Ros Agro PLC (AGRO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. I'm Konstantin, and I'm going to be your interpreter. This is a simultaneously interpreted event, and I'm going to advise you now how to proceed in your language of preference. I'll do that in both languages, then we switch on the interpretation, and you'll be able to talk barrier free. As soon as we switch on the interpretation, a globe icon will appear at the bottom of your screen. If you are joining from a mobile device such as a smart phone or a tablet, the language interpretation option will be hiding under the more menu represented by 3 dots. You need to click on the globe icon or tap on 3 dots and then select interpretation, English. [Operator Instructions].

[Audio Gap] pretty much equally because of the high volumes while the cash costs remained on par with 2020. The volumes have increased for beetroot, soybean and corn. You can see price dynamics in the left-hand side of the page. Now let's continue to Page 11 to discuss the same agriculture business with its key indicators across the 12 months rather than Q4 alone. The developments, however, are pretty much the same, both sales and EBITDA are on the rise pretty much equal terms for the same reason. Again, that's higher sales of mostly sugar beet and wheat. Our land bank as of the 31st of December 2021 is up from 641 to 688 hectares. Page 12 explains our Oil and Fats business in Q4. Again, we can see both EBITDA and sales growing, albeit not as significantly as was the case for agriculture. Similarly, the growth is explained by the positive market environment and industrial fats and dry whey mixes growing sales. The EBITDA remained flat in terms of its margin. This is explained by the fact that we had prices regulated during part of 2021, and feedstock prices remained somewhat higher than was the case in 2020. Page 13 explains Oil and Fats in the course of 2021, the full 12 months rather than Q4. You can see that the sales are up, but the EBITDA is not as significantly. You can see both crude oil and industrial fats have high volumes. In 2021, price regulation played as a strong factor. As you know, we sold oil at a price not above RUB 95 per bottle in the early months of 2021. The EBITDA margin went somewhat down as compared to 2020. Because of the feedstock prices, they are much higher than other elements of the sales items. Market prices for meal, sunflower and tropical oils are represented on the left-hand side in the bottom. Now over to Page 14. Let's discuss the Sugar business. Here, we see a significant boost in sales and equally significant boost in EBITDA. Production volumes are up in Q4 as compared to Q4 2020. This is driven mostly by high volumes, which is explained by higher production volumes. As I mentioned earlier, the EBITDA margin of our Sugar business is somewhat better than in the previous period due to cheaper sugar beet as feedstock. Now on Page 15, let's discuss the same sugar business over the course of the full 12 months of 2021. The sales side shows some rise and same is true for EBITDA. EBITDA margin remains rather flat relatively as compared to 2020. It's up actually by 2 percentage points. And the reasons behind it are the same as was the case in Q4. We also saw prices regulated at RUB 36 per kilo. So that meant we operated in full compliance with the requirements of our government. Page 16 discusses our meat business in the context of Q4. We see sales on the rise. However, the EBITDA is down and also production volumes are down in livestock pigs. And sales volumes are somewhat down. The EBITDA margin is also down mostly because we had to recognize the cost of our new operations in Primorye even given the fact that the revenue is not still in our accounts, the revenue from our new assets in Primorye, I mean. We hope that the situation will change in 2022 once the revenue is there. Page 17 discusses the same meat business across the full year of 2021. The sales are up by RUB 7 billion, while the EBITDA is down. And the rationale here is exactly the same. On the cost side, for Primorye registered in Q4, which explains why our margin is down for the full year of 2021. This concludes the main section of the presentation. You're welcome to ask your questions now. We normally start with questions asked online and real-time verbally. So these would be prioritized. If not, then we have a few questions in the Q&A section.

Sergey Beiden of Renaissance, our analyst.

I understand it wouldn't be -- it would be too early to ask you any questions about future regulations or regulatory changes. I have a question about dividends, however. If your payout ratio is 7% based on your RES accounts, then I would suggest the ruble to dollar ratio that you use in calculating a dividend for 2021, that would be RUB 86.7 or so. Given the high degree of volatility, we are currently seeing in the FX market, what would you prioritize dividends in dollars which would mean a payout of more than 50% or dividends that you'll pay in April? But in dollar terms, that would be or could change somewhat depending on how the events unfold and how they affect the FX markets. What's your position? Are you in favor of a 50% payout. Well, I am more flexible in this regard. So that you can benefit from your dollar position. And another question, the dividends you announced at this contemplated rate. Have you provisioned for them? Or is it a theoretical possibility?

Yes, the Board of Directors has endorsed paying the dividend in the amount of 50% of the net income. However, everyone understands the situation we are currently facing. And given a huge issue with getting the currencies converted at this hour, we understand we could face certain difficulties in terms of timing for the dividend. A decision has been made, and we'll be moving in that direction, just like I said.

Just a quick follow-up. There is a question on the webcast that correlates to this one. Could there be issues with Russian shareholders getting their dividend?

The situation is very complex. We all understand -- we all understand the environment, the external environment with the Swift. And working with Russian banks those that get sanctioned. So it's really difficult to answer this one. I believe that as soon as the situation gets clearer, as soon as we know what to expect and how to handle banks and banking transactions, we'll start looking into the service.

Since we don't have any further questions online, let's read those as per the Q&A section. Wording may be different, but the question is pretty much the same. What could -- what kind of an impact could you have on the sanctions on your operations, starting with exports?