR KEY SOCIAL PROGRAMMES1
Educated and Healthy Children of Russia
(DROZD)
Since 2003, PhosAgro has been successfully
implementing DROZD, a unique multi-level
educational support programme . It is distinctive
in its integration of social projects within a single
programme that covers all levels of education,
from preschool to higher professional education,
with the possibility of subsequent employment
in the Company .
Our Favourite Cities
The mission of Our Favourite Cities programme
implemented by PhosAgro since 2003
is to improve the quality of urban environment
and promote sustainable development of the cities
where we operate, including Kirovsk, Cherepovets,
Balakovo, and Volkhov . To this end, PhosAgro has
partnered with regional and local authorities,
charitable foundations and non-governmental
organisations and established its own non-profit
organisations .
Use of funds:
• Highways, bus stops, power grids
• The Khibiny Airport
• Landscaping, conservation of monuments
and architecture
• Constructing an ice stadium
• Clinics (purchase of equipment and apartments)
• Tirvas Sanatorium
• TV and LLC Teleset
• Holding and supporting city-wide holidays
• Competitions for city residents
Targeted assistance
Since 2003, we have been providing targeted
assistance to vulnerable population groups .
commissions for social issues and charity
have been set up across the Group companies
to consider new applications . The Group also
partners with In the Name of Good charity
foundation (Vologda Region), providing financial
support for disabled children who need urgent
treatment .
139
138
203-1
203-2
413-1
68
permanent clubs in place
kids study for free
5,681
>650
events across our geographies
9
students joined national youth sports teams
Cherepovets
• Harmony recreation and cultural centre, with some
Kirovsk
400 pensioners as regular visitors
• Annual aid to four non-governmental foundations
•
In the Name of Good charity foundation – treatment
and rehabilitation funding, equipment purchase
• Kukisvumchorr, Koashva, and Rodnik volunteer centres
for pensioners and disabled people. Each centre hosted
over 20 events involving 1,200 people in 2019
• Assistance to Great Patriotic War veterans and equal-
status persons, children of war and home front workers
(apartment renovations, holiday congratulations
and gifts)
• Annual aid to three non-governmental foundations
Balakovo
• Annual aid to three non-governmental foundations
Funds are also allocated to the CEOs of the Group companies to provide
assistance to organisations of veterans and disabled people on an ad-hoc basis.
1 . For more information on social projects, please visit www .phosagro .ru .
Annual report | 2019Sustainability report 141
140
Spiritual revival
PhosAgro has been providing charitable assistance in building and rebuilding
orthodox holy sites both in Russia and abroad, while also pursuing projects
fostering long-standing cultural and spiritual values .
The Company has also revived a pre-revolutionary tradition of building on-site
churches .
Cherepovets
• Mineral fertilizers are shipped to three churches
on an annual basis
• Seven churches receive assistance in repairing,
and purchasing equipment
• Assistance in maintaining three on-site churches
Kirovsk
• Three on-site churches have been opened and consecrated
at the following sites:
– Rasvumchorrsky mine, St Andrew church
– Vostochny mine, St Nicholas church
– ANBP No. 3, Great-Martyr and Unmercenary Healer
Pantaleon church
Balakovo
• Church of the Life-Giving Trinity – restoration of the Old
Testament Trinity historical mosaics
• Construction of a gas boiler house in the Sunday School
of this church
Volkhov
• The Church of St Andrew was constructed and consecrated
Bi-annually pilgrimages to visit the relics of St Nicholas in the Basilica of St
Nicholas in Bari (Italy), dedicated to St Nicholas Day (120 people a year).
Structure of community, charity and infrastructure
investment, RUB mln
Total community, charity and infrastructure investment
2,114.1
2,781.21
including
investment in community infrastructure
spending on community needs, charitable
and social projects
931.8
1,343.2
1,182.3
1,438.0
1 . Excluding the value of the Cherepovets Chemical and Technical College facilities handed
over to the local authorities, as well as PhosAgro-Region’s expenses
Promotion of sports
Since 2012, PhosAgro has been supporting non-
profit organisations, which promote sports, tourism
and healthy lifestyles .
Names of the sports organisations:
• Russian Olympians Foundation
• Russian Cross-Country Skiing Federation
• Moscow and Russian Rhythmic Gymnastics
Federations
• Russian Chess Federation
• Partnership with World Chess Events Ltd .
• Russian Swimming Federation
• Avtodor Basketball Club
• Proton Volleyball Club
• Turbina speedway team
• Severyanka Volleyball Club
• Unifight
2.9
bln RUB
Total community investment and charitable
giving in 2019
This amount includes a one-time component
of the value of the Cherepovets Chemical
and Technical College facilities handed
over to the local authorities, as well
as PhosAgro-Region’s expenses
Connecting generations
Since 2015, PhosAgro has been renovating
and upgrading its on-site museums to transform
them into cultural and educational centres
featuring the latest technology . The Company
also implements projects to repair and refurbish
monuments, war memorials and surrounding
areas .
2019 HIGHLIGHTS
Total community investment and charitable giving
in 2019, %
50
16
14
10
7
1
1
1
Social development in the regions
Education and school renovations
Sports
Spiritual revival
Nation-wide and international projects
Veterans' Foundation
Membership fees
Donations
PhosAgro's museum facilities are not just tourist
attractions, but also educational hubs in the cities
and districts across our geographies .
SPENDING
BREAKDOWN
All schools in our regions of operation hold
classes at the Green Planet interactive
educational centre and Apatit and PhosAgro-
Volkhov museum and exhibition centres, where
visitors of all ages can learn about the production
of the Group’s fertilizers . The core intention
behind these centres is to foster environmental
responsibility, spread interest in natural sciences,
provide career guidance to young people,
and promote the chemical industry .
Each month, up to 6,000 people visit
the Group’s museum and exhibition centre
Apatit, with the total number of visitors in 2019
reaching 50,728. In 2019, the Cherepovets
museum and exhibition centre received
the national Best Practices in Children’s Tourism
Development award.
Annual report | 2019Sustainability report 102–40
STAKEHOLDER
ENGAGEMENT
One of the key aspects of the Company’s responsible business conduct is interaction
with stakeholders that is based on a systemic approach, joint efforts and a balance of interests.
It is our ability to understand and adapt to our stakeholders evolving needs and expectations that
enables us to create a strong and sustainable company.
143
142
INVESTMENT AND FINANCE COMMUNITY
Why we interact
To facilitate an understanding
of the long-term sustainability
and potential value of PhosAgro
To update investors on PhosAgro’s
strategic priorities and progress
we have made
To provide market participants
with concrete indicators of progress,
such as operational, financial
and non-financial results
To attract a wider pool of investors
to improve liquidity, share price
and borrowing costs
To increase our access to a variety
of capital market instruments
To provide transparency on how
our corporate governance systems
work
To generate new ideas through
a dialogue with investors
To clarify the Company’s contribution
to the UN Sustainable Development
Goals
How we interact
Roadshows
One-on-one meetings with investors
Investor conferences
Conference calls on financial results
Perception studies
Ongoing engagement with analysts
Regulatory press releases
AGM and formal reporting
Corporate website
A dedicated in-house investor
relations team
The interests of our shareholders
are represented by seven independent
non-executive directors on the Board
of Directors
Key activities in 2019
The Investor Day and presentation
of the Strategy to 2025 were held
in London
Fifteen investment conferences
were attended and four non-
deal roadshows with Company
management conducted in key
financial market centres (London, New
York, Chicago, Frankfurt, Stockholm)
Four conference calls and webcasts
for analysts and investors were
organised in order to discuss
the Company’s financial results
More than 240 group and one-on-
one meetings were held with investors
and analysts
115 publications were made in line
with Russian disclosure regulations
via the Interfax Corporate Disclosure
Centre
More than 40 press releases were
distributed via the UK regulatory news
service
102–42
102–43
102–44
Management approach
Working in complex markets
and geographies around the world and establishing
relationships on regional, national and international
levels, our activities are heavily regulated .
The constantly evolving nature of both international
regulations and national legislation may affect
our business . Thus, we work hard to build
relationships with people at all government levels
in the countries where we operate and ensure
that we comply with all applicable regulatory
requirements .
We collaborate with a variety of external stakeholders in order to manage risks
related to our work and to remain competitive . These partnerships enable
us to create mutually beneficial opportunities.
In our engagement with our stakeholders, we strive to be constructive, honest
and principled . We establish links with only those organisations and educational
institutions that share our values and are actively involved in domains such
as food security, sustainable agriculture and health .
>240
meetings held
with investors
and analysts
Annual report | 2019Sustainability report REGIONAL GOVERNMENTS AND LOCAL COMMUNITIES
Why we interact
How we interact
To ensure that we act as a good neighbour
We implement environmental programmes
To support the sustainable socio-economic
welfare of the regions in which we operate
We implement cooperation agreements with regional governments
based on regional development needs
To address community needs, including
social or environmental concerns
To promote the health and well-being
of the communities where we operate
To maintain an ongoing dialogue around
government policies or potential regulatory
changes that could affect our business
To improve social infrastructure
and implement partnerships with regional
authorities
We support social and sporting organisations
We sponsor PhosAgro Classes and PhosAgro Schools to promote
advanced chemistry education for schoolchildren
We offer university scholarships and organise recruitment
programmes aimed at encouraging children to study chemistry
We implement the Healthy and Educated Children of Russia
programme
We encourage the development of sport in the regions where
we operate
We organise recreational activities for workers and their families
Our employees are provided with free medical treatment, and we also
fund medical infrastructure for residents of the regions in which
we operate
We encourage the development of cultural and spiritual awareness
among the younger generation, educating them about Russia’s
history and traditions
We run programmes to protect the socio-economic rights
of veterans, and providing material assistance to World War II veterans
and members of their families
Cooperation agreements
signed with the governments
of the Saratov, Leningrad,
and Vologda regions
145
144
Key activities in 2019
Holding environmental events in the regions of operation,
including community cleanups, Golden Fish and Clean
Coast campaigns, and others .
Supporting local professional sports clubs including Proton-
Saratov volleyball club, Avtodor basketball club, Turbina
speedway club, etc
Signing cooperation agreements between PhosAgro
and the governments of the Saratov, Leningrad,
and Vologda regions
Refurbishing mass graves of soldiers and civilians who died
during the Great Patriotic War in Mistolovo village (Leningrad
Region) and the city of Volkhov
Presenting gifts and financial assistance and arranging
festivities for veterans of the Great Patriotic War, former
company workers, on the occasion of the 9 May Victory Day
Holding a tree planting event at Balakovo’s Alley of Glory
to celebrate the 75th anniversary of victory in WWII,
sponsoring Sunday schools in Balakovo
Opening Apatit Arena – a sports and fitness centre in Kirovsk .
The projects was completed with support
from the Murmansk Region government under a social
and economic partnership agreement between
the Murmansk Region government and PhosAgro
Signing the cooperation agreement between the Russian
Ministry of Natural Resources and Environment,
the Federal Service for Supervision of Natural Resources,
the Government of the Vologda Region and PhosAgro
as part of the efforts under the Comprehensive Plan
to Reduce Pollutant Emissions in Cherepovets
Providing scholarships to students studying at universities
specialised in chemistry
Offering guaranteed employment for students with degrees
in chemical production
Hiring participants of the High Potential Graduates
programme and the first graduates of PhosAgro Сlasses
Opening an R&D lab at Balakovo’s Secondary School No . 25
as part of the school ongoing renovation
Launching an interactive library at PhosAgro School No . 1
Holding events to mark the Chemist’s Day across
the Company’s footprint
Hosting the Growth Energy: Apatit – 90! (Apatity city),
PhosAgro’s social programmes festival
Holding the Khibiny sports festival (Kirovsk–Apatity),
supporting the Khibiny Spring national skiing competition,
sponsoring the White Rook national chess tournament
Annual report | 2019Sustainability report INTERNATIONAL ORGANISATIONS
EMPLOYEES AND TRADE UNIONS
How we interact
Key activities in 2019
Why we interact
How we interact
Why we interact
To address community
needs, including social
or environmental concerns
To discuss the most important
issues from experts’ point of view
To develop a common strategy
and tactics and to unite
in the effort to overcome global
challenges
To review performance
To identify priority issues
and areas of focus for current
and future periods
PhosAgro was assigned
Global Compact
LEAD status
Active participation
in the work of global,
national and regional
organisations and industry
associations
Implementation of common
programmes
Support of major national,
regional, and international
initiatives promoting
sustainable development
goals
Davos 2019 World Economic Forum
PhosAgro is a permanent fixture in the forum
(Metals&Mining panel)
International Year of the Periodic Table (IYPT 2019):
PhosAgro was the official partner of the International
Year of the Periodic Table 2019 and the main sponsor
of the IYPT 2019 opening ceremony at UNESCO
headquarters
•
We supported scientific conferences, thematic
exhibitions, and competitions for young scientists:
the IYPT 2019 launching ceremony in Russia
•
at the Russian Academy of Sciences;
the 29th Mendeleev Workshop and Conference
for young researchers held at the Ivanovo State
University of Chemistry and Technology;
the 47th IUPAC World Chemistry Congress;
the 21st Mendeleev Congress on General
and Applied Chemistry .
•
•
Sustainable soil management project implemented
jointly with FAO:
The Regional Soil Laboratory Network (RESOLAN)
for Africa (AFRILAB) was launched in Nairobi (Kenya)
and hosted a technical seminar for representatives
from national labs .
Green Chemistry for Life,
a joint programme by PhosAgro, UNESCO and IUPAC
Young scientists received research grants for green
chemistry innovations at the sixth awards ceremony
at UNESCO Headquarters, which was timed to coincide
with the World Science Day for Peace and Development .
IUPAC Summer School on Green Chemistry
PhosAgro is the school’s official partner in Africa.
The second Summer School on Green Chemistry was
held at the University of Dar es Salaam in Tanzania .
United Nations Global Compact
The UN named PhosAgro as a Global Compact LEAD
company for its commitment to corporate social
responsibility and sustainable development .
International Fertilizer Association (IFA)
PhosAgro was awarded the Gold Medal as Industry
Stewardship Champion at the 2019 IFA Strategic Forum
in Versailles .
147
146
Key activities in 2019
Standing commission in place for collective
bargaining
Charity festivals and social projects
in the cities hosting our production sites
102-41
Annual tenders to select social service
providers
Corporate Sports Games (Spartakiads)
Dad, Mum and I – a Sporty Family contests
to promote healthy living
Programme to improve social and working
conditions under the auspices of social
services and trade unions
Z .I .M .A . corporate youth winter festival
Annual events to mark the Day of Older
Persons
Paid health resort tours for employees
of pre-retirement age and working
pensioners in line with the new
requirements of the pension legislation
To promote a corporate
culture that is aligned
with PhosAgro’s strategic
goals
To ensure employee
satisfaction and motivation
To guarantee appropriate
social welfare for our current
and retired employees
To maintain an open
dialogue with trade unions
and employees
To use human resources
responsibly and effectively
To provide our employees
with the opportunity
for professional advancement
We negotiate collective agreements
with trade unions that cover issues such
as working conditions and compensation
for employees at each of our production
enterprises (usually for a three-year period,
covering 100% of the employees of Apatit,
its branches and standalone business
units))
We involve trade unions
in the development of PhosAgro’s
workplace health and safety programmes
We collaborate extensively with trade
unions on cultural and sporting events,
workplace health and safety committees,
on the nomination of workplace
health and safety representatives,
and on our health and safety workshops
We implement employee development
programmes, including our Talent Pool
Programme
We conduct employee surveys, make
presentations and bulletin boards, and run
an intranet site and corporate newspaper
We hold meetings with general directors
of production sites and management
responsible for social and HR issues
together with trade union representatives
Surveys to assess the quality of children’s
summer vacations, health resort
rehabilitation, dietary and medical meals,
and children’s New Year’s gifts .
We have a whistle-blower hotline, email
addresses for complaints and telephone
hotlines for inquiries and social issues
and also for reporting violations
Monthly information sessions
for employees and other employee
communications
A regular dialogue is maintained
with employees, trade unions
and the management
Annual report | 2019Sustainability report
BUSINESS PARTNERS: CUSTOMERS
BUSINESS PARTNERS: SUPPLIERS AND CONTRACTORS
Why we interact
How we interact
To provide agricultural producers
with high-quality mineral fertilizers
at competitive prices
To preserve the health of future
generations and soil fertility by using
environmentally friendly mineral
fertilizers
To establish business partnerships
built on mutual trust and respect
To ensure a shared understanding
of obligations and expectations
from the partnership
To ensure sustainable growth of sales
markets
To increase crop yields in Russia
and abroad by developing complex
nutrition systems and efficient
farming practices
To promote the responsible
and rational use of mineral fertilizers,
i .e . green agriculture
Continuous communication
with customers – farmers,
distributors and business
partners, including those
in related areas – in both
the domestic and international
markets
Development of in-house
agronomic service
Partnerships with research
institutes
Development of new solutions
to meet market needs
Membership
in industry organisations such
as the International Fertilizer
Association and the Russian
Association of Fertilizer
Producers, and hosting joint
events with them
Key activities in 2019
Participation in industry exhibitions, holding
events for customers in Russia and abroad,
including eight Russian and six international
exhibitions; four Field Days at the company’s
field trial stations, two Field Days abroad;
and two agricultural conferences
Start of ecolabel design for Russian-made
mineral fertilizers, first in kind in Russia
PhosAgro’s new product concept:
39 fertilizer grades grouped into five product
categories based on form, type, ingredients
and purpose
Development of Russia’s first pilot online
platform to purchase mineral fertilizers (to be
fully launched and expanded in 2020)
Advertising portfolio expansion
New presentation materials for clients,
including a brochure describing trial results
for various nutrition systems and a booklet
with fertilizer samples
Why we interact
How we interact
To optimise procurement
procedures with emphasis
on greater efficiency
and transparency
To create a level playing field
for all prospective contractors
through uniform requirements
and fair bid evaluation .
To establish long-term
relationships with suppliers
Participation in conferences
and exhibitions, holding meetings
and negotiations
Procurement announcements
Compliance with the Company’s Code
of Ethics
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148
Key activities in 2019
Implementation of a project to improve
efficiency of procurement. Development
and launch of the Online Tender Committee .
Launching a single sign-on solution
for checking inventories
Revision of supplier social responsibility
clause to include prohibition of forced labour
and modern slavery
Drafting a procurement plan for the current
year and placing it an online bidding
platform
Participation in the Technology
and Equipment for Sulphuric Acid
Manufacturing international conference
and exhibition Learning the principles
of equipment layout at production facilities,
including various approaches and reporting
Implementing a project to review and update
procurement by-laws
Improved efficiency
of procurement
Ecolabels
for mineral fertilizers –
the first ever in Russia
Annual report | 2019Sustainability report SUPPLY CHAIN
AND PROCUREMENT
103
102-9
Procurement
PhosAgro places special emphasis on making its procurement activities
transparent and ensuring fair competition and equal conditions for all
suppliers of equipment, materials and services . We seek to build strong,
trustful and mutually beneficial relationships with our partners in compliance
with the applicable laws, regulations, industry standards, contractual and other
obligations .
Procurement principles
As set out in the relevant policy of Apatit, the Company’s procurement
activities rely on the following principles:
• Be legitimate, competitive, and transparent
• Factor in the requirements for specifications, quality, customer service,
delivery terms, reliability, eco-friendliness and total cost of ownership,
along with legal and social matters pertaining to the equipment
and materials sourced
• Use the best-fitting, sustainable business solutions
• Protect the Company’s reputation
• Comply with the Company’s existing procedures and best practices
Committed to fighting corruption, PhosAgro adheres to the Anti-Corruption
Charter of the Russian Business. We are making reasonable efforts to minimise
risks of doing business with partners that might be involved in fraud and/or
corruption .
In furtherance of our Anti-Corruption Policy, we establish and maintain
business relationships with companies that operate in a bona fide manner,
care about their own reputation, show commitment to high ethical standards,
combat corruption, and take part in joint anti-corruption initiatives
in accordance with article 13 .3 of the Federal Law On Combating Corruption .
In line with the Company's approved Code of Ethics published at www .
phosagro .com, the Company may refuse to cooperate with suppliers
or business partners discriminating their own or subcontractors’ employees
or using forced labour .
SUPPLY CHAIN
Supply chain represents a set
of interconnected processes
covering all stages of value
creation, from procurement
to product delivery .
At PhosAgro, supply chain
management aims to ensure
smooth operation of all
facilities, high product quality,
and seamless shipments
to customers .
151
150
REQUEST
PLANNING
Arranging and holding
a request campaign
Analysing the product/service required
and selecting the supply source
Cancelling or adjusting
requests and orders
TYPES OF PRODUCTS/SERVICES REQUIRED
PROCUREMENT
Market activities /
category strategy
Selecting
the procurement method
Pre-bid
arrangements
Bidding
Agreement
and specification
DRAFT AGREEMENT
SUPPORT
Signing
the agreement
and specification
Prepayment
planning
Delivery
monitoring
Ensuring
timely
arrival
Requesting/
replacing
original
documents
Pre-complaint
resolution
Arranging
for the replace-
ment of defective
items
Complaint
management
Payment
planning
and control
DELIVERY TO WAREHOUSE
WAREHOUSES AND INVENTORIES
Analysing inventory
movement and structure
Monitoring timely receipt
and write off
Inventory
Committees
Inventory Management
Committees
IMPROVEMENT OF INVENTORY TURNOVER
CONTROL
Monitoring operational
indicators
Monitoring compliance
with SLA and NSD
BI reporting
Bidding support
Corrective action plan
Annual report | 2019Sustainability report 153
152
Foreign vs domestic contracts in 2019
Company
Apatit
Balakovo branch of Apatit
Volkhov branch of Apatit
Kirovsk branch of Apatit
Total
Foreign
1,925.1
255.2
218.6
1,421.7
3,820.6
Domestic
50,047.7
10,960.9
5,413.6
19,958.5
86,380.7
total
51,972.8
11,216.1
5,632.2
21,380.2
90,201.3
Procurement methods
Corporate procurement is a competitive process,
with a dedicated commission put in charge
of organising tenders for equipment, materials,
petroleum products and services . For this purpose,
the Group uses an online bidding platform, which meets all applicable
requirements set by the Russian laws . We arrange for and hold tenders
with a view to achieving a greater procurement efficiency and transparency,
creating a level playing field for all prospective contractors, setting uniform
requirements, and ensuring fair bid evaluation .
Service tenders in 2019
Tenders in 2019
Corporate and other services
No. of tenders
Amount, RUB mln
Transportation, incl. rail
No. of tenders
Maintenance and repairs
No. of tenders
Amount, RUB mln
Capital construction
TOTAL
Amount, RUB mln
No. of tenders
Amount, RUB mln
No. of tenders
Apatit
47
473.0
22
1,208.0
63
3,201.0
85
13,132.0
217
Balakovo
branch
of Apatit
Volkhov
branch
of Apatit
Kirovsk
branch
of Apatit
4
63.0
9
83.0
47
485.0
78
775.0
138
2
97.0
5
122.0
39
227.6
51
5,768.0
97
6,214.6
Amount, RUB mln
18,014.0
1,406.0
204-1
Procurement from local businesses1 in 2019, RUB mln
Company
Apatit
Balakovo branch of Apatit
Volkhov branch of Apatit
Kirovsk branch of Apatit
Total
Other suppliers
Local suppliers
37,101.5
10,049.8
4,393.6
19,950.4
71,495.5
14,871.3
1,166.3
1,238.5
1,429.8
18,705.8
SME procurement in 2019, RUB mln
Company
Apatit
Balakovo branch of Apatit
Volkhov branch of Apatit
Kirovsk branch of Apatit
Total
SME procurement,
RUB mln
Other suppliers
total
19,783.2
3,120.3
1,715.6
8,094.3
32,713.4
32,189.6
8,095.7
3,916.6
13,285.9
57,487.9
51,972.8
11,216.1
5,632.2
21,380.2
90,201.3
1 . Local businesses – organisations and individuals that are registered in the same constituent entity of the Russian Federation (significant location of operation)
as the production facility that is the recipient of the procurement. The Company’s significant locations of operation are Murmansk, Vologda, Leningrad and Saratov regions.
20
112.0
8
197.0
106
1,796.0
160
3,218.0
294
5,323.0
total
51,972.8
11,216.1
5,632.2
21,380.2
90,201.3
Annual report | 2019Sustainability report 155
154
154
LEADERSHIP IN
SUSTAINABLE
DEVELOPMENT
MANAGEMENT
In February 2019, PhosAgro joined the Global
Compact Network Russia . In pursuance of its
mission, the Company has been contributing
to two platforms: Business Reporting on the SDGs
and Health is Everyone’s Business .
In September 2019, PhosAgro was included
in Global Compact LEAD, a group of around
30 global corporations that have achieved
the best results in corporate social responsibility .
E
C
N
A
N
R
E
V
O
G
E
T
A
R
O
P
R
O
С
Annual report | 2019Сorporate governance
CORPORATE
GOVERNANCE
FRAMEWORK
102-16
102-18
PhosAgro is a public company, whose shares are included
in Moscow Exchange’s Level 1 quotation list, and whose
depositary receipts are traded on the London Stock
Exchange. The listing of securities on Russian and foreign
stock exchanges imposes stricter requirements
to corporate governance.
The Company’s corporate governance framework relies on the principles
and recommendations set forth in the Bank of Russia’s Corporate Governance
Code, other relevant requirements of the regulator (Bank of Russia), the Listing
Rules of the Moscow and London stock exchanges, and the Global Reporting
Initiative (GRI) disclosure standards .
The Company is constantly developing its corporate governance framework
to improve its internal efficiency and external competitiveness, which
includes improved perception of corporate
governance practices by stakeholders . One
of the criteria to assess corporate governance
maturity is the degree to which it complies
with the recommendations of the Bank of Russia’s
Corporate Governance Code .
The Company sees its commitment to the highest
corporate governance standards as key to building
a transparent, responsible and trustworthy
governance framework to ensure further growth
and sustainable financial strength.
PhosAgro’s corporate governance principles,
structure, practices and procedures are set forth
in its Charter and other bylaws of the Company.
CORPORATE GOVERNANCE STRUCTURE
General Shareholders’ Meeting
Board of Directors
Review Committee
Board of Directors
committees:
• Audit
• Remuneration and Human
Resources
• Strategy
• Environmental, Health
and Safety
• Risk Management
• Sustainable Development
Management Board
Chief Executive Officer
Corporate Secretary
Internal Audit Department
Legal and Corporate Governance Department
157
156
OUR PRINCIPLES
Accountability
The Board of Directors is accountable to PhosAgro’s shareholders for formulating
and implementing the Company’s long-term strategy, setting control points
for, and the assessment of, management performance . Executive bodies report
to the Board of Directors and the General Shareholders’ Meeting .
Equality
PhosAgro’s corporate governance framework is designed to ensure equitable
treatment and protect the rights of all shareholders . The Board of Directors provides
timely support to every shareholder should their rights be violated . The Company
prevents any discrimination on the basis of gender, colour or religion . We strive
to give equal opportunities to every employee . At PhosAgro we believe that
professionalism, sustainably strong performance and adherence to corporate values
are the necessary and sufficient conditions that guarantee promotion and career
advancement .
Transparency
PhosAgro ensures a reliable and adequate disclosure of, and free access,
to the information relating to its operations, such as financial updates, social
and environmental indicators, ownership structure and corporate governance .
Responsibility
The Company’s material decisions affect a wide range of stakeholders including its
employees and their families, local residents, shareholders, investors, government
agencies and non-governmental organisations . We respect the rights and interests
of the above stakeholders and are strongly committed to protecting them
to the fullest possible extent . We also keep looking for ways to foster communication
and collaboration with all stakeholders .
https://phosagro.ru/upload/iblock/
c0d/c0d09d91657a2a4cca4b50c5
5db795de.pdf
https://phosagro.ru/upload/iblock/
64d/64d8bd7a93664921b15c
71d630372238.pdf
GENERAL SHAREHOLDERS’ MEETING
The General Shareholders’ Meeting is the Company’s highest governing body .
The meetings are convened by the Board of Directors at least once a year .
The Annual General Meeting takes place between 1 March and 30 June.
For more information, see the Regulation on the General Shareholders’
Meeting .
In May 2019, the Annual General Shareholders’
Meeting was held in the form of joint presence
to elect a new Board of Directors and Review
Committee, determine the Board of Directors’
remuneration, distribute the 2018 profit, including
dividend payouts, and resolve on other matters
within the its remit . The reporting year also
saw three extraordinary General Shareholders’
Meetings whose main agenda item was a vote
on interim dividends .
RESPECT FOR SHAREHOLDERS’ RIGHTS
One of the Company’s priorities is strict
compliance with corporate laws, the regulator’s
recommendations and best practices for minority
shareholders’ protection .
We acknowledge the shareholder right to prepare
for a meeting in advance. To this effect, we provide
timely and unimpeded access to meeting details
and materials, both for the previous and upcoming
meetings, at the General Shareholders’
Meeting section of the corporate website .
We also give our shareholders an opportunity
to email their questions to the executive bodies
and the Board of Directors to the dedicated
addresses available in the Corporate Secretary
and the General Shareholders’ Meeting sections
of the corporate website: ks@phosagro .
ru and osa@phosagro.ru (for questions
on the General Shareholders’ Meeting) .
The materials comprise a meeting notice indicating
contact phone numbers and the place where
the meeting materials are available for review .
Starting from 2019, the annual meeting materials
also specify the person who put forward an agenda
item or a candidate to the Board of Directors .
Besides, if the general meeting is to discuss
net profit distribution, the materials must
include rationale for the proposed distribution
and the Board of Directors opinion on whether
the proposal complies with the dividend policy
and reflects the Company’s current financial
standing . In line with the best practices,
the Company provides the shareholders authorised
by law with access to the list of persons entitled
to participate in the general meeting at any
time, from the preparation of the list to the end
of the meeting .
Annual report | 2019Сorporate governance 159
158
CHAIRMAN OF THE BOARD OF DIRECTORS
ROLE OF INDEPENDENT DIRECTORS
In May 2019, Sven Ombudstvedt stepped down as Chairman of the Board
of Directors, a role he had held since 2011. Mr Ombudstvedt contributed
greatly to the Company’s development, working tirelessly to drive
the Company forward and deliver its strategy to 2020 . Under his leadership,
the Company was able to upgrade its production capacities and make
them more efficient and environmentally friendly. Sven Ombudstvedt’s
top priority as the Chairman of the Board of Directors was to ensure full
compliance with the Board’s key operating principles, including accountability,
transparency, responsibility and equality. It is thanks to his efforts that
the Company has integrated sustainability principles and goals into its strategy
and day-to-day operations .
He passed his chairman’s baton to Xavier Rolet, former CEO of the London
Stock Exchange Group . Prior to his appointment Xavier Rolet had chaired
the Risk Management Committee of the Board of Directors . Committed
to the Company’s values, Xavier Rolet sets great store by improvements made
by his predecessor . In his new role, he is going to focus on organic growth,
diligent implementation of the investment programme, continued sustainable
development and innovations, which are key to adding value to the Company .
Board of Directors: period
of service %
Board of Directors: key
competencies %
<3 years
4–7 years
>7 years
50
30
20
Strategy
Finance and audit
Chemistry and mining
engineering
19
19
19
Environment, health and safety
15
Human resources
Risk management
Law and corporate governance
11
11
7
Starting from 2011, when the Company established
the Board of Directors, the number of independent
directors and their authority have been steadily
growing . Independent directors make a valuable
contribution to the Board’s decision-making
as their opinions rely solely on professional skills
and expertise, as well as a comprehensive study
of the matter . Their position is unbiased, independent
and free from the influence of other members
of the Board and the Company`s management,
and they are primarily focused on improving
the Company`s performance . At present, seven
of the ten directors are independent, which
is well above the average in Russia (38% according
to Spenser Stuart research in 2019) and at par
with the best global practices . Independent directors
chair five of the six Board committees .
They are world-class experts with unique
competencies and a track-record in investment
and management of major businesses, financial
and research organisations and government agencies .
They are equipped with a full set of knowledge
and skills needed to propel the Company
and its Board of Directors forward and foster dialogue
with stakeholders at various levels .
Board of Directors nominees and members
are assessed against the independence criteria
set out in the Regulation on the Board of Directors
and the Moscow Exchanges rules . The assessment
is performed twice a year by the Remuneration
and Human Resources Committee . In 2019,
the Board of Directors’ special resolution recognised
the independence of two directors, Sven
Ombudstvedt and Marcus Rhodes, even though
they met the formal criterion of being affiliated
with the Company (an 8-year tenure on the Board
of Directors) .
BOARD OF DIRECTORS
In 2019, the Board of Directors held
8 meetings and reviewed 70 matters.
https://phosagro.ru/upload/
iblock/954/9546a6b923a72
288a37e74c18853a30f.pdf
Full name
Year of birth
Board of Directors
Audit Committee
Strategy
Committee
Remuneration
and Human
Resources
Committee
Risk Management
Committee
Environmental,
Health and Safety
Committee
Sustainable
Development
Committee
Key competences
Strategy
Finance and audit
Chemistry
and mining
engineering
Environment,
health and safety
Human resources
Law
and corporate
governance
Risk management
Irina
Bokova
Andrey
A. Guryev
Andrey
G. Guryev
Sven
Ombudstvedt1
Natalia
Pashkevich
James
Rogers
Marcus
Rhodes
Mikhail
Rybnikov1
Xavier
Rolet
Andrey
Sharonov
1952
8/8
1982
8/8
1960
8/8
2/2
2/2
4/4
2/2
√
√
3/4
2/3
√
√
√
√
√
√
√
1966
1939
1942
1961
8/8
5/5
2/2
2/4
√
√
√
8/8
2/3
√
√
8/8
5/5
8/8
5/5
4/4
√
√
√
√
√
√
1964
7/8
4/5
3/4
2/2
√
√
√
1975
8/8
2/2
2/4
3/3
2/2
√
√
√
√
1959
7/8
4/4
√
√
√
√
√
1 Sven Ombudstvedt became member and Chairman of the Risk Management Committee on 24 May 2019 . Mikhail Rybnikov was member of the Risk
Management Committee until 24 May 2019 .
Annual report | 2019Сorporate governance ONBOARDING OF NEWLY ELECTED
DIRECTORS
Despite the fact that there were no changes
in the Board composition in 2019, the Remuneration
and Human Resources Committee updated
the Onboarding Programme for New Board Members .
This is done annually to provide them
with an effective tool to gain an insight into
the Company’s operations . As part of the onboarding
programme, newly appointed directors visit
the Company’s production sites and meet
with functional managers . In August 2019,
for example, the members elected to the Board
of Directors in 2018 visited PhosAgro sites in Kirovsk
and Apatity (Murmansk region) where, apart
from learning about the Company’s key asset, they
took part in the celebrations of the Miner’s Day .
PROFESSIONAL DEVELOPMENT
AND TRAINING OF THE BOARD
OF DIRECTORS
The Company views commitment to continuous
professional growth as a cornerstone
of good corporate governance . By expanding
their knowledge and skills, directors add value
to the Board of Directors and the Company
on the whole . An annual performance assessment
highlights the need for the qualification upgrade
and training of the Board members, with a focus
on the following areas:
•
•
• current legislative and stock exchange
industry trends in Russia and abroad;
risk management;
requirements;
• Board operation trends in Russia and abroad .
The assessment held in 2019 identified
another focus area for the Board of Directors,
which is cyberrisks and cybersecurity . To meet
this need, the Company engaged one of most
reputable companies in this domain to conduct
a training workshop for the Board of Directors
and the top management in May 2019 . On top
of that, the Board of Directors regularly receives
newsletters from the Company, including quarterly
newsletters on corporate governance and weekly
updates on the developments in the chemical
and related industries .
COMPOSITION OF THE BOARD OF DIRECTORS
An external assessment of the Board’s performance and an annual self-
assessment show that its composition is fully balanced . In 2019, there were no
changes in the Board of Directors composition. However, there were significant
changes to its committees in May 2019, with a new Sustainable Development
Committee set up by the Board of Directors . These measures gave a significant
boost to the Board of Directors’ performance .
Board of Directors:
independence %
Board of Directors: place
of residence %
Independent
Executive
Non-executive
70
20
10
Russia
Europe
USA
Board of Directors: gender
split %
Board of Directors: age %
Men
Women
80
20
50–60
60+
40–50
Under 40
50
40
10
50
30
10
10
161
160
Department
for International Trade
(London)
Member
of the Committee
of Expert Advisors
BOARD OF DIRECTORS
Information on Members of the Board of Directors
РОЛЕ
XAVIER
ROLET
КСАВЬЕ РОБЕРТ
CHAIRMAN
Title
Independent director
2017 – 2019
Year of election
2018
Equity interest /
Stake of ordinary
shares
None
Date of birth
12 November 1959
Education
KEDGE Business School (France)
Master’s degree in Management Science and Finance
Columbia Business School (USA)
MBA in International Finance
Institute for Higher National Defence Studies (IHEDN)
(France)
Post-graduate degree
1994 – 1996
Credit Suisse
Managing Director
1997 – 2000
Dresdner Kleinwort
Managing Director
2000 – 2007
Lehman Brothers (New York and London)
Senior Executive
2007 – 2009
Banque Lehman Brothers S.A. (France)
CEO
2009 – 2017
London Stock Exchange Group (LSEG)
CEO
2011 – Present
Columbia Business School
Member of the Board of Overseers
2018 – 02/2019 Verseon
Non-executive director
2018 – 2019
2018 – Present
PhosAgro
Chairman of the Risk
Management Committee
Shanghai Institute
of Finance for the Real
Economy — SIFRE
Expert Advisor
2019 – 2020
CQS Management Ltd.
CEO
2019 – Present
PhosAgro
• Chairman of the Board
2019 – Present
of Directors
• Member
of the Risk Management
Committee
Public Investment
Fund – Saudi Stock
Exchange (Tadawul)
Member of the Board
of Directors
2013 – 2017
HM Treasury
Member of the Financial Services Trade and Investment Board
2014
European Securities and Markets Authority (ESMA)
Member of the Securities and Markets Stakeholder Group
2014 – 2017
Bank of England
Governor’s Financial Services Forum
2017 – 2018
London Stock Exchange Group (LSEG)
Advisor
KEY COMPETENCIES:
• Strategy
• Finance and audit
• Risk management
• Law and corporate governance
• Chemistry and mining engineering
Annual report | 2019Сorporate governance 163
162
ANDREY A.
GURYEV
Title
Executive director
Year of election
2013
Equity interest /
Stake of ordinary
shares
None
Date of birth
7 March 1982
Education
University of Greenwich (UK)
Bachelor’s degree in Economics
Academy of National Economy under the Government
of the Russian Federation
PhD in Economics
2011 – 2013
PhosAgro AG
Deputy CEO for Sales and Logistics
2011 – Present
Moscow Rhythmic Gymnastics Federation
President
2012 – Present
Andrey Guryev Charitable Foundation
Chairman of the Management Board
2012 – 2014
Investment Trading Bank
Member of the Board of Directors
2012 – Present
PhosAgro-Region
Member of the Management Board
2013 – Present
PhosAgro
Member of the Board of Directors
2013 – Present
PhosAgro
• CEO
• Chairman of the Management Board
• Member of the Strategy Committee
• Member of the Environmental, Health and Safety
Committee
• Member of the Risk Management Committee
2014 – 2016
PhosAgro-Cherepovets
Member of the Management Board
2014 – Present
Russian Chess Federation
Member of the Board of Trustees
2015 – Present
Russian Olympians Foundation
• Member of the Council of Trustees
2015 – Present Russian Union
of Industrialists
and Entrepreneurs
Member
of the Management Board
2016 – Present Russian Association
of Fertilizer Producers
President
2016 – Present Russian Rhythmic
Gymnastics Federation
• Chairman of the Board
of Trustees
• Vice President
2016 – Present International Fertilizer
Association (IFA)
Member of the Board
of Directors
2016 – Present Miners of Russia non-
commercial partnership
Deputy Chairman
of the Supreme Mining
Council
2019 – Present Russian Union
of Industrialists
and Entrepreneurs
Member
of the Management Board
Bureau
KEY COMPETENCIES:
• Strategy
• Finance and audit
• Chemistry and mining engineering
• Environment, health and safety
ANDREY G.
GURYEV
DEPUTY CHAIRMAN
Title
Non-executive director
2001 – 2013
Year of election
2013
Equity interest /
Stake of ordinary
shares
None
Date of birth
24 March 1960
Education
Plekhanov St Petersburg State Mining Institute (Technical
University)
Degree in Economics and Management of Mining
and Exploration Enterprises
Central State Institute for Physical Education
2006 – Present
Russian Chemists Union
Vice President
Federation Council
of the Federal Assembly
of the Russian Federation
Member of the Federation
Council of the Russian
Federation
2013 – Present PhosAgro
• Deputy Chairman
of the Board of Directors
• Member of the Strategy
Committee
AgroGard-Finance
Member of the Board
of Directors
AgroGard-Finance
Chairman of the Board
of Directors
06/2017
–
06/2018
06/2018
–
Present
KEY COMPETENCIES:
• Strategy
• Chemistry and mining engineering
• Human resources
Annual report | 2019Сorporate governance 165
164
MIKHAIL
RYBNIKOV
Title
First Deputy CEO
Year of election
2016
Equity interest /
Stake of ordinary
shares
0.0258%
Date of birth
30 November 1975
Education
Lomonosov Moscow State University
Master’s degree in Economics
2011 – 2013
PhosAgro-Region
Member of the Management Board
2012 – 2015
PhosAgro AG
• CEO
• Chairman of the Management Board
2012 – 2017
PhosAgro-Cherepovets
CEO
2013
2013
Moscow Exchange
Member of the Board of Directors
Apatit
Member of the Board of Directors
2013 – 2016
PhosAgro-Cherepovets
Member of the Board of Directors
2013 – Present
PhosAgro
• Member of the Management Board
• Chairman of the Environmental, Health and Safety
Committee
• Member of the Strategy Committee
• Member of the Sustainable Development Committee
2015 – 2017
PhosAgro-Cherepovets
Chairman
of the Management Board
2016 – Present PhosAgro
Member of the Board
of Directors
2016 – Present PhosAgro-Region
Member
of the Management Board
2017 – 2018
2018 – 2019
Apatit
• CEO
• Chairman
of the Management Board
Apatit
Member
of the Management Board
2018 – Present Samoilov Scientific
Research Institute
for Fertilizers
and Insectofungicides
Member of the Board
of Directors
2018 – Present PhosAgro
First Deputy CEO
2019 – Present Apatit
Advisor to the CEO
(part-time)
SVEN
OMBUDSTVEDT
Title
Independent director
Year of election
Equity interest /
Stake of ordinary
shares
2011
None
Date of birth
Education
2008 – 2011
2010 – 2013
2010 – 2017
2011 – 2019
2011 – Present
2017
2017 – 2019
2017 – Present
2019 – Present
27 July 1966
Pacific Lutheran University (USA)
Bachelor’s degree
Thunderbird School of Global
Management
Master’s degree in International
Management
Saferoad AS
Member of the Board of Directors
Western Bulk
Member of the Board of Directors
Norske Skogindustrier ASA
CEO
PhosAgro
Chairman of the Board of Directors
PhosAgro
• Member of the Audit Committee
• Chairman of the Strategy Committee
• Chairman of the Risk Management
Committee
Norske Skogindustrier ASA
Special Advisor
Norske Skog AS
Chairman of the Board of Directors
Norske Skog Norway AS
Member of the Board of Directors
Norske Skog ASA
CEO
IRINA
BOKOVA
Title
Year of election
Equity interest /
Stake of ordinary
shares
Date of birth
Education
1989 – 1989
1995 – 1997
1991 – 1992
2002 – 2005
2005 – 2009
2009 – 2017
2018 – Present
2018 – Present
Independent director
2018
None
12 July 1952
Moscow State Institute of International
Relations (Russia)
International Relations
John F. Kennedy School of Government
at Harvard University (USA)
Leadership and Economic Development
University of Maryland School of Public
Affairs (USA)
Ford Foundation Fellow
Ministry of Foreign Affairs of the Republic
of Bulgaria
• Secretary of the Council of Ministers
of Bulgaria for European Integration
• Deputy Minister of Foreign Affairs
of the Republic of Bulgaria
National Assembly of the Republic
of Bulgaria
Member of the National Assembly
UNESCO
• Ambassador of Bulgaria to France
and Monaco
• Permanent Delegate of Bulgaria
UNESCO
Director-General
Ban Ki-moon Centre for Global Citizens
Member of the Board of Directors
PhosAgro
• Member of the Board of Directors
• Member of the Remuneration and Human
Resources Committee
• Chair of the Sustainable Development
Committee
2018 – Present
International Automobile Federation
Member of the Board of Directors
KEY COMPETENCIES:
• Strategy
• Finance and audit
• Chemistry and mining engineering
• Environment, health and safety
KEY COMPETENCIES:
• Strategy
• Finance and audit
• Chemistry and mining engineering
KEY COMPETENCIES:
• Environment, health and safety
• Human resources
Annual report | 2019Сorporate governance 167
166
MARCUS
RHODES
NATALIA
PASHKEVICH
Title
Independent director
Title
Independent director
Year of election
2017
Equity interest /
Stake of ordinary
shares
None
Date of birth
5 November 1939
Education
Leningrad Mining Institute
PhD in Economics, professor
1999 – Present
St. Petersburg Mining University
First Vice Rector
2017 – Present
PhosAgro
• Member of the Board of Directors
• Member of the Environmental, Health
and Safety Committee
KEY COMPETENCIES:
• Chemistry and mining engineering
• Human resources
Year of election
2011
Equity interest /
Stake of ordinary
shares
0.000644%
Date of birth
31 May 1961
Education
Loughborough University
Bachelor’s degree in Economics and History
of Economics
Institute of Chartered Accountants
in England and Wales
Qualified as chartered accountant, member
2008 – 2015
Rosinter Restaurants Holding
Member of the Board of Directors
2008 – 2016
Cherkizovo Group
Member of the Board of Directors
2008 – 2015
Tethys Petroleum Limited
Member of the Board of Directors
2011 – Present
PhosAgro
• Member of the Board of Directors
• Chairman of the Audit Committee
2014 – Present
QIWI Group (QIWI plc)
Member of the Board of Directors
2014 – 2017
Zoltav Resources Inc.
Member of the Board of Directors
2017 – Present
SIA Enterprises Limited
Honorary treasurer
08/2018 – 2019 Rustranscom Plc
Non-executive director
KEY COMPETENCIES:
• Law and corporate governance
• Risk management
JAMES
ROGERS
Title
Year of election
Equity interest /
Stake of ordinary
shares
Date of birth
Education
Independent director
2014
0.0064%
19 October 1942
Yale University (USA)
Bachelor’s degree
1986 – Present
1988 – Present
1990 – Present
2007 – Present
2007 – Present
2012 – 2019
2012 – Present
06/2013 – 06/2014
2014 – Present
2014 – 2019
2015 – 2016
2016 – Present
2016 – Present
03/2016 – 04/2018
08/2017 – Present
01/2018 – 2019
09/2018 – 2019
Balliol College, University of Oxford (UK)
Bachelor’s / master’s degree in Philosophy, Politics
and Economics
Virtus Total Return Fund Inc.
Director
Virtus Global Dividend & Income Fund Inc.
Director
Beeland Interests Inc.
Director
Beeland Enterprises Inc.
Director
Beeland Holdings Pte Ltd.
Director
Spanish Mountain Gold Limited
Director
Geo Energy Resources Limited
Non-executive director
Fab Universal Corp
Independent director
PhosAgro
• Member of the Board of Directors
• Chairman of the Remuneration and Human Resources
Committee
• Member of the Audit Committee
Sinofortune Financial Holdings Limited
Non-executive director
TLV Holding Limited
Advisor
Duff & Phelps Select Energy MLP Fund Inc.
Director
Virtus Global Multi-Sector Income Fund
Trustee
Crusader Resources Limited
Non-executive director
AgroGard-Finance
Independent director
Ocean Capital Advisors LLC
Director
Quantum Digital Asset Management Pte Ltd
Member of the Board of Directors
11/2018 –
Present
12/2018 –
Present
2006 – 2015
Sirius International
Insurance Group, Ltd
Member of the Board
of Directors
Ananti Inc
Director
CQS Cayman Limited
Partnership
Advisor
2011 – Present Forbes & Manhattan
Advisor
AgroGard-Finance
Member of the Board
of Directors
06/2017
–
06/2018
2012 – Present Santiago Gold Fund
2013
–
01/2018
Advisor
Laguna Bay Pastoral
Company Pty Ltd
Advisor
Genagro Limited
Advisor
Latitude Technologies
Limited
Senior Advisor
Agritrade Resources Ltd
Advisor
02/2014
–
Present
07/2015
–
01/2017
04/2017
–
Present
08/2017
–
08/2018
Global Blockchain
10/2017
Technologies Corp
–
Advisor
10/2018
2019 – Present Spanish Mountain Gold
Limited
Advisor
ITF Corporation
Advisor
2019 – Present Nanomedics Co. Ltd
External director
KEY COMPETENCIES:
• Finance and audit
• Human resources
• Risk management
• Law and corporate governance
Annual report | 2019Сorporate governance 169
168
168
D&O LIABILITY INSURANCE
Directors and officers liability for damage
caused to third parties by their duties is insured
by SOGAZ (contract No. 18 DO 0028 in effect
from 1 June 2018 to 31 May 2019, contract
No. 19 DO 0020 in effect from 1 June 2019
to 31 May 2020) and is covered up to USD 75 mln
(in rouble equivalent) and extended by USD 2 mln
for independent directors . Apart from directors
liability, the above contracts include the liability
of the Company’s officers. (since 2012).
BOARD OF DIRECTORS REPORT
According to Section 172 “Duty to promote
the success of the company” of the UK Companies
Act 2006, PhosAgro’s Board of Directors acts in good
faith to promote the success of the Company
for the benefit of all shareholders of PJSC PhosAgro,
taking into account possible long-term consequences
of its decisions for the society and the environment,
as well as the interests of the Company’s employees
and other stakeholders .
For the members of PhosAgro’s Board of Directors,
these standards mean that the Company’s
stakeholders should be interacted with responsibly
and that their interests should be respected
to the maximum extent possible . In 2019,
under the guidance of the Board of Directors’
Sustainable Development Committee, stakeholders
were identified and surveyed in order to define
aspects of the Company’s activities that were
significant to them . These aspects have since
been given maximum attention, both in terms
of information disclosure and intensifying work
in the relevant areas . For detailed information
on interaction with key stakeholders, recognition
and consideration of their interests, see
the Stakeholders section of this annual report .
The opinion of our employees is essential
for us, which is reflected, in particular, in one
of our strategic objectives – increasing the loyalty
and satisfaction of our staff. Analysis of employee
satisfaction and loyalty surveys is reviewed annually
by the Remuneration and Human Resources
Committee of PhosAgro’s Board of Directors . Analysis
of hotline complaints and respective management
response is reviewed by the Audit Committee
of PhosAgro’s Board of Directors on a quarterly
basis . The said committees are composed solely
of independent directors .
Although at the moment we do not apply such
practices as appointing directors from among
the employees or appointing a non-executive
director responsible for interaction with employees
for considering their standpoint when
managing the Company, we consider it effective
and are actively involved in a dialogue on all
major management issues with the trade union organisation (Minudobreniya
Association), which has historically been an equal partner for the Company’s
management and an authorised representative of employees in collective
bargaining, review and resolution of labour disputes .
In addition, heads of each production site of the Company regularly (at
least twice a year) visit all business units and hold meetings with employees,
at which they inform the staff about the Company’s performance,
implemented measures, and plans for production and social development .
A key component of such meetings is face-to-face conversation between
managers and teams . Everyone has an opportunity to ask questions or make
a proposal aimed at improving the technology and personnel working
conditions . Based on employees’ suggestions and comments, an action plan
for improving organisational and technological processes is then developed
and implemented .
New strategy
In March 2019, the Board of Directors approved PhosAgro’s Strategy to 2025
taking into account recommendations of the Strategy Committee issued
in late 2018 – early 2019. As part of the approval, it determined the metrics
subject to monitoring, as well as the frequency and the procedure for such
monitoring . This resolution formalised the management duty to submit, twice
a year, strategy progress reports to be pre-reviewed by the Strategy Committee
and finally reviewed by the Board of Directors.
Sustainability management
In 2019, the Board of Directors placed a special emphasis on sustainability
management, which was, first and foremost, incorporated into the Company’s
Strategy to 2025 as a standalone section defining goals and initiatives
in this domain . The Board of Directors also approved the updated Personnel
Management Policy and transparency statement in accordance with the UK
Modern Slavery Act 2015, along with the amended Environmental Policy .
The said documents were developed by the Company’s management based
on the analysis of local corporate documents and procedures needed to ensure
PhosAgro’s compliance with the applicable EU laws on human rights in supply
chains . Moreover, all Board meetings held following the setup of the Sustainable
Development Committee included reports from its chairman on the results
and plans in this area .
Strengthened role of committees
In 2019, the Board of Directors also focused on a more in-depth review of matters
at committee meetings, followed by chairman reports to the Board summarising
key statements, conclusions and proposals . As a result, the reporting year saw
an improvement in the quality of materials provided to the Board of Directors
in the form of chairman reports .
New dividend policy
An important milestone in the Board of Director’s work was the approval
of the new dividend policy aimed at boosting the Company’s investment
appeal .
Corporate governance assessment and development
In March 2019, the Board of Directors reviewed the report on the corporate
governance quality taking into account MSCI and Sustainalytics ratings
and the previous year’s self-assessment of compliance with the Corporate
Governance Code approved by the Bank of Russia on 21 March 2014.
Noting a high level of such compliance, the Board of Directors also analysed
the governance quality criteria, which for certain reasons were not met fully
or partially, and agreed on an improvement plan .
The early 2019 self-assessment and the subsequent recommendations
of the Remuneration and Human Resources Committee were also subject
ANDREY
SHARONOV
Title
Independent director
Year of election
2017
Equity interest /
Stake of ordinary
shares
None
Date of birth
11 February 1964
Education
Ufa Aviation Institute
Aviation Instrument Making
Russian Academy of Public Administration
under the President of the Russian Federation
Law
2010 – 2013
Government of Moscow
Deputy Mayor for Economic Policy
2014 – 2019
NOVATEK
Member of the Board
of Directors
2015 – 2018
VTB Bank
Member of the Supervisory
Council
2015 – 2017
Rosgeologia
Member of the Board
of Directors
2015 – 2016 Moscow Exchange
Member of the Supervisory
Board
2016 – Present Moscow School
of Management
SKOLKOVO
President
2011 – 2014
National Research University Higher School of Economics
Member of the Supervisory Council
2017 – Present PhosAgro
• Member of the Board
2011 – Present
National Research University Higher School of Economics
Professor (part-time) at School of Finance of the Faculty
of Economic Sciences
2011 – 2015
Bank of Moscow
Member of the Board of Directors
2013 – 2016
Moscow School of Management SKOLKOVO
Rector
2013 – 2016
MC Eko-Sistema
Chairman of the Board of Directors
2014 – 2015
ALROSA
Member of the Supervisory Board
2014 – Present
MC NefteTransService
Chairman of the Board of Directors
2014 – Present
Sovcomflot
Member of the Board of Directors
2016 – Present
SKOLKOVO Endowment Fund
Head
2016 – Present
Present Association for the Development of Moscow
School of Management SKOLKOVO
Executive director
of Directors
• Member of the Audit
Committee
• Member
of the Remuneration
and Human Resources
Committee
• Member
of the Sustainable
Development Committee
2018 – Present Medicina
Chairman of the Board
of Directors
2019 - Present En+ Group
• Independent director
KEY COMPETENCIES:
• Finance and audit
• Law and corporate governance
• Human resources
Сorporate governanceAnnual report | 2019 to review by the Board of Directors in the reporting
year . The self-assessment was held in the form
of a directors’ survey based on PwC’s methodology
approved by the Board of Directors in 2017 .
February 2020 saw KPMG conduct an external
assessment of the Company’s Board of Directors .
The independent consultant recognised
the Board’s high efficiency and a strong
engagement of its members .
KPMG also highlighted a balanced split
between executive and independent directors
and confirmed that they have the required
skills, competencies and expertise . In terms
of independence and the presence of foreign
directors, PhosAgro is almost on a par with foreign
industry leaders and ahead of the Russian players .
The current Board’s composition is fully in line
with the Company’s needs, which contributes
to well-reasoned decision-making .
The efficiency of the Board’s key functions was
also highly rated by the independent consultant .
The Board of Directors discusses a wide range
of matters to ensure the effective governance
of the Company’s operations .
Stakeholder engagement
In 2019, the Board of Directors strengthened its dialogue with stakeholders .
In addition to the participation in the Annual General Shareholders’ Meeting
and the visit to the sites in Kirovsk and Apatity, the Board’s independent
directors took part in the Investor Day held in September in London .
As part of it, they presented PhosAgro’s new strategy and dividend policy
to the investment community .
Miscellaneous
Apart from the above matters, the Board of Directors reviewed the Company’s
amended budget for 2019 and the 2020 budget and approved the Internal Audit
Department’s report for 2019 and the 2020 plan . On a quarterly basis, it also
discussed a number of other matters such as the approval of the Company’s
reports, the progress against the 2019 budget and the results of risk monitoring .
Where necessary, the Board of Directors considered matters relating to the approval
of significant transactions and interested-party transactions, convening of general
shareholders’ meetings and other matters within its remit under the Charter .
In 2019, the Board of Directors continued to foster cooperation with the Company’s
functional units by reviewing reports and issuing recommendation for such
functions as procurement, project management, IT and global projects . On top
of that, it reviewed and provided opinion on the external assessment of the internal
audit, risk management and internal control functions .
171
170
BOARD COMMITTEES
The committees of the Board of Directors are advisory and consultative bodies
made of the current Board members with relevant experience and expertise
in committees’ specific focus areas.
The committees can also involve external experts and consultants in their work .
The committees’ key role is to preview 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 the full and accurate
information . To achieve this, committee members
maintain a regular dialogue with the management,
the Company’s external auditor and other advisors
on the issues that fall within their remit .
REMUNERATION AND HUMAN RESOURCES COMMITTEE
James Rogers
independent director, Chairman of the Remuneration and Human Resources Committee
Having been reshuffled before the very end of 2018, the Committee
expanded its remit in 2019 . In addition to our customary responsibilities
(assessment of professional skills, independence and engagement
of prospective and existing members of the Board of Directors, evaluation
of staff motivation programmes, best practice guidance and analysis
for performance appraisal of the Board of Directors and N to N-2 managers),
we drew our focus toward more comprehensive staff training as well
as employee loyalty and engagement assessment . It goes without saying
that businesses operating in the era of digitalisation and artificial intelligence
are faced with new standards for staff training. HR priorities are now shifting
from skills training to creating a development-focused environment . It
is clear that employee development programmes must expand and evolve
to keep up with modern times . Without doubt, every company should
prioritise employee satisfaction . That is why the Company’s 2025 Strategy
sets out two targets which fall within the scope of our Committee:
the number of training hours and the creation of an integrated employee
loyalty index . Both when initially assessing nominations to the bi-annual
Board of Directors and subsequently when finalising its composition,
our Committee decides which reasons should
disqualify members from serving on it .
The introduction of external independent
directors (Xavier Rolet from CQS Management
Ltd ., Sven Ombudstvedt from Norske Skog,
Jim Rogers from Beeland Interests Inc . (among
others), A. Sharonov from Moscow School
of Management SKOLKOVO, N. Pashkevich
from St Petersburg Mining University) did
not affect the members’ performance
of their duties as directors in the reporting year,
and actually allowed for the greatest possible
contribution of these experts to the Company’s
growth .
In 2020, we intend to do our best to successfully
address these challenges .
Annual report | 2019Сorporate governance AUDIT COMMITTEE
Marcus Rhodes
independent director,
Chairman of the Audit Committee
The Committee’s remit includes:
•
reviewing the IFRS financials for integrity
and transparency;
• analysis of financial reporting processes,
including carrying out regular reviews
and making recommendations for the Board
of Directors;
recommending the Company’s external auditor
to the Board of Directors and maintaining
an ongoing relationship with the external
auditor;
•
• providing support to the Internal Audit function
and analysing the quarterly results of their work;
• ensuring compliance with applicable legislation
and relevant standards of business conduct .
According to the Regulations on the Company’s
Audit Committee, the Audit Committee shall
consist of no fewer than three current members
of the Board of Directors and shall be chaired
by an independent director . Since 2018,
the Committee has included four independent
directors .
In 2019, the Committee focused on:
• Reviewing IFRS consolidated financial
statements for integrity and transparency,
as well as analysing the Company’s financial
performance, including reasons for changes
when compared with the results of previous
periods and approved budgets .
• Analysing the Group’s financial reporting
processes . In 2019, the Group completed
technically challenging projects, including
the roll-out of a new consolidation system
based on Oracle Hyperion Financial
Management . This was integrated with three
accounting systems (Oracle E-Business Suite, SAP B1 and 1C) used
by consolidated companies of various jurisdictions, profiles and sizes.
With the successful completion of these projects, the Group managed
to reduce the time required to prepare its annual accounts (the Board
of Directors meeting regarding 2019 results was held on 20 February 2020)
by a month .
• Recommending the Company’s external auditors to the Board of Directors
and maintaining an ongoing relationship with them . When choosing
an auditor, we take into account the following factors in addition to its fees .
First, the team of auditors shall possess the relevant personal qualifications
and be suitably experienced to ensure the audit is performed in due time
and to the highest of standards .
Second, we assess the auditor’s independence based on a number of factors
including the scope of the non-audit services rendered by the auditor . Any
KPMG proposal for rendering a non-audit service is subject to an internal
review by KPMG. If the audit leader confirms that there is no threat to auditor
independence, the proposal is forwarded to the Company’s Audit Committee
for review and approval . The Committee only agrees to engage the auditor
if the scope of the non-audit services is not so substantial as to challenge
the objectivity and independence of the auditor . When assessing the auditor’s
independence, the Committee also looks at whether the auditor has internal
procedures in place to control the objectivity and professional ethics of its
staff. This includes the requirement for the routine rotation of the audit leader,
the auditor’s training in this area, and the use of specialised software to carry
out relevant reviews .
Third, we strive to maintain a balance between the benefits of long-term
cooperation and the need for a fresh perspective on the Company’s accounts
and the report preparation processes .
Finally, when assessing the possibility of continuing cooperation
with the external auditor, the Committee assesses the auditor’s performance
from the previous period . The Committee draws on its face-to-face meetings,
which are attended by the audit manager and the audit leader, when assessing
the performance of the external auditor . There are 4 to 5 of such meetings
every year . In addition, each meeting is preceded by a meeting of the audit
173
172
team and the Audit Committee Chair, which focuses, amongst other things,
on the quality of interaction with the Company employees responsible
for providing data for the audit .
• Supporting the internal audit function, approving annual action plans
for the Internal Audit Department, and monitoring its performance
on a quarterly basis . The Committee reviews risk-based audit plans
and submits them for approval by the Board of Directors . It should be noted
that all core business processes will be audited given the results achieved
by the Internal Audit Department in 2019 and its plans for 2020 .
• Providing control over the Company’s compliance with legal and regulatory
requirements, business ethics and customs . In particular, the Committee
reviewed an external analysis of the Company’s internal control and audit
functions in 2019 . In addition, the Committee performed reviews
of the Company’s compliance with the Russian
Central Bank Corporate Governance Code,
as well as with UK Corporate governance code .
Both reviews were positive .
Importantly, we also focus on ensuring
the required quality and completeness
of information disclosure . To ensure
this, we reviewed and approved quarterly press
releases on the Group’s performance prior
to their publication, at each of our quarterly
meetings .
SUSTAINABLE DEVELOPMENT COMMITTEE
Irina Bokova
independent director,
Chair of the Sustainable Development Committee
In May 2019, PhosAgro’s Board of Directors set up a Sustainable
Development Committee to ensure that in doing its business
the Company adheres to the highest standards of accountability,
integrity and transparency . We also aim to help the Company maintain
a balanced strategic approach to ESG reporting and activities . At its two
meetings in 2019, the Committee approved the list of the UN Sustainable
Development Goals and the relevant targets along with the Company’s
initiatives to pursue them, the respective timelines and budgets .
Under the Committee’s supervision, the Company introduced a number
of metrics and relevant measurable targets to 2025 linked to management
KPIs . The Committee steered the Company activities to promote the global
sustainable development agenda in 2019. Specifically, as a sponsor
and partner of the International Year of the Periodic Table, PhosAgro actively
contributed to the events held under its auspices . In May 2019, we launched
the Regional Soil Laboratory Network (RESOLAN) for Africa (AFRILAB)
development project, in November, the Company joined the European
Sustainable Phosphorus Platform (ESPP), and in December 2019, the Group
became the founding member of the Green Club, an independent
association of producers and suppliers of eco-friendly products . We
are pleased to note that our efforts have been recognised internationally.
In September, the UN named PhosAgro as a Global Compact LEAD company
for its commitment to corporate social responsibility and sustainable
development, in November, the Company
was awarded the Gold Medal as Industry
Stewardship Champion by the IFA (International
Fertilizer Association), in December, we became
the winner in two categories at the 2019 Awards
for Russian Leaders in Corporate Philanthropy
Advancing Sustainable Development,
organised by the Russian Donors Forum, PwC
and the Vedomosti newspaper .
In 2020, we will continue our efforts to strengthen
the Company’s sustainability framework
by integrating the UN Sustainable Development
Goals and the relevant targets into its strategy
and day-to-day operations . Going forward,
the Committee’s area of responsibility will include
PhosAgro’s numerous educational and charitable
projects, both domestic and international,
cooperation with global organisations, as well
as supervision and monitoring of approved social
and environmental initiatives .
Annual report | 2019Сorporate governance RISK MANAGEMENT COMMITTEE
STRATEGY COMMITTEE
ENVIRONMENTAL, HEALTH AND SAFETY COMMITTEE
175
174
Sven Ombudstvedt
independent director, Chairman of the Risk Management Committee,
Chairman of the Strategy Committee
Mikhail Rybnikov
member of the Management Board,
Chairman of the Environmental,
Health and Safety Committee
Xavier Rolet’s association with the Company helped
its risk management activities to gain traction .
In 2019, the Committee moved beyond general
risk assessment and monitoring to scrutinise
specific risks and perform an in-depth analysis.
The Committee held four meetings in 2019
focusing on:
• Results of monitoring the management of key
corporate risks (quarterly) .
• Results of a reassessment of the Company’s key
risks and updating its risk map for 2019 .
• Evaluation of the Company’s risk management
and internal control system .
• Management of key specific corporate risks
(new or critical) . These include cybersecurity
and sustainable development risks .
I note with satisfaction that the Company’s risk
management and internal control system was
highly appraised following an external assessment
in 2019 . We intend to keep this positive
momentum going into 2020 .
From late 2018 through early 2019, the Committee,
in cooperation with the Company’s management,
was actively developing our 2025 Strategy .
For the first time ever, we mapped our strategic
goals against inherent risks and the UN Sustainable
Development Goals. Our efforts were rewarded
in March 2019 when the Board of Directors
approved and adopted the document . The Board
of Directors also established targets and procedures
to monitor performance vs . the approved Strategy,
which falls within the remit of our Committee .
On top of that, the Committee held two meetings
where it reviewed the progress made towards
meeting Strategy 2020 goals, analysed actual
performance vs. 2016 targets and recommended
that the Board of Directors declare Strategy 2020
goals as achieved . The Committee also reviewed
a progress report covering priority areas
of the Company’s business in 2018 and approved
such priorities for 2019 .
The reporting year saw Natalia Pashkevich,
First Vice Rector at St Petersburg Mining
University and a world-renowned researcher,
join our Committee . This helped us gain
a fresh perspective on matters falling within
the Committee’s remit, and come forward with new
solutions . Traditionally, the Committee oversees
three major workstreams:
• health and safety;
• environmental protection;
• energy efficiency.
As regards health and safety, the reporting
year proved to be distressing for both
the Committee and the Company in general
since PhosAgro’s production sites recorded
several accidents . This required immediate
action from the management, which resulted
in Apatit’s strategic health and safety programme
for 2019–2021 reviewed and recommended
by the Committee for approval as early
as in the mid-year . The programme comprises a wide range of improvements
in this domain . Greatly concerned over this matter, the Board of Directors
has made it one of its priorities . As part of their commitment to improve
the situation, the directors now start every meeting with a review of a health
and safety report and progress on the relevant initiatives . In 2019,
the Committee expanded the scope of its duties to review the effectiveness
of programmes run by the Group’s companies to reduce pollutant emissions,
discharges and waste generation . At the same time, we continued
to monitor industrial emissions (effluents) for meeting the standards aligned
with the best available practices .
We also remained focused on regulatory compliance, reviewing,
among others, draft laws, which are yet to be considered and approved .
In the reporting year, due in no small part to our recommendations,
the Company’s sites launched energy reliability programmes . The coming
year will see the Company, for the first time in its history, generate energy
from renewable sources .
Annual report | 2019Сorporate governance EXECUTIVE BODIES
CORPORATE SECRETARY
EXECUTIVE BODIES
INFORMATION ON MEMBERS OF THE MANAGEMENT BOARD
177
176
In charge of PhosAgro’s day-to-day operations are two executive
bodies accountable to the Board of Directors:
•
•
the collegial body (Management Board) and
the sole executive body (CEO) .
In 2019, the Management Board held seven meetings
and reviewed twelve items most of which were related
to the budget discipline .
In this period, there were two changes to its composition,
• with Alexander Seleznev, a new Сhief of Staff for the CEO,
joining the Management Board in March 2019,
• and Alexander Gilgenberg leaving it in December 2019 due
to his appointment as General Director of Apatit (PhosAgro’s
subsidiary) .
As at 31 December 2019, the Management Board was
composed of:
• Andrey Guryev, CEO;
• Siroj Loikov, Deputy CEO;
• Roman Osipov, Business Development Director;
• Mikhail Rybnikov, First Deputy CEO;
• Alexander Seleznev, Сhief of Staff for the CEO;
• Alexei Sirotenko, Deputy CEO for Corporate and Legal Affairs;
• Alexander Sharabaika, Deputy CEO for Finance
and International Projects .
The Corporate Secretary is responsible for day-to-
day interactions with the shareholders, coordination
of the Company’s efforts to protect shareholder rights
and interests, and support to the Board of Directors to ensure
its efficient performance. The Corporate Secretary is appointed
by the Board of Directors . The operating procedures
of the Corporate Secretary are governed by the Regulation
on the Corporate Secretary approved by the Board of Directors .
SERGEY
SAMOSYUK
CORPORATE SECRETARY
Date of birth
1 October 1976
Education
St Petersburg State University
of Economics (former St Petersburg
Academy of Engineering and Economics)
Engineering and Economics
St Petersburg University
Law
In 1996, Mr Samosyuk joined the financial department
at Ammophos
From 2003, he held leading finance positions
at PhosAgro AG, Metachem and Mining and Chemical
Engineering (MCE), and was a member of PhosAgro-
Cherepovets review committee. In October 2014, he was
appointed head of methodology and economic analysis
at PhosAgro-Cherepovets.
For the regulation on the Corporate Secretary,
see the Company’s website at
https://phosagro.ru/upload/iblock/516/
5162b0971716ff98bd58f8590ea883a3.pdf
ANDREY A.
GURYEV
Title
Executive director, Chairman of the Management Board
2015 – Present Russian Union
Equity interest /
Stake of ordinary
shares
None
Date of birth
Education
7 March 1982
University of Greenwich (UK)
Bachelor’s degree in Economics
2011 – 2013
2011 – Present
2012 – Present
2012 – 2014
2012 – Present
2013 – Present
2013 – Present
2014 – 2016
2014 – Present
2015 – Present
Academy of National Economy under the Government
of the Russian Federation
PhD in Economics
PhosAgro AG
Deputy CEO for Sales and Logistics
Moscow Rhythmic Gymnastics Federation
President
Andrey Guryev Charitable Foundation
Chairman of the Management Board
Investment Trading Bank
Member of the Board of Directors
PhosAgro-Region
Member of the Management Board
PhosAgro
Member of the Board of Directors
PhosAgro
• CEO
• Chairman of the Management Board
• Member of the Strategy Committee
• Member of the Environmental, Health and Safety
Committee
• Member of the Risk Management Committee
PhosAgro-Cherepovets
Member of the Management Board
Russian Chess Federation
Member of the Board of Trustees
Russian Olympians Foundation
• Member of the Council of Trustees
of Industrialists
and Entrepreneurs
Member
of the Management Board
2016 – Present Russian Association
of Fertilizer Producers
President
2016 – Present Russian Rhythmic
Gymnastics Federation
• Chairman of the Board
of Trustees
• Vice President
2016 – Present International Fertilizer
Association (IFA)
Member of the Board
of Directors
2016 – Present Miners of Russia non-
commercial partnership
Deputy Chairman
of the Supreme Mining
Council
2019 – Present Russian Union
of Industrialists
and Entrepreneurs
Member
of the Management Board
Bureau
Annual report | 2019Сorporate governance 179
178
SIROJ
LOIKOV
ROMAN
OSIPOV
MIKHAIL
RYBNIKOV
Equity interest /
Stake of ordinary
shares
None
Date of birth
9 September 1972
Education
Tashkent State University of Economics
International Economic Relations
Nottingham University Business School (UK)
Bachelor’s degree in Business Management
2011 – 2013
2013 – 2015
PhosAgro AG
HR Director
PhosAgro
HR Director
2013 – 2015
PhosAgro AG
Human Resources and Social Policy Director
2013 – Present
PhosAgro
Member of the Management Board
2013 – 2017
Izumrud
Member of the Board of Directors
2014 – 2015
PhosAgro AG
Member of the Management Board
2015 – 2018
PhosAgro
Human Resources and Social Policy Director
2015 – 2018
Korporativnoe pitanie (Corporate Nutrition)
Member of the Board of Directors
2015 – 2017
PhosAgro-Cherepovets
• Human Resources
and Social Policy Director
• Member
of the Management Board
2017 – 2018
Tirvas
Member of the Board
of Directors
2017 – 2018
2017 – 2018
2018 – 2019
Apatit
Human Resources
and Social Policy Director
Apatit
Member
of the Management Board
PhosAgro
Deputy CEO for Human
Resources (part-time)
2018 – Present PhosAgro
Deputy CEO
2018 – Present Apatit
Deputy CEO (part-time)
Date of birth
4 November 1971
Date of birth
30 November 1975
Equity interest /
Stake of ordinary
shares
None
Equity interest /
Stake of ordinary
shares
0.0258%
Education
2012 – 2015
2012 – 2013
Baltic State Technical University
Master’s degree from the LETI-Lovanium
International School of Management
PhosAgro
Member of the Board of Directors
PhosAgro AG
Member of the Management Board
Education
2011 – 2013
2012 – 2015
Lomonosov Moscow State University
Master’s degree in Economics
PhosAgro-Region
Member of the Management Board
PhosAgro AG
• CEO
• Chairman of the Management Board
2013 – Present
PhosAgro
Business Development Director
2012 – 2017
PhosAgro-Cherepovets
CEO
2013 – Present
AgroGard-Finance
Member of the Board of Directors
2014 – Present
Giproruda
Member of the Board of Directors
2017 – Present
PhosAgro
Member of the Management Board
2018 – 2019
Apatit
Member of the Management Board
2018 – Present
Apatit
Advisor to the CEO (part-time)
2013
2013
2013 – 2016
2013 – Present
Moscow Exchange
Member of the Board of Directors
Apatit
Member of the Board of Directors
PhosAgro-Cherepovets
Member of the Board of Directors
PhosAgro
• Member of the Management Board
• Chairman of the Environmental, Health
and Safety Committee
• Member of the Strategy Committee
• Member of the Sustainable Development
Committee
2015 – 2017
PhosAgro-Cherepovets
Chairman of the Management Board
2016 – Present
PhosAgro
Member of the Board of Directors
2016 – Present
PhosAgro-Region
Member of the Management Board
2017 – 2018
Apatit
• CEO
• Chairman of the Management Board
2018 – 2019
Apatit
Member of the Management Board
2018 – Present
Samoilov Scientific Research Institute
for Fertilizers and Insectofungicides
Member of the Board of Directors
2018 – Present
Apatit
Advisor to the CEO (part-time)
2018 – Present
PhosAgro
First Deputy CEO
Annual report | 2019Сorporate governance 181
180
ALEXANDER
SELEZNEV
ALEXEI
SIROTENKO
ALEXANDER
SHARABAIKO
Date of birth
6 July 1984
Date of birth
3 January 1969
Equity interest /
Stake of ordinary
shares
None
Education
Bauman Moscow State Technical
University
Information Security
2011 – 2014
2015 – 2019
2019 – Present
VTB Capital
Analyst
PhosAgro
Head of Investor Relations
PhosAgro
• Сhief of Staff for the CEO
• Member of the Management Board
Equity interest /
Stake of ordinary
shares
None
Education
Lomonosov Moscow State University
Jurisprudence
2007 – 2015
PhosAgro AG
Member of the Management Board
2010 – Present
PhosAgro
Deputy CEO for Corporate and Legal Affairs
2011 – 2015
PhosAgro AG
Legal Affairs Director
2013 – Present
PhosAgro
Member of the Management Board
2015 – 2017
PhosAgro-Cherepovets
• Legal Affairs Director
• Member of the Management Board
2017 – 2019
Apatit
Member of the Management Board
2017 – Present
Apatit
Legal Affairs Director
2015 – Present PhosAgro-Region
Member
of the Management Board
2017 – 2018
PhosAgro
Member of the Board
of Directors
2017 – Present Apatit
Advisor to the CEO
(part-time)
2017 – 2019
Apatit
Member
of the Management Board
2018 – Present PhosAgro
Member
of the Management Board
2019 – Present PhosAgro
Deputy CEO for Finance
and International Projects
Date of birth
25 February 1977
Equity interest /
Stake of ordinary
shares
None
Education
Belarus State Economic University
Finance and Credit
Nottingham University Business School (UK)
Bachelor’s degree in Finance
2012 – 2014
2013 – 2014
2013 – 2015
2013 – 2015
2013 – 2017
2014 – 2015
2014 – 2019
2015 – 2017
PhosAgro AG
CFO
PhosAgro
CFO (part-time)
PhosAgro AG
Member of the Management Board
Ekoprombank
Member of the Supervisory Board
PhosAgro
Member of the Management Board
PhosAgro AG
Advisor to the CEO (part-time)
PhosAgro
CFO
PhosAgro-Cherepovets
• Advisor to the CEO (part-time)
• Member of the Management Board
2014 – 2016
PhosAgro-Cherepovets
Member of the Management Board
Annual report | 2019Сorporate governance CORPORATE CONTROLS
In December 2018, the Board of Directors approved
the Company’s Risk Management and Internal Control
Policy and made relevant amendments to the Corporate
Governance Code to segregate this function in the general
management framework.
The risk management and internal control framework
represents a set of organisational measures, methods,
practices and standards of corporate culture. It also
embraces actions taken by the Company to strike
the right balance between value growth, profitability
and risks, support financial sustainability, and ensure
efficient operations, protection of its assets, compliance
with the laws, Charter and bylaws, along with timely
and accurate reporting.
For key roles and other relevant information, see the
Risk Management and Internal Control Policy.
https://phosagro.ru/upload/iblock/c95/c95ee12
cfc97317372a98bd482c40808.pdf
RISK MANAGEMENT AND INTERNAL CONTROLS
The risk management and internal control framework comprises:
Review Committee
Audit Committee
Board of Directors
Risk Management
Committees
Executive bodies (Management Board and CEO)
Internal Audit Department
Other organisational units
Risk Management and Internal Control Department
183
182
The Board of Directors defines the key principles
of, and approaches to, risk management
and internal controls, oversees the Company’s
executive bodies, and performs other key
functions . It has set up a Risk Management
Committee to provide recommendations
and proposals to the Board of Directors and other
Company’s bodies on identifying material risks
and developing relevant management tools
and measures to enhance the risk management
framework . The Audit Committee focuses
on assessing and making proposal to improve
the risk management and internal control
efficiency. On top of that, its members supervise
the preparation of accounting (financial) statements
and the measures taken to prevent fraudulent
behaviour of the Company’s employees or third
parties .
The Review Committee elected by the General
Shareholders’ Meeting exercises control
over the financial and business operations
of the Company .
The Company’s executive bodies establish
and maintain an efficient risk management
and internal control framework. To this effect, they
set up a Risk Commission that monitors the status
and effectiveness of risk management initiatives.
The results serve as a basis for the relevant proposals
issued by the Commission to executive bodies
and the Board of Directors .
Following the audits, the Internal Audit Department
provides the Board of Directors and executive bodies
with recommendations and reports, including,
among other things, the assessment of the current
status, reliability and efficiency of the corporate
governance, risk management and internal control
framework .
The Company’s Risk Management and Internal
Control Department is charged with the general
supervision of risk management, including related
activities and consolidated reporting to the Board
of Directors and executive bodies .
As part of their duties, heads of other organisational
units are responsible for building, documenting,
implementing, monitoring and developing the risk management and internal
control framework in their respective functional areas . Besides, the framework
requires the Company’s employees to identify and assess relevant risks
and efficiently implement the controls and risk management initiatives.
REVIEW COMMITTEE
The General Shareholders’ Meeting held in May 2019 elected the following
members to the Review Committee:
• Ekaterina Viktorova;
• Elena Kryuchkova;
• Olga Lizunova .
The Committee endorsed PhosAgro’s financial statements for 2019, with its
report dated 18 February 2020 included in the materials for the Annual
General Shareholders’ Meeting .
INTERNAL AUDIT
The Company’s Internal Audit Department (IAD) assists the Company’s
top executives and the Board of Directors in improving the management
of business processes and enhancing the internal control and risk
management framework . In doing this, it uses a risk-oriented approach
and works closely with the Risk Management, Internal Control and Economic
Security Departments, and the Company management .
AUDIT OF BUSINESS PROCESSES
In 2019, the Internal Audit Department audited business processes related
to project, repair and contractor operational safety management . The audit
also covered IT of foreign offices and corporate governance. The audit plan
for the calendar year is subject to review, discussion and approval by the Audit
Committee and the Board of Directors . Audits are performed at the Group
level, as well as at specific branches and subsidiaries. In addition, the Internal
Audit Department monitors the effectiveness and efficiency of corrective
actions taken by the management following the audit, and reports
to the Board of Directors on a quarterly basis .
The 2020 audit plan covers such areas as sales, IT, information security, finance
and HR .
Annual report | 2019Сorporate governance EXTERNAL ASSESSMENT
EXTERNAL AUDIT
INSIDE INFORMATION
ANTI-CORRUPTION
185
184
102-16
103
The Company has adopted an Inside Information
Regulation compliant with Russian and EU laws .
In accordance with its provisions, the Corporate
Secretary’s office keeps a list of insiders, persons
discharging managerial responsibilities (PDMR)
and persons closely associated with them (PCA).
The Regulation defines the scope of responsibilities
for each insider group, which the Corporate
Secretary’s office from time to time communicates
to respective persons . First and foremost, these
include the limitations on the use of inside
information and trading in the Company’s
securities . Depending on the group, an insider may
be prohibited from such transactions or obliged
to notify the Company or obtain its consent
for such transactions . Every quarter, the Corporate
Secretary’s office goes through the list
of shareholders to identify transactions that may
have been executed in breach of such limitations .
The reporting year saw no violations of the Inside
Information Regulation .
The Company operates in strict compliance with generally accepted
ethical business standards and is intolerant to anyone taking advantage
of their official position contrary to public or national interests. PhosAgro takes
consistent efforts to prevent corruption and to this end has developed and put
in place Anti-Corruption Policy, Code of Ethics, Conflict of Interest Regulations,
and Hotline Regulations .
The Company’s anti-corruption policy is implemented in accordance
with applicable anti-corruption laws and international conventions
(including the United Nations Convention Against Corruption, the OECD
Convention, Russian anti-corruption laws) . In accordance with the Anti-
Corruption Policy, the members of the Company’s Board of Directors
and senior management must comply with and lead by example setting
the highest standards of behaviour and work ethic . The policy commits all
employees to a zero-tolerance approach to corruption . Any law violation
jeopardises successful development of business, that is why we try to minimise
the risk of business relations with those potentially involved in corruption .
To achieve this principle, we check counterparties for reliability and for having
their own rules and procedures to prevent fraud and corruption, also looking
at their willingness to comply with anti-corruption laws, have an anti-
corruption clause incorporated in contracts, and work together to prevent
fraud and corruption . PhosAgro’s Hotline is another important element
of the Company’ anti-corruption system . Used to collect and process
information, it allows employees and third parties to report fraud or signs
of fraud, theft and corruption in the Company or its subsidiaries . In 2019, two
cases of corruption were identified and prosecuted under the Russian Criminal
Code as Commercial bribery and Fraud . The Company terminated employment
of the offenders.
205-3
In early 2019, PwC completed
an external assessment of the IAD’s compliance
with the International Standards for the Professional
Practice of Internal Auditing, the Institute of Internal
Auditors’ Code of Ethics and the Corporate
Governance Code approved by the Bank of Russia .
For the IAD, the results were overall positive .
The Company is consistently working to improve its
internal audit function according to the plan .
Following the assessment, the internal audit
methodology saw the following amendments:
• annual audit plans take into account
the outcomes of reviewing and assessing IT
and information security risks;
• each audit includes risk evaluation and control
testing for information systems used
by the audited processes .
Going forward, the external assessment will take
place thrice a year .
RISK MANAGEMENT
The Company is making a consistent effort
to develop its risk management framework .
In 2019, the Board of Directors reviewed the results
of the independent risk management assessment,
which showed good progress compared to 2016,
including:
full compliance with regulatory requirements;
•
risk management roll-out at production sites;
•
introduction of key risk indicators;
•
•
risk appetite calculation and regular review;
• organising training sessions to develop risk
•
management competencies;
integrated approach to processing risk, control
and internal audit data .
The reporting year saw the Company’s production
sites complete the first full-year cycle of risk
management, including:
• ongoing risk monitoring;
• analysis of key risk indicators;
• development of corrective actions;
follow-up control and review .
•
In 2020, risk management initiatives will
focus on the support and deeper integration
of the existing elements into the Company’s
processes and practices .
For information on key risks and risk management,
see the Strategic Report section .
The Company›s auditor performs the audit of its financial
and business operations in compliance with Russian laws and regulations
and the agreement signed with the Company . The auditor is approved
by the General Shareholders’ Meeting .
In 2019, the Company engaged KPMG (10 Presnenskaya Embankment,
Moscow, Russia) to audit its IFRS financial statements . The actual
remuneration paid to the auditor for this service stood at RUB 34 .5 mln,
net of VAT . In addition, KPMG was engaged in preparing the Company’s
Eurobond issue and received RUB 14 mln for this service . Furthermore, during
the reporting year, other agreements were signed with the auditor for non-
audit services worth of RUB 1 .5 mln, net of VAT, as well as for non-audit
services to be provided to the Company’s subsidiaries worth of RUB 10 .3 mln,
net of VAT .
In 2019, the Company engaged FBK (44/1 Myasnitskaya St., Bld. 2AB,
Moscow, 101990, Russia) to audit its RAS accounting statements . The actual
remuneration paid to the auditor for this engagement stood at RUB 590,000,
net of VAT .
For more information
about the auditors, selection
procedure and independence,
see the Company’s quarterly
reports and this report’s section
discussing the Audit Committee’s
activities.
https://www.phosagro.ru/ori/phosagro/
ezhekvartalnye-otchety/
CONFLICTS OF INTEREST
The Board of Directors pays special attention to resolving conflicts of interest,
with independent directors playing a crucial role in their prevention . In late
2018, the Board of Directors approved the amended Conflict of Interest
Regulation as part of the Company’s internal anti-corruption regulations .
The Company’s Economic Security Department is responsible for identifying
conflicts of interest and taking the required corrective actions. In its quarterly
report, the IAD informs the Board’s Audit Committee of all complaints received
via the hotline and relevant investigation results .
The Regulation on the Board of Directors also contains provisions defining
a conflict of interest and regulating the directors’ actions if any such conflict
arises . Every year, at one of the Board’s in-person meetings, directors
are notified of their duties in connection with potential conflicts of interest.
In the reporting year, there were no conflicts of interests among the Board
members and the top management .
https://www.phosagro.ru/upload/docs/
about_conflict_of_interests.pdf
Annual report | 2019Сorporate governance REMUNERATION REPORT
PRINCIPLES FOR REMUNERATION OF THE BOARD
OF DIRECTORS
When deciding on a Board composition, the General Shareholders’ Meeting
approves the amount and the rules for determining and paying remuneration
and compensation to its members. The remuneration offered by the Company
to directors creates sufficient motivation for them to work effectively, allowing
the Company to attract and retain competent and skilled professionals .
At the same time, the Company avoids higher-than-necessary remuneration .
During their term of office, directors receive remuneration and compensation
for the expenses they incur while discharging their duties . Fixed (quarterly)
remuneration is paid to independent Board members only . Additional
(quarterly) remuneration is paid to the chairmen of Board committees who
are independent directors and the non-employee directors of the Board
of Directors. Remuneration is due within 20 days from the end of the reporting
quarter .
The Chairman of the Board of Directors who is an independent director
receives fixed (quarterly) remuneration equivalent to USD 90,000 for a full
quarter at the official exchange rate set by the Bank of Russia on the last day
of the relevant quarter . Other independent directors are paid an equivalent
of USD 45,000 for a full quarter at the official rate set by the Bank of Russia
on the last day of the relevant quarter .
Additional (quarterly) remuneration is payable to the chairmen of Board
committees who are either independent directors or non-employee directors
in an amount equivalent to USD 30,000 for a full quarter at the official
exchange rate set by the Bank of Russia on the last day of the relevant quarter .
If such independent or non-employee director chairs two or more committees,
the additional (quarterly) remuneration is increased to USD 45,000 for a full
quarter at the official exchange rate set by the Bank of Russia on the last day
of the relevant quarter .
The Company compensates directors for actual
expenses incurred by them while performing
their respective functions . The compensation
is payable within 20 days of the month following
the reporting month based on requests submitted
by the Board members to PhosAgro’s sole executive
body, with supporting documents attached .
BOARD OF DIRECTORS
REMUNERATION
Members of PhosAgro’s Board of Directors
may receive remuneration and compensation
for the expenses incurred during their term
of office if so resolved by the General Shareholders’
Meeting . According to the Company’s Corporate
Governance Code, the Board remuneration shall
be in line with current market trends and shall
be sufficient to enable the Company to attract,
motivate and retain highly skilled professionals
to help drive the future growth and performance .
At the same time, its size shall not exceed
the amount needed to achieve this .
187
186
In 2019, the total remuneration paid to PhosAgro’s Board of Directors
was RUB 109,762,000 (excluding reimbursed expenses). The amount
of remuneration and additional compensation due to PhosAgro’s CEO
is regulated by a contract between them and the Company, which is signed
by the Chairman of the Board of Directors. The total remuneration reflects
the CEO’s qualifications and their personal contribution to the Company’s
financial results.
MANAGEMENT BOARD REMUNERATION
The remuneration paid to the CEO and six other Management Board
members who represent the senior management team for their services
to the Company during the year ended 31 December 2019 was RUB 451.2 mln
(in 2018 – RUB 185.6 mln).
The remuneration due to the Company’s senior
executives consists of a monthly base salary plus
additional compensation payable twice a year .
Additional compensation is linked to achieving
the Company’s key performance indicators (KPIs)
and accomplishing additional tasks and objectives,
as determined by the Board of Directors
and the CEO for the reporting year or quarter .
KPIs for each individual senior manager are set
by period and mainly take into account metrics
related to operational efficiency and individual
contribution to the corporate growth and strategic
performance . The Company calculates
the additional annual compensation using EBITDA
for the reporting period as resolved by the Board
of Directors .
Board of Directors remuneration, RUB
Name
Total
Igor Antoshin
Sven Ombudstvedt
James Rogers
Ivan Rodionov
Marcus Rhodes
Andrey Sharonov
Xavier Rolet
Irina Bokova
2017
65,472,631.92
4,749,761.34
19,376,953.47
16,147,461.81
6,458,984.49
16,147,461.81
2,592,009.00
—
—
2018
2019
97,317,831.89
109,761,832.04
—
22,957,434.00
19,131,195.00
2,959,284.38
19,131,195.00
11,478,717.00
11,784,706.71
9,875,299.80
22,871,844.00
19,059,870.00
19,059,870.00
11,435,922.00
21,339,381.35
15,994,944.69
Сorporate governanceAnnual report | 2019 189
188
OWNERSHIP STRUCTURE
Based on information available to the Company,
the shares of Chlodwig Enterprises Limited
and Adorabella Limited were transferred to trusts
where the economic beneficiaries are Andrey
Guryev and members of his family .
As at 31 December 2019, there were no
shareholders in the Company with a stake
of more than 5% beyond those already disclosed
by the Company in this report .
The Company is unaware of any shareholders that may gain or have gained
control disproportionate to their share in the Company’s authorised capital,
including by virtue of shareholder agreements .
Adorabella Limited
Chlodwig Enterprises Limited
Vladimir Litvinenko
Evgenia Guryeva
Other shareholders
Total:
Number
of shares
32,176,662
24,359,900
27,174,815
6,235,960
39,552,663
129,500,000
% of issued
and outstanding
shares
24.85
18.81
20.98
4.82
30.54
100.00
The current ownership structure is available
on the Company’s website at
https://phosagro.com/investors/capital/
SHAREHOLDER
AND INVESTOR
INFORMATION
SHARE CAPITAL
The authorised capital of PhosAgro (the
“Company”) as at 31 December 2019 amounted
to RUB 323,750,000 consisting of 129,500,000
ordinary shares with a par value of RUB 2 .5 per
share .
Global depositary receipts (three GDRs represent one share) are traded
in the Main Market of the London Stock Exchange under the symbol PHOR .
Regulation S GDRS
CUSIP number: 71922G209 ISIN: US71922G2093 Common code: 065008939
SEDOL: 0B62QPJ1 RIC: PHOSq .L
Rule 144A GDRS
STOCK EXCHANGES
PhosAgro’s shares are traded on the A1 quotation
list of the Moscow Exchange under the ticker
symbol PHOR (ISIN: RU000A0JRKT8) .
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/GDR performance
18
17
16
15
14
13
12
11
10
January
February March
April
May
June
July
August September October November December
GDR price (LSE)
Share price (MOEX) rebased to one GDR
Annual report | 2019Сorporate governance
INVESTOR RELATIONS
At PhosAgro, we are committed to transparency
and consistency, and maintain an ongoing
dialogue with the investor community
through a variety of communication channels
and with involvement of the Company’s senior
management and independent directors .
• We keep the market abreast of the Company’s performance by publishing
quarterly operational and financial results that are made available
to investors via press releases, presentations, conference calls and webcasts .
• On top of that, we take every opportunity to answer investors’ questions
and gather feedback from market players by participating in industry
and regional investment conferences .
• Regular NDRs allow us to expand our investor base through meetings
arranged outside of key financial market centres.
• A well developed Eurobond programme helps reinforce the Company’s
position in the public debt market while ensuring the lowest cost
of funding .
ANALYST COVERAGE
PhosAgro is covered by analysts from leading
Russian and international brokers:
Company
Aton
Analyst
Andrey Lobazov
BCS Investment Bank
Anastasia Egazaryan
VTB Capital
Goldman Sachs
BMO
Sberbank CIB
BofA
Alfa Bank
Renaissance Capital
Elena Sakhnova
Nina Dergunova
Joel Jackson
Irina Lapshina
Sashank Lanka
Boris Krasnojenov
Steven Friedman
Phone
+7 (495) 213 0337
+7 (495) 785 5336
+7 (495) 287 68 77
+7 (495) 645 4230
+1 (416) 359 4250
+7 (495) 258 05 11
+971 44 258 23 11
+7 (495) 795 36 12
+27 (11) 750 14 81
191
190
DEBT MANAGEMENT
The conservative approach to leverage allows
the Company to maintain its net debt/EBITDA within
the range of 1–1 .5x .
The decision on the currency of borrowings is based on the Company’s revenues,
70% of which is in foreign currency and the rest is strongly correlated with US
Dollar exchange rate .
When determining its borrowing requirements,
the Company assesses the cost of borrowing
from banks and public debt markets, the amount
and maturity available while striving to ensure that
this fits into the Group’s long-term debt reduction
strategy .
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, and PhosAgro’s official disclosure page
on the Interfax portal and at LSE webpage .
The corporate website
Official disclosure
https://phosagro.com/
http://www.phosagro.ru/ori/
item4157.php
PhosAgro’s official
disclosure page
on the Interfax portal
http://www.e-disclosure.ru/portal/
company.aspx?id=573
LSE webpage
https://www.londonstockexchange.
com/exchange/prices-and-
markets/stocks/exchange-insight/
company-news.html?fourWayKey=
US71922G2093USUSDIOBE
Annual report | 2019Сorporate governance 193
192
MANAGEMENT
RESPONSIBILITY
STATEMENT
The Company’ management hereby confirms that, to the best of its
knowledge:
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 .
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 Company was guided by GRI standards, as well
as the principles of the ISO 26000 and AA 1000
standards during the preparation of the integrated
report .
A draft of this integrated report was reviewed
and pre-approved at a Board of Directors meeting
on 20 February 2020 and reviewed and approved
by the Annual General Shareholders’ Meeting .
The consolidated financial statements for the year
ended 31 December 2019 were approved by the Board
of Directors on 20 February 2020 .
Andrey A. Guryev
Chairman of the Management Board
and Chief Executive Officer of PJSC PhosAgro
DIVIDENDS AND DIVIDEND POLICY
In accordance with PhosAgro’s dividend policy,
the Board of Directors seeks to make sure that
the amount of distributed dividends ranges
from 50% to over 75% (subject to the Company’s
leverage ratio) of the Company’s consolidated
free cash flow for the respective year under IFRS.
At the same time, the amount of declared dividends
should not be lower than 50% of net profit
for the year under IFRS .
On 20 February 2020, PhosAgro’s Board
of Directors recommended that the Annual
General Shareholders’ Meeting approve dividends
of RUB 18 per share (RUB 6 per depositary
receipt), or RUB 2,331 billion in total . If approved
by the Annual General Shareholders’ Meeting (AGM)
on 22 May 2020, this will bring PhosAgro’s payout
ratio to 67% of net profit after foreign exchange
differences.
For more information
on our dividend policy,
please visit
https://www.phosagro.ru/
investors/capital/dividends/
Our dividend policy
is available at
https://www.phosagro.ru/upload/
iblock/747/7479a53e07de62-
ea5397 d362769332d6.pdf
Type and date of the General Shareholders’
Meeting where the relevant resolution
on the declaration of dividends was
adopted
Reporting period for which
(following the results of which)
the declared dividends
are (were) paid
Declared
dividends,
total, RUB
Declared dividends per
ordinary
share, RUB
depositary
receipt, RUB
EGSM 24 January 2020
EGSM 4 October 2019
EGSM 24 June 2019
EGSM 24 May 2019
EGSM 22 January 2019
EGSM 1 October 2018
EGSM 6 July 2018
EGSM 30 May 2018
EGSM 26 February 2018
EGSM 2 October 2017
EGSM 5 July 2017
EGSM 30 May 2017
EGSM 16 January 2017
EGSM 3 October 2016
EGSM 29 July 2016
EGSM 31 May 2016
EGSM 15 January 2016
EGSM 6 October 2015
EGSM 14 July 2015
EGSM 8 June 2015
EGSM 31 December 2014
EGSM 16 September 2014
EGSM 13 June 2014
—1
—
—
—
—
—
—
—
—
—
—
2016
—
—
—
2015
—
—
—
2014
9M 2014
6M 2014
—
1
Payments were made from undistributed profit for previous years
6,216,000,000
6,993,000,000
9,324,000,000
6,604,500,000
9,324,000,000
5,827,500,000
3,108,000,000
1,942,500,000
2,719,500,000
3,108,000,000
2,719,500,000
3,885,000,000
5,050,500,000
4,273,500,000
8,158,500,000
7,381,500,000
8,158,500,000
7,381,500,000
6,216,000,000
1,942,500,000
2,590,000,000
3,237,500,000
2,499,350,000
48.00
54.00
72.00
51.00
72.00
45.00
24.00
15.00
21.00
24.00
21.00
30.00
39.00
33.00
63.00
57.00
63.00
57.00
48.00
15.00
20.00
25.00
19.30
16.00
18.00
24.00
17.00
24.00
15.00
8.00
5.00
7.00
8.00
7.00
10.00
13.00
11.00
21.00
19.00
21.00
19.00
16.00
5.00
6.67
8.33
6.43
Annual report | 2019Сorporate governance 102-56
L
A
I
C
N
A
N
I
F
S
T
N
E
M
E
T
A
T
S
195
194
Independent Auditors’ Report
Valuation of deferred tax assets
Please refer to the Note 19 in the consolidated financial statements.
PJSC “PhosAgro”
Independent Auditors’ Report
Page 2
To the Shareholders and Board of Directors of 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 2019, 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 2019,
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 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 Code of Ethics for Professional Accountants (including International
Independence Standards), and we have fulfilled our other ethical responsibilities in
accordance with the requirements in the Russian Federation and the International Code of
Ethics. 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.
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.
1027700125628.
in
the Unified State Register of Legal Entities
Member of the Self-regulatory Organization of Auditors Assosiation
“Sodruzhestvo” (SRO AAS). The Principal Registration Number of the Entry
in the Register of Auditors and Audit Organisations: No. 12006020351.
How the matter was addressed in our
audit
Our audit procedures included the following:
We tested the accuracy of the taxable profits
forecast model used
the
likelihood of the recovery of deferred tax
assets.
to estimate
the Group entities,
the appropriateness of
We evaluated
management’s
key assumptions and
estimates used by management to allocate
the
profit between
likelihood of generating sufficient future
taxable profits to support the recognition of
deferred
to
performance trends and dividend capacity
of the Group subsidiaries.
tax assets,
reference
in
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.
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
interest
Company mainly
income to be received by the Company on
the loans issued to the Group subsidiaries
less expenses of the Company.
represent
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.
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.
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.
Annual report | 2019Appendices
197
196
PJSC “PhosAgro”
Independent Auditors’ Report
Page 3
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 scepticism 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 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
Annual report | 2019Appendices Consolidated Statement of Profit or Loss and Other Comprehensive Income for 2019
Consolidated Statement of Financial Position as at 31 December 2019
Note
2019
RUB Million
2018
RUB Million
Note
31 December 2019
RUB million
31 December 2018
RUB million
199
198
Revenues
Cost of sales
Gross profit
Administrative expenses
Selling expenses
Taxes, other than income tax, net
Other expenses, net
Operating profit
Finance income
Finance costs
Foreign exchange gain/(loss), net
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Non-controlling interests
Shareholders of the Parent
Other comprehensive (loss)/income
Items that will never be reclassified to profit or loss
Actuarial losses and gains
Items that may be reclassified subsequently to profit or loss
Foreign currency translation difference
Other comprehensive (loss)/income for the year
Total comprehensive income for the year
Attributable to:
Non-controlling interests
Shareholders of the Parent
Basic and diluted earnings per share (in RUB)
26
The consolidated financial statements were approved on 20 February 2020:
7
9
10
11
12
13
14
14
31(b)
15
248,125
(136,224)
111,901
(16,476)
(38,121)
(2,384)
(3,269)
51,651
1,458
(4,271)
12,346
61,184
(11,776)
49,408
59
49,349
29
(133)
(1,129)
(1,262)
48,146
59
48,087
381
233,312
(124,008)
109,304
(14,271)
(34,888)
(3,469)
(2,679)
53,997
447
(6,721)
(19,613)
28,110
(5,975)
22,135
66
22,069
170
2,872
3,042
25,177
66
25,111
170
A.A. Guryev
Chief executive officer
A.F. Sharabaiko
Deputy CEO for Finance and
International Projects
Assets
Property, plant and equipment
Advances issued for property, plant and equipment
Right-of-use assets
Catalysts
Intangible assets
Investments in associates
Deferred tax assets
Other non-current assets
Non-current assets
Other current investments
Inventories
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Retained earnings
Actuarial losses
Foreign currency translation reserve
Equity attributable to shareholders of the Parent
Equity attributable to non-controlling interests
Total equity
Liabilities
Loans and borrowings
Lease liabilities
Defined benefit obligations
Deferred tax liabilities
Non-current liabilities
Loans and borrowings
Lease liabilities
Trade and other payables
Derivative financial liabilities
Current liabilities
Total equity and liabilities
16
17
18
19
20
21
22
23
24
25
27
28
29
19
27
28
30
199,459
13,006
6,891
2,376
1,567
519
8,214
1,636
233,668
251
29,405
31,061
8,236
68,953
302,621
372
7,494
111,054
(689)
7,236
125,467
170
125,637
96,736
4,701
857
10,278
112,572
36,839
1,543
26,030
-
64,412
302,621
186,231
6,759
-
2,574
1,786
506
8,995
1,843
208,694
313
31,710
36,186
9,320
77,529
286,223
372
7,494
93,951
(556)
8,365
109,626
195
109,821
122,877
376
630
9,023
132,906
20,679
718
21,473
626
43,496
286,223
1 . The Group initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated
and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application. The comparative information is restated
on account of correction of errors . See Notes 2 (g) .
2 . Non-controlling interests are the minority shareholders of the subsidiaries of PJSC “PhosAgro”
1 . The Group initially applied IFRS 16 at 1 January 2019, using the modified retrospective approach. Under this approach, comparative information is not restated
and the cumulative effect of initially applying IFRS 16 is recognised in retained earnings at the date of initial application. The comparative information is restated
on account of correction of errors . See Notes 2 (g) .
Annual report | 2019Appendices
Consolidated Statement of Cash Flows for 2019
Consolidated Statement of Changes in Equity for 2019
201
200
Note
2019
RUB million
2018
RUB million
RUB Million
Share
capital
Share
premium
Retained
earnings
Actuarial
gains
and losses
Foreign
currency
translation
reserve
Attributable
to non-
controlling
interests
Total
372
7,494
85,480
(726)
5,493
129
98,242
Cash flows from operating activities
Operating profit
Adjustments for:
Depreciation and amortisation
Loss on disposal of property, plant and equipment and intangible assets
Operating profit before changes in working capital and provisions
Decrease/(increase) in inventories and catalysts
Decrease 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
Acquisition of property, plant and equipment and intangible assets
Loans issued, net
Proceeds from disposal of property, plant and equipment
Finance income received
Acquisition of investments, net
Other payments
Cash flows used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to shareholders of the Parent
Dividends paid to non-controlling interests
Leases paid
Proceeds/(payments) from settlement of derivatives, net
Cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rates fluctuations
Cash and cash equivalents at 31 December
9, 10, 11
13
27
27
25
28
24
51,651
23,931
611
76,193
1,593
2,764
5,398
85,948
(10,550)
(3,842)
71,556
(42,656)
(84)
86
637
-
(1,267)
(43,284)
48,725
(42,698)
(32,244)
(84)
(1,937)
112
(28,126)
146
9,320
(1,230)
8,236
53,997
20,911
586
75,494
(5,438)
324
655
71,035
(6,146)
(5,210)
59,679
(38,416)
(257)
19
307
(8)
(814)
(39,169)
83,874
(83,572)
(13,598)
-
(1,285)
(22)
(14,603)
5,907
2,691
722
9,320
Balance at 1 January
2018
Total comprehensive
income for the year
Profit for the year
Actuarial gains
Foreign currency
translation difference
Transactions
with owners recognised
directly in equity
Dividends to shareholders
of the Parent
Balance at 31 December
2018
Balance at 1 January
2019
Total comprehensive
income for the year
Profit for the year
Actuarial losses
Foreign currency
translation difference
Transactions
with owners recognised
directly in equity
Dividends to shareholders
of the Parent, note 25
-
-
-
-
-
-
372
372
-
-
-
-
-
-
-
-
-
-
-
-
7,494
22,069
-
-
22,069
(13,598)
(13,598)
93,951
-
170
-
170
-
-
-
-
2,872
2,872
-
-
66
22,135
-
-
170
2,872
66
25,177
-
-
(13,598)
(13,598)
(556)
8,365
195
109,821
7,494
93,951
(556)
8,365
195
109,821
-
-
-
-
-
-
49,349
-
-
-
(133)
-
-
-
(1,129)
59
49,408
-
-
(133)
(1,129)
49,349
(133)
(1,129)
59
48,146
(32,246)
(32,246)
111,054
-
-
-
-
(689)
7,236
(84)
(32,330)
(84)
170
(32,330)
125,637
Balance at 31 December
2019
372
7,494
Annual report | 2019Appendices
203
202
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR 2019
1. BACKGROUND
(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 two Cyprus entities holding approximately 44% of the Company‘s ordinary shares in total .
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.
Starting in 2014, the United States of America, the European Union and some other countries have imposed and expanded economic
sanctions against a number of Russian individuals and legal entities . The imposition of the sanctions has led to increased economic
uncertainty, including more volatile equity markets, a depreciation of the Russian rouble, a reduction in both local and foreign
direct investment inflows and a significant tightening in the availability of credit. As a result, some Russian entities may experience
difficulties accessing the international equity and debt markets and may become increasingly dependent on state support
for their operations. The longer-term effects of the imposed and possible additional sanctions are difficult to determine.
(c) Basis of measurement
The consolidated financial statements are prepared on the historical cost basis except for the financial assets measured at fair value.
(d) 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, EUR .
(e) 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 2019 were translated at the closing exchange rate of RUB 61.9057 for USD 1 (31
December 2018: RUB 69 .4706 for USD 1);
• Profit and loss items were translated at the average exchange rate for 2019 of RUB 64.7362 for USD 1 (for 2018: RUB 62.7078
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 2019 were translated at the closing exchange rate of RUB 69.3406 for EUR 1 (31 December
2018: RUB 79 .4605 for EUR 1);
• Profit and loss items were translated at the average exchange rate for 2019 of RUB 72.5021 for EUR 1 (for 2018: RUB 73.9546
for EUR 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.
(f) Use of estimates and judgments
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 .
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.
2. BASIS OF PREPARATION
(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.
This is the first set of the Group’s annual financial statements where IFRS 16 Leases has been applied. The related changes
to significant accounting policies are disclosed in the note 2 (g).
(b) Going concern
Note 31 to the consolidated financial statements includes the Group‘s objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.
The Group has considerable financial resources together with long-standing relationships with a number of customers across
different geographic areas. As a consequence, the directors believe that the Group is well placed to manage its business risks
successfully .
The directors remain confident that the Group has adequate resources to continue in operational existence for the foreseeable future.
Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
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
in the consolidated financial statements is included in the following notes:
• note 3(c)(iii) – estimated useful lives of fixed assets;
• note 19 – recognition of deferred tax assets: availability of future taxable profit against which carry-forward tax losses can be used;
Annual report | 2019Appendices (g) Adoption of new and revised standards and interpretations
1As at 1 January 2019, the Group has initially adopted IFRS 16 Leases (as issued by the IASB in January 2016) .
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to the lessee
accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset
and a lease liability at the lease commencement for all leases, except for short-term leases and leases of low value assets . In contrast
to lessee accounting, the requirements for lessor accounting have remained largely unchanged . The impact of the adoption of IFRS
16 on the Group‘s consolidated financial statements is described below.
The Group has applied IFRS 16 using a modified retrospective approach. The comparative information for 2018 has not been restated
in accordance with provisions of IFRS 16 .
Impact of the new definition of a lease
The Group used the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease .
Accordingly, the definition of a lease in accordance with IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains
a Lease will continue to be applied to leases entered or modified before 1 January 2019.
The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains
a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange
for consideration .
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or modified
on or after 1 January 2019 (whether it is a lessor or a lessee in the lease contract) . When preparing for the initial application of IFRS 16,
the Group carried out an implementation project. The project results presented that the new definition in IFRS 16 would not change
significantly the scope of contracts that meet the definition of a lease for the Group..
Impact on Lessee Accounting
Leases formerly recognised as operating leases under IAS 17
IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off-balance-
sheet. Before 1 January 2019 expenses on operating lease were reflected as rent expenses in cost of sales, administrative expenses
and selling expenses, which were recognised on a straight-line basis during the lease period .
For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use assets and the lease liability
as at 1 January 2019 are determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that
date .
Financial impact of initial application of IFRS 16
At the date of transition to IFRS 16 the Group recognised additional lease liabilities (short-term and long-term) in the amount of RUB
1,738 million with the corresponding increase in right-of-use assets . Previously the Group recognised lease liabilities in the amount
of RUB 1,094 million with residual value of fixed assets in the amount of RUB 3,271 million as at 31 December 2018 because this lease
contracts were classified as finance leases according to IAS 17. The amount of lease liabilities recognised was determined based
on the present value of the remaining future minimum lease payments at the transition date . The Group used incremental borrowing
rate in determining the present value of future payments .
The weighted average incremental borrowing rate at 1 January 2019 was 9 .0% per annum . This discount rate was used for all
the lease contracts concluded by the Group .
When the Group is either required to acquire assets at the end of lease contracts or has a purchase option, which the Group
is reasonably certain to exercise, such payments are also included in model when determining the present value of future payments .
The majority of the Group’s leases of land plots have the periodic lease payment linked to cadastral value of a plot . Cadastral value
as well as applicable rates are set and updated by governmental authorities, which do not represent a market index or rate . Hence, all
the lease payments under such contracts are considered variable not dependent on index or rate and are recognised in profit or loss
as they are incurred, which means the Group recognises no liability in respect of future lease payments and no corresponding right-
of-use assets .
As at 1 January 2019, the Group recognised additional right-of-use assets in the amount of RUB 1,738 million . According to terms
fixed in the lease contracts, right-of-use assets were depreciated on a straight-line basis over the lease term within the range from 1
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204
to 5 years . In cases when ownership of the underlying right-of-use asset is transferred to the Group, or the Group is reasonably certain
to exercise a purchase option, then the depreciation period runs to the end of the useful life of the underlying right-of-use asset .
Depreciation expenses were reflected in cost of sales, administrative expenses and selling expenses.
Future minimum lease payments as at 31 December 2018 as disclosed in the consolidated
financial statements for the year ended 31 December 2018:
Operating leases
Finance leases
Impact of payments on land plots based on cadastral values and options to extend and cancel lease contracts
Impact of discounting
Lease liabilities recognised as at 1 January 2019 (note 28)
Residual value of fixed assets under finance lease as at 31 December 2018
Finance lease liability as at 31 December 2018
Right-of-use assets recognised as at 1 January 2019 (note 17)
Effect on retained earnings as at 1 January 2019
RUB million
2,469
1,158
3,627
(383)
(412)
2,832
3,271
(1,094)
5,009
-
Had the Group not applied IFRS 16 for 2019, it would have the following effect on the Group‘s
consolidated statement of profit or loss and other comprehensive income for 2019
and consolidated statement of financial position as at 31 December 2019:
Revenues
Cost of sales
Gross profit
Administrative expenses
Selling expenses
Taxes, other than income tax, net
Other expenses, net
Operating profit
Finance income
Finance costs
Foreign exchange gain, net
Profit before tax
Income tax expense
Profit for the year
Note
7
9
10
11
12
13
14
14
31(b)
15
as if IAS 17 still
applied
IFRS 16
adjustments
2019
as presented
RUB million
RUB million
RUB million
248,125
(136,739)
111,386
(16,490)
(38,121)
(2,384)
(3,269)
51,122
1,458
(4,059)
12,346
60,867
(11,712)
49,155
-
515
515
14
-
-
-
529
-
(212)
-
317
(64)
253
248,125
(136,224)
111,901
(16,476)
(38,121)
(2,384)
(3,269)
51,651
1,458
(4,271)
12,346
61,184
(11,776)
49,408
Annual report | 2019Appendices Note.
31 December 2019
as if IAS 17
still applied
IFRS 16
adjustments
31 December 2019
as presented
RUB million
RUB million
RUB million
Assets
Property, plant and equipment
Advances issued for property, plant and equipment
Right-of-use assets
Catalysts
Intangible assets
Investments in associates
Deferred tax assets
Other non-current assets
Non-current assets
Other current investments
Inventories
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Retained earnings
Foreign currency translation reserve
Actuarial losses
Equity attributable to shareholders of the Parent
Equity attributable to non-controlling interests
Total equity
Liabilities
Loans and borrowings
Lease liabilities
Defined benefit obligations
Deferred tax liabilities
Non-current liabilities
Loans and borrowings
Lease liabilities
Trade and other payables
Current liabilities
Total equity and liabilities
16
17
18
19
20
21
22
23
24
25
27
28
29
19
27
28
30
199,488
13,006
-
2,376
1,567
519
8,214
1,636
226,806
251
29,405
31,460
8,236
69,352
296,158
372
7,494
110,801
7,236
(689)
125,214
170
125,384
96,736
1
857
10,214
107,808
36,839
1
26,126
62,966
296,158
(29)
-
6,891
-
-
-
-
-
6,862
-
-
(399)
-
(399)
6,463
-
-
253
-
-
253
-
253
-
4,700
-
64
4,764
-
1,542
(96)
1,446
6,463
199,459
13,006
6,891
2,376
1,567
519
8,214
1,636
233,668
251
29,405
31,061
8,236
68,953
302,621
372
7,494
111,054
7,236
(689)
125,467
170
125,637
96,736
4,701
857
10,278
112,572
36,839
1,543
26,030
64,412
302,621
The Group has adopted amendments to IAS 23 Borrowing Costs issued by the International Accounting Standards Board as part
of Annual Improvements to IFRS Standards 2015–2017 Cycle from 1 January 2019 and apply them to borrowing costs incurred
on or after that date . The amendments clarify that the general borrowings pool used to calculate eligible borrowing costs excludes
only borrowings that specifically finance qualifying assets that are still under development or construction. Therefore, the Group
treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities
necessary to prepare that asset for its intended use or sale are complete. Borrowings that were intended to specifically finance
qualifying assets which are now ready for their intended use or sale – or any non-qualifying assets – the Group includes in its general
pool . During 2019, the Group capitalised an additional amount of borrowing costs of RUB 260 million as a result of this revised
approach .
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206
(h) New standards and interpretations not yet adopted
A number of new standards are effective for annual periods beginning after 1 January 2019 and earlier application is permitted;
however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.
The following amended standards and interpretations are not expected to have a significant impact on the Group’s consolidated
financial statements.
• Amendments to References to Conceptual Framework in IFRS Standards .
• Definition of a Business (Amendments to IFRS 3).
• Definition of Material (Amendments to IAS 1 and IAS 8).
•
IFRS 17 Insurance Contracts .
3.SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, except for the adoption of IFRS 16 from 1 January 2019 .
(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 measured at FVOCI 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 .
Annual report | 2019Appendices (b) Foreign currencies
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange
rate ruling at the date of the transaction . Monetary assets and liabilities denominated in foreign currencies at the reporting date
are translated to the functional currency at the exchange rate ruling at that date . Non-monetary assets and liabilities denominated
in foreign currencies that are stated at historical cost are translated to the functional currency at the 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
at the 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 .
(ii) 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 .
(iii) Depreciation
Depreciation is charged to the profit or loss on a straight-line basis over the estimated useful lives of the individual assets.
Depreciation commences on the month of acquisition or, in respect of internally constructed assets, from the month when 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:
• Buildings 12 to 17 years;
• Plant and equipment 4 to 15 years;
• Fixtures and fittings 3 to 6 years.
Tangible fixed assets acquired after the date of adoption of IFRS, are depreciated over the following useful lives:
• Buildings 10 to 60 years;
• Plant and equipment 5 to 35 years;
• Fixtures and fittings
2 to 25 years.
(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 or 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
209
208
labour and an appropriate proportion of overheads. Other development expenditure is recognised in the profit or 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) Financial instruments
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 .
The Group financial assets are classified in the following measurement categories based on the on the Group’s business model
for managing the financial assets and the contractual terms of the cash flows: financial assets at amortised cost; financial assets at fair
value (either through other comprehensive income or profit or loss).
Financial assets at amortised cost.
Financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value through
profit or loss (“FVTPL”):
•
•
the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding .
The financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Any gains
or losses arising from derecognition are recognised directly in profit or loss.
Financial assets at fair value through other comprehensive income (“FVOCI”). Financial assets are classified and measured at fair value
through other comprehensive income if they meet both of the following conditions and are not designated as at FVTPL:
•
they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial
assets; and
their contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding .
•
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign
exchange gains and losses and impairment are recognised in profit or loss.
Financial assets at fair value through profit or loss (“FVPL”).
Financial asset that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss (“FVPL”).
(f) Inventories
Financial assets at fair value through profit or loss (“FVPL”). Financial asset that do not meet the criteria for amortised cost or FVOCI
are measured at fair value through profit or loss (“FVPL”).
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 .
Annual report | 2019Appendices 211
210
Lease payments included in the measurement of the lease liability comprise the following:
• fixed payments
• variable lease payments that depend on the rate
• amounts expected to be payable under a residual value guarantee .
Lease liability is measured at amortised cost using the effective interest method. It is revalued when there is a change in future lease
payments arising from adjusted interest rate, extension or termination option and other events .
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets .
For short-term leases (lease term of 12 months or less) and leases of low-value assets the Group has opted to recognise a lease
expense on a straight-line basis as permitted by IFRS 16 . This expense is presented within cost of sales, administrative expenses
and selling expenses in the consolidated statement of profit or loss and other comprehensive income.
Policy applicable before 1 January 2019
For contracts entered into before 1 January 2019, the Group determined whether the arrangement was or contained a lease based
on the assessment of whether:
•
•
fulfilment of the arrangement was dependent on the use of a specific asset or assets; and
the arrangement had conveyed a right to use the asset . An arrangement conveyed the right to use the asset if one of the following
was met:
the purchaser had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount
of the output;
the purchaser had the ability or right to control physical access to the asset while obtaining or controlling more than
an insignificant amount of the output; or
facts and circumstances indicated that it was remote that other parties would take more than an insignificant amount
of the output, and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output.
•
•
•
As a lessee
In the comparative period, as a lessee the Group classified leases that transferred substantially all of the risks and rewards
of ownership as finance leases. Plant and equipment acquired by way of finance lease were 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 .
Assets held under other leases were classified as operating leases and were not recognised in the Group’s statement of financial
position. Payments made under operating leases were recognised in the profit or loss on a straight-line basis over the term
of the lease. Lease incentives received were recognised in the profit or loss as an integral part of the total lease payments made.
(g) Impairment
Financial assets
The Group recognises loss allowances for expected credit loss (ECLs) on financial asset measured at amortised cost and debt
investments measured at fair value through other comprehensive income (“FVOCI”) . The loss allowances are measured on either
of the following bases: 12-month ECLs that result from default events that are possible within the 12 months after the reporting date;
and lifetime ECLs that result from all possible default events over the expected life of a financial instrument.
For trade receivables the Group estimated the expected credit losses for the entire period, applying a simplified approach
to measuring expected credit losses, which uses lifetime expected loss allowance . In the terms of calculating the expected credit loss,
the Group considers the credit rating for each counterparty, adjusted with forward-looking factors specific to the debtors, historical
credit loss experience and economic environment in which they operate .
If, in a subsequent period, the fair value of an impaired financial assets 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.
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 or 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 .
(h) Leases
Policy applicable from 1 January 2019
The Group has applied IFRS 16 Leases using a modified retrospective approach under which comparative information has not been
restated in accordance with provisions of IFRS 16 and continues to be reported under IAS 17 .
The Group has disclosed accounting policies under both IFRS 16 (for the current period) and IAS 17 (for the comparative period
presented) in order for users to understand the current period as well as comparative information and changes in significant
accounting policies .
As a lessee
Applying IFRS 16 for all leases (except as noted below), the Group:
• Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured
at the present value of future lease payments;
• Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss
and other comprehensive income; and
• Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented
within operating activities) in the consolidated statement of cash flows.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and making
certain adjustments to reflect the terms of the lease and type of the asset leased.
Annual report | 2019Appendices (i) 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 .
(j) Financial liabilities
The Group financial liabilities comprise trade and other payables, borrowings and bonds and derivative financial instruments.
The Group financial liabilities are measured at amortised cost, except for financial liabilities at fair value through profit or loss. Such
liabilities include derivatives, other liabilities held for trading, and liabilities that the Group designates to be measured at fair value
through profit or loss.
The Group derecognises a financial liability when its obligation specified in the contract is discharged or cancelled or expires.
(k) 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 or loss. To the extent the benefits vest immediately, the expense is recognised immediately
in the profit or 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 .
(l) 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.
(m) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or 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 .
213
212
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 that it is no longer
probable that the related tax benefit will be realised.
(n) Revenues
Revenue from contracts with customers is recognised when control of the goods or services is transferred to a customer . The amount
of revenue recognised reflects the consideration the Group expects to receive in exchange for goods or services, taking into account
any trade, volume and other discounts . Advances received before the control passes to a customer are recognised as the contract
liabilities. There are no other contract liabilities. The amount of consideration does not contain a significant financial component
as payment terms for the majority of contracts are less than one year . No information is provided about remaining performance
obligations as at the reporting date that have an original expected duration of one year or less, as allowed by IFRS 15 .
Contracts with customers for the supply of goods use a variety of delivery terms . The Group determined that under the terms
of the majority contracts for the supply of mineral fertilizers the Group undertakes to provide delivery and the related delivery services
after the transfer of control over the goods to the buyer at the loading port . Under IFRS 15, these services are a separate performance
obligation, which revenue must be recognised during the period of delivery as revenue from logistics activities . The Group recognises
revenue from these logistics services at the time of delivery, due to the fact that the potential difference is calculated and recognised
as insignificant.
In the revenue disclosure the sales of certain product groups include the proceeds from logistics services . Costs related to rendering
of logistics services are mainly represented by transportation costs and included in selling expenses .
(o) Finance income and costs
Finance income comprises interest income, dividend income, gain on the financial assets at FVTPL, gain arising from operations
with foreign currency, unwind of discount of financial assets, share of profit of associates 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, loss on the financial assets at FVTPL, bank fees, securitisation fees, loss
arising from operations with foreign currency, discount of financial assets, share of loss of associates and foreign currency losses.
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, gains and losses arising from operations with foreign currency, securitisation fees, share of profit
and losses of associates are reported on a net basis .
(p) 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.
Annual report | 2019Appendices 215
214
(q) 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.
(a) Financial assets measured at amortised cost
The fair values of financial assets carried at amortised cost, which are mainly loans issued and trade and other receivables,
approximate their carrying amounts as at the reporting date .
(r) 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 .
(s) 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.
(b) Financial instruments measured at fair value
The fair values of derivative financial assets and liabilities are determined using inputs from observable market data
and are categorised as Level 2 of the fair value hierarchy .
The fair values of derivative financial liabilities, represented by put and call options on oil (Brent) contracts, are based on broker
quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments.
(c) Other financial liabilities not measured at fair value
The fair values of other financial liabilities, which are mainly loans and borrowings and lease liabilities, are determined for disclosure
purposes and categorised as Level 3 of the fair value hierarchy . The fair values are calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of interest at the reporting date.
5. PRIOR YEAR ADJUSTMENTS AND RECLASSIFICATIONS
During the current period the Group made a decision to make certain reclassifications to prior period comparatives to be consistent
with the current period classifications, effecting the following captions:
•
•
•
revenue, cost of sales, administrative expenses, selling expenses, other expenses, net, finance costs and share of loss of associates;
inventory, catalysts (as non-current assets);
to change the presentation of statement of cash flows, starting from the line of operating profit instead of profit before tax
as in previous periods.
Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment .
Comparatives were changed accordingly to align them with current year presentation .
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.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible . Fair values
are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities .
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i .e . as prices)
or indirectly (i .e . derived from prices) .
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) .
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that
is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change
has occurred .
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 .
Revenue
Cost of sales
Administrative expenses
Selling expenses
Other expenses, net
Finance costs
Share of loss of associates, net of provision
Catalysts
Inventories
As previously
presented
Reclassifications
As adjusted
RUB Million
RUB Million
RUB Million
2018
233,430
(123,964)
(14,864)
(34,410)
(2,726)
(6,098)
(623)
(118)
(44)
593
(478)
47
(623)
623
233,312
(124,008)
(14,271)
(34,888)
(2,679)
(6,721)
-
31 December 2018
Reclassifications
As adjusted
As previously
presented
RUB Million
RUB Million
RUB Million
2,414
31,870
160
(160)
2,574
31,710
Annual report | 2019Appendices 6. 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 2019 and for the year then ended is as follows:
RUB million
Segment revenue and profitability
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 assets1
Additions to non-current assets1
Phosphate-
based
products
Nitrogen-
based
products
Other
operations
Total
201,248
37,882
8,995
248,125
135,220
66,028
(111,086)
31,100
6,782
(16,609)
1,098
7,897
(8,529)
167,418
80,707
(136,224)
90,162
21,273
466
111,901
(17,521)
144,680
37,084
(5,723)
60,645
5,587
(687)
4,968
963
(23,931)
210,293
43,634
Segment information of the Group as at 31 December 2018 and for the year then ended is as follows:
RUB million
Segment revenue and profitability
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 assets2
Additions to non-current assets2
Phosphate-
based
products
Nitrogen-
based
products
Other
operations
Total
186,971
37,011
9,330
233,312
132,098
54,873
(98,962)
30,178
6,833
(16,431)
903
8,427
(8,615)
163,179
70,133
(124,008)
88,009
20,580
715
109,304
(14,304)
122,164
25,618
(5,883)
63,162
5,890
(724)
5,265
843
(20,911)
190,591
32,351
The analysis of export revenue by regions is as follows:
Europe
South America
North America
India
CIS
Africa
Asia
Australia
7. REVENUES
Phosphate-based products
Sales of chemical fertilisers
Sales of apatite concentrate
Sales of other phosphate-based products and services
Sales of nepheline concentrate
Nitrogen-based products
Other
8. PERSONNEL COSTS
Cost of sales
Administrative expenses
Selling expenses
217
216
2019
RUB million
2018
RUB million
72,372
34,836
19,397
14,153
13,634
9,509
3,477
40
57,308
43,684
27,589
11,890
11,557
7,895
3,250
6
167,418
163,179
2019
RUB million
2018
RUB million
201,248
165,110
25,799
9,203
1,136
37,882
8,995
248,125
186,971
155,733
22,098
8,326
814
37,011
9,330
233,312
2019
RUB Million
2018
RUB Million
(12,744)
(9,300)
(2,662)
(24,706)
(11,760)
(7,907)
(2,257)
(21,924)
1 . Total non-current segment assets include property, plant and equipment, intangible assets, right-of-use assets and catalysts .
2 . Total non-current segment assets include property, plant and equipment, intangible assets and catalyst
Annual report | 2019Appendices 9. COST OF SALES
Depreciation
Materials and services
Potash
Salaries and social contributions
Natural gas
Repair expenses
Sulphur and sulphuric acid
Transportation of phosphate rock
Chemical fertilisers and other products for resale
Electricity
Fuel
Ammonia
Ammonium sulphate
Drilling and blasting operations expenses
10. ADMINISTRATIVE EXPENSES
Salaries and social contributions
Professional services
Depreciation and amortisation
Other
11. SELLING EXPENSES
Expenses linked to basis of delivery, inc.
Freight, port and stevedoring expenses
Russian Railways infrastructure tariff and operators’ fees
Custom duties
Materials and services
Other fixed expenses, inc.
Salaries and social contributions
Depreciation and amortisation
Materials and services
2019
RUB Million.
(21,368)
(20,138)
(13,691)
(12,744)
(12,627)
(10,119)
(9,165)
(8,641)
(6,683)
(6,204)
(4,849)
(4,095)
(3,577)
(2,323)
2018
RUB Million.
(18,936)
(18,488)
(10,238)
(11,760)
(12,096)
(9,485)
(10,682)
(7,671)
(6,287)
(5,474)
(4,019)
(4,195)
(3,015)
(1,662)
(136,224)
(124,008)
2019
RUB million
2018
RUB million
(9,300)
(1,963)
(1,378)
(3,835)
(16,476)
(7,907)
(1,677)
(1,242)
(3,445)
(14,271)
2019
RUB million.
2018
RUB million.
(32,628)
(30,578)
(18,340)
(11,441)
(1,898)
(949)
(5,493)
(4,310)
(2,662)
(1,185)
(1,646)
(38,121)
(17,829)
(10,363)
(1,391)
(995)
(2,257)
(733)
(1,320)
(34,888)
12. TAXES, OTHER THAN INCOME TAX, NET
Mineral extraction tax
Property tax
Land tax
VAT included in expenses
Environment pollution payment
Using water objects payment
Other taxes
13. OTHER EXPENSES, NET
Social expenditures
Loss on disposal of property, plant and equipment and intangible assets
Increase in provision for bad debt
Increase in provision for inventory obsolescence
(Accrual)/reversal of accrual of contingent liabilities
Other income, net
14. FINANCE INCOME AND FINANCE COSTS
Gain from operations with derivatives
Interest income
Unwind of discount on financial assets
Share of profit of associates (note 18)
Dividend income
Other finance income
Finance income
Interest expense
Bank fees
Securitisation fees
Write off of equity securities
Provision for bad debt on financial investments
Share of loss of associates, net of provision (note 18)
Other finance costs
Finance costs
Net finance costs
219
218
2019
RUB million.
2018
RUB million
(954)
(558)
(301)
(294)
(171)
(38)
(68)
(885)
(1,966)
(291)
(123)
(130)
(38)
(36)
(2,384)
(3,469)
2019
RUB million.
2018
RUB million.
(2,661)
(1,856)
(611)
(106)
(19)
(62)
190
(586)
(452)
(88)
35
268
(3,269)
(2,679)
2019
RUB million..
2018
RUB million..
700
484
68
13
4
189
1,458
(3,457)
(209)
(175)
(150)
(45)
-
(235)
(4,271)
(2,813)
-
230
67
-
-
150
447
(4,666)
(156)
-
-
(566)
(623)
(710)
(6,721)
(6,274)
Annual report | 2019Appendices 15. INCOME TAX EXPENSE
16. PROPERTY, PLANT AND EQUIPMENT
221
220
The Company’s applicable corporate income tax rate is 20% (2018: 20%).
2019
RUB million
2019
RUB million
Current tax expense
Origination and reversal of temporary differences,
including change in unrecognised assets
Reconciliation of effective tax rate:
Profit before tax
Income tax at applicable tax rate
Over/(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
2019
RUB million.
61,184
(12,237)
4
3
(1,174)
15
337
1,276
(11,776)
(9,724)
(2,052)
(11,776)
2018
RUB million
28,110
(5,622)
(3)
(125)
(1,434)
17
39
1,153
(5,975)
%
100
(20)
-
-
(2)
-
1
2
(19)
(8,487)
2,512
(5,975)
%
100
(20)
-
-
(5)
-
-
4
(21)
RUB Million
Cost
At 1 January 2018
Additions
Transfers
Disposals
Other movements
At 1 January 2019
Recognition of ROU asset on initial
application of IFRS 16
Adjusted cost at 1 January 2019
Additions
Transfers from right-of-use assets
(note 17)
Transfers
Disposals
Other movements
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Depreciation charge
Disposals
Other movements
At 1 January 2019
Recognition of ROU asset on initial
application of IFRS 16
Adjusted depreciation at 1 January
2019
Transfers from right-of-use assets
(note 17)
Depreciation charge
Disposals
Other movements
At 31 December 2019
Net book value at 1 January 2018
Net book value at 1 January 2019
Net book value at 1 January 2019
adjusted of IFRS 16
Net book value at 31 December
2019
Land
and buildings
Plant
and equipment
Fixtures
and fittings
Construction
in progress
Total
67,175
127,023
2,286
6,835
(138)
94
76,252
-
76,252
2,493
-
16,582
(779)
(66)
94,482
(12,435)
(4,582)
74
(6)
(16,949)
-
3,903
13,425
(1,335)
1,632
144,648
(4,262)
140,386
5,826
4,245
17,203
(2,623)
(108)
164,929
(53,276)
(14,813)
1,234
(707)
(67,562)
991
(16,949)
(66,571)
-
(1,033)
(5,469)
(16,010)
638
6
(21,774)
54,740
59,303
59,303
2,522
(72)
(81,164)
73,747
77,086
73,815
72,708
83,765
11,078
2,363
-
(129)
12
13,324
-
13,324
2,517
-
-
(182)
(10)
15,649
(6,310)
(1,863)
96
(7)
(8,084)
-
(8,084)
-
(1,732)
152
6
(9,658)
4,768
5,240
5,240
5,991
41,858
23,309
(20,260)
(305)
-
44,602
-
44,602
26,696
-
(33,785)
(518)
-
247,134
31,861
-
(1,907)
1,738
278,826
(4,262)
274,564
37,532
4,245
-
(4,102)
(184)
36,995
312,055
-
-
-
-
-
-
-
-
-
-
-
-
41,858
44,602
44,602
(72,021)
(21,258)
1,404
(720)
(92,595)
991
(91,604)
(1,033)
(23,211)
3,312
(60)
(112,596)
175,113
186,231
182,960
36,995
199,459
Annual report | 2019Appendices During 2019, the Group capitalised borrowing costs in the amount of RUB 1,283 million (2018: RUB 836 million) in the value
of property, plant and equipment using the weighted average interest rate of 3 .24% per annum .
As at 31 December 2019, the balance of the construction in progress account includes the accumulated costs related to
in Cherepovets:
• Development programme of production facilities for extraction of phosphoric acid and fertilizers in the amount of RUB 3,893
million;
• Development programme of ammonia production facilities in the amount of RUB 2,581 million;
• Development programme of production facilities for sulphuric acid in the amount of RUB 2,137 million;
• The construction of ammonium sulphate plant in the amount of RUB 941 million .
in Kirovsk:
• Kirovsk mine extension and modernization in the amount of RUB 8,140 million;
• The construction of transporter of Koashvinskiy quarry in the amount of RUB of 4,893 million;
• The construction of apatit-nepheline beneficiation plant in the amount of RUB 2,277 million;
• The development of Rasvumchorrskiy mine in the amount of RUB 1,347 million .
17. RIGHT-OF-USE ASSETS
The Group has the following types of right-of-use assets as at 31 December 2019: railway wagons, production equipment, offices.
The leases typically run for a period of 5 years, with an option to renew the lease after that date .
RUB million
Cost
At 1 January 2019
New lease contracts and modification of existing lease
contracts
Disposals
Currency translation
Transfers to property, plant and equipment (note 16)
At 31 December 2019
Accumulated depreciation
At 1 January 2019
Depreciation
Disposals
Currency translation
Transfers to property, plant and equipment (note 16)
At 31 December 2019
Net book value at 1 January 2019
Net book value at 31 December 2019
Buildings
Plant
and equipment
137
136
(73)
(11)
-
189
-
(105)
23
2
-
(80)
137
109
5,863
5,822
(51)
-
(4,245)
7,389
(991)
(654)
5
-
1,033
(607)
4,872
6,782
Total
6,000
5,958
(124)
(11)
(4,245)
7,578
(991)
(759)
28
2
1,033
(687)
5,009
6,891
Amounts recognised in profit and loss
Leases under IFRS 16
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases with variable payments
Amounts recognised in profit and loss
Operating leases under IAS 17
Lease expense
Contingent rent expense
18. INVESTMENTS IN ASSOCIATES
The movement in the balance of investments in associates is as follows
Balance at 1 January
Share in profit for the period
Provision for investments in associates
Foreign currency translation difference
Balance at 31 December
Carrying values of the Group’s investments in associates are as follows:
JSC Khibinskaya Teplovaya Kompaniya
JSC Giproruda
JSC Soligalichskiy izvestkovyi kombinat
223
222
2019
RUB million
759
236
587
375
2018
RUB million.
887
345
2019
RUB million.
2018
RUB million
506
13
-
-
519
969
99
(722)
160
506
31 December 2019
RUB Million
31 December 2018
RUB Million
435
63
21
519
421
61
24
506
Annual report | 2019Appendices Summary financial information for associates is as follows:
2019
Total assets RUB
Million
Total liabilities
RUB Million
Net assets
RUB Million
Revenue
RUB Million
JSC Khibinskaya Teplovaya Kompaniya
JSC Giproruda
JSC Soligalichskiy izvestkovyi
kombinat
1,605
161
598
2,364
(809)
(33)
(381)
796
128
217
494
99
581
(1,223)
1,141
1,174
2018
Total assets RUB
Million
Total liabilities
RUB Million
Net assets
RUB Million
Revenue
RUB Million
JSC Khibinskaya Teplovaya Kompaniya
LLC PhosAgro-Ukraine
JSC Giproruda
JSC Soligalichskiy izvestkovyi
kombinat
1,876
-
146
526
2,548
(1,075)
-
(24)
(294)
(1,393)
801
-
122
232
1,155
705
3,549
54
497
4,805
Profit/(loss)
for the year
RUB Million
27
6
(3)
30
Profit/(loss)
for the year
RUB Million
48
181
9
11
249
19. DEFERRED TAX ASSETS AND LIABILITIES
(а) Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following items:
RUB Million
Assets
Liabilities
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)
2019
129
43
1,067
1,826
7,427
(55)
10,437
(2,223)
8,214
Net
2019
2019
(12,056)
(11,927)
(51)
(390)
(4)
-
-
(12,501)
2,223
(10,278)
(8)
677
1,822
7,427
(55)
(2,064)
-
(2,064)
Assets
Liabilities
2018
102
17
1,067
748
8,482
(40)
10,376
(1,381)
8,995
2018
(9,869)
(44)
(488)
(3)
-
-
(10,404)
1,381
(9,023)
Net
2018
(9,767)
(27)
579
745
8,482
(40)
(28)
-
(28)
The deferred tax assets on tax loss carry-forwards relate to the Russian entities . Due to amendments to the Russian tax legislation,
starting from 1 January 2017, tax losses for Russian tax purposes carried forward existing as at 31 December 2019 do not expire .
Management has developed a tax strategy to utilise the tax losses above . In assessing the recoverability of the tax losses, major
part of which relates to the Company, 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 expenses of the Company. When developing the forecast, management has evaluated profitability
and dividend capacity of the Group subsidiaries, and considered expected rates of interest for loans and expected foreign currency
rates .
As at 31 December 2019, no deferred tax liability for taxable temporary differences of RUB 57,156 million has been recognised (31
December 2018: RUB 52,016 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% .
225
224
(b) Movement in temporary differences during the year
RUB million
31 December
2019
Recognised
in profit
or loss
Recognised
in other
comprehensive
income
Reclassification
1 January
2019
Property, plant and equipment
(11,927)
(2,186)
Other long-term assets
Current assets
Liabilities
Tax loss carry-forwards
Unrecognised deferred tax assets
Net tax (liabilities)/assets
RUB million
Property, plant and equipment
Other long-term assets
Current assets
Liabilities
Tax loss carry-forwards
Unrecognised deferred tax assets
Net tax (liabilities)/ assets
20. OTHER NON-CURRENT ASSETS
Loans issued to third parties, at amortised cost
Financial assets, at fair value
Loans issued to employees, at amortised cost
Other long-term assets
Provision for loans issued to third parties
21. OTHER CURRENT INVESTMENTS
Interest receivable
Loans issued to third parties, at amortised cost
Loans issued to employees, at amortised cost
Loans issued to related parties, at amortised cost
Investments in debt securities, at amortised cost
Loans issued to associates, at amortised cost
Provision for doubtful accounts
(8)
677
1,822
7,427
(55)
(2,064)
19
108
1,077
(1,055)
(15)
(2,052)
3
-
(10)
-
-
-
(7)
23
(9,767)
-
-
-
-
-
23
(27)
579
745
8,482
(40)
(28)
31 December
2018
Recognised
in profit
or loss
Recognised
in other
comprehensive
income
Reclassification
1 January
2018
(9,767)
(27)
579
745
8,482
(40)
(28)
(951)
(5)
655
(166)
2,996
(17)
2,512
(1)
-
4
-
-
-
3
-
-
-
-
-
-
-
(8,815)
(22)
(80)
911
5,486
(23)
(2,543)
31 December 2019
RUB million
31 December 2018
RUB million
653
602
218
673
(510)
1,636
779
752
88
795
(571)
1,843
31 December 2019
RUB million
31 December 2018
RUB million
118
105
80
2
-
-
(54)
251
88
35
52
117
32
13
(24)
313
Annual report | 2019Appendices 22. INVENTORIES
Raw materials and spare parts
Finished goods:
Chemical fertilisers
Apatite concentrate
Other products
Work-in-progress:
Chemical fertilisers and other products
Chemical fertilisers and other products for resale, purchased from third parties
Other goods for resale
Provision for obsolescence
23. TRADE AND OTHER RECEIVABLES
Trade accounts receivable
VAT and other taxes receivable
Advances issued
Income tax receivable
Deferred expenses
Receivables from employees
Other receivables
Provision for doubtful accounts
The movements in provision for doubtful accounts are as follows:
Balance at 1 January
Written off provision through trade receivables
Reclassification to non-current assets
Foreign currency translation difference
Reversal of provision
Disposal of trade receivables through provision
Increase in provision for bad debt
Balance at 31 December
See note 31 (c) for the analysis of overdue trade accounts receivable.
31 December 2019
RUB million
31 December 2018
RUB million
11,723
10,837
443
273
4,491
1,778
63
(203)
29,405
12,340
12,982
327
651
3,782
1,729
83
(184)
31,710
227
226
31 December 2019
RUB Million
31 December 2018
RUB Million
5,724
2,506
6
8,236
5,126
4,188
6
9,320
24. CASH AND CASH EQUIVALENTS
Cash in bank
Call deposits
Petty cash
25. EQUITY
(a) Share capital
Number of shares unless otherwise stated
Shares on issue at 31 December 2019 RUB 2.5 par value
Shares authorised for additional issue at 31 December 2019, RUB 2.5 par value
Shares on issue at 31 December 2018, RUB 2.5 par value
Shares authorised for additional issue at 31 December 2018, RUB 2.5 par value
Ordinary shares
129,500,000
994,977,080
129,500,000
994,977,080
31 December 2019
RUB million
31 December 2018
RUB million
(b) Dividend policy
14,375
10,214
4,865
1,286
99
20
460
(258)
31,061
20,379
8,973
5,716
533
159
11
1,033
(618)
36,186
2019
RUB Million
2018
RUB Million
(618)
305
73
42
15
5
(80)
(258)
(536)
380
-
(16)
-
-
(446)
(618)
The Croup’s dividend policy is based on the following principles:
• striking an effective and reasonable balance between the payment of dividends and reinvestment of profit in further development;
• ensuring transparency and predictability of dividend payments as a way to boost the Company’s investment case .
Amount of such payment is subject to approval of the General Shareholders’ Meeting, based on recommendations provided
by the PhosAgro Board of Directors . The Board of Directors’ recommendations depend on such factors as the Company’s earnings
for the reporting period and its financial position. To calculate the amount of dividend payments, the Board of Directors considers
the Company’s consolidated free cash flow for the reporting period (quarter, six months, first nine months or year) under IFRS.
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 reporting period . The term for dividend payments is determined by the General Shareholders’ Meeting and must
not exceed 60 days from the date of the resolution to pay the same. Holders of PhosAgro GDRs are also entitled to receive dividends
in respect of the underlying shares, subject to the terms of their Depositary Agreements .
In accordance with dividend policy, the Board of Directors shall seek to make sure that the amount of distributed dividends ranges
from 50% to over 75% (subject to the Company’s leverage ratio) of the Company’s consolidated free cash flow for the respective
period under IFRS. At the same time, the amount of declared dividends shall not be lower than 50% of net profit for the relevant
period under IFRS adjusted by the amount of unrealized exchange rate difference.
(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 2019, the Company had cumulative retained earnings of RUB 8,689 million (31 December 2018: RUB 12,252
million) .
Annual report | 2019Appendices Proposed by the Board
of Directors in
Approved
by shareholders in
Total dividends approved during the reporting period
November 2018
March 2019
May 2019
August 2019
January 2019
May 2019
June 2019
October 2019
Total dividends approved subsequent to the reporting date
November 2019
February 2020
January 2020
February 2020
26. EARNINGS PER SHARE
Amount per share
RUB.
Amount of dividends
RUB million.
72
51
72
54
48
18
9,324
6,605
9,324
6,993
32,246
6,216
2,331
8, 547
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.
Weighted average number of ordinary shares in issue
Profit for the year attributable to shareholders of the Parent, RUB million
Basic and diluted earnings per share, RUB
27. LOANS AND BORROWINGS
2019 RUB million
2018 RUB million
129,500,000
129,500,000
49,349
381
22,069
170
This note provides information about the contractual terms of the Group’s loans and borrowings . For more information
about the leases, see note 28 . For more information about the Group’s exposure to foreign currency risk, interest rate risk and liquidity
risk, see note 31 .
31 December 2019
RUB million
31 December 2018
RUB million
Current loans and borrowings
Unsecured bank loans
Interest payable
Unsecured loans from related parties
Bank commission (short-term)
Non-current loans and borrowings
Loan participation notes1,2
Unsecured bank loans
Bank commission (long-term)
36,225
19,934
621
-
(7)
733
20
(8)
36,839
20,679
61,906
34,951
(121)
96,736
133,575
69,471
53,570
(164)
122,877
143,556
1 .
2 .
In May 2017, the Company’s SPV issued a USD 500 million 4,5-year Eurobond with a coupon rate of 3 .95%, which is listed on the Irish Stock Exchange, with the fair value
at the reporting date of RUB 33,211 million (31 December 2018: RUB 34,102 million) .
In January 2018 the Company’s SPV issued a USD 500 million 5,25-year Eurobond with a coupon rate of 3 .949%, which is listed on the Irish Stock Exchange, with the fair value
at the reporting date of RUB 33,843 million (31 December 2018: RUB 33,745 million) . Management believes that the fair value of the Group’s other loans and borrowings
approximates their carrying amounts .
229
228
The breakdown of the loans and borrowings denominated in different currencies is as follows:
USD-denominated
EUR-denominated
RUB-denominated
The maturity of the loans and borrowings is as follows:
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
More than 5 years
31 December 2019
RUB million
31 December 2018
RUB million
101,853
31,850
-
133,703
123,152
18,531
2,045
143,728
31 December 2019
RUB million
31 December 2018
RUB million
36,846
41,124
9,960
34,190
3,237
8,346
20,687
19,623
46,326
5,665
38,380
13,047
133,703
143,728
Reconciliation of liabilities arising from financing activities:
31
December
2018 RUB
million
Impact
of IFRS
16 RUB
million
Cash
inflows
RUB
million
Cash
outflows
RUB
million
Accrual
of liabilities
RUB million
Amortis
tion
of bank
commission
RUB million
Foreign
exchange
gain
RUB
million
31
December
2019
RUB million
142,823
-
48,725
(42,698)
-
51
(15,947)
132,954
1,094
143,917
1,738
1,738
-
(1,937)
48,725
(44,635)
5,412
5,412
-
51
(63)
6,244
(16,010)
139,198
Loans
and borrowings
(excluding interest
payable)
Lease liabilities
28. LEASES
Balance as at 1 January 2019
New lease contracts and modification of existing lease
contracts
Interest expense on lease liabilities
Principal lease payments
Interest lease payments
Effect of foreign currency translation reserve
Balance as at 31 December 2019
Leases under IAS 17
Less than one year
Between one and five years
Lease liability
without
subsequent asset
buyout RUB million
Lease liability
with subsequent
asset buyout RUB
million
Total RUB million
1,738
3,804
168
(776)
(168)
(9)
4,757
1,094
1,608
68
(1,161)
(68)
(54)
1,487
2,832
5,412
236
(1,937)
(236)
(63)
6,244
2018 RUB million
1,673
1,954
3,627
Annual report | 2019Appendices 29. DEFINED BENEFIT OBLIGATIONS
Pension obligations, long-term
Post-retirement obligations other than pensions
31 December 2019
RUB Million
31 December 2018
RUB Million
332
525
857
302
328
630
The Group has defined benefit plans at JSC “Apatit”, Kirovsk Branch of JSC “Apatit”, Balakovo Branch of JSC “Apatit”, Volkhov Branch
of JSC “Apatit” and PhosAgro Trading SA which stipulate payment of a lump sum allowance to employees who have a specified period
of service in these companies 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 2018
Benefits paid
Current service costs and interest
Past service costs
Actuarial gain in other comprehensive income
Defined benefit obligations at 1 January 2019
Benefits paid
Current service costs and interest
Past service costs
Actuarial loss in other comprehensive income
Defined benefit obligations at 31 December 2019
RUB Million
950
(102)
87
(135)
(170)
630
(104)
129
69
133
857
The key actuarial assumptions used in measurement of the defined benefit obligations are as follows:
Discount rate
Future pension increases
30. TRADE AND OTHER PAYABLES
Trade accounts payable
incl. accounts payable for property, plant and equipment and intangible assets
Advances received (contract liabilities)
Payables to employees
Taxes payable
Income tax payable
Accruals
Dividends payable
Other payables
31 December 2019
31 December 2018
6.4%
3.9%
8.8%
4.1%
31 December 2019
RUB million
31 December 2018
RUB million
12,121
11,922
4,728
7,160
2,970
2,526
207
97
2
947
4,248
3,644
3,068
2,229
298
36
-
276
26,030
21,473
231
230
31. 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 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 .
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:
RUB Million
31 December 2019
31 December 2018
Current assets
Non-current assets
Non-current liabilities
Loans and borrowings
Lease liability
Current liabilities
Loans and borrowings
Lease liability
Payables
USD denominated
EUR denominated USD denominated
EUR denominated
2,593
-
227
23
3,759
-
11
-
(84,277)
(12,580)
(108,405)
(12,615)
-
-
(375)
-
(17,576)
(19,270)
(14,747)
-
(571)
-
(907)
(674)
(495)
(99,831)
(32,507)
(120,937)
(5,916)
(38)
(679)
(19,237)
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 13,234 million, before any tax effect
(2018: would have increased/(decreased) the Group’s profit for the year by RUB 14,017 million). This analysis assumes that all other
variables, in particular interest rates, remain constant . The analysis is performed on the same basis for 2018 .
The foreign exchange gain recognised in profit or loss of RUB 12,346 million (RUB 19,613 million of foreign exchange loss
for the comparative period) resulted from the appreciation of the Russian Rouble against major currencies during the reporting period
(its depreciation during the comparative period) .
Foreign currency translation differences
In addition, the net assets of the Group’s foreign subsidiaries denominated in USD and EUR amount to RUB 15,235 million
as at the reporting date (31 December 2018: RUB 15,319 million).
Annual report | 2019Appendices 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 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:
Fixed rate instruments
Other non-current assets
Other current investments
Long-term borrowings
Short-term borrowings
Lease liabilities
Variable rate instruments
Long-term borrowings
Short-term borrowings
31 December 2019
RUB Million
31 December 2018
RUB Million
870
2,692
(87,285)
(33,610)
(7,214)
(124,547)
(9,572)
(3,236)
(12,808)
868
4,405
(113,781)
(14,655)
(1,094)
(124,257)
(9,260)
(5,299)
(14,559)
At 31 December 2019, a 1% increase/(decrease) in LIBOR/EURIBOR would have decreased/(increased) the Group’s profit and equity
by RUB 128 million (31 December 2018: RUB 146 million) .
(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 .
As at 31 December 2019, the Group’s maximum exposure to credit risk is represented by the carrying amount of its financial assets
and amounted to RUB 24,721 million (31 December 2018: RUB 32,281 million) .
As at 31 December 2019, the Group’s financial assets measured at amortised cost amounted to RUB 24,118 million (31 December
2018: RUB 31,529 million) .
As at 31 December 2019, the Group’s financial assets measured at fair value amounted to RUB 602 million (31 December 2018: RUB
752 million) .
233
232
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 .
In addition, the major part of trade receivables in the Group’s foreign subsidiaries is insured .
The Group establishes an allowance for impairment that represents its estimate of the expected credit losses in respect of trade
and other receivables and other financial assets. The main component of this allowance is a specific loss component that relates
to individually significant exposures.
The analysis of overdue trade and other receivables 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 2019
RUB Million
31 December 2018
RUB Million
13,234
884
139
318
260
17,956
3,143
75
137
101
14,835
21,412
Starting from 2019 the Group sells without recourse trade receivables to a bank for cash proceeds . These trade receivables
are derecognised from the statement of financial position, because the Group transfers substantially all of the risks and rewards
- primarily credit risk and late payment risk . The amount of cash proceed received on transfer is recognised in cash and cash
equivalents . The arrangement with the bank is such that the customers remit cash directly to the Group and the Group transfers
the collected amounts to the bank . The receivables are considered to be held within a held-to-collect business model consistent
with the Group‘s continuing recognition of the receivables .
The following information shows the carrying amount of trade receivables for the reporting period that was transferred
and derecognised and the cash proceeds received .
Trade receivables transferred to the bank
Associated cash proceeds/(outflow), net
Net-off with other payables and effect of forex
31 December 2019
RUB Million
31 December 2018
RUB Million
11,696
5,332
6,364
-
-
-
Payables to the bank as at 31 December 2019 amounted to RUB 748 million are presented within other payables . Receivables
from the bank as at 31 December 2019 amounted to RUB 474 million are presented within trade receivables .
Annual report | 2019Appendices Current and non-current financial assets
The Group lends money to related parties and to third 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 and third party loans.
Cash and cash equivalents are primarily held with banks with high credit rating .
Guarantees
The Group considers that financial guarantee contracts entered into by the Group to guarantee the indebtedness of other parties
are insurance arrangements in accordance with IFRS 4 Insurance Contracts, 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 (note 34) .
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 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:
RUB Million
Unsecured bank loans
Interest payable
Leases
Loan participation notes
Trade and other payables
Financial guarantees issued for associates
and related parties
31 December 2019
Carrying
value
Contractual
cash flows
0-1
year
1-2 yrs
2-3 yrs
3-4 yrs
4-5 yrs
> 5 yrs
71,176
75,983
37,689
11,240
10,782
3,780
3,654
8,838
621
6,244
61,906
13,167
726
621
621
-
-
-
7,214
1,944
1,824
1,674
1,104
68,323
2,452
33,294
1,222
31,355
13,167
13,167
804
366
-
438
-
-
-
-
-
668
-
-
-
-
-
-
-
-
153,840
166,112
56,239
46,796
13,678
36,239
4,322
8,838
RUB Million
Carrying
value
Contractual
cash flows
0-1
year
1-2 yrs
2-3 yrs
3-4 yrs
4-5 yrs
> 5 yrs
Unsecured bank loans
73,504
80,901
22,009
21,258
12,795
6,515
4,255
14,069
31 December 2018
235
234
(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 .
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 .
32. COMMITMENTS
The Group has entered into contracts to purchase plant and equipment for RUB 43,603 million
(31 December 2018: RUB 30,826 million).
33. CONTINGENCIES
(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 .
(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 .
The tax authorities have the power to impose fines and penalties for tax arrears. A tax year is generally open for review by the tax
authorities during three subsequent calendar years . Currently the tax authorities are taking a more assertive and substance-based
approach to their interpretation and enforcement of tax legislation .
Current Russian transfer pricing legislation requires transfer pricing analysis for the majority of cross-border intercompany and major
domestic intercompany transactions. Starting from 2019, transfer pricing control, as a general rule, is applied to domestic
transactions only if both criteria are met: the parties apply different tax rates, and the annual turnover of transactions between them
exceeds RUB 1 billion .
The Russian transfer pricing rules are close to OECD guidelines, but have certain differences that create uncertainty in practical
application of tax legislation in specific circumstances. A very limited number of publicly available transfer pricing court cases in Russia
does not provide enough certainty as to the approach to applying transfer pricing rules in Russia . The impact of any transfer pricing
assessment may be material to financial statements of the Group, however, the probability of such impact cannot be reliably assessed.
Russian tax authorities may review prices used in intra-group transactions, in addition to transfer pricing audits . They may assess
additional taxes if they conclude that taxpayers have received unjustified tax benefits as a result of those transactions.
Russian tax authorities continue to exchange transfer pricing as well as other tax related information with tax authorities of other
countries . This information may be used by the tax authorities to identify transactions for additional in-depth analysis .
Unsecured loans from other companies
Interest payable
Secured finance leases
Loan participation notes
Trade and other payables
Financial guarantees issued for associates
and related parties
20
733
1,094
69,471
12,221
1,057
20
733
1,158
20
733
766
-
-
-
-
262
130
-
-
-
-
-
-
79,303
2,744
2,751
37,250
1,372
35,186
12,221
12,221
1,233
300
-
455
-
478
-
-
-
-
-
-
-
-
-
-
-
-
-
Derivative financial liabilities
626
626
626
-
-
158,726
176,195
39,419
24,726
50,653
7,887
39,441
14,069
Annual report | 2019Appendices (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.
34. RELATED PARTY TRANSACTIONS
(a) Transactions and balances with associates
(i) Transactions with associates
Sales of goods and services
Other income, net
Interest income
Purchases of goods and services
(ii) Balances with associates
Trade and other receivables
Short-term loans issued, at amortised cost
Trade and other payables
2019
RUB million
2018
RUB million
32
2
1
(527)
2,150
4
3
(472)
31 December 2019
RUB million.
31 December 2018
RUB million.
41
-
(18)
15
13
(10)
(iii) Financial guarantees
The Group issued financial guarantees to banks on behalf of associates amounting to RUB 726 million (31 December 2018: RUB
1,007 million) .
(b) Transactions and balances with other related parties
(i) Transactions with other related parties
Sales of goods and services
Other expenses, net
Interest income
Interest expenses
Purchases of goods and services
(ii) Balances with other related parties
Short-term loans issued, at amortised cost
Trade and other receivables
Short-term loans received
Trade and other payables
2019
RUB million
2018
RUB million
352
(61)
3
(1)
557
22
14
(54)
(2,005)
(2,030)
31 December 2019
RUB million
31 December 2018
RUB million
2
7
-
(123)
117
53
(20)
(131)
237
236
(iii) Financial guarantees
The Group has not issued financial guarantees to banks on behalf of other related parties (31 December 2018: RUB 50 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 key management personnel amounted to RUB 2,462 million (2018: RUB 1,775
million) . .
35. SIGNIFICANT SUBSIDIARIES
Subsidiary
Apatit, JSC (including Balakovo, Volkhov and Kirovsk branchs)
Mekhanik, LLC
NIUIF, JSC
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 Logistics SA
PhosAgro Polska Sp.z o.o.
PhosAgro Deutschland GmbH
PhosAgro France SAS
PhosAgro Balkans
UAB PhosAgro Baltic
Logifert Oy
Bulk Terminal Kotka Oy
Country
of ncorporation
Effective
ownership31
December
2019(rounded)
Effective
ownership31
December
2018(rounded)
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Russia
Cyprus
Singapore
Switzerland
Cyprus
Switzerland
Poland
Germany
France
Serbia
Lithuania
Finland
Finland
100%
100%
94%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
94%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Annual report | 2019Appendices 36. SEASONALITY
The Group is subject to certain seasonal fluctuations in fertiliser demand due to the timing of fertiliser application and, as a result, fertiliser
purchases by farmers. However, the effect of seasonality on the Group‘s revenue is partially offset by the fact that the Group sells its fertilisers
globally and fertiliser application and purchases vary by region .
The Group’s costs are generally stable throughout the year, hovever several maintenance activities undertaken at the Group‘s production
facilities may not be evenly spreaded .
37. EVENTS SUBSEQUENT TO THE REPORTING DATE
In January 2020 the Company’s SPV issued a USD 500 million 5-year Eurobond with a coupon rate of 3 .05%, which is listed on the Irish
Stock Exchange .
In January 2020 the Company partly redeemed 4,5-year Eurobond issued through SPV in May 2017 with a 3 .95% coupon rate (see
note 27) by USD 150 million. Redemption was financed by the Eurobond issued in January 2020.
In February 2020, the Board of Directors proposed paying a dividend of RUB 18 per ordinary share . The total amount of proposed
dividends was RUB 2, 331 million (see note 25) .
239
238
Annual report | 2019Appendices 102-55
GRI CONTENT
INDEX
GRI Indicator
GRI 102 GENERAL DISCLOSURES
Organisational profile
GRI 102–1 Name of the organisation
GRI 102–2 Activities, brands, products and services
GRI 102–3 Location of headquarters
GRI 102–4 Location of operations
GRI 102–5 Ownership and legal form
GRI 102–6 Markets served
GRI 102–7 Scale of the organisation
GRI 102–8 Information on employees and other workers
GRI 102–9 Supply chain
Omissions/Comment
PJSC PhosAgro
55/1 Leninsky Avenue, Bld. 1, Moscow, 119333, Russia
Public Joint-Stock Company PhosAgro
For technical reasons, 2019 data on the number of employees, type of employment and contract, with a breakdown by age
and gender, is not fully disclosed; this information will be provided in the 2020 report.
GRI 102–10 Significant changes to the organisation and its supply chain
There were no significant changes
N
O
I
T
A
M
R
O
F
N
I
L
A
N
O
I
T
I
D
D
A
GRI 102–11 Precautionary principle or approach
GRI 102–12 External initiatives
GRI 102–13 Membership of associations
Strategy
GRI 102–14 Statement from senior decision-maker
Ethics and Integrity
GRI 102–16 Values, principles, standards and norms of behaviour
Governance
GRI 102–18 Governance structure
Stakeholder Engagement
GRI 102–40 List of stakeholder groups
GRI 102–41 Collective bargaining agreements
GRI 102–42 Identifying and selecting stakeholders
GRI 102–43 Approach to stakeholder engagement
GRI 102–44 Key topics and concerns raised
Reporting Practice
GRI 102–45 Entities included in the consolidated financial statements
GRI 102–46 Defining report content and topic boundaries
GRI 102–47 List of material topics
GRI 102–48 Restatements of information
GRI 102–49 Changes in reporting
GRI 102–50 Reporting period
GRI 102–51 Date of most recent sustainability report
GRI 102–52 Reporting cycle
GRI 102–53 Contact point for questions regarding the report
GRI 102–54 Claims of reporting in accordance with the GRI Standards
No restatement of information was made for the previous reporting period.
The Report contains updates of the data for previous years, which is indicated in the text
Throughout the reporting period, there were no significant changes to the scope and boundaries of aspects compared
to previous reporting periods
The reporting period is calendar year 2019
The Company does not have a separate report on sustainable development. Information on sustainable development
is included in the integrated report. The most recent integrated report was published on April. 30, 2019
Since 2011, PhosAgro has been publishing integrated reports annually
This Report has been prepared in accordance with the GRI Standards: Core option
78
241
240
Page number
(or link)
2–3
4–5, 8–9
254
8–9
2–3
8–9, 48–49
12–13, 14–15, 127
127
150–151
58–61
18–19, 84–95
16–17, 18–19, 84–93
22–29, 81
82–83, 156–157, 185
156–181
142–149
147
142, 78–79
142
79–81, 142–149
2–3
78–79, 2–3
79–80
Annual report | 2019Appendicies
GRI Indicator
GRI 102–55 GRI content index
GRI 102–56 External assurance
GRI 200 ECONOMIC
GRI 201 Economic Performance
GRI 103 Management approach
GRI 201–1 Direct economic value generated and distributed
GRI 201–3 Defined benefit plan obligations and other retirement plans
GRI 202 Market Presence
GRI 103 Management approach
GRI 202–1 Ratios of standard entry level wage by gender compared to local minimum wage
GRI 202–2 Proportion of senior management hired from the local community
GRI 203 Indirect Economic Impacts
GRI 103 Management approach
GRI 203–1 Infrastructure investments and services supported
GRI 203–2 Significant indirect economic impacts
GRI 204 Procurement Practices
GRI 103 Management approach
GRI 204–1 Proportion of spending on local suppliers at significant locations of operation
GRI 205 Anti-corruption
GRI 103 Management approach
GRI 205–3 Confirmed incidents of corruption and actions taken
GRI 300 ENVIRONMENTAL
GRI 302 Energy
GRI 103 Management approach
GRI 302–1 Energy consumption within the organisation
GRI 302–3 Energy intensity
GRI 302–4 Reduction in electricity consumption
GRI 303 Water and Effluents
GRI 103 Management approach
GRI 303–1 Interactions with water as a shared resource
243
242
Page number
(or link)
240
2, 194
12–13, 42–56
75
130
124–125
128
128
136–138
138–141
138–141
150
152–153
185
185
111–112
111
111
112
109–111
109
Omissions/Comment
This appendix
Withdrawal of water from surface water bodies
Branch
Apatit (Cherepovets)
Kirovsk branch of Apatit
Volkhov branch of Apatit
Water body in accordance with water use agreement
Rybinsk Reservoir
Lake Bolshoi Vudyavr
Volkhov Reservoir (Volkhov River)
Balakovo Branch of Apatit
Saratov Reservoir
Waste water discharge at Apatit
Waste water discharge
Kirovsk branch of Apatit
Discharge 1. Industrial waters at ANBP-3
Discharge 2. Industrial waters at ANBP-2
Discharge 3. Rainwaters at ANBP-2
Receiving water body
Zhemchuzhnaya River
Belaya River
Belaya River
Discharge 4. Mining waters of the combined Kirovsky, Central, and Rasvumchorrsky mines
Lake Bolshoi Vudyavr
Discharge 6. Waters of the wells installed at the Vostochny mine to reduce groundwater level
Vuonnemyok River
Discharge 5. Mining waters of the Koashva and Nyorkpakh underground mines
Discharge 8. Mining waters of the Koashva and Nyorkpakh underground mines
Apatit (Cherepovets)
Effluents from the phosphate facility
Effluents from the nitrogen facility
Lake Kitchepakhk
Lake Kitchepakhk
Rybinsk Reservoir
Rybinsk Reservoir
Annual report | 2019Appendicies GRI Indicator
Omissions/Comment
GRI 303–2 Management of water discharge-related impacts
Effluents are treated to standard permissible discharge and temporarily permitted discharge levels set by permits
to discharge pollutants into the environment (water bodies) issued by a relevant authority for each discharge
GRI 303–3 Water withdrawal
GRI 303–4 Water discharge
GRI 303–5 Water consumption
GRI 305 Emissions
GRI 103 Management approach
GRI 305–1 Direct (Scope 1) GHG emissions
GRI 305–4 GHG emissions intensity
GRI 305–7 Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air emissions
GRI 306 Effluents and Waste
GRI 103 Management approach
GRI 306–1 Total water discharge by quality and destination
GRI 306–2 Waste by type and disposal method
GRI 306–4 Transport of hazardous waste
GRI 307 Environmental Compliance
GRI 103 Management approach
GRI 307-1 Non-compliance with environmental laws and regulations
1. 98% of effluents are treated in various ways by undergoing mechanical, physical and chemical or biological purification
at treatment facilities until standard permissible discharge and temporarily permitted discharge rates are reached
as required by permits to discharge pollutants into the environment (water bodies) issued by a relevant authority for each
discharge. 2% of effluents are discharged without any treatment, but their quality is also in line with the standard permissible
discharge and temporarily permitted discharge rates. There has been no unplanned water discharge.
2. Waste water discharge at Apatit
Waste water discharge
Receiving water body
Kirovsk branch of Apatit
Discharge 1. Industrial waters at ANBP-3
Discharge 2. Industrial waters at ANBP-2
Discharge 3. Rainwaters at ANBP-2
Zhemchuzhnaya River
Belaya River
Belaya River
Discharge 4. Mining waters of the combined Kirovsky, Central, and Rasvumchorrsky mines
Lake Bolshoi Vudyavr
Discharge 6. Waters of the wells installed at the Vostochny mine to reduce groundwater level
Vuonnemyok River
Discharge 5. Mining waters of the Koashva and Nyorkpakh underground mines
Discharge 8. Mining waters of the Koashva and Nyorkpakh underground mines
Apatit (Cherepovets)
Effluents from the phosphate facility
Effluents from the nitrogen facility
Lake Kitchepakhk
Lake Kitchepakhk
Rybinsk Reservoir
Rybinsk Reservoir
The Company performs no cross-border shipping of waste deemed hazardous under the terms of the Basel Convention
а. i. - disclosed on page 93
a. ii. - in 2019, 10 cases of non-compliance were identified across all production sites.
No penalties other than financial applied
a. ii. - there were no litigations
b. not applicable
245
244
Page number
(or link)
110
110
111
109
104–106
106
106
105
106–108
111
108
99
Annual report | 2019Appendicies GRI Indicator
GRI 400 SOCIAL
GRI 401 Employment
GRI 103 Management approach
GRI 401–1 New employee hires and employee turnover
247
246
Page number
(or link)
124–125
127
Omissions/Comment
New hires in 2019
Region
Vologda region
Vologda region
Vologda region Total
Saratov region
Saratov region
Saratov region Total
Leningrad region
Leningrad region
Leningrad region Total
Moscow region
Moscow region
Moscow region Total
Murmansk region
Murmansk region
Murmansk region Total
Total
Leavers in 2019
Region
Vologda region
Vologda region
Vologda region Total
Saratov region
Saratov region
Saratov region Total
Leningrad region
Leningrad region
Leningrad region Total
Moscow region
Moscow region
Moscow region Total
Murmansk region
Murmansk region
Murmansk region Total
Total
Gender
<25
years
25–34
years
35–44
years
45–55
years
over 55
Total
F
M
F
M
F
M
F
M
F
M
57
80
137
5
8
13
10
8
18
1
1
2
21
101
122
292
120
143
263
15
36
51
28
19
47
2
3
5
63
394
457
823
96
86
182
17
16
33
27
19
46
8
6
14
64
387
451
726
40
36
76
5
6
11
8
13
21
2
3
5
42
145
187
300
23
10
33
9
15
24
22
8
30
2
2
21
23
44
133
336
355
691
51
81
132
95
67
162
15
13
28
211
1,050
1,261
2,274
Gender
<25
years
25–34
years
35–44
years
45–55
years
over 55
Total
F
M
F
M
F
M
F
M
F
M
24
43
67
3
3
4
4
8
14
31
45
1
1
76
83
159
11
16
27
18
20
38
37
242
279
2
7
9
57
69
126
15
11
26
18
23
41
34
259
293
3
2
5
43
40
83
3
14
17
14
17
31
36
121
157
1
1
36
26
62
11
27
38
34
13
47
15
28
43
3
1
4
236
261
497
40
71
111
88
77
165
136
681
817
8
12
20
124
512
491
289
194
1,610
GRI 401–2 Benefits provided to full-time employees that are not provided to temporary or part-time employees
Benefits established by collective bargaining agreements apply to all employees of the Company’s main production sites
and do not depend on the status or conditions of employment
GRI 401–3 Parental leave
GRI 403 Occupational Health and Safety
GRI 103 Management approach
GRI 403–1 Occupational health and safety management system
GRI 403–2 Hazard identification, risk assessment, and incident investigation
GRI 403–3 Occupational health services
GRI 403–4 Worker participation, consultation, and communication on occupational health and safety
129
130
116
117
118
117
119
Annual report | 2019Appendicies GRI Indicator
Omissions/Comment
GRI 403–5 Worker training on occupational health and safety
GRI 403–6 Promotion of worker health
GRI 403–7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships
GRI 403–8 Workers covered by an occupational health and safety management system
GRI 403–9 Work-related injuries
GRI 404 Training and Education
GRI 103 Management approach
GRI 404–1 Average hours of training per year per employee
GRI 404–2 Programmes for upgrading employee skills and transition assistance programmes
GRI 404–3 Percentage of employees receiving regular performance and career development reviews
GRI 413 Local Communities
GRI 103 Management approach
GRI 413–1 Percentage of operations with implemented local community engagement, impact assessments,
and development programmes
Data on the assessment of engagement of, dialogue with, and development of local communities, formal grievance
mechanisms and other aspects in compliance with the GRI 413-1 disclosure requirements will be fully disclosed
in the 2020 report.
136–141
249
248
Page number
(or link)
119
116
118–120
117–119
120
130
132
131
132
136
Annual report | 2019Appendicies INDEPENDENT
ASSURANCE REPORT
Independent practitioner’s limited assurance
report by AO Deloitte & Touche CIS (‘Deloitte’)
to PJSC Phosagro Board of Directors
on the 2019 Sustainability Report for the year ended
31 December 2019 .
SCOPE OF ASSURANCE
We have been engaged by PJSC Phosagro
to perform an assurance engagement in accor-
dance with International Standard on Assurance
Engagements (ISAE) 3000 (Revised) (‘the Standard’)
to provide public limited assurance on accu-
racy of Selected Data presented in PJSC Phosagro
Sustainability Report prepared in accordance
with GRI Standards (‘the Report’) for the year ended
31 December 2019 .
ASSURANCE PROCEDURES
AND ROLES
We carried out limited assurance on accuracy
of the following data related to 2019 year
and included into the Report:
(1) Selected key performance indicators specified
below in the section “Selected non-financial
performance data for public limited assurance”, and
(2) PJSC Phosagro’s self-declaration in preparing its
Report 2019 in accordance with the requirements
of Global Reporting Initiative (GRI) Sustainability
Reporting Standards as stated on page 193
of the Report .
OUR KEY ASSURANCE PROCEDURES
To achieve limited assurance, the ISAE 3000
(Revised) requires that we review the processes,
systems and competencies used to compile
the areas on which we provide our assurance .
Considering the risk of material error,
we planned and performed our work to obtain all
of the information and explanations we considered
necessary to provide sufficient evidence to support
our assurance conclusion .
To form our conclusions, we undertook the following procedures:
• Conducted site visit to one business unit – AO “Apatit” (Vologda region);
• Analysed on a sample basis the key systems, processes, policies
and controls relating to the collation, aggregation, validation and reporting
processes of the selected sustainability performance indicators;
• Conducted interviews with employees of PJSC Phosagro responsible
for sustainability performance, policies and corresponding reporting;
• Conducted selective substantive testing to confirm accuracy of received
data to the selected key performance indicators;
• Made enquiries of management and senior executives to obtain
an understanding of the overall governance and internal control
environment, risk management, materiality assessment and stakeholder
engagement processes relevant to the identification, management
and reporting of sustainability issues;
• Performed selective review of disclosures in the Report on compliance
with GRI Standards;
We believe that our evidence obtained is sufficient and appropriate to provide
a basis for our limited assurance conclusion .
INHERENT LIMITATIONS
Inherent limitations exist in all assurance engagements due to the selective testing
of the information being examined. Therefore fraud, error or non-compliance
may occur and not be detected. Additionally non-financial information, such
as that included in reporting documents is subject to more inherent limitations
than financial information, given the nature and methods used for determining,
calculating and sampling or estimating such information.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to them in this Report and for no other
purpose . To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than PJSC Phosagro for our work, for this Report,
or for the conclusions we have formed .
Our engagement provides limited assurance as defined in ISAE 3000 (Revised).
The procedures performed in a limited assurance engagement vary in nature
and timing from, and are less in extent than for, a reasonable assurance
engagement and consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance that would have
been obtained had a reasonable assurance engagement been performed.
ROLES AND RESPONSIBILITIES
• The Directors are responsible for the preparation, accuracy
and completeness of the sustainability information and statements
contained within the Report . They are responsible for determining
PJSC Phosagro sustainability objectives and for establishing
and maintaining appropriate performance management and internal
control systems from which the reported information is derived .
• Our responsibility is to express a conclusion on the selected Subject Matter
based on our procedures . We conducted our engagement in accordance
with the ISAE 3000 (Revised) Assurance Engagements other than Audits
or Reviews of Historical Financial Information issued by the International
Auditing and Assurance Standards Board .
251
250
LIMITED ASSURANCE
CONCLUSION
Based on the scope of our work and the assur-
ance procedures performed nothing has come
to our attention that causes us to believe that
the aforementioned Selected Data, which we were
engaged to provide limited assurance on, as speci-
fied in the ‘Roles and responsibilities’ section above
are materially misstated .
Natalya Kaprizina
Engagement partner
28 April 2020
INDEPENDENCE AND QUALITY CONTROL
• We have complied with the independence and other ethical
requirements established by the Rules on Independence of Auditors
and Audit Firms and the Code of Professional Ethics for Auditors
approved by the Audit Council of the Ministry of Finance of the Russian
Federation and by the Code of Ethics for Professional Accountants issued
by the International Ethics Standards Board for Accountants, which
are based on fundamental principles of integrity, objectivity, professional
competence and due care, confidentiality and professional behavior.
• The firm applies the International Standard on Quality Control 1
and accordingly maintains a comprehensive system of quality control
including documented policies and procedures regarding compliance
with ethical requirements, professional standards and applicable legal
and regulatory requirements .
SELECTED NON-FINANCIAL PERFORMANCE DATA
FOR PUBLIC LIMITED ASSURANCE
We have been engaged by the Board of Directors of PJSC Phosagro to perform
limited assurance procedures on accuracy of the following key performance
data of the 2019 reporting year included into the Report:
Employees
Health and safety
Emissions into
the atmosphere
Average headcount (Total number of emploees in PhosAgro
Group, including all branches and subsidiaries).
Proportion of senior management hired from the local
community in total headcount.
Percentage of employees receiving regular performance
and career development reviews
Average hours of training per year per employee
Total number of workplace accidents.
Total number of fatal accidents.
Lost Time Injury Frequency Rate (LTIFR) per 1 million hours
Gross sulphur dioxide emissions, tones.
Gross nitrogen oxides emissions calc. in NO2, tones.
Gross carbon monoxide emissions, tones.
Gross solid emissions, tones.
Greenhouse gas
Gross GHG emissions (Scope1), tones.
Hazardous waste
Total weight of generated waste, tones.
Waste with a breakdown by the disposal methods, tones
Water consumption
Total water withdrawal by source by branches, mln m3.
Waste-water discharge by branches, mln m3.
Energy
Total non-renewable fuel consumption by fuel type.
Electricity consumption.
Heating consumption.
Stakeholder
engagement
The total amount of funds allocated for the needs of society,
charity, in million rubles.
Anticorruption
Confirmed amount of incidents of corruption
The Entity: Public Joint Stock Company Phosagro
Primary State Registration Number: 1027700190572
State registration number: P-18009.16 dated 10.10.2001 issued
by the State Registration Chamber under the Ministry of Justice
of the Russian Federation
Address: 119333, Russian Federation, Moscow, Leninsky prospekt., 55/1
Audit Firm: AO “Deloitte & Touche CIS”
Certificate of state registration № 018.482, issued by the Moscow Registration Chamber on 30.10.1992.
Primary State Registration Number: 1027700425444
Certificate of registration in the Unified State Register № 77 004840299 of 13.11.2002, issued by Moscow
Interdistrict Inspectorate of the Russian Ministry of Taxation № 39.
Member of Self-regulatory organization of auditors Association “Sodruzhestvo”, ORNZ 12006020384
Annual report | 2019Appendicies GLOSSARY
253
252
ESG – environmental, social,
and governance
kg – kilogram
KPI – key performance indicator
ESPP – European Sustainable Phosphorus
Platform
kWh – kilowatt-hour
AN – ammonium nitrate
ANBP – apatite-nepheline beneficiation
plant
ANSES – French Agency for Food,
Environmental and Occupational Health
& Safety
ASF – African swine fever
ATG – atmosphere gauge (unit of pressure)
BAT – best available technique
bln – billion
Capex – capital expenditure
CCl 4 – carbon tetrachloride
Cd – cadmium
CDA 2 – nationwide programme
to modernise the electricity industry
EU – European Union
FAO – Food and Agriculture Organisation
GDP – gross domestic product
GDR – global depositary receipt
GLONASS – Global Navigation Satellite
System
GLOSOLAN – Global Soil Laboratories
Networks; supporting the GLOSOLAN
by developing research capacities
and strengthening the Regional Soil
Laboratories Networks (RESOLAN) .
GRI – Global Reporting Initiative
CDP – Carbon Disclosure Project
GSP – Global Soil Partnership
CIS – Commonwealth of Independent
States
CJSC – closed joint-stock company
CO2 – carbon dioxide
COVID-19 – сoronavirus disease 2019,
the pandemic caused by severe acute
respiratory syndrome coronavirus 2
(SARS-CoV-2)
DAP – diammonium phosphate
DCDA – Double Contact Double
Absorption
DROZD – Educated and Healthy Children
of Russia programme
EBITDA – earnings before interest, taxes,
depreciation and amortisation
EMERCOM – Ministry for Civil
Defence, Emergencies and Elimination
of Consequences of Natural Disasters
H2SO4 – sulphuric acid
HR – human resources
HSE – health, safety and environment
IFA – International Fertilizer Association
IFRS – International Financial Reporting
Standards
IMF – International Monetary Fund
IPCC – in-pit crushing and conveying
at the Vostochny mine
IRR – internal rate of return
IT – information technology
IUPAC – International Union of Pure
and Applied Chemistry
IYPT 2019 – International Year
of the Periodic Table
JSC – joint-stock company
JSCB – joint-stock commercial bank
LSE – London Stock Exchange
LTIFR – lost time injury frequency rate
MAP – monoammonium phosphate
MCP – feed monocalcium phosphate
mg – milligram
mln – million
MOP – muriate of potash
MS – management system
MW – megawatt
NH3 – ammonia
NIUIF – Samoilov Scientific
Research Institute for Fertilizers
and Insectofungicides
NO2 – nitrogen dioxide
NPK – nitrogen-phosphorus-potassium
fertilizer
OHS – occupational health and safety
OJSC – open joint-stock company
OPEC – Organisation of the Petroleum
Exporting Countries
P2O5 – phosphoric pentoxide
PhosAgro Group – PJSC PhosAgro and its
subsidiaries and affiliates
PJSC – public joint-stock company
PwC – PricewaterhouseCoopers
R&D – research and development
RAFP – Russian Association of Fertilizer
Producers
RAS – Russian Accounting Standards
REACH – Registration, Evaluation,
Authorisation and Restriction of Chemicals
Rospotrebnadzor – Federal Service
for Surveillance on Consumer Rights
Protection and Human Wellbeing
Rosstandart – Federal Agency
on Technical Regulating and Metrology
Rostekhnadzor – Federal Service
for the Supervision of Environment,
Technology and Nuclear Management
RSPP – Russian Union of Industrialists
and Entrepreneurs
RUB – Russian rouble
SDG – UN Sustainable Development Goal
SMEs – small and medium-sized
enterprises
SO2 – sulphur dioxide
STPP – sodium tripolyphosphate
Strategy to 2025 – PhosAgro’s
Development Strategy to 2025
t – metric tonne
ths – thousand
TTF – Title Transfer Facility
UDT – thermal treatment facility
UN – United Nations
UNESCO – United Nations Educational,
Scientific and Cultural Organisation
USA – United States of America
USD – United States dollar
VAT – value-added tax
VOC – volatile organic compound
WHO – World Health Organisation
Annual report | 2019Appendicies 255
254
CONTACTS
INVESTOR RELATIONS
CORPORATE SECRETARY
PHOSAGRO LEGAL ADDRESS
DEPOSITARY
AUDITOR
REGISTRAR
CONTACTS FOR EMPLOYEES
AND POTENTIAL EMPLOYEES
CONTACTS FOR MEDIA
SUSTAINABILITY CONTACTS
Andrey Serov
Head of Investor Relations
Tel .: +7 (495) 231 31 15
Email: ir@phosagro .ru
Sergey Samosyuk
Tel .: +7 (495) 232 96 89, ext . 2712
Email: ks@phosagro .ru
55/1 Leninsky Prospekt, bldg . 1, Moscow 119333, Russia
Tel .: +7 (495) 232 96 89
Fax: +7 (495) 956 19 02
Citigroup Global Markets Deutschland AG
Frankfurter Welle Reuterweg 16 60323 Frankfurt, Germany
JSC KPMG
Naberezhnaya Tower Complex, 10 Presnenskaya Naberezhnaya Moscow
123112, Russia
Tel .: +7 (495) 937 44 77
Fax: +7 (495) 937 44 00/99
Web: www .kpmg .ru
JSC Reestr
129090, Moscow, B . Balkanskiy lane, 20, bldg . 1, Russia
Tel .: +7 (495) 617 01 01
Fax: +7 (495) 680 80 01
Email: reestr@aoreestr .ru
Web: www .aoreestr .ru
Diana Sidelnikova
Deputy Director of Human Resources and Social Policy
Tel .: +7 (820) 259 31 13
Email: dsidelnikova@phosagro .ru
Andrey Podkopalov
Director of Information Policy
Tel .: +7 (495) 232 96 89, ext . 26 51
Timur Belov
Head of Information Policy Division Press Secretary
Tel .: +7 (495) 232 96 89, ext . 26 52
Email: pr@phosagro .ru
Sam VanDerlip
International PR Advisor
Mobile (UK): +44 (7554) 993 032
Tel . (Russia): +7 (499) 918 31 34
Email: vanderlip@em-comms .com
Sergey Kudryashov
Head of Sustainable Development Department
Tel .: +7 (495) 231 27 47
Email: SVKudryashov@phosagro .ru
Annual report | 2019Appendicies