Acron Group
SPRING IS ALWAYS
AROUND THE CORNER
2020 Annual Report
DRAFT
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
About the Report
Acron Group is a leading vertically integrated mineral fertiliser producer
in Russia and globally. Its wide range of products includes complex
and nitrogen fertilisers and industrial products. In 2020, the Group sold
7.8 million tonnes of its key products.
'The COVID-19 pandemic has affected nearly everyone on our
planet. As the situation unfolded, Acron Group established a
coronavirus emergency centre. All of our employees were given
personal protective equipment, and office staff started working
remotely. Our production facilities continued operations with
measures in place to protect against the virus. These timely
measures and our employees’ strict compliance with them helped
prevent the spread of infection at the Group’s production facilities.'
Vladimir Kunitsky, Chief Executive Officer
Information on approval of the Annual Report:
Preliminarily approved by PJSC Acron Board of Directors on 22 April 2021
Approved by Acron General Meeting on ___________
Chief Executive Officer Vladimir Kunitsky
To read more about
www.acron.ru/en/
1
Contents
COMPANY OVERVIEW 4
Company Overview
4
2020 Highlights
6
Key Awards
8
Business Geography
10
Priority Business Areas and Business Model
12
Letter from the Chairman of the Board of Directors
14
Letter from the Chief Executive Officer and President
16
STRATEGIC REPORT 18
Mineral Fertiliser Market Overview 18
Development Strategy and Prospects 24
Investment Programme 28
Sales Markets 30
Acron Group’s Market Position 32
Acron Group’s Unique Competitive Advantages 33
Board of Directors Report on Priority Operating Areas 34
Financial Overview 55
Risks and Risk Mitigation Strategy 63
Investor and Shareholder Information 71
CORPORATE GOVERNANCE 78
Statement by the Board of Directors on Compliance
with the Principles of the Corporate Governance Code 78
Report on Corporate Governance 83
Corporate Governance System 84
Board of Directors 87
Managing Board 98
Remuneration and Reimbursement to the Members
of the Board of Directors and Managing Board 102
Control System 109
Procurement 112
SUSTAINABILITY
114
Responsibility for Personnel
116
Occupational and Industrial Safety
125
Environmental Efforts
127
Social Involvement
134
Cooperation with Stakeholders
136
FINANCIAL STATEMENTS
140
Responsibility Statement
140
IFRS Financial Statements
141
RAS Financial Statement
201
APPENDICES
204
Appendix 1. List of Major and Related-Party
Transactions
204
Appendix 2. Group Structure 205
Appendix 3. Report on Energy Consumption 206
Appendix 4. Acron Report on Compliance with
Corporate Governance Code Principles and
Recommendations (separate book)
Appendix 5. RAS Financial Statements and Audit
Report (separate book)
Contacts 207
NITRIC ACID UNIT
UREA GRANULATION UNIT
Veliky Novgorod-based Acron commissioned a new
135,000-tpa nitric acid unit, the third new unit in two years.
The first two units were launched at the Veliky Novgorod
site in 2019. The total cost of all three units was USD 58
million. Research and design centre Aron Engineering (a
member of Acron Group) was the general designer for the
units.
Nitric acid is used to produce AN and NPK. The launch of
the new units will help Acron Group increase its AN output
by 500,000 tpa.
2
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Projects Completed in 2020
AMMONIA4 UPGRADES
Acron Group ramped up output at its Ammonia-4 unit
to 2,550 tonnes per day, 24% above its design capacity,
bringing the unit’s capacity to 900,000 tonnes per
year and making it one of the largest ammonia plants
in Europe. Investments in the project totalled USD
34 million. Critical work was supervised by experts
from Haldor Topsoe (HTER), Mitsubishi, and Acron
Engineering.
Acron Group commissioned a new 700-ktpa urea gran-
ulation unit at its Veliky Novgorod site, which previously
only produced prilled urea. With the new unit on stream,
the Group will supplement its product portfolio, improve
production flexibility, and better meet the market’s
needs by switching to products with the greatest
demand at any given moment. The project cost a total
of USD 29 million. Research and design centre Aron
Engineering (a member of Acron Group) was the general
designer for the unit.
These projects
increased the Group’s
commercial output
in 2020 to
77
7,976,0007,976,000
%
tonnes
3
Acron Group is a leading vertically integrated mineral fertiliser producer
in Russia and globally. Its wide range of products includes complex and
nitrogen fertilisers and industrial products. In 2020, it sold 7.8 million tonnes
of its key products.
The Group continues to expand its production capacity, allowing it to
develop distribution opportunities and diversify its product portfolio.
ACRON GROUP
HIGHLIGHTS
Sales of key products, '000 t
• Vertical integration in
nitrogen and phosphate;
implementation of potash
project underway
• Extensive logistics and
distribution network with
sales in 74 countries
• Listed on Moscow
Exchange and London
Stock Exchange
• Leading producer of complex
and nitrogen fertilisers
AMMONIA
NITROGEN FERTILISERS
COMPLEX FERTILISERS
ORGANIC COMPOUNDS
NONORGANIC COMPOUNDS
APATITE CONCENTRATE
TOTAL
116
304
2019
2020
3,874
3,843
2019
2020
2,271
2,098
2019
2020
3,874
3,843
211
237
2019
2020
1,048
797
2019
2020
287
290
2019
2020
7,807
7,569
287
290
1000
2000 3000 4000 5000 6000 7000 8000
7,807
7,569
2019
2020
Company Overview
4
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Acron Group’s Financial Highlights
Financial performance (IFRS) 2020 2019
Revenue, RUB mn 119,864 114,835
Operating profit, RUB mn 26,029 23,401
Net profit, RUB mn 3,836 24,786
Earnings per share, RUB 87.71 619.83
EBITDA, RUB mn 35,311 35,749
EBITDA margin, % 29 31
Assets, RUB mn 220,089 200,355
Available-for-sale investments, RUB mn 11,264 9,784
Short-term borrowings, RUB mn 36,911 13,288
Long-term borrowings, RUB mn 78,205 73,253
Net debt, RUB mn 99,579 75,185
Cash flow from operating activities, RUB mn 26,190 28,278
Capital expenditures, RUB mn 17,946 19,030
8.0 mn tmn t
Sales volume
11,429
employees
119,864
2020 Revenue
mn
RUB
5
Acron took the bronze medal at the Graduate
Awards-2020, the fifth national contest for projects
that benefit graduates and young specialists.
Otkritie Bank acquired a stake in the Talitsky potash project
from Verkhnekamsk Potash Company (VPC).
Acron Group commissioned a new
700-ktpa urea granulation unit at its
Veliky Novgorod site.
2020 Highlights
Acron Group supplied Argentina with
96,000 tonnes of liquid fertilisers for
the first time through its own local
distribution company, Acron Argentina
S.R.L.
Acron Group
commissioned a new
135,000-tpa nitric acid unit
at its production site in
Veliky Novgorod, the third
new unit in two years.
A complex automation project at Plodorodie Agribusiness
Holding (a member of Acron Group) won the 2019 Global
CIO Project of the Year award for best IT project in the
agricultural industry.
6
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
JANUARY
FEBRUARY
APRIL
MAY
JUNE
Acron (Veliky Novgorod) completed
a project to ramp up output at its
Ammonia-4 unit to 2,550 tonnes
per day.
Modern geriatric centre opened in Veliky
Novgorod with Acron’s support. The
Company allocated a total of RUB 143
million for the project.
Acron (Veliky Novgorod) won the Project
of the Year nomination at 5 Stars:
Chemical Industry Leaders, a nationwide
competition to recognise innovation in the
industry. Acron’s winning project involved
construction of three UKL units for nitric
acid production with a total capacity of
405,000 tonnes per year.
North-Western Phosphorous Company
(NWPC) marked its 15th anniversary.
Dorogobuzh celebrated its 55th
anniversary.
7
DECEMBER
NOVEMBER
OCTOBER
AUGUST
Key Awards
In the reporting year, Acron Group earned
several prestigious awards.
Acron Wins Chemistry Complex Business Index Award
Acron Wins Nationwide Competition 5 Stars: Chemical Industry Leaders
Acron won the Chemistry Complex Business Index Award in the category for Investing in People. The award showcases
the most important chemical industry projects that further the industry’s development.
Acron (Veliky Novgorod) won the Project of the Year nomination at 5 Stars: Chemical Industry Leaders. Acron’s winning
project involved construction of three UKL units for nitric acid production with a total capacity of 405,000 tonnes per
year. The nationwide competition aims to foster a high-tech and competitive Russian chemical industry and related
industries, motivate companies to improve their workers’ professional skills and efficiency, and introduce innovations
and global best practices.
8
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Acron Group Website Wins Moscow Exchange Competition
Dorogobuzh Named Best Chemical Production Facility in
Smolensk Region
Automation Project at Plodorodie Agribusiness Holding Named Best
at Global CIO Project of the Year Competition
Acron won the award for Best Corporate Website Design and Navigation as part of the Moscow Exchange annual
report competition.
Dorogobuzh was ranked first among Smolensk region’s chemical production companies in the category Best
Group of Chemical Production Facilities. Fifty-eight companies based in Smolensk region were rated, and 18
industrial companies won prizes. This is the regional contest’s eighth year, and each year Dorogobuzh has
consistently been rated as one of the top three chemical production leaders in the region.
A complex automation project undertaken by Plodorodie Agribusiness Holding won the Global CIO award for
best IT project in the agricultural industry. The project, aimed at streamlining cooperation between Plodorodie’s
production sites, was implemented by the agribusiness holding’s units.
Acron Educational Project Wins Third Prize
at Graduate Awards Contest
Acron took the bronze medal at the Graduate Awards-2020, the fifth national contest for projects that benefit
graduates and young specialists.
The Group presented a project called Our Hope that aims at enhancing the popularity of chemical industry
professions among local students. The project was submitted to the category Contribution to the Future.
9
NWPC
Kirovsk, Murmansk region, Russia
VPC
Berezniki, Perm Krai, Russia
North Atlantic Potash Inc.
Saskatchewan, Canada
MINING
1
2
3
Read more on page 36
Business Geography
8
9
10
11
DISTRIBUTION
Agronova
Russia
Beijing Yong Sheng
Feng AMPC, Ltd
China
Acron Switzerland AG
Switzerland
Acron USA Inc.
United States
Acron France SAS
France
Acron Brasil Ltda
Brazil
Acron Argentina S.R.L.
Argentina
12
13
14
Read more on page 47
With two large chemical production
facilities, phosphate mining operations,
a potash deposit in progress, transportation
infrastructure, and an international
distribution network, the Group leverages
vertical integration as a platform for
dynamic development.
3
11
12 10
13
14
10
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
CHEMICAL PRODUCTION
Acron
Dorogobuzh
Dorogobuzh, Smolensk region, Russia
6
7
Read more on page 40
LOGISTICS
AS DBT
Muuga and Sillamäe, Estonia
Andrex
Kaliningrad, Russia
4
5
Read more on page 46
5
4
1
8
9
2
7
6
Sales volume in 2020
7.8 mn t
Revenue in 2020
USD 1.7 bn
11,429 11,429
employees
11
(key segment)
Priority Business Areas
and Business Model
CHEMICAL
PRODUCTION
Phosphates
NWPC —
Oleniy Ruchey mine
Murmansk region, Russia
Potash
(Ongoing projects)
VPC, Talitsky mine
Perm Krai, Russia
North Atlantic Potash Inc. (NAP)
Potash deposits
in Saskatchewan, Canada
AIM
Provide the Group’s chemical production facilities with
feedstock and enhance the Group’s competitive edge
The Oleniy Ruchey mine provides all the phosphate
feedstock for the Group’s chemical production facilities.
It also ships apatite concentrate to third-party consumers.
The Group is among the top three companies in Europe by
phosphate capacity. A capacity expansion project is currently
underway at the Oleniy Ruchey mine.
Acron Group is also implementing potash projects to secure
potash feedstock for the Group’s production facilities.
In 2018, the Group resumed active construction of the Talitsky
mine.
The Group plans to develop potash deposits in
Saskatchewan, Canada.
Nitrogen and Complex
Mineral Fertilisers,
Industrial Products
Acron
Veliky Novgorod, Russia
Dorogobuzh
Smolensk region, Russia
AIM
Maintain high performance at existing production
facilities, develop new capacity and implement new
complex fertiliser brands
The Group’s two large chemical facilities produce a wide
range of complex and nitrogen mineral fertilisers based on
in-house ammonia production.
The Group expands its chemical production capacity
annually, constructing new units and upgrading existing
facilities.
BROAD PRODUCT PORTFOLIO
Our highly diversified product portfolio allows us
to adapt to the market’s needs.
VERTICAL INTEGRATION
Vertical integration helps us accumulate added value at
all stages, from feedstock mining to product delivery to
end customers.
(key segment)
MINING
12
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
LOGISTICS
Sea Port Terminals
AS DBT, two port terminals
Estonia
Andrex
Russia
AIM
Facilitate smooth and efficient
operation of the Group’s facilities
The Group’s logistics infrastructure
comprises three Baltic Sea port
terminals and a rail car and tank fleet,
which ship final product and feedstock
supplies for the Group's facilities.
Handling cargo for third-party
producers improves the profitability of
this segment.
Russia
Agronova
China
Beijing Yong Sheng Feng
AMPC, Ltd
United States
Acron USA Inc.
AIM
Strengthen the Group’s position in key sales markets and make
advances in promising new markets
Extensive distribution networks in Russia and China and trading
companies in Europe and the United States provide the Group with
market diversification and 100% product sales.
The Group holds leading market positions in its segments in Russia,
Brazil, the United States, China, and Thailand.
The Group continues its geographic expansion by creating warehouse
capacity and distribution channels in key markets.
DIVERSIFICATION OF
SALES MARKETS
We are constantly assessing business
opportunities in the most rapidly
emerging and largest markets.
Objective
Create sustainable value
and stable dividend flow
(auxiliary segment) (auxiliary segment)
DISTRIBUTION
Europe
Acron Switzerland AG
Acron France SAS
Latin America
Acron Brasil Ltda.
Acron Argentina S.R.L.
13
14
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Letter from
the Chairman of
the Board of Directors
In the reporting period, Acron Group’s
financial results improved each quarter,
supported by sales volume, a weaker
rouble, and price recovery. Eventually,
due to the Group’s weak performance
in H1 2020, total revenue decreased 6%
to USD 1,661 million, EBITDA was down
11% to USD 489 million at 29% EBITDA
margin. Net profit was USD 53 million,
down from USD 383 million year-on-
year. This decline in profit was mainly
due to non-monetary factors, including
a foreign exchange loss.
countries, which helped our
facilities continue production and
operate stably after taking the
necessary measures to protect our
employees’ health.
In 2020, the Group’s sales volume
continued to increase, reaching
7.8 million tonnes, supported by
existing production potential. We
sold our products to 74 countries.
Sales in Russia were up 43%, and
sales to Brazil were up 25%.
The past year was a true ordeal
for the whole world as the COVID-
19 pandemic brought disease,
lockdowns, and volatility on stock
and commodity exchanges.
For Acron Group, the situation was
compounded by global mineral
fertiliser prices approaching
a long-term record-low level.
However, agriculture and related
industries were given top
priority in Russia and in most
DEAR SHAREHOLDERS,
15
Alexander Popov
Chairman of Acron’s Board of
Directors
The Group’s debt burden grew in
2020, so we took measures to save
and cut capex. Its actual amount
was USD 249 million against the
scheduled USD 300 million. By the
end of 2020, dollar-denominated net
debt/EBITDA was 2.8.
We follow a strategy of continual
performance improvement and pursue
our investment programme even
in an environment of cost-saving
measures. We commissioned three
new production lines in the nitrogen
sector and established a pool of highly
effective projects to be implemented
at our chemical production facilities in
the coming years.
The COVID-19 pandemic affected
progress on the Group’s major
investment project to construct
the Talitsky mine. Because of the
uncertainty caused by the COVID-
19 crisis, we had to postpone the
execution of the project financing deal
but the project is still moving forward:
in 2020 we independently completed
the construction of both vertical shafts
and plan to resume raising project
financing in the near future.
In the reporting year, the potash
project saw its shareholder structure
change. VTB Group and Otkritie
Asset Management Ltd. (Otkritie
Bank) acquired 10% and 10.1% of
the project’s shares, respectively.
Sberbank Investments LLC reduced
its share in the project to 29.9% from
39.9% and extended the term of
participation to seven years. Acron
Group retained 50% plus one share
in the project. We believe that
the participation and support of
powerful financial institutions will
help us optimise the structure and
cost of project financing.
In early 2021, the global mineral
fertiliser market saw prices recover
rapidly from multi-year lows amid
very strong demand in Europe and
the United States. Supplies to the
Russian market have been increasing
by double-digit rates as well.
The FOB Baltics price for urea, the
most popular nitrogen fertiliser
in the world, increased to USD
350 from USD 250 in Q1 2021.
Prices are expected to remain
strong, supported by the start of
the season when India and Brazil
purchase urea, limited tonnage of
urea available for export from China,
further growth in global natural
gas prices, and record-high grain
prices; however, the end of the high
season in Europe and the United
States and expansion of Chinese
exports may cause an excess of
supply on the market.
With these factors in mind, Acron
Group remains cautiously optimistic
and focused on controlling its debt
burden.
In the reporting year, the Group
increased its quasi-treasury stock
portfolio by purchasing 4.1% of its
own shares on the open market for
USD 131 million.
In 2020, the Group’s sales volume continued to increase, reaching
7.8 million tonnes, supported by existing production potential.
We sold our products to
74 countries. Sales in Russia were up
43%, and sales to Brazil were up 25%.
In line with the interests of our
shareholders, Acron Group remains
committed to a stable dividend
pay-out, with a total of USD 228
million allocated as dividends
in 2020, which is in line with our
historical dividends and our goal of
paying out at least USD 200 million
per calendar year in dividends.
16
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Letter from
the Chief Executive
Officer and President
DEAR SHAREHOLDERS,
COLLEAGUES, AND PARTNERS,
In 2020, Acron’s production facility
in Veliky Novgorod completed three
investment projects: construction of
nitric acid unit with capacity of 135,000
tonnes per annum, construction of a
urea granulation unit with capacity
of 700,000 tonnes per annum, and
upgrades to the Ammonia-4 unit,
increasing its capacity by 90,000
tonnes per annum.
I would like to note that 2020 was a
milestone in the Group’s history: we
launched a new product, granulated
urea, which is highly popular across the
globe. The unit was commissioned in
May 2020 and since then has produced
261,000 tonnes of granulated urea.
mineral fertiliser sector. Our plants
worked continuously and, after a
short breathing space in 2019, Acron
Group posted a new production
record in 2020 – our commercial
output increased 7% to almost 8
million tonnes.
Dorogobuzh, which celebrated its
55th anniversary in 2020, was the
largest contributor to this increase.
In late 2019, the Company completed
upgrades to the ammonia unit,
which helped expand output of
all ammonia-based products.
Dorogobuzh marked its anniversary
by posting a record-high commercial
output of 2,179,000 tonnes.
The COVID-19 pandemic has affected
nearly everyone on our planet. As
the situation unfolded, Acron Group
established a coronavirus emergency
centre. All of our employees were
given personal protective equipment,
and office staff started working
remotely. Our production facilities
continued operations with measures
in place to protect against the virus.
These timely measures and our
employees’ strict compliance with
them helped prevent the spread of
infection at the Group’s production
facilities.
Lockdowns around the world had
a minimal effect on agriculture and
17
Vladimir Kunitsky
Acron’s CEO and President
We have more plans to expand urea
production. The Urea-6+ project
is well underway and once it is
complete, Acron’s aggregate urea
output will increase to 2 million
tonnes from 1.5 million tonnes. The
unit’s launch is scheduled for Q2 2021.
We are absolutely certain that Acron
Group’s output will continue to grow
and expect it to reach 8.4 million
tonnes of commercial products in 2021.
In terms of sales, in 2020, we managed
to adapt to the market’s new needs,
with the urea granulation unit providing
better flexibility. As UAN became less
profitable, we shifted to dry nitrogen
fertiliser output. Russia and Brazil
boosted the overall demand in 2020. In
response to a strong demand, our sales
to the Russian market increased to 2.1
million tonnes from 1.5 million tonnes,
including record-high sales of fertilisers
exceeding 1.3 million tonnes, and sales
to Brazil increased to 1.5 million tonnes
from 1.2 million tonnes.
We are continually improving the
quality of our products and expanding
our product portfolio. The Group
conducts large-scale field tests of
its fertilisers on a regular basis. In
2020, together with our partners, we
carried out field tests in Russia to
develop techniques for growing high-
quality durum wheat, researched
the effectiveness of specialised
NPK brands in coffee production in
Colombia, and organised field tests
for NPK application in vegetable
farming in Vietnam. All these efforts
delivered immediate results. In 2020,
in addition to traditional brands NPK
16:16:16 and NPK 15:15:15, we sold a
total of 410,000 tonnes of over 20
other NPK brands.
In 2020, NWPC celebrated its 15th
anniversary. The Company is growing
and developing, and construction
of the Oleniy Ruchey mine is
underway. In the reporting year, we
brought on stream crushing and
conveyor complex No. 1, and ore
output increased by a factor of 1.8
to 1.4 million tonnes. Open-pit ore
extraction volume was 4.2 million
tonnes. Total apatite concentrate
output increased 9% year-on-year to
1,182,000 tonnes, meeting all demand
at the Group’s Novgorod-based Acron
and Dorogobuzh production facilities,
while 287,000 tonnes of surplus
apatite concentrate were sold on
the market. Taking into account the
potential capacity of the open pit and
underground mine, we expect that
by 2023 apatite concentrate output
will increase to 1.5 million tonnes per
annum, with possible further expansion
to 2 million tonnes per annum.
In line with our strategy of focusing
on relatively small but highly effective
projects, we started implementing
three other projects designed to
further increase the Group’s output
in the coming years. Construction of
a nitric acid unit and expansion of
AN capacity by 180,000 tonnes per
annum are underway at Dorogobuzh.
Novgorod-based Acron is building
a calcium nitrate unit with capacity
of 100,000 tonnes per annum and
upgrading its Ammonia-3 unit to
increase capacity by 200,000 tonnes
per annum. The commissioning of
these three projects is scheduled for
2021, 2022, and 2023 respectively.
In total, Acron Group’s consolidated
scheduled capex for 2021 is USD 210
million.
The Group continues to introduce
digital technology at its chemical
production facilities, including the
Mobile Inspector application for the
repair and maintenance teams, which
helps detect defects at early stages,
contributing to operational stability
and production volume. Additionally,
in 2020 we introduced a consolidated
e-trading platform, which automates
procurement procedures and collects
commercial proposals from suppliers.
In 2020, the Timiryazev Russian
State Agrarian University opened its
Acron Classroom to train agricultural
specialists. Students attend lectures
on mineral fertiliser application,
ways to improve the effectiveness
of complex fertilisers, and Acron’s
advanced solutions for developing
new brands and reducing the
environmental impact of agriculture.
They also study the best practices
of Plodorodie Agribusiness Holding
in using agricultural technology,
including precision agriculture, and
introducing digital solutions to
optimise agricultural processes.
People are the key to success at
any company. Acron Group employs
11,000 enthusiastic and committed
specialists. On behalf of the Group, I
would like to thank all our employees
for their diligent work and responsible
behaviour during the pandemic.
Acron Group has made significant
investments in social projects in
its footprint regions, for example, a
modern geriatric centre at the War
Veterans Hospital in Veliky Novgorod.
In 2020, Acron Group allocated
RUB 2.3 billion to environmental
protection, occupational health
and safety, support for its footprint
regions, and social programmes for
employees. I have seen that these
investments always pay off. In
2020, Acron Group was voted one of
Russia’s top 100 employers among
large companies at the respected
HeadHunter online portal.
MINERAL
FERTILISER
MARKET
• In 2020, global
consumption of mineral
fertilisers continued to
rise.
• India, the United States,
and Brazil increased
their consumption the
most.
• Russian growers also
placed stronger orders
for mineral fertilisers.
Mn t 2019 2020 Change
Nitrogen, N 105.1 107.3 2.0%
Phosphate, P
2
O
5
46.3 47.8 3.2%
Potash, K
2
O 35.8 36.4 1.6%
Total 187.2 191.4 2.2%
Global Mineral Fertiliser Consumption
In 2020, global mineral fertiliser
consumption continued its upward
trend despite the coronavirus
pandemic. This was made possible
by government support for farmers
in many countries, which included
measures to ensure uninterrupted
supply of mineral fertilisers. India
and the United States increased
their consumption the most due to
favourable weather conditions. Brazil
also saw significant growth in mineral
fertiliser consumption caused by a
weaker local currency, which gave
a boost to Brazilian growers, whose
business is mostly export-oriented.
In contrast, Indonesia and Malaysia
reduced their mineral fertiliser
consumption in response to lower
palm oil prices.
According to the International
Fertilizer Association (IFA), global
mineral fertiliser consumption in
2020 rose 2.2% to 191.4 million tonnes
in terms of nutrients. Consumption of
phosphate fertilisers saw the biggest
gains (up 3.2%). Consumption of
nitrogen fertilisers increased 2.0%,
while potash fertiliser consumption
was up 1.6%.
In 2020, mineral fertiliser
consumption in Russia continued
to rise due to advances in the
agricultural sector. Over the year,
Russian growers purchased 4.0
million tonnes of mineral fertilisers
in terms of nutrients, up 0.5 million
tonnes year-on-year.
Mineral Fertiliser Market
Overview
Source: IFA estimates, November 2020
Strategic Report
18
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Source: IFA estimates, November 2020
Global Mineral Fertiliser
Consumption, in terms of
nutrients
a
d
e
a 56 Nitrogen
d 25 Phosphorus
e 19 Potassium
Mineral Fertilisers Supplied
to Russian Growers, mn t of
nutrients
Source: Russian Ministry of Agriculture
2019
2017
2016
2015
2018
4.0
3.5
3.2
3.0
2.8
2.5
2020
USD/t,
FOB Baltics/Black Sea
Average price
Change
Year-end price
Change
2019 2020 2019 2020
Urea 240 222 –8% 208 240 15%
DAP 346 306 –12% 265 368 39%
Potash 264 211 –20% 234 210 –10%
NPK 16:16:16 296 256 –14% 260 270 4%
Indicative Prices
Sources: IHS Markit, Argus Media
In H1 2020, global mineral fertiliser
prices remained low following their
decline in 2019. However, H2 2020 saw
a recovery backed by a global rise in
prices for agricultural products, metals,
oil, and gas. At the same time, average
prices in 2020 were below their 2019
levels across all market segments.
Mn t 2020 2021F Change
Nitrogen, N 107.3 109.1 1.7%
Phosphate, P₂O₅ 47.8 48.8 2.1%
Potash, K₂O 36.4 36.9 1.6%
Total 191.4 194.8 1.8%
Global Mineral Fertiliser Consumption
Source: IFA estimates, November 2020
According to IFA forecasts, total global
mineral fertiliser consumption in
2021 will be up 1.8 % to 194.8 million
tonnes in terms of nutrients. Nitrogen
fertiliser consumption will rise 1.7%,
with phosphate and potash fertiliser
consumption also showing growth (up
2.1% and 1.6% respectively).
2020 total
191.4 mn t
19
NITROGEN
SEGMENT
• 2020 saw a rise
in global urea
consumption.
• Imports to Brazil
increased significantly.
• Strong urea demand in
a number of countries
and higher global gas
prices fuelled a price
recovery in H2 2020.
Mn t 2019 2020 Change
India 11.2 11.2 0%
Brazil 5.6 7.1 28%
Urea Imports to Key Countries
Urea Exports from China, mn t
Source: CFMW
Source: Argus Media
Urea Prices
Source: IHS Markit
150
200
250
300
USD per t FOB Baltics
Jan 2019
Feb 2019
Mar 2019
Apr 2019
May 2019
Jun 2019
Jul 2019
Aug 2019
Sep 2019
Oct 2019
Nov 2019
Dec 2019
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
Source: IFA estimates, November 2020
Effective capacity, mt t
Consumption, mt t
Potential surplus
Urea Market Balance
185
197
181
190
186
183
184
2021
178
174
171
2020
2019
2018
2017
7%
5%
4%
5%
6%
2020
5.5
4.9
2.5
2019
2018
According to IFA estimates, global
consumption of urea, the main
nitrogen fertiliser, was up 1.7% to
181.3 million tonnes in 2020, with
India, the United States, and Latin
America demonstrating the greatest
growth in demand. Urea output
increased 2.8% to 181.7 million
significantly, while imports to India
were also high, holding the record
reached the previous year.
In H1 2020, global urea prices showed
a weak dynamic after their decline in
2019, recovering only in H2 2020. The
recovery was driven by high demand
tonnes. India, the United States, and
African countries saw the largest
output growth. Production also
increased in China, Ukraine, and
Indonesia, all of which posted higher
exports. In 2020, global trade in urea
was 52.2 million tonnes, up 3.4%
year-on-year. Imports to Brazil rose
20
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Mn t 2019 2020 Change
India 5.9 6.5 10%
Brazil 4.2 5.2 24%
DAP and MAP Imports to Key Countries
Source: Argus Media
Source: CFMW
Exports from China, mn t
2020
2019
2018
5.7 2.5
7.5 2.5 1.1
6.5 2.4 1.2
0.9
In 2020, global consumption of
phosphate fertilisers continued
to grow, while output of the main
phosphate fertilisers (DAP, MAP, and
TSP) was down 0.5% to 68 million
tonnes, according to IFA estimates.
China posted the most significant
cutback in production, as it shut
down several facilities in early 2020
due to quarantine measures. Output
continued to increase in Morocco
and Saudi Arabia. Global trade in
phosphate fertilisers was also on the
rise, driven by growing consumption.
Imports to India and Brazil increased
the most, while Turkey reduced its
imports, having ramped up domestic
production.
In 2020, global phosphate fertiliser
prices experienced a recovery trend
following their decline in 2019. This
was due to several factors: strong
demand, especially in India, the
United States, and Brazil; curtailed
US output in early 2020, and reduced
exports from China; and discussions
in the United States on imposing
countervailing duties on phosphate
fertilisers from Morocco and Russia,
which led to a change in trade flows
and, as a result, a supply shortage
in some markets. Production costs
increased by year-end, driven
by higher prices for sulphur and
ammonia, both used as feedstock for
phosphate fertiliser production.
Effective phosphoric acid capacity
was up 1.4% (0.7 million tonnes of
P
2
O
5
) in 2020 to 50.7 million tonnes
of P
2
O
5
, according to IFA estimates.
Global consumption rose 2.8% to 48.3
million tonnes of P
2
O
5
, decreasing the
potential surplus to 5% from 6% in
2019.
According to IFA estimates,
phosphoric acid effective capacity will
go up 1.0% (0.5 million tonnes of P₂O₅)
to 51.2 million tonnes of P₂O₅ in 2021.
Consumption is expected to rise 2.1%
to 49.3 million tonnes of P₂O₅, while
the potential surplus will be down
to 4%. The supply/demand balance
indicates the fundamental strength
of this market, but the largest
manufacturers have the potential
to rapidly increase their output and
exports.
DAP MAP TSP
seen mostly in India, Brazil, and the
United States, with additional support
generated by an increase in global
gas prices in H2 2020, which resulted
in higher urea production costs in a
number of countries.
In 2020, effective urea capacity was
up 2.2% (4.1 million tonnes) to 190.3
million tonnes, according to IFA
estimates, with the potential surplus
up to 5% from 4% in 2019.
According to IFA estimates, global
urea consumption will increase 2.3%
to 185.4 million tonnes in 2021, with
effective capacity growing 3.4%
(6.4 million tonnes) to 196.7 million
tonnes. India, Nigeria, and Russia are
the countries expected to ramp up
capacity. The potential surplus will rise
to 6%, and the urea market will remain
competitive due to these factors.
PHOSPHATE
SEGMENT
• 2020 saw a rise in
global phosphate
fertiliser consumption.
• Imports to India
and Brazil increased
significantly.
• Prices began to recover,
spurred by strong
demand in several
countries, discussions
on imposing
countervailing duties
in the United States,
and higher sulphur and
ammonia prices.
21
DAP Prices
Source: Argus Media
200
250
300
350
400
450
USD per t FOB Baltics
Jan 2019
Feb 2019
Mar 2019
Apr 2019
May 2019
Jun 2019
Jul 2019
Aug 2019
Sep 2019
Oct 2019
Nov 2019
Dec 2019
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
Source: IFA estimates, November 2020
Effective capacity, mn t of P
2
O
5
Consumption, mn t of P
2
O
5
Potential surplus
Phosphoric Acid Market Balance
2021
49
51
48
47
47
47
51
50
49
49
2020
2019
2018
2017
5%
5%
6%
5%
4%
POTASH SEGMENT
• 2020 saw an increase
in global potash
consumption.
• Imports were up mainly
to Brazil, the United
States, and India.
• Growing demand led to
price stabilisation.
Mn t 2019 2020
Production 66 67
Exports 49 51
Potash
Source: IFA estimates, November 2020
Potash Prices
Source: Argus Media
175
200
225
250
275
300
USD per t, spot FOB FSU ports
Jan 2019
Feb 2019
Mar 2019
Apr 2019
May 2019
Jun 2019
Jul 2019
Aug 2019
Sep 2019
Oct 2019
Nov 2019
Dec 2019
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
In 2020, globl potsh production
ws up 0.9% to 67 million tonnes,
ccording to IFA estimtes. Higher
output ws minly seen in Cnd
nd Russi, both of which incresed
exports. Globl potsh sles volume
ws up 5.8% to 51.4 million tonnes.
Imports incresed to the United
Sttes nd Indi, but even more so
to Brzil, which sw rpid growth in
consumption (still ongoing).
Wekened in 2019, globl potsh prices
stbilised in 2020. While supported
by growing demand, prices were held
back by increased production.
22
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
NPK 16:16:16 Prices
Source: Argus Media
200
250
300
350
USD per t, spot FOB FSU ports
Jan 2019
Feb 2019
Mar 2019
Apr 2019
May 2019
Jun 2019
Jul 2019
Aug 2019
Sep 2019
Oct 2019
Nov 2019
Dec 2019
Jan 2020
Feb 2020
Mar 2
020
Apr 2020
May 2
020
Jun 2020
Jul 2020
Aug 2
020
Sep 2
020
Oct 2020
Nov 2
020
Dec 2
020
Source: IFA estimates, November 2020
Effective capacity, mn t of K
2
O
Consumption, mn t of K
2
O
Potential surplus
Potassium Market Balance
2021
43
50
42
42
43
43
48
48
47
46
2020
2019
2018
2017
6%
13%
12%
7%
14%
COMPLEX
FERTILISERS
• NPK fertilisers are
increasingly popular
worldwide.
• Producers strive to
expand their range of
NPK brands.
• In 2020, prices stabilised
and started recovering
following basic basket
prices.
NPK is gaining popularity worldwide
because it is effective and easy to
store and apply. China is both the
largest producer and consumer of
NPK. In addition to its significant
domestic production, China imports
sizeable volumes of complex fertilisers
each year. Other Pacific Rim, Latin
American, and African countries are
boosting their NPK consumption, as
well. Complex fertilisers are invariably
popular in the CIS, where consumption
of straight phosphate and potash
fertilisers is traditionally low. Russia
is a leading NPK producer and the
world’s largest NPK exporter to Brazil,
Thailand, China, and other countries.
Over the past several years, brand
diversification has been a major
NPK market trend. Consumers
are increasingly demanding NPK
brands that are tailored to specific
soils, climates, and crops. Local
distributors in close proximity to
customers generally offer maximum
diversification and on-site blending
of specific NPK formulas, but even
producers of standard large-tonnage
NPK have been vigorously diversifying
their product portfolios. NPK blends
containing microelements and
water-soluble and controlled-release
products are increasingly popular.
NPK prices traditionally track the
prices of the basic products (urea,
DAP, and potash). In early 2020,
NPK prices stabilised after declining
throughout 2019 and started to recover
in late 2020, supported by positive
price dynamics in the nitrogen and
phosphate segments. The premium
over the basic basket remained flat at
approximately 20%.
In 2020, effective potassium capacity
was up 1.7% (0.8 million tonnes of
K₂O) to 48.4 million tonnes of K₂O,
according to IFA estimates. Global
consumption was up 1.2% to 42.1
million tonnes of K₂O. The potential
surplus increased to 13% from 12%
in 2019.
According to IFA estimates, effective
potassium capacity will be up
3.5% (1.7 million tonnes of K₂O)
to 50.1 million tonnes of K₂O, with
consumption increasing 1.7% to
42.9 million tonnes of K₂O in 2021.
The potential surplus will rise to
14%, with capacity increase mainly
observed in Russia and Belarus.
Therefore, there will be surplus
of supply in the market, but it will
be controlled by several major
producers.
23
In 2017, Acron Group presented
a revised Development Strategy
through 2025 that focuses on
maximum utilisation of existing
industrial potential. The new
development programme includes
several highly efficient projects at
Acron and Dorogobuzh with relatively
moderate capex and a short payback
period. The option of combining some
of the projects ensures investment
flexibility in future and allows the
Group to manage its debt burden. The
new strategy is consumer-focused
and provides for expanding the
product portfolio and developing the
distribution network.
In 2020, the Group completed the
shaft sinking for its strategic Talitsky
potash mining project. While project
financing was suspended due to
the COVID-19 pandemic and the
project schedule has been revised,
Acron Group remains committed to
the project because it will complete
the Group’s vertical integration
for all three key inputs – nitrogen,
phosphate and potash – making it
one of the most competitive NPK
producers in the world.
Development Strategy
and Prospects
Strategy element Key performance indicators Achievements in 2020 Next steps Risks
1
Improving production
performance by expanding
existing processing
capacity and constructing
new capacity; diversifying
product portfolio
• Implementing projects, commissioning new
production lines
• Capex budget
• Output volume
• Number of products
• Additional EBITDA for the Group
• In 2020, commercial output was up 7% to 8 mn t.
• The Group constructed a nitric acid unit and a urea
granulation unit and upgraded the Ammonia-4 unit, all
within budget.
• The Group launched a new granulated urea line, with
output reaching 261,000 t.
• In 2020, total capex was USD 249 mn, less than expected.
• EBITDA in 2020 was USD 489 mn, down 11% year-on-year.
• Changes were made to the investment programme to
approve new projects.
Investment Programme → p. 28 and Chemical Production → p. 40
• Implement projects under the
Development Strategy through 2025
• Introduce new complex fertiliser
brands
• Increase output of premium products
Investment Programme → p. 28 and Chemical
Production → p. 40
• Industry risks
• Operating risks
• Financial risks
• Social and
environmental risks
Risks and Risk Mitigation
Strategy → p. 63
2
Covering the increasing
feedstock needs of the
Group’s production facilities
through implementation of
mining projects, maintaining
business vertical integration
• Complying with licence provisions
• Self-sufficiency in major raw materials
• Completing project milestones
• Capex budget
• Additional EBITDA for the Group
PHOSPHATES
Oleniy Ruchey mine
In 2020, the mine produced 1.182 mn t of apatite
concentrate, up 9% year-on-year, providing all the
Group’s phosphate feedstock for NPK; 287,000 t were
sold to third-party consumers.
Mining/Phosphates → p. 36
POTASH
Talitsky mine
• In the reporting period, Acron Group completed shaft
sinking and decommissioned freezing holes. Construction
of a grout curtain is underway.
• The project schedule was revised due to the COVID-19
pandemic.
• The Group amended its engineering design for
development of potash reserves at the Talitsky area of the
Verkhnekamsk potassium-magnesium salt deposit. The
design was approved by Rosnedra’s Central Development
Commission for Mineral Resources, and mining is scheduled
to start in 2025.
Mining/Potash → p. 36
PHOSPHATES
Oleniy Ruchey mine
Continue constructing the
underground mine and expand
the processing plant’s capacity to
increase apatite concentrate output
Mining/Phosphates → p. 36
POTASH
Talitsky mine
• Continue project implementation
• Start production in 2025
• Look for co-investors and raise
project financing to implement the
project
Mining/Potash → p. 36
• Industry risks
• Operating risks
• Financial risks
• Social and
environmental risks
• Legal risks
Risks and Risk Mitigation
Strategy → p. 63
3
Ensuring sale of
increasing output through
development of distribution
segment
• Selling prices
• Sales volumes
• Sales markets
• Market penetration
• Creating stable distribution channels
• In 2020, the Group’s sales totalled 7.8 mn t, up 3% year-on-
year.
• The Group sold its products in 74 countries.
• Acron Group started selling a new product, granulated urea.
• Expand to high demand markets and
global premium markets
• Create new distribution routes
by establishing branch offices,
purchasing and renting warehouses,
and signing long-term agreements
with local distributors
• A feasibility study is underway to
establish several branches in Asia,
Latin America, and Africa
Distribution → p. 47
• Industry risks
Risks and Risk Mitigation
Strategy → p. 63
24
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Strategy element Key performance indicators Achievements in 2020 Next steps Risks
1
Improving production
performance by expanding
existing processing
capacity and constructing
new capacity; diversifying
product portfolio
• Implementing projects, commissioning new
production lines
• Capex budget
• Output volume
• Number of products
• Additional EBITDA for the Group
• In 2020, commercial output was up 7% to 8 mn t.
• The Group constructed a nitric acid unit and a urea
granulation unit and upgraded the Ammonia-4 unit, all
within budget.
• The Group launched a new granulated urea line, with
output reaching 261,000 t.
• In 2020, total capex was USD 249 mn, less than expected.
• EBITDA in 2020 was USD 489 mn, down 11% year-on-year.
• Changes were made to the investment programme to
approve new projects.
Investment Programme → p. 28 and Chemical Production → p. 40
• Implement projects under the
Development Strategy through 2025
• Introduce new complex fertiliser
brands
• Increase output of premium products
Investment Programme → p. 28 and Chemical
Production → p. 40
• Industry risks
• Operating risks
• Financial risks
• Social and
environmental risks
Risks and Risk Mitigation
Strategy → p. 63
2
Covering the increasing
feedstock needs of the
Group’s production facilities
through implementation of
mining projects, maintaining
business vertical integration
• Complying with licence provisions
• Self-sufficiency in major raw materials
• Completing project milestones
• Capex budget
• Additional EBITDA for the Group
PHOSPHATES
Oleniy Ruchey mine
In 2020, the mine produced 1.182 mn t of apatite
concentrate, up 9% year-on-year, providing all the
Group’s phosphate feedstock for NPK; 287,000 t were
sold to third-party consumers.
Mining/Phosphates → p. 36
POTASH
Talitsky mine
• In the reporting period, Acron Group completed shaft
sinking and decommissioned freezing holes. Construction
of a grout curtain is underway.
• The project schedule was revised due to the COVID-19
pandemic.
• The Group amended its engineering design for
development of potash reserves at the Talitsky area of the
Verkhnekamsk potassium-magnesium salt deposit. The
design was approved by Rosnedra’s Central Development
Commission for Mineral Resources, and mining is scheduled
to start in 2025.
Mining/Potash → p. 36
PHOSPHATES
Oleniy Ruchey mine
Continue constructing the
underground mine and expand
the processing plant’s capacity to
increase apatite concentrate output
Mining/Phosphates → p. 36
POTASH
Talitsky mine
• Continue project implementation
• Start production in 2025
• Look for co-investors and raise
project financing to implement the
project
Mining/Potash → p. 36
• Industry risks
• Operating risks
• Financial risks
• Social and
environmental risks
• Legal risks
Risks and Risk Mitigation
Strategy → p. 63
3
Ensuring sale of
increasing output through
development of distribution
segment
• Selling prices
• Sales volumes
• Sales markets
• Market penetration
• Creating stable distribution channels
• In 2020, the Group’s sales totalled 7.8 mn t, up 3% year-on-
year.
• The Group sold its products in 74 countries.
• Acron Group started selling a new product, granulated urea.
• Expand to high demand markets and
global premium markets
• Create new distribution routes
by establishing branch offices,
purchasing and renting warehouses,
and signing long-term agreements
with local distributors
• A feasibility study is underway to
establish several branches in Asia,
Latin America, and Africa
Distribution → p. 47
• Industry risks
Risks and Risk Mitigation
Strategy → p. 63
25
Strategy element Key performance indicators Achievements in 2020 Next steps Risks
4
Raising capital for the
investment programme;
securing the Group’s solid
financial standing
• Gross and net debt indices
• Net Debt/EBITDA
• Average interest rate
• Long-term debt ratio
• Credit ratings
• The Group’s total debt increased to USD 1,558 mn from USD
1,398 mn, and net debt increased to USD 1,348 mn from
USD 1,215 mn.
• Net Debt/EBITDA was 2.8 against 2.2 at the end of 2019
(expressed in USD).
• The Group’s long-term debt accounted for 68%, down from
85% year-on-year.
• As of 31 December 2020, the average interest rate on loans
and borrowings was 3.9%, against 4.9% in 2019.
• Moody’s and Fitch rating agencies affirmed Ba3 and BB–
credit ratings, respectively, and the outlook is Stable.
• Expert RA agency affirmed the ruA+ credit rating with
Stable Outlook.
Financial Overview → p. 55
• Not increase debt burden
• Improve credit ratings
• Reduce the average interest rate on
loans and borrowings
• Monetise portfolio investments and/
or non-core assets
• Secure sufficient liquidity
• Diversify risks for potash investment
projects by engaging strategic
partners and raising project financing
Financial Overview → p. 55
• Industry risks
• Financial risks
Risks and Risk Mitigation
Strategy → p. 63
5
Enhancing investment
appeal through
transparency and excellent
corporate governance
• Complying with corporate principles,
Russian laws, and the most significant
recommendations of Russian and international
best practices in corporate governance
• Ensuring clear distribution of responsibility
among the main management and supervision
bodies of the Group’s companies
• Paying dividends while maintaining a moderate
debt burden
• Increasing the Group’s capitalisation and stock
value
• In 2020, Acron Group paid dividends of RUB 16.4 bn.*
• The Group’s share price at the Moscow Exchange was up
24%; at the end of 2020, Acron’s capitalisation totalled USD
3.282 bn.
• Pay dividends while maintaining a
moderate debt burden
• Maintain and improve the corporate
governance system, align it with the
most recent recommendations of the
Corporate Governance Code
Corporate Governance → p. 78
• Legal risks
Risks and Risk Mitigation
Strategy → p. 63
6
Corporate and social
responsibility
• Personnel qualifications
• Industrial safety at the Group’s production
facilities
• Economic and social development in footprint
regions
• Healthy environment in footprint regions
• Five employees were named Honoured Chemist of the
Russian Federation.
• All employees at the Group’s production facilities complete
occupational and industrial safety courses annually.
• In 2020, 1,529 employees completed advanced training and
occupational retraining programmes.
• In late 2020, with Acron’s sponsorship, the War Veterans
Hospital in Veliky Novgorod opened a new, modern geriatric
centre.
• Acron Group was named among the top 100 largest Russian
employers by HeadHunter, a respected recruiting website.
The Group ranked 51
st
among companies employing over
5,000 people.
• In the reporting period, the Timiryazev Russian State
Agrarian University established the Acron Classroom,
where Acron will take part in training experts for Russian
agricultural industry and equip a state-of-the-art laboratory
and lecture hall for teaching future agronomists.
• Air emissions, pollutant effluents, and industrial waste were
within established limits.
• In all its footprint regions, the Group cooperates with local
authorities on social and economic matters and supports
socially significant projects. In 2020, Acron Group invested
a total of RUB 674 mn in regional social and economic
development.
Sustainability → p. 114
• Enhance the level of employee
qualifications
• Develop and introduce measures to
reduce air emissions and pollutant
effluents to open water, as well as
generation and storage of industrial
and consumer waste
Sustainability → p. 114
• Social and
environmental risks
Risks and Risk Mitigation
Strategy → p. 63
The Group anticipates that the new
Development Strategy will deliver
the following results by 2025:
• Increased capacity and output,
expanded product portfolio
• Higher efficiency due to processing
of surplus ammonia and apatite
concentrate
• Own potash production, complete
vertical integration
• Considerably advanced
distribution and enhanced
penetration in key markets
In 2020, Acron Group expanded
its product portfolio by
commissioning a unit to produce
granulated urea, which is in high
demand in the global market.
Sales in the reporting year
reached 179,000 tonnes, with key
markets in Latin America.
*Less dividends paid on shares held by subsidiaries (quasi-treasury shares)
26
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Strategy element Key performance indicators Achievements in 2020 Next steps Risks
4
Raising capital for the
investment programme;
securing the Group’s solid
financial standing
• Gross and net debt indices
• Net Debt/EBITDA
• Average interest rate
• Long-term debt ratio
• Credit ratings
• The Group’s total debt increased to USD 1,558 mn from USD
1,398 mn, and net debt increased to USD 1,348 mn from
USD 1,215 mn.
• Net Debt/EBITDA was 2.8 against 2.2 at the end of 2019
(expressed in USD).
• The Group’s long-term debt accounted for 68%, down from
85% year-on-year.
• As of 31 December 2020, the average interest rate on loans
and borrowings was 3.9%, against 4.9% in 2019.
• Moody’s and Fitch rating agencies affirmed Ba3 and BB–
credit ratings, respectively, and the outlook is Stable.
• Expert RA agency affirmed the ruA+ credit rating with
Stable Outlook.
Financial Overview → p. 55
• Not increase debt burden
• Improve credit ratings
• Reduce the average interest rate on
loans and borrowings
• Monetise portfolio investments and/
or non-core assets
• Secure sufficient liquidity
• Diversify risks for potash investment
projects by engaging strategic
partners and raising project financing
Financial Overview → p. 55
• Industry risks
• Financial risks
Risks and Risk Mitigation
Strategy → p. 63
5
Enhancing investment
appeal through
transparency and excellent
corporate governance
• Complying with corporate principles,
Russian laws, and the most significant
recommendations of Russian and international
best practices in corporate governance
• Ensuring clear distribution of responsibility
among the main management and supervision
bodies of the Group’s companies
• Paying dividends while maintaining a moderate
debt burden
• Increasing the Group’s capitalisation and stock
value
• In 2020, Acron Group paid dividends of RUB 16.4 bn.*
• The Group’s share price at the Moscow Exchange was up
24%; at the end of 2020, Acron’s capitalisation totalled USD
3.282 bn.
• Pay dividends while maintaining a
moderate debt burden
• Maintain and improve the corporate
governance system, align it with the
most recent recommendations of the
Corporate Governance Code
Corporate Governance → p. 78
• Legal risks
Risks and Risk Mitigation
Strategy → p. 63
6
Corporate and social
responsibility
• Personnel qualifications
• Industrial safety at the Group’s production
facilities
• Economic and social development in footprint
regions
• Healthy environment in footprint regions
• Five employees were named Honoured Chemist of the
Russian Federation.
• All employees at the Group’s production facilities complete
occupational and industrial safety courses annually.
• In 2020, 1,529 employees completed advanced training and
occupational retraining programmes.
• In late 2020, with Acron’s sponsorship, the War Veterans
Hospital in Veliky Novgorod opened a new, modern geriatric
centre.
• Acron Group was named among the top 100 largest Russian
employers by HeadHunter, a respected recruiting website.
The Group ranked 51
st
among companies employing over
5,000 people.
• In the reporting period, the Timiryazev Russian State
Agrarian University established the Acron Classroom,
where Acron will take part in training experts for Russian
agricultural industry and equip a state-of-the-art laboratory
and lecture hall for teaching future agronomists.
• Air emissions, pollutant effluents, and industrial waste were
within established limits.
• In all its footprint regions, the Group cooperates with local
authorities on social and economic matters and supports
socially significant projects. In 2020, Acron Group invested
a total of RUB 674 mn in regional social and economic
development.
Sustainability → p. 114
• Enhance the level of employee
qualifications
• Develop and introduce measures to
reduce air emissions and pollutant
effluents to open water, as well as
generation and storage of industrial
and consumer waste
Sustainability → p. 114
• Social and
environmental risks
Risks and Risk Mitigation
Strategy → p. 63
27
This approach will maximise
production potential from feedstock
processing (ammonia and apatite
concentrate) to end products. After the
programme is complete, end product
output is expected to grow to 9 million
tpa in 2025 from 6.5 million tpa in
2016. In 2020, commercial output was
already 8 million tonnes of product.
The Group reviews and updates the
list of projects annually.
In 2020, the Group successfully
implemented three major projects at
its site in Veliky Novgorod:
• Construction of three nitric acid units
and equipment upgrades at AN units
• Construction of a urea granulation
unit
• Capacity increase at the Ammonia-4
unit
In 2019, Acron Group launched the first
two nitric acid units and commissioned
the third 135,000-tpa unit in February
2020, ramping up total nitric acid
capacity by 405,000 tonnes. Nitric acid
is mainly used to produce nitrogen
and complex mineral fertilisers. By
launching these units, the Group
significantly increased its AN output.
Processing 405,000 tonnes of nitric
acid makes it possible to produce over
500,000 tonnes of nitrogen fertilisers by
increasing AN, NPK, and UAN output.
The construction of a 700,000-tpa urea
granulation unit allowed us to produce
a new, high-end granulated product,
enter new sales markets, and increase
total urea output. Equipment upgrades
at urea units 1-5 boosted existing annual
urea capacity by 100,000 tonnes.
Upgrades to the Ammonia-4 unit
increased its actual capacity by more
than 90,000 tpa (to 2,550 tpd), which
was more than the projected increase
of 70,000 tpa. This additional ammonia
will be used for further processing into
fertilisers.
Veliky Novgorod-based Acron continues
making comprehensive upgrades to
the Urea-6 unit (the Urea-6+ project),
which will ramp up urea capacity by
520,000 tpa. The unit is scheduled for
launch in Q2 2021. Currently underway
Investment Programme
are two other projects: construction
of a CN production unit, scheduled for
completion in 2022, and a capacity
increase at the Ammonia-3 unit,
scheduled for completion in 2023.
Project Production increase per year Investments, USD mn Status
ACRON VELIKY NOVGOROD
Completed projects
Increasing capacity of Urea-5 unit 50,000 t of urea
4 Commissioned in 2018
Building Urea-6 unit 210,000 t of urea 30 Commissioned in 2018
Building three nitric acid units, upgrading
equipment at AN unit
500,000 t of AN 58 Commissioned in 2019-2020
Building urea granulation unit 700,000 t of granulated urea 29 Commissioned in 2020
Upgrading Ammonia-4 unit to increase capacity 90,000 t of ammonia 34 Commissioned in 2020
Projects underway
Comprehensive upgrades to Urea-6 unit
(Urea-6+)
520,000 t of urea
81 To be commissioned in Q2 2021
Building CN production unit 100,000 t of CN 22
Design work underway
To be commissioned in 2022
Upgrading Ammonia-3 unit to increase capacity 200,000 t of ammonia 95
Design work underway
To be commissioned in 2023
Projects under consideration
Building methanol production unit 107,000 t of methanol
48 Design work underway
Upgrading Ammonia-2 unit to increase capacity 175,000 t of ammonia 95 Front-end engineering design underway
Upgrading urea units 1-4 to increase capacity
and building urea granulation unit
390,000 t of urea
700,000 t of granulated urea
92 Front-end engineering design underway
DOROGOBUZH
Completed projects
Upgrading ammonia unit to increase capacity 130,000 t of ammonia
75 Completed in 2019
Projects under consideration
Construction of nitric acid unit and equipment
upgrades at AN units
180,000 t of AN
23
Design work underway
To be commissioned in December 2021
PHOSPHATE FEEDSTOCK
AT THE OLENIY RUCHEY MINE*
Apatite concentrate output
growth to 1.5 mn t by 2023
with further increase to 2 mn t
200
In progress
Gradual increase of underground mining
POTASH FEEDSTOCK AT
THE TALITSKY MINE*
2 mn t of potassium chloride
capacity with further increase
to 2.6 mn t
1,400
In progress
Mining to start by 2025
* Projected future investments up to projects completion.
Key Projects in the Investment Programme
28
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Project Production increase per year Investments, USD mn Status
ACRON VELIKY NOVGOROD
Completed projects
Increasing capacity of Urea-5 unit 50,000 t of urea
4 Commissioned in 2018
Building Urea-6 unit 210,000 t of urea 30 Commissioned in 2018
Building three nitric acid units, upgrading
equipment at AN unit
500,000 t of AN 58 Commissioned in 2019-2020
Building urea granulation unit 700,000 t of granulated urea 29 Commissioned in 2020
Upgrading Ammonia-4 unit to increase capacity 90,000 t of ammonia 34 Commissioned in 2020
Projects underway
Comprehensive upgrades to Urea-6 unit
(Urea-6+)
520,000 t of urea
81 To be commissioned in Q2 2021
Building CN production unit 100,000 t of CN 22
Design work underway
To be commissioned in 2022
Upgrading Ammonia-3 unit to increase capacity 200,000 t of ammonia 95
Design work underway
To be commissioned in 2023
Projects under consideration
Building methanol production unit 107,000 t of methanol
48 Design work underway
Upgrading Ammonia-2 unit to increase capacity 175,000 t of ammonia 95 Front-end engineering design underway
Upgrading urea units 1-4 to increase capacity
and building urea granulation unit
390,000 t of urea
700,000 t of granulated urea
92 Front-end engineering design underway
DOROGOBUZH
Completed projects
Upgrading ammonia unit to increase capacity 130,000 t of ammonia
75 Completed in 2019
Projects under consideration
Construction of nitric acid unit and equipment
upgrades at AN units
180,000 t of AN
23
Design work underway
To be commissioned in December 2021
PHOSPHATE FEEDSTOCK
AT THE OLENIY RUCHEY MINE*
Apatite concentrate output
growth to 1.5 mn t by 2023
with further increase to 2 mn t
200
In progress
Gradual increase of underground mining
POTASH FEEDSTOCK AT
THE TALITSKY MINE*
2 mn t of potassium chloride
capacity with further increase
to 2.6 mn t
1,400
In progress
Mining to start by 2025
In 2017, the Group updated its Development
Strategy and established a long-term investment
programme to upgrade existing capacity and
create new production facilities and products at
Acron and Dorogobuzh through 2025.
In late 2019, Dorogobuzh completed
technically demanding upgrades
to its Ammonia-4 unit, increasing
the unit’s capacity by 130,000 tpa.
In 2020, this ammonia was used for
further processing, replacing ammonia
purchased from third-party companies
due to the shortage of in-house product
in previous years.
In 2020, Dorogobuzh decided to
construct a nitric acid unit and
make equipment upgrades at its AN
units, increasing ammonium nitrate
production by 180,000 tpa. Construction
is underway, with over 80% of the
foundations poured and the launch
scheduled for late 2021. The Group
decided to postpone an integrated
project to build a complex fertiliser
production facility (JSC Dorogobuzh
Phosphorus) and construction of the
CAN unit.
Feedstock projects continue to move
forward, with expansion of the Oleniy
Ruchey phosphate underground mine
and construction of the Talitsky potash
mine underway.
(For more information on feedstock projects, please
see the relevant sections of the Annual Report).
29
324,000 t
Sales of own products (AN, NPK, urea)
2,379,000 t
Sales of own products (AN, urea, NPK, UAN,
bulk blends)
932,000 t
Sales of own products (UAN, AN, urea, NPK,
bulk blends)
1
United States and Canada
2
Latin America
3
Africa
The United States is the Group’s
largest UAN market (61% of total UAN
sales volume in 2020). The Group
also sells third-party products in this
market.
Despite the commissioning of new
UAN facilities in the United States,
the Group’s position in the US market
remained strong (27% of total US UAN
imports in 2020) due to established
distribution channels and strong
relations with local distributors.
Sales in this region increased 27% year-on-
year, and the Group significantly boosted
its direct sales without involving third-party
retailers. Brazil is the Group’s largest export
sales market for urea (41% of total urea sales
volume in 2020) and the second largest
sales market for AN and NPK (31% of total
AN sales volume and 19% of total NPK sales
volume in 2020). Argentina is the Group’s
largest market in Latin America for UAN. By
developing its own distribution network, the
Group was able to ramp up its UAN sales to
Argentina to 86,000 tonnes.
The Group is committed to maintaining its
leading position in this region. In 2020, it
accounted for 65% of total Brazil AN imports
and for 17% of total Argentina UAN imports.
This region is an evolving sales market for
a wide variety of products. Morocco, Kenya,
Ghana, and Togo are the Group’s main
consumers in the region.
Fertiliser demand is on the rise in the
region because of the fast pace of
agricultural development, and there is
enormous potential for an increase in
fertiliser consumption. Acron Group plans
to increase its NPK sales in the region by
introducing new brands that are more
suitable for African soils and crops. In 2020,
the Group sold 104,000 tonnes of NPK to
Africa, up 15% year-on-year.
Sales Markets
1
2
3
4
5
5
7
6
8
9
In 2020, the Group sold its products to 74 countries.
11%
13%
20%
11%
4%
6%
2%
1%
32%
Note: Share in the Group’s revenue
30
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
4
Europe
898,000 t
Sales of own products (urea, NPK, bulk blends,
ammonia, AN, UAN, apatite concentrate,
industrial products)
604,000 t
Sales of own products (NPK)
315,000 t
Sales of own products (NPK)
2,114,000 t
Sales volume (ammonia, AN, NPK, urea,
industrial products)
134,000 t
Sales of own products (NPK, AN, industrial
products)
7
Asia
**
8
China
6
Russia
5
CIS
*
Europe is a stable market for a
wide variety of products. The major
consumers of the Group’s products
in the region are the Netherlands,
Finland, Lithuania, Norway, Estonia, and
the United Kingdom. Europe is a key
sales market for ammonia and apatite
concentrate.
The Group plans to increase its urea
sales following the commissioning of
a urea granulation unit and inspired
by higher demand for technical urea,
including for producing AdBlue. The
Group intends to further develop its NPK
sales in Eastern Europe and Turkey.
Thailand is the largest sales market for
the Group’s NPK in this region. India,
Vietnam, Indonesia, and Turkey are
also major importers of the Group’s
products in the region.
There are several large and mature
markets in this region that recently
dialled back their increases in fertiliser
consumption, as well as several
countries with high potential for
growth. The Group plans to maintain
its presence in key countries and ramp
up its sales in premium markets.
China is a stable sales market for the
Group’s NPK (15% of total NPK sales).
The Group holds a steady position in
this key market and sells its products
through its own distribution network
under the Acron brand, as well as
through third-party distributors. In
2020, the Group provided 23% of total
NPK imports to China.
China remains a key complex fertiliser
market, and the Group is committed to
maintaining its position there.
Russia is the Group’s largest AN and NPK
market (39% of total AN sales and 21% of
total NPK sales in 2020) and a key market for
industrial products.
Dynamic development in the country’s
agricultural sector is triggering a rapid
increase in fertiliser consumption. In 2020,
the Group’s domestic sales were up 43%.
Russia remains a priority market, and the
Group is committed to maintaining its
leading position there. In 2020, the Group
accounted for 19% of total NPK sales and for
18% of total AN sales in the Russian market.
Recent years have seen a decrease in
the Group’s sales in this region, but
it remains an important market for
the Group because of its extensive
agricultural sector and long history of
cooperation.
*
Excluding Russia
**
Excluding China
109,000 t
Sales of own products (UAN)
9
Australia
Australia is a promising market as the
Group seeks to diversify its current
markets and open new sales channels.
31
32
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Acron Group’s
Market Position
1.4% of global mineral fertiliser output
No.1
AN importer to Brazil
(65% of imports)
No.2
NPK importer to Brazil
(31% of imports)
No.2
NPK importer to China
(23% of imports)
No.2
UAN importer to the United
States (27% of imports)
No.2
AN and NPK supplier to
Russia (18% of imports)
Among Europe’s
top-3
NPK, UAN, and phosphate
feedstock producers
Among the world’s
top-10
NPK producers
33
Acron Group’s Unique
Competitive Advantages
• One of the world’s most competitive businesses due to extensive vertical
integration, encompassing segments from in-house feedstock production to
distribution of products to end consumers
Read more: Priority Business Areas and Business Model, Development Strategy and Prospects, Board of
Directors Report on Priority Operating Areas, Financial Overview
• Leadership in key sale markets supported by a diversified, high-quality product
portfolio and streamlined logistics
Read more: Acron Market Position, Sales Markets, Distribution
• Talented, highly skilled and motivated personnel with a positive history of
investment project implementation
Read more: Personnel, Board of Directors Report on Priority Operating Areas
• Room for further increases in output through maximum use of existing production
potential
Read more: Development Strategy and Prospects, Investment Programme
Board of Directors Report
on Priority Operating Areas
CHEMICAL
PRODUCTION
Simplified Process Flow
Aggregate production capacity of the Group’s facilities
Natural Gas
Apatite
Concentrate
(1.3 mn t)
Potash
NPK
(2.4 mn t*)
Urea
(1.5 mn t)
UAN
(1.7 mn t)
Ammonia
(2.9 mn t)
Nitric Acid
(3.1 mn t)
AN
(3.6 mn t** )
* NPK 16-16-16
** Including solution used to produce UAN
Read more on page 36
Share in Group’s assets
Read more on page 40
Share in Group’s assets
Read more on page 46
Share in Group’s assets
2020 Revenue by Product, %
a
b
c
d
e
f
g
a 48 Nitrogen fertilisers
b 36 Complex fertilisers
c 6 Non-organic compounds
d 3 Apatite concentrate
e 3 Organic compounds
f 1 Ammonia
g 3 Services and other goods
MINING LOGISTICS
46%
38%
3%
Major flows
Auxiliary flows
(conversion fluid)
Feedstock
Nitrogen mineral fertilisers
Complex mineral
fertilisers
Semi-finished products
34
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
DISTRIBUTION
PLODORODIE
AGRIBUSINESS
HOLDING
PORTFOLIO
INVESTMENTS
Acron Group’s business model is based on an effective chain of interconnected
segments, including mining, chemical production, logistics, and distribution.
Vertical integration allows the Group to control the value-added chain and
ensures business sustainability and competitive strength.
Commercial Output, ‘000 t* 2020 2019 2018
Ammonia 112 291 438
Nitrogen fertilisers 4,017 3,806 3,278
Complex fertilisers 2,319 1,989 2,475
Organic compounds 210 238 236
Non-organic compounds 1,035 841 824
Apatite concentrate 283 292 264
Total 7,976 7,458 7,514
Sales of Key Products, ’000 t* 2020 2019 2018
Ammonia 116 304 448
Nitrogen fertilisers 3,874 3,843 3,097
Complex fertilisers 2,271 2,098 2,473
Organic compounds 211 237 236
Non-organic compounds 1,048 797 799
Apatite concentrate 287 290 259
Total 7,807 7,569 7,312
*Excluding turnover inside the Group; industrial AN and industrial urea are accounted in non-
organic compounds
*Sales of own products (excluding sales of third-party products)
Read more on page 47
Share in Group’s assets
Read more on page 48
Share in Group’s assets
Read more on page 54
Share in Group’s assets
2020 Revenue by Region, %
a
b
c
d
e
f
g
h
a 32 Latin America
b 20 Russia
c 13 Europe
d 11 the U.S. and Canada
e 11 Asia (excl. China)
f 7 China
g 1 CIS (excl. Russia)
h 5 Africa and other
1% 3%
9%
35
MINING
Phosphates
Acron Group sources all of its
apatite concentrate, the high-quality
phosphate feedstock used by the
Group’s Russian facilities, from
NWPC, which operates the Oleniy
Ruchey mine in Murmansk region.
Oleniy Ruchey Deposit
Reserves
Apatite-nepheline ore balance
reserves under Russian standards
(as of 31 December 2020):
• Categories B+C1: 242.7 million
tonnes (
2
5
: 40.0 million tonnes)
• Category 2: 128.4 million tonnes
(
2
5
: 19.2 million tonnes)
Balance reserves are sufficient to
ensure the operation of NWPC for
57 years.
2020 Operating Results
In 2020, the Oleniy Ruchey mine
produced a total of 1,182,000 tonnes
of apatite concentrate, up 9% year-
on-year. Performance was down in
the first quarter due to scheduled
maintenance on the mill and drying
drum, but the mine ramped up output
for the rest of the year and hit a record
high in the fourth quarter. In 2021,
NWPC plans to produce 1.3 million
tonnes of apatite concentrate.
NWPC continued to construct
the mine in 2020: ore production
was up 80% to 1.4 million tonnes,
and P
2
O
5
grade was up 0.61
percentage points to 9.58%, which
is still fairly low at this stage of
the mine’s development. In 2020,
the Oleniy Ruchey mine met all
demand from the Group’s Russian
production facilities, providing them
with 900,000 tonnes of apatite
concentrate, and shipped 291,000
tonnes to third-party consumers
(against 287,000 tonnes in 2019).
In 2020, total output was 5,617,000
tonnes of apatite-nepheline ore, up
19.5% year-on-year. The average P
2
O
5
grade reached 10.4%. The Oleniy
Ruchey mine extracted 11 million
cubic metres of rock.
Work Completed and
Development Plans
In 2020, NWPC started building the
third flotation bank and the ball
centrifugal mill at the processing
plant. The underground mine saw
commissioning of the crushing and
conveying line.
The main fan and heating unit
is under construction at the
service shaft site. Once the unit is
commissioned, post-blast ventilation
times will be reduced.
NWPC switched from trucks to
railway for fuel oil deliveries. A new
diesel fuel warehouse is being built
at the boiler station, which will cut
the cost of diesel fuel transportation.
NWPC continued to reequip its
mining and auxiliary fleet, which
improved tunnelling and excavation
rates. In 2020, the mine received a
total of 22 pieces of equipment.
With both open-pit and underground
mining capacity operating, the mine
is expected to gradually bring apatite
concentrate output to 1.5 million
tonnes per annum by 2023, later
reaching 2 million tonnes per annum.
Potash
TALITSKY MINE
Acron Group subsidiary VPC
continued building a mining
and processing complex at the
Talitsky area of the Verkhnekamsk
potassium-magnesium salt deposit
in Perm Krai, one of the most
promising potash deposits globally.
Once this project is on stream, it
will complete Acron Group’s vertical
integration for all key inputs –
ammonia, phosphate and potash.
Talitsky Area Reserves
Balance sylvinite reserves according
to State Reserves Committee
(Rosnedra) (2012):
• Categories ++1: 726.1 million
tonnes of salts (
2
: 163 million
tonnes, KCl: 258 million tonnes)
JORC reserves (2016)
• Proven and probable: 190.7 million
tonnes of salts (KCl: 59.9 million
tonnes)
Project Highlights
• Deposit is favourable for
development due to its shallow
depth, advanced infrastructure,
and high grade of ore.
• Design capacity is 2 million tonnes
per annum of potassium chloride,
with further increase to 2.6 million
tonnes per annum.
36
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
• The project aims to meet the
Group’s demand for 600,000
tonnes per annum and to sell
excess potash in the market.
• Capex required to complete
the project (reaching 2 million
tonnes per annum in capacity) is
estimated at USD 1.4 billion. The
Group has already spent about
USD 300 million in capex, not
including the cost of the licence.
• The project timeline is established
by the approved technical design
for deposit development. In early
2021, a revised technical design
was approved, with ore production
starting in 2025 and the mine
reaching design capacity in 2028.
Key Results since Start of
the Project
Designing
• VPC obtained subsoil licence
02683 , designed the
project, and performed most of
the geological research on subsoil
resources at the East Talitsky area
of the Verkhnekamsk potassium-
magnesium salt deposit.
• VPC drafted design documentation
and obtained a positive finding
from Gosexpertiza (state expert
review) for all key facilities of
the mine, including the shafts,
underground mine, surface
facilities (processing unit and
auxiliary shops), external utility
facilities, and linear infrastructure.
• VPC finalised the working
documentation for construction of
vertical shafts, a number of surface
and mine facilities, external utility
facilities, and infrastructure (gas,
water, electric power supply,
motorway, and railway facilities).
• Working documentation for
construction of the processing
plant is underway.
• VPC took administrative and
technical measures to elaborate
technical solutions for increasing
capacity to 2.6 million tonnes of
finished product per annum.
Construction
Shafts
• In December 2020, VPC completed
sinking the skip and cage shafts,
and installed the permanent
combined cast-iron and concrete
lining. The cage shaft is 363 metres
deep and the skip shaft is 414
metres deep, both with a diameter
of 8 metres.
• VPC interconnected each shaft
with the ventilation and transport
levels, completed decommissioning
freezing holes, and is constructing
a grout curtain.
Industrial Site
• Construction is almost complete of
a haul road to the industrial site of
the Talitsky mine from the Kungur-
Solikamsk highway.
• VPC continued clearing the site and
moving utility facilities to make
way for permanent mine facilities.
• VPC is almost done with vertical
levelling for the residential and
mining administration facilities, and
the flotation processing plant.
• Hydrogeological and hydrological
monitoring of the Talitsky mine
facilities is underway.
In December 2020, VPC signed
an investment protection and
promotion agreement with the
Russian Ministry of Economic
Development and the Perm Krai
Ministry of Economic Development
and Investments.
2021 Development Plans
• Prepare shafts for armour lining,
armour 360 metres of the skip
shaft and 300 metres of the cage
shaft
• Start constructing fan and heating
channels for the vertical shafts
• Continue geological survey of
subsurface at the East Talitsky
area
• Complete the first stage of
construction of the haul road to
the industrial site of the Talitsky
mine from the Kungur-Solikamsk
highway
• Continue designing working
documentation for construction of
the Talitsky mine facilities
• Update engineering survey and
adjust design documentation for
the Talitsky mine facilities
• Equip the health post at the
Talitsky mine with electronic
system for automated health
monitoring of VPC workers.
Acron Group is continuing negotia-
tions with a pool of banks to raise
project financing. In December 2019,
the Supervisory Board of VEB.RF, the
anchor lender for the future transac-
tion, approved a syndicated financing
transaction for Acron Group’s Talitsky
project, but financing was put on
hold due to the COVID-19 pandemic.
The Group plans to resume raising
project financing in 2021.
37
POTASH ASSETS IN CANADA
North Atlantic Potash Inc. (NAP,
a member of Acron Group) and
CanPacific Potash Inc. (a joint
venture between NAP and Rio
Tinto, represented by Rio Tinto
Potash Management Inc.) hold nine
mining leases and one exploration
permit for mining property covering
approximately 1,960 square
kilometres at a potash deposit
in Saskatchewan, Canada. Acron
Group considers these holdings
to be a long-term investment
in its potash resource base. The
area is divided into two promising
clusters, including the Albany
project (six parcels in the south of
Saskatchewan) and the Foam Lake
project (four parcels in the northern
part of the exploration and mining
area in the province).
The available resource base provides
a wide range of investment options.
Both mid-scale and large-scale
projects may be implemented,
while geological structures allow
for a range of potash production
technology, from conventional
underground mining to solution
mining (borehole leaching).
Highlights
• In 2016, all permits were converted
into 21-year renewable mining
leases.
• Albany project (a joint
venture with Rio Tinto Potash
Management Inc.)
— In 2011, a joint venture
agreement was signed with
Rio Tinto Potash Management
Inc. for nine permits. In June
2014, the joint venture was
incorporated and all nine
Albany project permits were
transferred to it.
— In 2011-2013, an extensive
exploration programme
costing approximately USD
50 million was completed.
Based on the exploration
results, 1.4 billion tonnes of
salts (inferred resources)
with average KCl grade of
31% were recorded. In 2017,
resources were reclassified
from ‘Inferred’ to ‘Measured
and Indicated’ (1.07 billion
tonnes with average KCl
grade of 30.3%).
— In December 2017, the
Prefeasibility Study
commenced in 2016 was
completed. Following the
Prefeasibility Study findings,
the Group carried out
additional surveys focused
on ways to improve economic
performance of the project
through optimising the
process to reduce capex and
opex costs.
— In 2018, the NI 43-101
Technical Report covering
the Albany project mining
lease recorded 226.7 million
tonnes of KCl in recoverable
reserves (229.6 million tonnes
of equivalent MOP product),
including 22.9 million tonnes
in proven reserves and 203.8
million tonnes in probable
reserves.
— In December 2018, one potash
permit adjoining the proposed
Albany project production
site was acquired by tender
arranged by Saskatchewan
Government, which will cut
development, construction
and production costs.
— In January 2019, additional
exploration was done. Two
exploration wells were
successfully drilled: in
proximity to the proposed
project site and the recently
acquired potash permit. In
February 2020, based on
the additional exploration
findings including geological
data from the new permit,
an independent professional
geologist revised the NI
43-101 Technical Report:
the recoverable reserves
totalled 793.4 million tonnes
of KCl (803.1 million tonnes
of equivalent MOP product),
including 77.6 million tonnes
in proven and 715.9 million
tonnes in probable reserves,
which is sufficient to support
more than 200 years of
mine operation at a steady
production at a potential rate
of 3.25 million tonnes per
annum.
— In September 2019, following
the examination of and public
meetings and comments on
the Environmental Impact
Study, the Saskatchewan
Government issued a
conditional approval for the
project.
The Albany project lots cover
approximately 1,350 square
kilometres. The volume of reserves,
KCL concentration, formation
temperature, and location make
this project one of the world’s best
solution mining prospects.
• Foam Lake project
— In late 2012, resources were
valuated according to NI
43-101 standards based on
the exploration programme
findings and 942 million
tonnes of potash salts
38
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
(indicated and inferred
resources) at a depth of
1,000 to 1,100 metres with
average KCl grade of 30%
were recorded. Recoverable
KCl resources are estimated
at 89 million tonnes. The cost
of geological research was
approximately USD 15 million.
The project covers a cluster of four
leases in the northern part of the
province’s potash exploration and
mining zone, with a total area of
600 square kilometres. The cluster
is suitable for constructing a
conventional potash mining facility.
• Stockholm project
— A short exploration pro-
gramme was completed in
2012. The exploration drill
hole showed very high KCl
content: 34-45% at a depth of
1,100 to 1,200 metres.
— The project was sold in 2020.
The principal strategy for this asset
is to consider the prospects for
each lease and choose the most
convenient option: either working
with investors on joint ventures to
further develop leases or selling the
leases.
39
CHEMICAL PRODUCTION
Nitrogen Fertilisers
Operating Results
• Ammonia output hit a record
high of 2,729,000 tonnes (up 6%
year-on-year) following upgrades
to Dorogobuzh’s ammonia unit in
late 2019.
• Commercial nitrogen fertiliser
output also reached a record high
of 4,017,000 tonnes (up 6% year-
on-year), powered by higher AN
production at both Acron (Veliky
Novgorod) and Dorogobuzh.
Development Plans
• Complete comprehensive upgrade
of urea unit 6 to boost its capacity
by over 500,000 tonnes per annum,
and gradually upgrade urea units 1
to 4
• Upgrade ammonia unit 3 to increase
its capacity by 200,000 tonnes per
annum at Acron (Veliky Novgorod)
• Construct nitric acid unit and revamp
ammonia nitrate units to increase AN
output by 180,000 tonnes per annum
at Dorogobuzh’s site
Ammonia Nitrogen fertilisers
AN Urea UAN Total for the
Group
Output
Acron 2,003 1,128 1,180 1,096 3,405
Dorogobuzh 726 1,302 – – 1,302
Total output 2,729 2,430 1,180 1,096 4,707
Incl. in-house
consumption
2,617 213 477 – 690
Total commercial output 112 2,217 703 1,096 4,017
Year-on-year –62% +44% +32% –37% +6%
Sales* 116 2,077 643 1,155 3,874
2020 Operating Results, ‘000 t
*Sales of own products (excluding sales of third-party products)
2020 Ammonia Production
in Russia by Producer, %
2020 Nitrogen Fertiliser Production
in Russia by Producer *, %
*In terms of nutrient
Source: Azotecon-Plus
a
b
c
d
e
f
g
h
a 21 Eurohem
b 16 Togliattiazot
c 15 URALCHEM
d 14 Acron
e 10 PhosAgro
f 9 SBU Azot
g 6 Minudobrenia (Rossosh)
h 9 Other
a 21 Eurohem
b 18 PhosAgro
c 17 Acron
d 16 URALCHEM
e 11 SBU Azot
f 5 KuibyshevAzot
g 4 Minudobrenia (Rossosh)
h 8 Other
• Construct calcium nitrate (CN) line
with capacity of 100,000 tonnes
per annum at Acron’s site
a
b
c
d
e
f
g
h
40
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
ACRON VELIKY NOVGOROD
In 2020, Acron:
• Commissioned a new nitric acid
unit with capacity of 135,000
tonnes per annum
• Upgraded the Ammonia-4 unit,
increasing its capacity by 90,000
tonnes per annum of ammonia
• Constructed a urea granulation
unit with capacity of 700,000
tonnes per annum
• Upgraded urea units 1 to 4
increasing capacity by 50,000
tonnes per annum.
Ammonia. In the reporting period,
Acron produced 2,003,000 tonnes
of ammonia, down 5% year-on-year
because of upgrades and scheduled
overhauls at the Ammonia-4 unit.
Average aggregate natural gas
consumption at the ammonia units
was down year-on-year to 1,032 m3
per tonne.
AN. In the reporting period, Acron
produced 1,427,000 tonnes of AN
(including 1,128,000 tonnes for
agriculture and 299,000 tonnes for
industrial purposes), up 28% year-
on-year following the launch of a
new nitric acid unit, which resulted in
higher output of the main feedstock,
nitric acid, and upgrades to the AN
units’ evaporators.
In-house consumption of AN was
213,000 tonnes (mainly for UAN).
Urea. In the reporting year, urea
output was 1,320,000 tonnes
(including 1,180,000 tonnes for
agriculture and 140,000 tonnes for
industrial purposes), down 5% year-
on-year following shutdown and
reconstruction of urea units 1 to 4.
In 2020, Acron also put on stream a
urea granulation unit and produced
261,000 tonnes of this product.
Acron’s output of urea for industrial
purposes was up 6% year-on-year
to 140,000 tonnes, including 138,000
tonnes of extra-pure urea required
for the production of AdBlue solution.
In 2020, 477,000 tonnes of urea
were used internally (36% of
total output), mainly for UAN and
urea-formaldehyde resin (UFR)
production.
UAN. Urea and AN are the key
components for producing UAN. The
process flow at Veliky Novgorod is
able to use conversion fluid from the
NPK units as a partial replacement
for AN as a source of nitrate nitrogen.
This type of operations integration
improves the aggregate performance
of all the units. In the reporting year,
Acron decreased its UAN output 37%
to 1,096,000 tonnes due to changes
in the market environment that
motivated a shift in production to AN
and urea.
DOROGOBUZH
Ammonia. In 2020, Dorogobuzh’s
ammonia output was 726,000
tonnes, up 56%, or 261,000 tonnes,
year-on-year due to completion
of upgrades to the ammonia unit
in 2019, which helped increase
ammonia production capacity by
130,000 tonnes per annum and
reduce natural gas consumption
to 1,008 cubic metres per tonne
(down 9% year-on-year). All
of the facility’s ammonia was
allocated for further processing,
and additional 33,000 tonnes
of ammonia were purchased
from other producers. All of
the purchased ammonia was
processed at the facility.
AN. In 2020, AN output reached
a record high of 1,321,000 tonnes
(including 19,000 tonnes of
industrial AN), up 29% year-on-
year as a result of overhauls in
2019 and performance-improving
measures instituted in the
reporting year.
41
Complex Fertilisers
Operating Results
• In 2020, total commercial complex
fertiliser output, including NPK and
bulk blends, was 2,319,000 tonnes
(up 17% year-on-year)
• NPK output was 2,236,000 tonnes
(up 18% year-on-year)
• In the reporting period, the Group
added eight new brands of
complex fertilisers, bringing its
total to 23
Development Plans
• Upgrade two NPK units at Veliky
Novgorod site to increase output
by over 30,000 tonnes per annum
• In the long term: use only
internally-sourced potash
feedstock once the Talitsky mine is
commissioned
• Produce new NPK brands
depending on market needs
UAN Sales Geography
in 2020, %
Agricultural AN Sales
Geography in 2020, %
Agricultural Urea Sales
Geography in 2020, %
a 61 the U.S.
b 15 Canada
c 9 Australia
d 7 Argentina
e 3 Mexico
f 2 Russia
g 3 Other
a 41 Russia
b 37 South America
c 10 North America
d 6 Africa
e 3 CIS (excl. Russia)
f 2 Europe
g 1 Asia
a 49 South America
b 24 North America
c 17 Europe
d 8 Africa
e 2 Russia
Note: In terms of volume. Sales of own products (excluding sales of third-party products)
*Sales of own products (excluding sales of third-party products)
NPK Bulk blends Complex
fertilisers, total
for the Group
Output
Acron 1,494 136 1,629
Dorogobuzh 742 – 742
Total output 2,236 136 2,372
Incl. in-house
consumption
52 – 52
Total commercial output 2,184 136 2,319
Year-on-year +18% +2% +17%
Sales* 2,141 130 2,271
2020 Operating Results, ‘000 t
ACRON VELIKY NOVGOROD
In 2020, Acron produced 1,494,000
tonnes of NPK, up 7% year-on-year,
primarily due to a higher utilisation
rate than in 2019, when a temporary
reduction in the phosphate feedstock
supply (apatite concentrate from
the Oleniy Ruchey mine) adversely
affected output.
a
b
c
d
e
f
g
a
b
c
d
e
a
b
c
d
e
f
g
42
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
NPK Sales Geography, %
2020 Complex Fertiliser
Production in Russia
by Producer*, %
a
b
c
d
e
f
g
a
b
c
d
e
a 42 Asia
b 20 Russia
c 19 South America
d 8 Europe
e 5 North America
f 5 Africa
g 1 CIS (excl. Russia)
a 44 PhosAgro
b 24 Acron
c 12 URALCHEM
d 12 Minudobrenia (Rossosh)
e 8 Eurohem
In the reporting period, Acron:
• Launched a microelement additive
injection unit, conducted pilot tests
to produce brands with added
manganese(II) sulphate, boron and
iron
• Introduced a selective NPK
treatment with a special agent
delivering increased water
resistance
• Put on stream a new unit to treat
bulk blends with an anticaking
agent
• Continued implementing the project
to increase NPK 16:16:16 daily output
to 2,400 tonnes
To meet market demand, the facility
produced 410,000 tonnes of 20 other
brands (including NPK 23:10:5 S Mg Zn,
containing sulphur, manganese and
zinc), in addition to NPK 16:16:16 and
NPK 15:15:15.
In 2020, Acron continued expanding
its bulk blends production and posted
bulk blends output of 136,000 tonnes
(up 9% year-on-year).
DOROGOBUZH
In the reporting period, Dorogobuzh
produced 742,000 tonnes of NPK,
up 241,000 tonnes (48%) year-on-
year mainly due to a low base effect
compared to Q4 2019, when the
ammonia unit was offline for a lengthy
overhaul. Dorogobuzh did not produce
any bulk blends in 2020.
In 2020, the Veliky Novgorod and
Dorogobuzh facilities received all of
their apatite concentrate from the
Group’s NWPC.
* In terms of nutrients
Source: Azotecon-Plus
Note: In terms of volume. Sales of own
products (excluding sales of third-party
products)
43
Acron Dorogobuzh
Total
output
Commercial
products, total
YOY
Sales
Organic
compounds
423 210 –12% 211
Methanol 98 – 98 19 +25% 20
Formalin 151 – 151 20 +11% 20
UFRs 174 – 174 171 –16% 171
Non-organic
compounds
1,035 1,035 +23% 1,048
Low-density and
technical-grade AN
299 19 318 318 +68% 317
Industrial urea 140 – 140 140 +6% 153
Calcium carbonate 433 83 515 515 +11% 515
Liquid carbon dioxide 22 33 55 55 +16% 55
Argon 7 – 7 7 –5% 7
Industrial Products
2020 Operating Results, ‘000 t
44
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
ACRON VELIKY NOVGOROD
In 2020, Acron’s methanol and
formalin output was 98,000 tonnes
and 151,000 tonnes respectively, down
8% and 13% year-on-year respectively.
In the reporting period, Acron took
measures to improve process safety
at the formalin and UFR shops by
reducing the response time of the
safety instrumented system. The gas
compressor at the methanol shop
was upgraded.
Acron mainly uses methanol and
formalin for further processing and
UFR production. In the reporting year,
80% of methanol and 87% of formalin
was used in-house.
UFR output in 2020 was 174,000
tonnes, down 15% year-on-year. UFRs
are used in the wood-processing
and furniture industries to produce
chipboard and medium- and high-
density fibreboards.
In 2020, the market environment
was unfavourable because of the
suspension of production due to
pandemic restrictions. Since the major
facilities were halted and products
could not be stored long term, the
output of all organic compounds
declined. Despite the shutdown of
the entire wood-processing industry
in mid-2020, Acron retained its sales
share in key markets.
Overall output of non-organic
compounds (low-density and
technical-grade AN, industrial urea,
liquid carbon dioxide, argon, and
calcium carbonate) was up 19% to
900,000 tonnes due to higher global
demand for AN and industrial urea
and the Group’s success in promoting
these products in the market.
2020 REE Commercial
Output, %
a
b
c
d
e
f
g
a 59 REE solution nitric acid
b 22 Cerium oxide
c 11 Didymium oxide
d 2 Neodymium nitrate
e 2 Medium heavy REE carbonates
concentrate
f 2 Cerium carbonate
g 2 Other
DOROGOBUZH
In 2020, the overall output of non-
organic compounds was 135,000
tonnes, up 57% year-on-year,
primarily because of an increase in
calcium carbonate output by 28,000
tonnes (up 52%) in response to
higher demand.
Rare Earth Element Project
Acron developed a technology
for extracting rare earth element
(REE) concentrate from the apatite
concentrate process flow to obtain
several products, including cerium,
neodymium, lanthanum oxides,
and medium heavy and light REE
concentrates.
Since 2011, the Veliky Novgorod
facility has been operating a pilot
unit to fine-tune the technology. In
2014, Acron completed construction
of a production line.
In the reporting period, Acron
took measures to enhance the
sustainability of its REE production
technology under higher loads. The
commercial product portfolio was
expanded to include didymium
carbonate and polishing powder
based on cerium and neodymium
nitrate.
In 2020, REE commercial output
totalled 88.8 tonnes (in terms of
100% oxides).
This project was included in the
Rare and Rare Earth Elements
sub-programme of a national
government programme entitled
Industrial Development and
Competitive Growth.
45
LOGISTICS
AS DBT and Andrex Seaport
Terminals
Acron Group owns three port
terminals on the Baltic Sea that ship
most of the Group’s export cargo. AS
DBT (Muuga, Estonia) and Andrex
(Kaliningrad, Russia) transship bulk
cargoes, while AS DBT (Sillamäe,
Estonia) transships liquid fertilisers
and ammonia.
Operating Results
In 2020, the Group’s port terminals
transshipped a total of 3.4 million
tonnes, down 28% year-on-year. The
Group’s own products made up 99% of
this cargo.
The significant decrease in ammonia
transshipment volume was mainly
due to the lack of third-party volumes,
which were high in 2019, and lower
in-house ammonia volumes because
of the significantly increased in-house
consumption. UAN transshipments
declined in response to the market
environment for the benefit of other
nitrogen fertilisers.
Transshipment at Acron Group's Port Terminal
Facilities by Product, '000 t
Ammonia
689
131
1,702
2,350
1,041
2,243
UAN
Bulk
cargoes
Rail Fleet
In 2020, Acron Group’s Russian
companies moved a total of 8.5 million
tonnes of feedstock and finished
products by rail. Acron Group owns and
operates over 1,700 railcars and tanks, in
addition to over 2,000 leased railcars.
2019
2020
46
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
DISTRIBUTION
This segment of Acron Group’s
operations includes distribution
networks in Russia (Agronova), China
(Beijing Yong Sheng Feng AMP Co., Ltd.
– YSF), the United States (Acron USA
Inc.), France (Acron France SAS), Brazil
(Acron Brasil Ltda.), Argentina (Acron
Argentina S.R.L.), and the wholly owned
trading company Acron Switzerland AG.
The Group’s export strategy aims to
achieve a diversified sales geography
and improve the product range. Priority
targets include increasing supplies
to emerging markets, expanding the
Group’s own distribution network, and
making direct sales to local distributors.
Distribution Networks
Russia (Agronova)
In 2020, Acron Group sold 2,114,000
tonnes of its products in the Russian
market, up 43% year-on-year. The
Group sells mineral fertilisers through
its trading subsidiary Agronova, while
industrial products are sold ex-works.
Agronova comprises ten specialised
trading companies that provide direct
access to consumers in the country’s
key farming regions. Agronova’s
subdivisions store, sell, and deliver
mineral fertilisers, with a total storage
capacity of 189,000 tonnes.
In 2020, Acron Group’s shipments in
Russia totalled 1,316,000 tonnes of
mineral fertilisers. AN and NPK were
the key products sold by Agronova in
the Russian market. In the reporting
year, the Company sold 858,000 tonnes
of agricultural AN (up 89% year-on-
year) and 425,000 tonnes of NPK (up
57% year-on-year).
Agronova also sold 33,000 tonnes of
urea and UAN in the Russian market in
the reporting year.
China (Beijing Yong Sheng Feng
AMP Co., Ltd.)
Acron Group remains a major NPK
supplier to the Chinese market and
continues to expand its distribution
network. Despite strong competition
among fertiliser producers, Acron
Group steadily maintains its positions
in key NPK brands, introduces new
products, and expands its sales
geography. In 2020, YSF sold 133,000
tonnes of NPK in the Chinese market,
up 18% year-on-year.
In 2020, the Company continued to
supply and promote the Group’s new
NPK brands in the Chinese market
by improving its marketing and
streamlining its corporate structure
and internal logistics.
United States (Acron USA Inc.)
Acron Group’s American trading
subsidiary operates UAN warehouse
facilities with a total capacity of
290,000 tonnes. In 2020, Acron USA Inc.
sold 824,000 tonnes of UAN.
Based on 2020 results, Acron Group is
a leading importer of this product to
the United States. With sustainable
distribution channels, the Group
controls sales on both the East and
West Coasts.
Europe (Acron France SAS)
Europe is Acron Group’s key market
for ammonia, apatite concentrate,
and industrial urea, and the Group
sells significant volumes of NPK
to the region as well. Acron Group
expands its footprint in Eastern Europe,
Scandinavia, and the United Kingdom
as a responsible supplier of a variety of
NPK brands, including dry blends.
In the reporting period, the Group
supplied 202,000 tonnes of UAN
through its subsidiary, Acron France
SAS, which was established for direct
supplies to France and its neighbouring
countries. Acron France SAS operates
55,000 tonnes of storage capacity.
Argentina (Acron Argentina S.R.L.)
Since 2019, Acron Argentina S.R.L. has
supplied liquid fertilisers (mainly UAN)
to a wide spectrum of customers,
including importers, distributors, and
grain producers. In 2020, the Group
supplied 77,000 tonnes of UAN to
Argentina. Acron Argentina S.R.L.
imports, stores and sells fertilisers to
the customers from rented reservoirs
located along the Paraná River. The
Company can store up to 47,000 tonnes
of fertiliser and is the second major
UAN importer to Argentina with a 17%
share in total imports.
Brazil (Acron Brasil Ltda.)
In 2019, Acron Brasil Ltda. obtained all
required state permits to sell fertilisers.
Acron Group expects to start direct
supplies to Brazil through Acron Brasil
Ltda. in 2021.
Read more in Sales Markets, page 30
47
PLODORODIE AGRIBUSINESS HOLDING
Plodorodie comprises four
agribusiness companies: Kubris
(Krasnodar Krai), Zvyaginki (Orel
region), Plodorodie-Lukoyanov (Nizhny
Novgorod region) and Plodorodie-
Saratov (Saratov region), with total
land assets of 65,000 hectares. As of
the beginning of 2021, 44,000 hectares
(68%) were put into operation. Under
the Plodorodie Development Strategy
adopted in 2017, all land assets will
be in use by 2025. In 2020, Plodorodie
harvested a total of 118,000 tonnes on
40,500 hectares. Plodorodie cultivates
winter and spring wheat, spring
durum wheat, rice, spring barley,
soybean, peas, corn, sunflower, lentils,
and winter and spring rapeseed,
depending on the location and
climate.
Plodorodie uses cutting-edge
technology and equipment and
builds modern storage and grain
drying facilities. It conducts
experiments in its own test fields
on techniques for applying new
fertiliser brands to high-demand
crops. The new NPK 22:15:0:7S brand
with added sulphur is popular with
growers because it delivers a high
yield of cereal and oil crops.
Kubris (Krasnodar Krai) is one of
the most advanced companies in
the Holding. Between 2008 and
2020, Kubris has regularly posted
the highest rice yield in Russia. In
2020, the company averaged yields
of 8,150 kg/ha over an area of 2,345
hectares (Russia’s average was
5,600 kg/ha in 2015-2020). Kubris
also posts high wheat yields. Even
in an extremely arid 2020, its output
was 4,830 kg/ha (Russia’s average
was 3,640 kg/ha in 2020).
Kubris achieves premier results
and showcases the benefits of
Acron Group’s fertilisers through
its cooperation with specialised
research centres, including the Pavel
Lukianenko National Cereal Crop
Centre, the Russian Rice Research
Institute, and the Vasily Pustovoyt
Oil Crop Research Institute.
Together with local scientists,
Kubris’ agronomy division conducts
comparative tests of various types
of fertilisers and improves farming
methods.
Today, Plodorodie is working to
improve automated management
systems for agribusiness and
implement precision agriculture
technologies. Kubris uses a field
planning system based on a fixed
satellite radio navigation station.
This system makes it possible
to achieve positioning accuracy
when planning rice fields, which
ultimately ensures higher yields.
The Holding also uses a parallel
swathing system in its fields, which
increases equipment productivity
by reducing unnecessary overlaps
and manoeuvring and decreasing
fuel and labour costs. This improves
work quality and streamlines the
process.
Plodorodie uses quadcopters and
Normalised Difference Vegetation
Index (NDVI) satellite monitoring
systems to remotely monitor crop
growth, forecast yields, and respond
quickly to issues.
A GIS system makes it easier to
classify the Holding’s land and
adjust crop rotations. The Holding
has also invested in a weather
station to obtain quality data for
accurate agricultural process timing
and to prevent blight before it
occurs.
48
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Acron Group established
Plodorodie Agribusiness
Holding in 2008 to
implement agricultural
projects, test the Group’s
advanced fertiliser
brands, and improve their
application techniques.
Plodorodie’s companies also use
a system to collect and analyse
equipment telemetry. This system
improves the accuracy of field
processes and monitors equipment
speed, type of operation, operated
agriculture machinery, and other
data to uncover issues and diagnose
problems at early stages.
Gross Output of Plodorodie Agribusiness Companies, '000 t
Plodorodie-Lukoyanov
first yield
Plodorodie-Saratov
first yield
592017
10.527.52.9 5.9 12.7
62
2018
15.727.1
4.6
3.3 10.9
65
2019
17.930.85.5 11.0
118
2020
26.031.050.8 10.6
45
2016
25.1 4.84.0 11.1
2015
44
30.0 6.2 7.9
Plodorodie-
Saratov
Zvyaginki
(beet)
Plodorodie-
Lukoyanov
Zvyaginki
(excl. beet)
Kubris
Total Area Harvested by Plodorodie Agribusiness Companies, '000 t
122017
351 3
16
2018
64
2
3
20
2019
3
54 8
41
2020
6 824 3
Plodorodie-
Saratov
Zvyaginki Kubris Rate of increase Plodorodie-
Lukoyanov
28%
36%
30%
100%
2020 Total Sales Volume of
Plodorodie Agribusiness
Companies by Crop, '000 t
a
b
c
d
e
a 56 Winter wheat
b 18 Spring wheat
c 15 Rice
d 10 Barley
e 12 Other
49
Plodorodie Agribusiness Companies
KUBRIS KRASNODAR KRAI
Kubris is one of the
most advanced rice
producers in Krasnodar
Krai and the nation.
In 2008-2020, it posted
the best rice output
results in its region.
Highlights
Best rice yield in Russia: average of
8,000 kg/ha
in 2015-2020 (Russia’s average: 5,600 kg/ha;
Krasnodar Krai average: 6,300 kg/ha)
Total land owned:
5,700 hectares
Gross output:
31,000
tonnes
Own storage capacity:
25,000 tonnes
Main crops (as percentage of 2020
harvested area):
rice (41%), winter wheat (32%),
soybeans (26%)
2020 harvested area:
5,700
hectares
Kubris Rice Yields, '00 kg/ha
120
100
80
60
40
20
0
20202019201820172016201520142013
98
84
86
79
80
72
81
80
Rice (Kubris)
Rice (Krasnodar Krai)
Rice (Russia)
50
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
2020 harvested area:
3,100
hectares
Main crops (as a percentage of 2020 harvested area):
winter and spring wheat (52%),
barley (25%), rapeseed (14%), peas (8%)
ZVYAGINKI OREL REGION
Zvyaginki is an
advanced agricultural
company and one of
the top three grain
producers in Orlov
region. It grows eight
crops.
Highlights
Wheat yield: average of
4,600 kg/ha
in 2015–2020 (regional average: 4,100 kg/ha)
Barley yield: average of
4,400 kg/ha
in 2017–2020 (regional average: 3,600 kg/ha)
Own storage capacity:
12,000
tonnes
Gross output:
10,700
tonnes
Total land owned:
3,100
hectares
Zvyaginki Winter Wheat Yields, '00kg/ha
80
60
40
20
0
20202019
201820172016201520142013
47
57
54
57
49
42
39
35
Winter weat
(Zvyaginki)
Winter wheat
(Orel region)
Winter wheat (Russia)
51
PLODORODIELUKOYANOV NIZHNY NOVGOROD REGION
Plodorodie-Lukoyanov is a
new, fast-growing company
that posted the best grain
yield in Lukoyanov district in
2016, its first crop year.
Today, the company delivers
the highest yields of
grain and legume crops in
Lukoyanov district.
Highlights
Wheat yield: average of
3,100 kg/ha
in 2017–2020 (regional average: 2,700 kg/ha)
2020 harvested area:
7,500
hectares
Main crops (as a percentage of 2020 harvested area):
winter and spring wheat (52%), peas
(21%), barley (19%)
Barley yield: average of
3,500 kg/ha
in 2017–2020 (regional average: 2,300 kg/ha)
Own storage capacity:
16,000
tonnes
Gross output:
26,000
tonnes
Total land owned:
16,200
hectares
Plodorodie-Lukoyanov Winter
Wheat Yields, '00/ha
60
40
20
0
2020201920182017
33
24
15
50
Winter wheat
(Plodorodie-Lukoyanov)
Winter wheat (Nizhny
Novgorod region)
Winter wheat (Russia)
52
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
2020 harvested area:
24,300
hectares
Main crops (as a percentage of 2020 harvested area):
winter and spring wheat (83%),
sunflower (15%)
PLODORODIESARATOV SARATOV REGION
Plodorodie-Saratov is a new, fast-
growing company that harvested
its first crops in 2017. It owns a total
of 33,300 hectares of land.
In 2020, Plodorodie-Saratov
harvested 24,500 hectares
and posted a gross output of
51,000 tonnes.
As of early 2021, 24,000 hectares of
the company’s land (72%) was in
cultivation.
In 2020, the company had 60% of
Plodorodie Agribusiness Holding’s
total harvested area, and it delivered
43% of the Holding’s gross output.
Highlights
Wheat yield: average of
2,900 kg/ha
in 2018–2020 (regional average: 2,200 kg/ha)
Sunflower yield: average of
1,100 kg/ha
in 2020 (regional average: 1,300 kg/ha)
Own storage capacity:
62,000
tonnes
Gross output:
50,800
tonnes
Total land owned:
33,300
hectares
Plodorodie-Saratov Winter
Wheat Yields, '00 kg/ha
Winter wheat
(Plodorodie-Saratov)
Winter wheat
(Saratov region)
Winter wheat (Russia)
30
40
20
10
0
2020
20192018
17
20
30
29
35
23
53
Plodorodie Agribusiness Holding Consolidated Results
PORTFOLIO INVESTMENTS
Plodorodie Agribusiness
Financial Highlights, RUB mn
Revenue
EBITDA
EBITDA margin
UOM 2020 2019 2018
Revenue
RUB
mn
1,613.8 706.3 595.8
EBITDA
RUB
mn
447.6 53.5 7.6
EBITDA margin % 27.7 7.6 1.3
Harvested area
‘000,
ha
40.5 20.9 16.5
Gross output ‘000, t 118 65 62
Output in standard Output in standard
weightweight
‘000, t‘000, t 115115 6464 5858
Key Objectives
• The Group’s portfolio investments
are liquid assets and therefore
included in Acron’s shareholder value.
The Group may raise additional funds
at any time by selling these assets.
• The return on sales of financial
investments may be used for
investments, debt service, and
dividends.
Stake in Grupa Azoty S.A
In 2020, the Group did not change
its stake in the Polish Grupa Azoty,
keeping it at 19.8%. The market value
of the Group’s stake as of 31 December
2020 was RUB 10.8 billion.
The Group has no other significant
portfolio investments.
2020
706
54
1,614
448
2019
2018
28%
8%
596
8
1%
54
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Financial Overview
This financial performance analysis
is based on the audited consolidated
financial statements of Acron
Group prepared in accordance with
international financial reporting
standards (‘IFRS’) and should be
reviewed jointly with them. It is based
on a comparison of the results of
the financial year that ended on 31
December 2020 and the financial year
that ended on 31 December 2019. In
addition to the IFRS financial results
and indices, this section contains
management financial and operational
information.
Dividends
In the reporting year, the Group made
two dividend payments for a total of
RUB 432 per share, totalling RUB 16.4
billion (USD 228 million) less dividends
paid on quasi-treasury shares.
• Acron’s extraordinary general
meeting on 3 April 2020 resolved to
distribute part of Acron’s earnings
for previous years in the amount of
RUB 157 per share.
• Acron’s Annual General Meeting on
29 May 2020 resolved to declare
dividends of RUB 376 per share
based on 2019 results. After the
previously paid interim dividends of
RUB 101 per share based on 9M 2019,
the additional payment was RUB
275 per share.
Debt Structure
Total debt increased 33% to RUB
115,116 million as of the end of 2020,
against RUB 86,541 million year-on-
year. USD-denominated debt was up
11% to USD 1,558 million. Net debt was
up 32% to RUB 99,579 million as of
the end of 2020, against RUB 75,185
million in 2019. USD-denominated net
debt was up 11% to USD 1,348 million.
The net debt/EBITDA ratio increased to
2.8, against 2.1 as of the end of 2019. In
dollar terms it was 2.8, against 2.2 as of
the end of 2019.
The majority of Acron Group's debt
portfolio consists of foreign-currency
debt instruments, so its debt rose
in 2020 mainly due to a weaker
rouble against the US dollar and
euro. In addition, short-term loans
KEY NUMBERS FOR 2020
Revenue decreased 6% to
1,661
EBITDA decreased 11% to
489
Net profit was
down 86% to
53
Capex decreased 15% to
249
Two dividend payments
for a total of
228
Net debt/EBITDA ratio was
2.8
at year end
USD
mn
USD
mn
USD
mn
USD
mn
USD
mn
Net Debt Index, RUB mn
As of 31
December 2020
As of 31
December 2019
YOY (%)
Long-term borrowings 78,205 73,253 +7
Short-term borrowings 36,911 13,288 +178
Total debt 115,116 86,541 +33
Less:
Cash and cash
equivalents
15,537 11,356 +37
Net debt 99,579 75,185 +32
EBITDA 35,311 35,749 –1
Net debt/EBITDA 2.8 2.1 +0.7 pts
and borrowings increased as part of
the syndicated structured pre-export
finance facility matured in 2021. The
duration of the Group's debt portfolio
decreased from 2.4 to 1.7 years.
55
As of 31 December 2020, USD-
denominated loans and borrowings
made up 54% of the total debt,
against 57% at the end of 2019;
RUB-denominated debt made up
36%, against 33% as of 31 December
2019; EUR-denominated loans and
borrowings remained unchanged at
10%.
The major borrowers among the
Group’s companies were Acron,
Dorogobuzh, NWPC, Acron Switzerland
AG, and Plodorodie. The Group’s
principal lenders included UniCredit
Bank, Otkritie Bank, Nordea Bank
Abp, filial i Sverige, ING Bank N.V.,
VTB Bank, HSBC Bank plc., Rosbank,
Raiffeisenbank, Crédit Agricole
Corporate & Investment Bank, and
Sberbank.
As of 31 December 2020, the Group has
made a public offering of five issues of
its rouble bonds:
• Series 04 with a par value of RUB
3,750 million, to be redeemed in
2021. In 2012, Series 04 bonds were
redeemed for RUB 1,380 million as
part of the Group’s reorganisation.
In 2015 and 2016, securities worth
RUB 10 million and RUB 725 million
respectively were repurchased during
offers. Later in 2016, the Group placed
all securities repurchased during
the offers. As a result, securities
currently in circulation are worth
RUB 2,370 million.
• Series 05 with a par value
of RUB 3,750 million, to be
redeemed in 2021. In 2012,
Series 05 bonds were redeemed
for RUB 1,997 million as part
of the Group’s reorganisation.
In 2015 and 2016, securities
worth RUB 9 million and RUB
610 million respectively were
repurchased during offers. Later
in 2016, the Group placed all
securities repurchased during
the offers. As a result, securities
currently in circulation are worth
RUB 1,753 million.
• Series O-001P-01 with a par
value of RUB 5,000 million, to be
redeemed in 2026, were issued
in 2016. After an offer in 2020,
the Group repurchased securities
totalling RUB 506 million. The
bonds from this series that are
currently in circulation are worth
RUB 4,494 million.
• Series O-001P-02 with a par
value of RUB 5,000 million, to be
redeemed in 2027 and with an
offer date in 2021, were issued in
2017. All bonds from this series
are currently in circulation.
• Series O-001P-03 with a par
value of RUB 10,000 million, to be
redeemed in 2023, were issued in
2019. All bonds from this series are
currently in circulation.
The total par value of bonds in
circulation as of 31 December 2020
was RUB 23,617 million (RUB 23,266
million not counting bonds held by
Acron’s subsidiaries).
Group’s Credit Ratings
In June 2020, Fitch Ratings
confirmed Acron’s BB- long-term
domestic and foreign-currency issuer
default ratings. The outlook is Stable.
In April 2020, Moody’s Investors
Service confirmed Acron Group’s Ba3
long-term corporate family rating
with Stable Outlook.
In December 2020, the Expert RA rating
agency confirmed Acron’s ruA+ non-
financial company creditworthiness
rating with Stable Outlook.
Financial Performance
Revenue
In physical terms, sales of the
Group’s main products increased 3%
to 7.8 million tonnes year-on-year.
Sales of Acron Group’s Main Products, ‘000 t
Product 2020 2019 YOY (%)
Ammonia 116 304 –62
Nitrogen fertilisers 3,874 3,843 +1
Complex fertilisers 2,271 2,098 +8
Organic compounds 211 237 –11
Non-organic compounds 1,048 797 +31
Apatite concentrate 287 290 –1
Fertiliser and industrial products 7,807 7,569 +3
56
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Most of the Group’s revenue is
generated by sales of nitrogen and
complex fertilisers. In 2020, Russia,
Brazil, the United States, China,
Thailand, and North American and
European countries were the Group’s
key markets by volume.
In 2020, the Group’s revenue was up
4% to RUB 119,864 million. Higher
revenue resulted from higher sales,
which increased 3%, and from an
11% increase in the average USD/
RUB exchange rate. However, lower
dollar-denominated global prices for
most of the Group's products had a
limiting effect on revenue growth.
Average Indicative Global Fertiliser Prices
USD/t FOB Baltic Sea/Black Sea Ports 2020 2019 YOY (%)
Ammonia 204 235 –13
Urea (prilled) 222 240 –8
AN 167 189 –12
UAN 125 149 –16
NPK 16-16-16 256 296 –14
Sources: Fertecon, FMB
Official USD/RUB Exchange Rate
2020 2019 YOY (%)
USD exchange rate as of 31 December 73.8757 61.9057 +19
Average annual USD exchange rate* 72.1464 64.7361 +11
*Calculated average nominal exchange rate for the corresponding one-year period
Source: Central Bank of the Russian Federation
Revenue by Region, RUB mn
Region 2020 2019 YOY (%)
Latin America 38,036 28,547 +33
Russia 23,939 17,179 +39
European Union 16,071 22,707 –29
USA and Canada 13,256 17,395 –24
Asia (excl. PRC) 12,791 12,373 +3
PRC 7,743 7,133 +9
Other regions 6,316 6,271 +1
CIS 1,712 3,230 –47
Total 119,864 114,835 +4
Cost of Sales
In 2020, the Group’s cost of sales was RUB 65,817 million, up 10% year-on-year.
Cost of Sales, RUB mn
Type of Expense 2020 2019 YOY (%)
Natural gas 16,304 15,550 +5
Depreciation and amortisation 12,106 11,344 +7
Fuel and energy 8,637 8,661 0
Staff costs 7,554 7,309 +3
Other materials and components 7,165 4,018 +78
Potash used in production 7,062 6,925 +2
57
Type of Expense 2020 2019 YOY (%)
Repairs and maintenance 3,639 2,993 +22
Services 960 840 +14
Drilling and blasting 925 857 +8
Social expenditures 777 629 +24
Production overhead 688 658 +5
Total 65,817 59,784 +10
Natural Gas
In 2020, natural gas costs reflected in
the cost of sales were up 5% mainly
due to the low base in 2019, when
a portion of natural gas costs was
capitalised because of upgrades at
Dorogobuzh’s ammonia unit (main
natural gas consumer). The upgrade
reduced the natural gas consumption
rate per tonne of ammonia. So,
natural gas consumption increased
only slightly despite a 6% increase in
the Group’s ammonia output. Higher
natural gas prices were another
factor behind the increase in natural
gas costs in 2020.
Depreciation and Amortisation
In the reporting period, depreciation
and amortisation increased 7% due
to commissioning of:
• Property, plant and equipment
after upgrades to Dorogobuzh’s
ammonia unit in late 2020
• Nitric acid unit in March 2020
• Urea granulation unit in May 2020
• Property, plant and equipment
after upgrade of equipment at
current production facilities
Fuel and Energy
Electricity accounts for approximately
68% of this item, and thermal
power (steam) is the second major
component. In 2020, the Group’s
electricity costs were up 6% due to a
7% increase in consumption. Average
prices were down 1%. Thermal power
consumption was up 8%, which
resulted in a 7% increase in thermal
power costs. The average price
remained unchanged year-on-year.
Despite higher electricity and thermal
power costs, the fuel and energy item
remained almost unchanged year-
on-year due to lower average prices
for fuel oil and the capitalisation
of a portion of electricity costs
in 2020 due to overhauls and
commissioning of new production
facilities.
Staff Costs
Staff costs only include the cost of
production personnel. The cost of
administrative staff is included in
selling, general, and administrative
expenses. In 2020, salary costs
reflected in the cost of sales were
up 3% to RUB 7,554 million due to
a 2% increase in personnel across
the Group that was mainly related
to development of the Oleniy
Ruchey underground mine. The
increase was also affected by salary
adjustments.
Main Inputs and Energy Consumption*
2020 2019
Price, RUB** Quantity Amount, RUB
mn
Price, RUB** Quantity Amount, RUB
mn
Acron and Dorogobuzh
Natural gas, m3 mn 4,830 3,392 16,382 4,749 3,349 15,907
Acron 4,808 2,481 11,929 4,738 2,618 12,403
Dorogobuzh 4,889 911 4,453 4,791 731 3,504
Apatite concentrate, ‘000 t 10,812 908 9,812 11,374 784 8,912
Acron 10,605 587 6,225 11,250 568 6,390
Dorogobuzh 11,191 321 3,587 11,699 216 2,522
58
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
2020 2019
Price, RUB** Quantity Amount, RUB
mn
Price, RUB** Quantity Amount, RUB
mn
Sylvine (potassium
chloride), ‘000 t
11,819 580 6,854 14,231 469 6,669
Acron 11,721 381 4,464 14,085 331 4,667
Dorogobuzh 12,008 199 2,390 14,585 137 2,003
Energy, kWh mn 3,828 1,394 5,337 3,872 1,298 5,024
Acron 3,746 1,113 4,171 3,780 1,048 3,961
Dorogobuzh 4,149 281 1,165 4,258 250 1,063
Thermal power at Acron,
‘000 Gcal
1,041 1,483 1,543 1,046 1,373 1,436
NWPC
Energy, kWh mn 2,706 201 545 2,725 191 521
Diesel, ‘000 l 39 22,990 899 40 22,414 887
Fuel oil, ‘000 t 12,820 25 323 20,809 23 482
*Energy resources from third-party sources
**Including transportation costs and related expenses; unit prices: natural gas per 1,000 m3, apatite concentrate and potassium chloride per 1 tonne,
energy per 1,000 kWh, thermal power per 1 Gcal, diesel per 1 litre, fuel oil per 1 tonne
Potash Feedstock
In the reporting year, potassium
chloride costs were up 2% due to a
24% increase in consumption, which
was offset by a lower average annual
price paid for potassium chloride
(down 17%).
Transportation Expenses
In 2020, transportation expenses
were up 1% to RUB 21,642 million.
Expenses included in this item
showed a variety of trends. The
demand for gondola cars dropped
significantly, which was followed
by lower rental rates for this type
of cars and the cost of spare parts.
This lowered the Group's expenses
for railcar lease and rolling stock
maintenance, despite the growth in
sales. Rail transportation expenses
decreased due to changes in shipping
arrangements. Sea freight and
container shipping costs increased
mainly due to a weaker rouble. In
addition, container transportation
rates increased significantly.
Transportation Expenses , RUB mn
Type of expense 2020 2019 YOY (%)
Ocean freight 7,192 6,955 +3
Handling of goods 5,067 5,068 0
Railway tariff 4,073 4,205 –3
Container transportation 2,174 1,908 +14
59
Selling, General and
Administrative Expenses
In 2020, selling, general, and
administrative expenses were up 6%
to RUB 9,048 million. This growth
was due mainly to greater sales
volume and staffing.
Other Operating Income
In the reporting year, Acron Group
posted other operating income of
RUB 1,781 million, against expenses
of RUB 1,574 million in 2019. The
income was generated by a net
foreign currency gain of RUB 2,184
million. In 2019, the Group posted a
net foreign exchange loss of RUB 799
million.
EBITDA
EBITDA is calculated as operating profit
adjusted for depreciation and amorti-
sation, foreign currency profit or loss on
operating transactions and other non-
cash and extraordinary items. In 2020,
EBITDA was down 1% to RUB 35,311
million, against RUB 35,749 million in
2019. Increased sales and a weaker
rouble positively affected the dynamic,
while the drop in global prices for
the Group’s products had an adverse
impact on its EBITDA. Dollar-denom-
inated EBITDA was down 11% to USD
489 million, against USD 552 million
in 2019. The EBITDA margin was 29%
(against 31% in 2019).
EBITDA Calculation, RUB mn
2020 2019
Operating profit 26,029 23,401
Depreciation and amortisation 12,106 11,344
Foreign currency (profit)/loss on operations, net –2,184 799
Profit on sale of potash leases –891 –
Loss on disposal of property, plant and equipment 251 205
Total consolidated EBITDA 35,311 35,749
Finance Income/Expenses
In 2020, finance expenses were RUB
12,936 million, against finance income
of RUB 7,236 million in 2019. This
change was mainly driven by a 2020
foreign currency net loss of RUB 12,919
million, against a foreign currency net
gain of RUB 7,812 million in 2019.
Interest Expense
In 2019, interest expense almost tripled
to RUB 3,285 million, mainly because
of the Group’s increased debt burden.
This item is reported less capitalised
interest expense, which decreased in
2020 to support the growth of interest
expense. Capitalised interest expense
was down due to lower interest rates
and reduced capital investments in
the Group’s mining assets in 2020 as
compared to 2019.
Net Profit
Net profit for the year was down
85% to RUB 3,836 million, against
RUB 24,786 million in 2019. Dollar-
denominated net profit decreased 86%
year-on-year to USD 53 million, against
USD 383 million in 2019.
Changes in Key Balance Sheet
Indicators
Property, Plant and Equipment
As of 31 December 2020, the value
of the Group’s property, plant and
equipment was up 8% to RUB 110,601
million, against RUB 102,157 million
in 2019, due to significant capital
expansion and commissioning of
production units. Property, plant and
equipment was 50% of the total book
value of the Group’s assets as of the
end of 2020.
Type of expense 2020 2019 YOY (%)
Railcar lease 1,826 1,892 –3
Maintenance of rolling stock 539 842 –36
Other 771 646 +19
Total 21,642 21,516 +1
60
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Subsoil Licences and Related Costs
In the reporting period, this item
increased 8% to RUB 42,614 million
mainly due to capitalisation of loan
costs related to implementation of
the Talitsky potash project.
Investment in equity instruments
measured at fair value through
other comprehensive income
This item primarily consists of a
19.8% interest in Grupa Azoty S.A.
In the reporting period, this item
increased 15% to RUB 11,264 million
as Grupa Azoty’s market value rose.
Inventories
In the reporting period, the Group’s
inventories were up 18% to RUB
19,301 million due to a 20% increase
in inventories of feedstock, materials,
and spare parts and a 21% increase
in finished product inventories.
Non-Controlling Interests
Minority shareholder equity in the
Group’s subsidiaries is recorded in
non-controlling interests under
equity. This item mainly consists
of the stakes of VPC’s minority
shareholders. In the reporting
period, the Group sold 10.1% of VPC
shares, which resulted in a 24%
increase in this item to RUB 26,100
million.
Cash Flows
Operating Activities
In 2020, net operating cash flow
was down 7% to RUB 26,190
million. Working capital was up
RUB 2,186 million in the reporting
year, against a drop of RUB 2,084
million in 2019.
Investing Activities
In 2020, net cash flow used in
investing activities was RUB
17,181 million, against RUB 19,054
million in 2019. The Group’s capital
expenses decreased 6% to RUB
17,946 million from RUB 19,030
million in 2019 (details are avail-
able in the Investment Programme
section).
Financing Activities
Net cash flow allocated to financing
activities in 2020 totalled RUB 7,392
million, almost unchanged year-on-
year from RUB 7,328 million. In 2020,
net proceeds from borrowings were
RUB 16,478 million, against RUB
8,840 million in 2019. In the reporting
period, the Group repurchased Acron's
shares on the open market for RUB
9,465 million. The 2019 repurchase
was RUB 1,330 million. Dividends paid
to shareholders stood at RUB 16,448
million, against RUB 14,313 million in
2019 (or USD 228 million, against USD
221 million in 2019).
Segment Information
Acron Group defines its operating
segments as components of the Group
that engage in business activities
capable of earning revenues or
incurring expenses, whose operating
results are regularly reviewed by the
chief operating decision maker(s), and
for which discrete financial information
is available.
Segment financial information includes
revenue and EBITDA.
Information on Reportable Segments for the Year Ended 31 December 2020, RUB mn
Segment
sales
Eliminable
intersegment
sales
External
sales
EBITDA EBITDA
margin
Acron
66,469 –59,136 7,333 20,110 30%
Dorogobuzh
26,617 –25,545 1,072 6,144 23%
Logistics
3,233 –3,026 207 951 29%
Trading
114,059 –4,487 109,572 4,451 4%
Mining NWPC
11,302 –11,248 54 2,948
26%
Other
2,600 –974 1,626 707 27%
Total 224,280 –104,416 119,864 35,311 29%
61
Information on Reportable Segments for the Year Ended 31 December 2019, RUB mn
Segment
sales
Eliminable
intersegment
sales
External
sales
EBITDA EBITDA
margin
Acron
67,112 –58,109 9,003 25,944 39%
Dorogobuzh
21,629 –19,669 1,960 3,922 18%
Logistics
4,772 –3,767 1,005 2,221 47%
Trading
105,533 –3,418 102,115 1,190 1%
Mining NWPC
11,003 –10,948 55 2,543
23%
Other
1,670 –973 697 –71
–4%
Total 211,719 –96,884 114,835 35,749 31%
Acron and Dorogobuzh
(Chemical Production)
In the reporting year, Acron’s commercial
product output was down 1% to
5,514,000 tonnes mainly due to the
changes in output structure: output of
fertilisers with higher nitrogen content
increased, while production of low-
nitrogen fertilisers decreased (details
are available in the Chemical Production
section of the Board of Directors Report
on Priority Operating Areas). In 2020,
the EBITDA margin at Acron was 30%,
against 39% in 2019.
In the reporting period, Dorogobuzh’s
commercial product output was up 36%
to 2,179,000 tonnes due to a boost in
ammonia output following upgrades
at the ammonia unit in 2019. In 2020,
the EBITDA margin at Dorogobuzh was
23%, against 18% in 2019.
Logistics
In the reporting year, turnover at the
Group’s seaport terminals was down
28% to 3.4 million tonnes (the reasons
for this are given in the Logistics
section of the Board of Directors
Report on Priority Operating Areas).
Acron Group’s own cargo accounted
for 99% of that volume. The logistics
segment’s EBITDA margin was down
from 47% in 2019 to 29% due to
decreased transshipment volumes.
Trading
In 2020, the Group posted consolidated
sales of 7,807,000 tonnes, up 3% year-
on-year due to higher finished products
output. In H2 2020, the prices for
mineral fertilisers recovered after falling
in 2019. This boosted the segment’s
EBITDA margin to 4% from 1% in 2019.
This is a secondary segment from
a profit-generating point of view. Its
major objective is to promote effective
sales of the Group’s products and enter
promising sales markets.
Mining NWPC
In 2020, NWPC produced 1,182,000
tonnes of apatite concentrate, up
9% year-on-year. This increase was
driven by a larger volume of extracted
ore and higher phosphate content.
However, output was restricted by
apatite concentrate prices, which
were low in 2020. As a result, NWPC’s
EBITDA margin was up to 26%, against
23% in 2019.
Most of Acron Group’s apatite
concentrate is consumed internally. A
surplus of 287,000 tonnes was sold to
third parties in 2020.
62
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Risks and Risk Mitigation
Strategy
Acron Group’s activity is associated
with risks that can affect its operating
and financial performance, whether
positively or negatively. Mitigating
the effects of such risks is a key task
for the Board of Directors and the
Managing Board.
As part of the risk management
system, the Board of Directors and the
Managing Board:
• Analyse and evaluate existing and
potential risks
• Develop and implement measures to
mitigate the effects of those risks
• Elaborate and implement plans for
crisis management and recovery
Historically, the major risks with
the greatest impact on the Group’s
activity have been related to
purchasing mineral inputs, global
fertiliser market conditions, and
financing. Acron Group’s long-term
development strategy is aimed at
mitigating the influence of these
risks, ensuring stability, and creating
the foundation for continuing growth
and improvement in the Group’s
competitive position.
The Group’s operating results depend
on fertiliser prices and return on
sales, which in turn are contingent
on demand for fertilisers. Demand is
affected by several factors, such as
weather conditions, fertiliser price
forecasts, public policy, consumers'
access to financing, and the availability
of inventory in distribution channels.
Risk Description Risk mitigation
Risk
significance
COVID19 PANDEMICRELATED RISKS
Health of
employees
Massive spread of COVID-19
among employees could halt
operations.
In order to prevent COVID-19 infection, Acron
Group took the following measures as per the
recommendations of the Russian Federal Service
for Surveillance on Consumer Rights Protection and
Human Wellbeing (Rospotrebnadzor):
• Personal protective equipment and
decontamination equipment provided to
employees
• Body temperature/viral respiratory infection
symptom checks
• Employees who can work remotely do so
• On-site employees minimise contacts and
practice social distancing
• Increased use of electronic documents
• Vaccination
These measures have prevented outbreaks at the
Group’s companies. The vaccination campaign
started in Q1 2021.
High
Continuing
restrictive
measures
related to
COVID-19
Long-term restrictions could affect
the Group’s operations and sales
Currently, the COVID-19 pandemic has had little
impact on the mineral fertiliser industry in terms of
supply and demand, since governments make food
supplies a priority.
Demand:
• No reduction in sales of mineral fertilisers is forecast.
The agricultural sector is a priority in most countries,
and there have been few, if any, restrictions imposed
on related activities. The demand for fertilisers both
in Russia and globally remains the same.
High
63
Risk Description Risk mitigation
Risk
significance
• Demand for industrial products temporarily
contracted (this includes AN for blasting work and
urea for glue and AdBlue production). This was
fully offset by the redistribution of products to
the agricultural segment, and by the end of 2020,
demand for industrial products had returned to
normal levels.
Supply:
• All the Group’s production facilities continue to
operate as usual. There is currently no threat of
failure to meet the production plan.
• All the Group’s offices in Russia and worldwide
continue to operate, and staff has partially
transitioned to remote work. Warehouses are
operating as usual.
Delivery terms:
• The pandemic did not affect the supply of feedstock
or the dispatch of finished products.
INDUSTRY RISKS
Changes in the
global mineral
fertiliser
market
Deterioration in the
macroeconomic situation,
insufficient increase in demand
(which depends, among other
things, on government subsidies,
exchange rate dynamics, yield and
grain prices in key sales markets,
current and forecast fertiliser
inventory) or excess increase in
production capacity may cause
significant price fluctuations for
fertilisers and inputs and may
have a material effect on the
Group’s performance.
• Pursuing a vertical integration strategy to augment
the Group’s long-term competitive advantages
• Signing long-term contracts with leading fertiliser
consumers in key markets (Brazil, the US, China) to
allocate 30-50% of certain products in advance
• Developing wholly owned distribution; selling
through wholly owned trading and distribution
companies
• Developing long-term cooperation plans with
independent distributors
• Diversifying the Group’s product portfolio to include
new brands and products. Developing sales of non-
agricultural products
• Implementing a marketing strategy aimed at
strengthening the brand and customer loyalty
High
Seasonal
fluctuations
in demand for
the Group’s
key products
Seasonal fluctuations in fertiliser
application depend on weather
and climate conditions. Abnormal
climate phenomena such as
droughts and floods may have a
significant effect on demand in
certain regions.
• Diversifying sales markets in order to promptly
redistribute product flows and sales across 74
countries, mitigating the effects of seasonal factors
• Diversifying the product portfolio, which includes
fertilisers and industrial products, to reduce
the Group’s dependence on agricultural market
dynamics
• Advanced warehouse facilities at production sites
and in key sales markets (Russia, China, the US,
Canada, Brazil, Argentina) smooth out seasonal
fluctuations in sales.
Medium
New restrictive
measures on
commercial
products
In October 2019, the European
Commission resolved to introduce
anti-dumping duties of EUR 42.47
per tonne on Acron’s UAN from
Russia. This stopped Acron's
product sales to the EU market.
• In 2020, the Group launched the anti-dumping
duty revision procedure. An EU decision to start the
revision is expected in mid-2021.
• Successful shifting of UAN sales to other markets
• Due to flexible production lines, Acron increased the
output of commercial urea and AN by reducing UAN
output.
Medium
64
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Risk Description Risk mitigation
Risk
significance
Price
fluctuation
and changes
to the terms
for purchasing
key inputs and
services
Acron Group’s Russian production
facilities obtain key inputs and
services from companies that
are monopolies or dominate
their markets. This increases the
Group's exposure to uncontrolled
price hikes and manipulation of
raw material prices and supplies.
Increased raw material and service
prices result in higher production
costs and decreased profit.
• Creating own phosphate and potash raw material
base; since mid-2013, the Group’s Russian
production facilities have received all their raw
materials from wholly owned phosphate assets.
• Signing long-term contracts and diversifying
suppliers where possible
Low
Natural Gas
With gradual market
liberalisation in Russia, industrial
consumers can buy gas either
from Gazprom or independent
suppliers. In addition, Russia
started exchange trading of
natural gas in 2014.
At the same time, as far as natural
gas tariffs for consumers buying
gas from Gazprom are concerned,
the government’s policy is aimed
at staged price increases to avoid
spikes. There are long-term risks
that changes in government
priorities could cause sharp
increases in gas tariffs.
• The Russian government’s decision to implement
a long-term freeze on tariffs for goods and services
provided by natural monopolies mitigates the risk of
immediate gas price increases in the short term.
• Continuous modernisation of ammonia units (which
consume the majority of the natural gas) in order
to reduce the specific feedstock consumption rate.
Acron’s ammonia units are among Russia’s most
efficient in terms of gas utilisation rate.
• Acron purchases part of its natural gas on the
exchange. In 2020, 10% of its total natural gas was
acquired on the exchange.
• Acron purchases the rest of its natural gas under
an agreement with Gazprom Mezhregiongaz Veliky
Novgorod LLC (a member of Gazprom Group), which
is valid through the end of 2030. The new ten-year
agreement was signed in 2020.
• Dorogobuzh purchases natural gas under an
agreement with the independent supplier NOVATEK,
which is valid through the end of 2021.
Medium
Power
Acron Group’s production
assets are major electric power
consumers, and they have two
options for purchasing power
(energy):
• On the retail market from a last-
resort provider
• Independently on the wholesale
market
Generally speaking, pricing
on the wholesale and retail
power (energy) market prevents
unreasonable, sudden spikes in
prices.
• The Group’s companies keep their power and power
transfer agreements separate in order to mitigate
the retail market risks of last-resort providers
defaulting on payments for power transfer services.
• In 2019, Dorogobuzh started purchasing power from
the wholesale platform.
• Acron operates a power-generating unit at the
Ammonia-4 unit that recycles process steam. Power
generation depends on the main process and the
volume of surplus steam. In 2020, the generating
unit produced about 3% of the total power
consumed at the production site.
• Dorogobuzh operates three power-generating
units with a total capacity of 11 MW. In 2020, they
produced 12% of the plant’s total consumption.
• Power-efficient solutions are being implemented as
early as the design stage of projects. For example,
the design for the second stage of the Oleniy Ruchey
mine includes a solution to use solid-state lighting
and soft starter and frequency regulating devices for
equipment drives.
Medium
65
Risk Description Risk mitigation
Risk
significance
Additionally, the Russian
government is implementing
a new programme to revamp
power-generating assets in the
Russian Federation. According
to a presidential decree, this
programme will be launched
only if the increase in consumer
charges does not exceed the
inflation rate.
In reality, the actual increase in
consumer charges may exceed the
inflation rate due to a variety of
non-market surcharges (support
for the development of nuclear
power plants, renewable power
sources, waste burning plants, Far
East regions, etc.).
Power transfer services (which
make up approximately 50% of
the ultimate price per 1 kWh) are
a monopoly activity. The Federal
Antimonopoly Service of Russia
regulates the tariffs, which are
updated annually close to the rate
of inflation.
Potash
In 2018, the Usolskiy mine (f
member of the EuroChem Group)
became Russia’s second potash
producer. However, its entire
output is used for the company’s
in-house consumption.
Therefore, URALKALI remains
Russia’s sole potash supplier.
Without competition, the supplier
may abuse its monopoly position,
leading to higher prices and
manipulation of supply volume.
• Acron Group is building its own potash mine as part
of its vertical integration strategy.
• Contracts with URALKALI for potash supplies to
Acron and Dorogobuzh are valid until the end of
2021.
Medium
The cost of transportation
services
is a significant part of the Group’s
expenses. Increases in the cost
of railway transportation, railcar
leases or sea freight and cargo
transshipment may materially
impair the Group’s financial
position or weaken its competitive
strength.
In 2020, railway transportation
tariffs were indexed 3.5%.
However, in addition to indexation
of the basic tariff, JSC Russian
Railways periodically discusses
the imposition of various
surcharges. As a result, the actual
tariff increase for Acron Group
may turn out to be higher than the
base value.
• The government will control further indexation of
railway transportation tariffs, so the risk of higher rail
charges is limited. The government introduced the
“inflation minus” indexation formula.
• The Group negotiates with Russian Railways to
decrease the railway tariff for cargo transportation
within the tariff corridor.
• Acron Group operates its own fleet of 1,700 railcars,
which covers approximately 1/3 of its freight traffic.
• The Group works with a number of railway operators
on a competitive basis.
• Acron Group’s port logistics segment comprises own
port terminals with warehouse facilities.
• Freight expenses are offset by optimising shipment
sizes and using the Group’s warehouses, terminals
and trading companies.
Medium
66
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Risk Description Risk mitigation
Risk
significance
OPERATING RISKS
Failures and
unscheduled
production
shutdowns
Failures and unscheduled
production shutdowns may cause
higher repair costs and lower
operating results.
• Acron Group makes sizeable annual investments in
engineering, upgrades, and replacement of outdated
equipment and construction of safe, modern
facilities.
• The Group maintains process control, ensures
compliance with industrial safety requirements
in the operation of production facilities, and
implements other engineering measures to reduce
the risks of accidents and injuries. Critical equipment
is identified and its condition is monitored.
• The Group holds all mandatory types of insurance,
including third-party liability for operators of
hazardous production facilities.
• The ammonia operations at Acron and Dorogobuzh
are fully insured with reliable insurance companies
because they are the most hazardous and cost-
intensive part of the Group’s operations. Recovery
costs associated with a failure would be covered by
insurance.
Low
Technical risks
related to the
investment
programme
Acron Group is implementing
several investment projects
simultaneously to construct new
production assets and develop
mineral deposits. Engineering
complexities in the course of
construction and lack of personnel
resources may significantly delay
completion of the projects or
require additional costs.
• By thoroughly elaborating investment projects
and hiring highly skilled personnel, the Group can
meet deadlines and successfully commission new
production capacity.
• The Group purchases modern equipment from
leading global manufacturers and selects
experienced and highly qualified contractors.
• Acron Engineering Research and Design Centre (a
member of Acron Group) has designed most of the
current investment projects.
Talitsky mine
• The Talitsky mine’s CAR/EAR are insured by a pool of
Russian and international insurance companies.
• Process and engineering solutions implemented
in the Talitsky mine project are optimal and include
all recent changes in the regulatory framework for
the development and operation of such facilities.
The deposit development process has been tested
at similar facilities operating at the Verkhnekamsk
potassium-magnesium salt deposit.
Low
Mining-related
risks
Geological and hydrogeological
features of ore bodies can lead
to damage or destruction of
subsoil areas and production
facilities, potentially causing harm
to the environment and natural
resources, employees, or local
residents.
Talitsky mine
During the construction stage:
• In 2020, the vertical shafts were successfully
completed; sinking was carried out using an ice wall,
which is the most reliable method
• Installation of shaft grout curtain
• Ongoing environmental and geological monitoring
Design solutions for the development stage:
• Geotechnical 3D modelling, confirmation of the
selected pillar thickness
• Development of waterproof areas in the minefield
with safety waterproofing barrier pillars inside the
shaft and between shafts.
Low
67
Risk Description Risk mitigation
Risk
significance
Oleniy Ruchey mine (development)
The mine operates in accordance with Federal rules
and regulations on industrial safety, including Safety
Rules for Mining and Processing Solid Commercial
Minerals, and other guidelines for the protection of
subsoil during deposit development.
To ensure safety during the extraction of minerals
from the mine, the following measures have been
taken:
• Mining operations strictly adhere to the
development project and mine development plan,
compliance with technical design and process
documentation requirements
• Production processes are fully mechanised using
high-performance equipment; design simplicity and
cyclical work planning
• Proactive operational exploration to clarify the ore
body outline
• Geological survey monitoring of the completeness of
mineral resources extraction
• Prevention of unauthorised development of sites
with mineral deposits and compliance with the
established procedure for using such sites for other
purposes
• Monitoring of the subsurface, including monitoring
of formation and earth movement
SOCIAL AND ENVIRONMENTAL RISKS
Personnel risks Scarcity of highly skilled personnel
and conflicts with trade unions
could lead to an increase in
expenditures on professional
training and expose the Group to
the risk of strikes.
Measures to reduce turnover of highly qualified
personnel:
• Focus on internal replacement, internal candidates
get priority in hiring, effective succession policy
• Programmes aimed at long-term retention of
specialists (e.g., mortgage programmes)
• Strengthening the employer's brand awareness;
transparent channels to attract specialists
• Systematic interaction with schools, secondary
vocational and higher education institutions to train
future specialists
• Maintaining competitive pay and benefits packages
The Group’s Fair Work Programme regulates its
social obligations to employees, including job
placement and housing.
• The career development programme includes
advanced professional training courses and
corporate training to ensure that the Group’s
personnel have the necessary qualifications for
high-tech operations.
• Recruitment of young specialists to work at plants
(chemists, power, heat, and mechanical engineers)
with additional employment benefits.
Low
68
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Risk Description Risk mitigation
Risk
significance
• Cooperation with higher education institutions.
The second class of students majoring in Pure and
Applied Chemistry graduated from Yaroslav-the-
Wise Novgorod State University. This programme
was established in 2012 on Acron’s initiative.
Some of the students’ graduation projects were
recommended for implementation at Acron.
• In 2020, 256 students from higher and secondary
professional education institutions underwent
industrial training at the Group’s chemical facilities.
Environmental
risks
There are risks related to potential
adverse environmental impact
from the Group’s operations due
to accidents, as well as the risk
of failure to meet performance
standards due to changes to
environmental legislation, which
may entail additional liabilities and
expenditures.
• Upgrading equipment and commissioning
environmentally safe facilities to avoid accidents and
reduce emissions.
• Acron and Dorogobuzh continually maintain the
operating gas cleaning units in accordance with the
design documentation (current repairs, replacement
of filter cloth and worn-out equipment).
• Dorogobuzh and Acron take steps to protect surface
water, including the accident-free operation of
biological treatment units and hydraulic structures
(repair, replacement of worn-out equipment and
pipelines).
• Ongoing environmental monitoring and disclosure
of information about environmental efforts.
• The Group insures its civil liability as the owner
of hazardous production facilities and obtains
extended insurance risk coverage, including for
environmental risks.
Low
FINANCIAL RISKS
Interest rate
fluctuation
Higher interest rates may
negatively affect the Group’s
financial performance.
• The Group’s policy on interest rate risks is based on a
mix of fixed and floating interest rates.
• To mitigate the risk of interest rate increases, the
Group diversifies its loan portfolio by using a range
of financial instruments and raising borrowed funds
from multiple lenders.
• In addition, the Group is able to attract loans with
subsidised interest rates as part of several state
programmes to support exporters.
Low
Currency risks Most of the Group’s revenues and
committed loans are denominated
in foreign currency, while its
expenditures are primarily in
roubles. As a result, currency
exchange market volatility
significantly affects the Group’s
financial performance.
Exchange rate fluctuations can
both positively and negatively
affect the Group’s financial
performance.
• The multidirectional effect of the rouble exchange
rate on the Group’s performance indices creates
natural hedging. This means that when the rouble
exchange rate falls, the rouble value of the Group’s
foreign-currency debt (mainly foreign-currency
loans) increases, resulting in rising liabilities and
reduced current profit; revenue, sales profit, and
EBITDA, however, all increase.
• The Group generates a significant part of its revenue
from exports, which ensures a natural hedge with an
inflow of foreign currency, and this reduces the risks
of foreign currency loans.
Medium
69
Risk Description Risk mitigation
Risk
significance
Liquidity risks The Group’s development strategy
requires ongoing financial outlays,
and unstable cash flow could lead
it to default on its obligations.
Cash flow control and operational liquidity
management include:
• Credit limits at banks, as well as registered exchange
bonds
• Available cash sufficient to cover short-term
liabilities
• Financial assets for sale
Low
Credit risks Risks of default by debtors Domestic sales are prepaid.
To manage payment risks for export sales, the Group
uses:
• Non-recourse factoring
• Insurance of receivables from sales with deferred
payment
• Settlement by letter of credit
• Ongoing monitoring of overdue debts and analysis
of the financial standing of counterparties, including
using a scoring assessment system
The Group has no significant overdue receivables.
Medium
LEGAL RISKS
Changes in
legislation
Changes in Russian and
international laws may create
additional liabilities and limitations
for the Group’s operations.
The Group’s specialists continually monitor all
amendments to applicable laws and changes in
interpretation and application practices, engaging
third-party experts if needed.
Low
Changes in
standards for
licensing the
Group’s core
business
Acron Group operates under a
variety of licences.
The corresponding licence
agreements mandate the
subsoil user’s actions and
project timelines. Licence
requirements mainly concern
drafting design documentation,
obtaining government approvals,
commencing certain operations
(exploration, extraction,
processing), and ensuring
compliance with industrial
and environmental safety
requirements. Any violation of
licence agreements may result in
licences being withdrawn.
The Group monitors performance of its licence
requirements on an ongoing basis and makes every
effort to prevent violations.
Low
Losses if the
EU introduces
cross-border
carbon
regulation
The possible introduction of an
additional cross-border carbon tax
in the EU will lead to a decrease
in the profitability of sales in this
region.
• The Group’s specialists continually monitor changes
in relevant EU regulations and policies, as well as
other initiatives on this issue that could potentially
affect the Group's business.
• The Group assesses the carbon footprint of its
products, studies the best available technologies for
capturing and storing emissions, and explores ways
to offset emissions.
• The Group participates in special Russian and
European initiatives and cooperates with Russian
federal executive authorities.
Medium
70
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
As of 31 December 2020, Acron had
authorised capital of RUB 202,670,000
divided into 40,534,000 ordinary shares
with a par value of RUB 5 per share.
Share Capital Structure
As of 31 December 2020, the Group’s
immediate parent is Acronagroservice.
The Group’s ultimate controlling
company is Terasta Enterprises Limited
(Republic of Cyprus), and the Group is
ultimately controlled by Viatcheslav
Kantor.
The Group is not aware of any
actual or potential acquisition
by any shareholders of control
disproportionate to their equity
ownership, including acquisition under
shareholder agreements or on other
grounds.
Investor and Shareholder
Information
SHARE CAPITAL
a
b
c
d
e
a 55.00 Acronagroservice
b 30.98 Redbrick Investments S.à r.l.
c 7.82 Dorogobuzh
d 3.81
National Settlement Depository
(nominee holder)
e 2.39 Other
Acron's Share Capital Structure, %
Full Name
Share in authorised
capital as of
31 December 2020, %
Share in authorised
capital as of
31 December 2019, %
Acronagroservice* 55.00 23.27
Redbrick Investments S.à r.l. 30.98 62.71
Dorogobuzh 7.82 3.70
National Settlement
Depository (nominee holder)
3.81 7.93
Other 2.39 2.39
Total 100 100
Members of the Board of Directors
and the Managing Board
Changes in the
reporting year
Number of Acron’s ordinary shares
as of 31 December 2020
Interest in Acron’s
authorised capital, %
Alexander Popov – 19,929 0.049
Nikolai Arutyunov – – –
Vladimir Gavrikov – – –
Georgy Golukhov – – –
Alexander Dynkin – – –
Yury Malyshev – – –
Vladimir Sister – – –
Vladimir Kunitsky – 17,517 0.043
Alexei Milenkov – 790 0.002
Dmitry Balandin – – –
Dmitry Khabrat – – –
Alexander Lebedev – – –
Irina Raber – – –
Acron’s Shareholders
Information on Shares of Acron and its Subsidiaries Held by Members of Acron’s Board
of Directors and Managing Board as of 31 December 2020
*On 25 February 2021, changed its name to JSC Acron Group Entities controlled by the issuer held
7.96% shares of the Group as of 31 December 2020, and 3.78% as of 31 December 2019.
71
Trading Floors
As of 31 December 2020, Acron’s
shares were traded in roubles at the
Moscow Exchange (AKRN ticker) on
the Level 2 quotation list.
Since 2008, global depositary
receipts (GDRs) for Acron’s ordinary
shares (each ordinary share
represents ten GDRs) have been
listed at the main London Stock
In 2020, Acron’s share price went up
24%, outstripping the MOEX Index,
which increased a mere 8%.
This upward trend was supported
by a number of factors, including the
continuous stable demand for the
Group’s products, production output
expansion, and rising global prices.
In 2020, the Group paid dividends
twice, with an aggregate dividend of
RUB 432 per share, and successfully
completed three investment projects.
Read more: Mineral Fertiliser Market
Overview, Financial Overview and Acron
Board of Directors’ Report on Priority
Activities
ACRON’S SHARE PRICE IN 2020
Dynamics of Acron Shares vs MOEX Index
Dynamics of Acron Capitalisation (MOEX)
Exchange (LSE, AKRN ticker). As
of 31 December 2020, Acron GDRs
traded at the London Stock Exchange
accounted for 0.19% of Acron’s share
capital.
70%
80%
90%
100%
110%
120%
130%
140%
170
190
210
230
250
270
2.8
3.0
3.2
3.4
3.6
3.8
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
70%
80%
90%
100%
110%
120%
130%
140%
170
190
210
230
250
270
2.8
3.0
3.2
3.4
3.6
3.8
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sep 2020
Oct 2020
Nov 2020
Dec 2020
Acron shares
MOEX Exchange
RUB, bn (lhs)
USD, bn (rhs)
72
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
MOEX 2020 2019
Low price, RUB 4,486 (09 Apr 2020) 4,424 (28 Mar 2019)
High price, RUB 6,972 (09 Nov 2020) 5,098 (19 Sep 2019)
Price at year-end, RUB 5,926 4,790
Number of transactions for the year 280,340 71,852
Annual trading volume, RUB mn 16,703 3,139
Average daily trading volume, RUB mn 66.8 12.5
LSE 2020 2019
Low price, USD 7.00 (13 Jan 2020) 6.00 (10 Apr 2019)
High price, USD 8.70 (01 Jun 2020) 7.65 (28 Oct 2019)
Price at year-end, USD 8.10 7.65
Annual trading volume, USD mn 1.4 0.8
Trading in Acron’s Ordinary Shares (AKRN)
Trading in Acron’s GDRs
Acron’s Dividend Policy, approved by
the Board of Directors in December
2012, was developed to provide
shareholders with a transparent
and clear system for determining
the dividend rate and payment
procedures and to guide the Board of
Directors in making recommendations
on the dividend rate and payment
terms and procedures. According
to the Dividend Policy, Acron will
DIVIDEND POLICY
distribute at least 30% of the Group’s
IFRS net profit as dividends. The
Group intends to pay dividends at
least twice per fiscal year.
In the calendar year 2020, Acron Group
declared (paid) dividends twice.
The extraordinary general meeting
held on 3 April 2020 resolved to
allocate a portion of Acron’s profit
from previous years at a rate of
RUB 157 per ordinary share.
The Annual General Meeting held
on 29 May 2020 resolved to declare
dividends for 2019 at a rate of RUB 376
per ordinary share. Since interim
dividends of RUB 101 per share
had already been paid for 9M 2019,
the amount allocated for dividend
payment was RUB 275 per share.
73
Declared dividends were paid in the
manner and by the deadline specified
by law.
Date of General
Meeting
Period Dividends per share,
including interim, RUB
Total dividends
accrued, RUB mn
Total dividends
paid, RUB mn
29 May 2020 2019 376 15,241 15,228*
03 Apr 2020 Undistributed profit from
previous years
157 6,364 6,359
29 Nov 2019 9M 2019 101 4,094 4,091
30 May 2019 2018 135 5,472 5,468
11 Mar 2019 Undistributed profit from
previous years
130 5,269 5,266
19 Oct 2018 Undistributed profit from
previous years
40 1,621 1,620
31 May 2018 2017 185 7,499 7,493
12 Jan 2018 Undistributed profit from
previous years
112 4,540 4,536
08 Sep 2017 Undistributed profit from
previous years
235 9,525 9,518
22 Jun 2017 2016 250 10,134 10,126**
09 Sep 2016 6M 2016 155 6,283 6,278
26 May 2016 2015 180 7,296 7,291
Acron’s Dividend Payment History
* Following the payment of RUB 101 per share for 9M 2019, the Board of Directors recommended paying dividends of RUB 275 per ordinary share.
** Following the payment of RUB 155 per share for 9M 2016, the Board of Directors recommended paying dividends of RUB 95 per ordinary share.
In some cases, the Group was
unable to pay declared dividends
because neither it nor the registrar
had the address or bank details for
certain shareholders. In other cases,
a nominee shareholder returned
dividends that had been transferred
to it because it was unable to
discharge its obligation to deliver
them for reasons beyond its control.
74
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
As of 31 December 2020, the
Group had bonds worth a total
of RUB 23,617 million (at nominal
value) in circulation. Excluding
BONDS
bonds owned by the Group's
subsidiaries, the Group’s bonds
were worth RUB 23,266 million.
In 2020, the Group neither issued
new bonds nor redeemed previously
issued bonds.
Item Series 04 Series 05 Series 001 Exchange-Traded Bonds Programme
Series
-001-01
Series
-001-02
Series
-001-03
Total par value of issue,
RUB ’000
3,750,000 3,750,000 5,000,000 5,000,000 10,000,000
Bonds in circulation,
RUB ’000
2,369,962 1,752,785 4,494,271 5,000,000 10,000,000
Original placement
date
31 May 2011 31 May 2011 06 Oct 2016 06 Jun 2017 25 Oct 2019
Early redemption
(offer) date
04 Oct 2022 03 Dec 2021
Maturity date 18 May 2021 18 May 2021 24 Sep 2026 25 May 2027 21 Apr 2023
Number of coupon
periods and interest
rate
20 periods
Rate:
Coupons 1-6:
7.95%
Coupons 7-8:
10.25%
Coupons 9-10:
13.60%
Coupons 11-18:
10.20%
Coupons 19-20:
6.50%
20 periods
Rate:
Coupons 1-6:
7.95%
Coupons 7-8:
10.25%
Coupons 9-10:
13.60%
Coupons 11-18:
10.20%
Coupons 19-20:
6.50%
20 periods
Rate:
Coupons 1–8:
9.55%
Coupons 9–12:
5.90%
Coupons 13-20:
to be determined
by the issuer
20 periods
Rate:
Coupons 1–9:
8.60%
Coupons 10–20: to
be determined by
the issuer
7 periods
Rate:
Coupons 1–7:
7.25%
Key Details on Acron’s Traded Bonds as of 31 December 2020*
* Bonds are traded at the Moscow Exchange on the Level 2 quotation list.
75
On 11 June 2020, Fitch Ratings
confirmed Acron Group’s Long-Term
Foreign-Currency Issuer Default
Rating and Long-Term Local-Currency
Issuer Default Rating as BB– with
Stable Outlook.
CREDIT RATINGS
On 20 April 2020, Moody’s Investor
Service confirmed the Group’s
Long-Term Foreign-Currency
Corporate Rating as Ba3 with
Stable Outlook.
On 22 December 2020, Expert RA
Rating Agency confirmed Acron
Group’s Non-Financial Company
Creditworthiness Rating as ruA+
with Stable Outlook.
Date of assignment/updating Credit rating/outlook
11 Jun 2020 Long-Term Issuer Default Rating BB–/Stable
11 Jun 2020 Long-Term Local-Currency Issuer Default Rating BB–/Stable
11 Jun 2020 Short-term Issuer Default Rating
Date of assignment/updating Credit rating/outlook
20 Apr 2020 Long-Term Foreign-Currency Corporate Rating Ba3/Stable
20 Apr 2020 Probability of Default Rating Ba3-PD/Stable
20 Apr 2020 Local-Currency Unsecured Debt Rating Ba3/Stable
Date of assignment/updating Credit rating/outlook
22 Dec 2020 Non-Financial Company Creditworthiness Rating ruA+/Stable
Fitch Ratings
Moody’s Investor Service
Expert RA
76
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Acron is committed to a stringent
transparency policy. The Group’s
information policy is founded on
prompt and regular disclosure of
accurate information about the Group’s
activity, open access to information,
and a reasonable balance between
transparency and protection of trade
secrets and insider information.
The Group complies with all legal
requirements for information disclosure
governed by the Federal Law On the
Securities Market and the Corporate
Governance Code recommended by the
Bank of Russia. The Group implements
the Regulation on Information Policy
(https://www.acron.ru/en/investors/
corporate-governance/corporate-
documents-acron/the-current-edition/),
SHAREHOLDER RELATIONS AND
INFORMATION DISCLOSURE
approved by the Board of Directors
in 2011, which establishes the basic
principles of information disclosure.
Acron Group informs interested parties
in a timely manner by releasing its
news to news agencies and media in
accordance with the requirements of
applicable laws and stock exchange
listing rules, publishing information on
the Group’s website in the Information
Disclosure section (https://www.
acron.ru/en/investors/disclosure/
acron-disclosure/) and on the Interfax
website (http://www.e-disclosure.
ru/portal/company.aspx?id=357),
and responding to questions from
journalists, professional security
market participants, and other parties.
Because its securities are exchange-
traded, Acron must comply with
additional information disclosure
requirements about its operations.
The Group releases notifications
on its financial and operating
performance on the London
Stock Exchange website. Acron is
careful to disclose any important
information to all shareholders and
analysts simultaneously under the
UK Financial Conduct Authority
principles of openness and
transparency.
In 2020, Acron won the award for
Best Corporate Website Design and
Navigation as part of a Moscow
Exchange competition.
CONTACT INFORMATION FOR INVESTORS
Ilya Popov
Head of Acron Investor Relations
Team, Moscow
Phone: +7 495 745 77 45 (ext. 5252)
Email: ipopov@acron.ru
GDR Programme Depositary
Bank
Deutsche Bank Trust Company
Americas
Depositary Receipts Department
60 Wall Street, New York, NY 10005,
USA
Corporate Actions, New York:
+1 (212) 250-15-04
GDR Issue Department, London /
Broker Services Group, London:
+ 44 (0) 207 547-65-00
DR Department, Moscow:
+7 (495) 642-06-16
Nadezhda Bashkirtseva
Head of Acron Securities Circulation
Division, Veliky Novgorod
Phone: +7 816 299 67 63
Email: nbashkirceva@vnov.acron.ru
77
Corporate
Governance
Statement by the Board of
Directors on Compliance with
the Principles of the
Corporate Governance Code
The Company is committed to
complying with the stringent
corporate governance standards
established by legislative authorities,
the Moscow Exchange, and the
London Stock Exchange for public
companies. The Company designed
its corporate governance system in
line with best practices to meet the
interests of all stakeholders.
The Company’s transparency policy,
which includes timely disclosure of
complete, up-to-date, and reliable
information about its activities, is
the key to building trust-based
relationships between the Company
and its partners, shareholders, and
investors. The opportunity for all
stakeholders to make informed
decisions makes the Company more
attractive for investors and positively
affects share value.
In 2020, the Company adapted
swiftly to the coronavirus pandemic,
including in the field of corporate
governance. Following the Bank
of Russia’s recommendations,
set out in Information Letter No.
IN-06-28/48 dated 3 April 2020
On Holding General Shareholder
Meetings in 2020, the Company
held its Annual General Meeting
and an extraordinary general
meeting remotely. The Company had
already introduced remote voting
by electronic ballot in 2019, and
shareholders appreciated the option
during the pandemic. All Board of
Directors meetings were also held
remotely.
These measures allowed the
Company to minimise the risk
of coronavirus infection for its
employees and the registrar,
individual shareholders, and Board
members.
On 1 December 2020, the Moscow
Exchange transferred the Company’s
ordinary shares to its Level Two,
which implies compliance with
strict requirements for corporate
governance and information
disclosure. The Company’s
securities were listed at Level One
for many years, and it built out
rigorous corporate governance
standards during that time that it
will continue to follow.
The Corporate Governance Code
recommended by the Bank of
Russia for use by public joint stock
companies is the foundation on
which the Company’s corporate
governance system is based.
Since the Code is voluntary, the
degree to which the Company
applies it, along with best
corporate governance practices,
demonstrates its motivation
to increase its investment
attractiveness. The Company
periodically analyses the
feasibility of putting additional
recommendations from the
Corporate Governance Code
into practice, with a strong
preference for implementing
recommendations unless there is a
serious reason to wait.
78
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
A brief overview of the most
important elements of the current
corporate governance model and
practices is available in the section
entitled Corporate Governance
System. In the reporting period,
the Board of Directors conducted
an annual assessment of Acron’s
compliance with the principles and
recommendations of the Corporate
Governance Code; the key details
of this assessment are presented
below.
Methodology used to
assess the Company’s
compliance with the
principles of corporate
governance established by
the Corporate Governance
Code
The Company assessed its
compliance with corporate
governance principles within the
scope recommended by the Bank
of Russia in its information letter
No. IN 06-52/8 dated 17 February
2016 On Disclosure of the Report
on Compliance with Principles and
Recommendations of the Corporate
Governance Code in the Annual Report
of a Public Joint Stock Company.
The Company used the following
compliance criteria (assessment
criteria) recommended by the Bank
of Russia to assess its compliance
with the Corporate Governance Code.
In cases where the Company met all
criteria recommended by the Bank
of Russia, it was reported that the
principle under assessment is in
compliance. If the Company did not
meet all the criteria recommended
for a principle, it was reported that
this specific principle is in partial
compliance or not in compliance. In
such cases, the Company reported
on which criteria were not met and
provided a detailed description of
the key reasons, factors, and/or
circumstances for each failure to meet
a criterion. When required, the report
provides a description of corporate
governance mechanisms and
instruments used by the Company
instead of those recommended by the
Corporate Governance Code.
Sources of information about the
Company’s corporate governance
system and practices used for rating
purposes are: the Company’s Charter
and other internal regulations
governing corporate relations;
bylaws governing the legal status
and operation of the Company’s
business units and officers; minutes
of meetings of the Company’s
management bodies; information
the Company discloses under
corporate and security laws, and
any other information disclosed by
the Company on its website; and
comments (interviews) by members
of the Company’s management
bodies, other officers, the Secretary
of the Company’s Board of Directors,
and the Company’s Corporate
Secretary.
79
Securing shareholder rights and equal conditions for
their exercise
Results of the assessment of the Company’s compliance with
the corporate governance principles established by the Corporate Governance Code
The Code principles related to:
Effective functioning of the Company’s Board of
Directors
Effective functioning of the
Corporate Secretary
System of remuneration for members of
governing bodies and key executives
Operating effective risk management and
internal control systems
Disclosing corporate information and
information policy
Taking material corporate actions
Summary of the Company’s compliance with the
corporate governance principles established by the
Corporate Governance Code
a
Compliance
d
Partial compliance
e
Non-compliance
Assessment of compliance, %
a
e
a
a
d
e
a
a
d
e
a
d
e
a
d
a 92
d 0
e 8
a 100
d 0
e 0
a 64
d 14
e 22
a 100
d 0
e 0
a 80
d 10
e 10
a 60
d 20
e 20
a 71
d 29
e 0
80
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
The results of the assessment show
that, on average, the Company
complies with 75% of the principles
assessed, partially complies with
11% of the principles, and is not in
compliance with 14% of the principles.
In all, the Company complies or
partially complies with up to 86%
of the principles recommended by
the Bank of Russia for assessment.
The Company’s highest compliance
rates are observed in the areas of
disclosing corporate information and
information policy and operating
effective risk management and
internal control systems. The lowest
level of compliance is seen in the area
of taking material corporate actions.
Detailed information about the
Company’s compliance with these
corporate governance principles is
presented in Appendix 4 in the form of
a report, as recommended by the Bank
of Russia.
According to the Board of Directors,
these results confirm the Company’s
commitment to gradually applying
the best corporate governance
practices recommended by the Code.
The majority of the Code’s principles
are already applied in full or in part
in the Company’s model of corporate
governance. In most instances when
the Company has not implemented
some of the recommendations,
it was due to existing internal
traditions of intra-corporate relations
and administrative policies. For
instance, the Company opted not to
apply some of the recommendations
of the Corporate Governance Code
because it needed to maintain
sufficient management flexibility
to maximise the Company’s profits.
The overregulation of corporate
relations and hasty application of all
the recommendations without due
consideration for the actual needs of
the Company and its shareholders
could significantly complicate
corporate governance and hinder
important decision-making in
response to new external challenges.
The Company will continue to
perform an annual assessment of
the advisability of opting to comply
with certain recommendations of the
Code that are not already applied,
and to make decisions about their
future application after analysis of
all positive and negative potential
consequences. The Board of Directors
believes that full compliance with
all principles and recommendations
of the Code cannot be the ultimate
goal of a commercial corporation
because the Company and its
shareholders are mainly focused on
the development of the Company’s
business and generation of profit.
When the Board of Directors considers
improving intra-corporate relations
in the area of corporate governance
(including taking into account
recommendations of the Corporate
Governance Code), it will primarily
take into account the real current
needs of the Company to implement
certain instruments recommended by
the Code, applicable legal regulations,
shareholder expectations, and
any feedback from the Company’s
investors.
The Board of Directors assures
stakeholders that the Company will
continue to improve its model of
corporate governance in order to
gain and strengthen the trust of its
shareholders and other investors,
including by means of the instruments
recommended by the Corporate
Governance Code.
The Company’s plan of action
and measures to improve its
corporate governance model
and practices
In 2021, the Company plans to
continue to amend its corporate
governance bylaws to align them
with current laws.
Acron’s Board of Directors
81
Key Events of the
2020 Corporate Year
82
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Board of Directors recommends
paying 2019 cash dividends on
Acron ordinary shares at the rate of
RUB 376 per share. After previously
paid interim 9M 2019 dividends of
RUB 101 per share, the Company will
pay dividends of RUB 275 per share
(RUB 11,147 million)
Acron’s shareholders approve
dividends as recommended by the
Board of Directors
Board of Directors approves the list of BoD nominees
for voting at the Annual General Meeting
5 MARCH
Board of Directors recommends allocating
RUB 6,364 million for dividends (RUB 157 per share)
12 MARCH
Acron posts consolidated audited 2019
IFRS Financial Statements
23 MARCH
3 APRIL
7 MAY
29 MAY
30 APRIL
Acron posts 2019 Draft
Annual Report
Acron’s shareholders approve dividends as
recommended by the Board of Directors
and the Regulation on Acron’s Board
of Directors as amended and passed
resolutions on other agenda items
Acron releases unconsolidated audited
2019 RAS Statements
27 MARCH
Report
on Corporate Governance
Ensuring high-quality corporate
governance is a top priority for
Acron (the ‘Company’). The Company
is committed to aligning its
management structure and internal
procedures with applicable laws and
global best practices.
Transparent and fair distribution of
the Company’s income, specifically
through dividends, is one of the
direct consequences of strong
corporate governance. In 2020, the
general meeting approved a Board
recommendation to pay dividends
twice: in April from the retained
earnings of previous years and in
May for 2019. With this move, the
Company resumed paying dividends
at least twice a year as stipulated by
the current Dividend Policy. Payment
of interim dividends subject to
sufficient profit and absent a budget
deficit, aligns with the interests of
shareholders and the Company as a
whole. Payment of interim dividends
and traditional annual dividends
allows shareholders to receive
dividend income more often. An
additional benefit is the reduction
in price volatility during the period
between dividend declaration and
payment. It is also easier for the
Company to pay dividends in two or
more stages rather than as a lump
sum, which can be significant. All of
these factors eventually affect the
Company’s market capitalisation and
help investors evaluate the business
more fairly. Subject to sufficient cash
flow, the Board of Directors intends to
continue paying interim dividends of
at least 30% of the net profit posted
in its consolidated IFRS financial
statements, as set forth by the current
Dividend Policy.
The Board of Directors expects that
the Company’s efforts to maintain
and improve corporate governance
practices will serve as a clear sign for
its shareholders and partners, as well
as for the investment community at
home and abroad, that the Company
manages and monitors its business in
accordance with the most advanced
standards.
Acron’s Board of Directors
83
The Company believes that an
effective corporate governance
system is one of the most important
factors in creating a relationship of
trust with shareholders and building
a productive partnership with the
investment community and other
stakeholders.
The Company’s corporate
governance system is subject to legal
requirements that regulate corporate
relations at public companies, the
listing rules of the Moscow Exchange
and the London Stock Exchange, the
recommendations of the Corporate
Governance Code, and international
corporate governance standards.
The key elements of the Company’s
corporate governance model include
the general meeting, the Board of
Directors with its committees, the
Managing Board, the sole executive
body, and the Company’s business
units performing internal control and
audit with powers and authorities that
are clearly delineated and formalised
by the Charter and the Company’s
bylaws.
The Corporate Secretary, appointed
by the Board of Directors, monitors
the Company’s compliance with the
applicable requirements of corporate
law and the provisions of the Charter
and bylaws, ensuring that the rights
of the Company’s shareholders
are exercised and their legitimate
interests are pursued.
The Company provides additional
guarantees of the accuracy of its
accounting and financial statements
prepared under Russian and
international standards by engaging
an external (independent) auditor that
is chosen by the general meeting.
Key Principles of Corporate
Governance
Following the guidance of the best
practices in corporate governance
and the recommendations of the
national Corporate Governance Code,
the Company always complies with
the following key principles, which are
intended to ensure that the interests
of the Company’s shareholders are
respected and that a reasonable
balance is maintained between the
powers of managing and oversight
bodies:
• The Company ensures that
shareholders have a real opportunity
to exercise their rights related to their
interest in the Company.
• The Company ensures the equal
treatment of shareholders owning an
equal number of shares of the same
type (category), including minority
and foreign shareholders.
• The Board of Directors performs
strategic management and effective
Corporate
Governance System
control over the Company’s executive
bodies. Members of the Company’s
Board of Directors are accountable to
its shareholders.
• The Company’s executive bodies
manage its day-to-day business in
order to ensure that the Company
develops sustainably over the long
term for the benefit of shareholders.
The Company’s executive bodies are
accountable to its Board of Directors
and shareholders.
• Timely disclosure of complete and
accurate information about the
Company required for the Company’s
shareholders and investors to make
informed decisions
• Effective control over the Company’s
financial and business activity in order
to protect shareholders’ rights and
legitimate interests
• Social responsibility and respect for
the rights and legitimate interests of
other related parties.
Corporate Governance
Developments in the Reporting
Period
The Company is committed to
continual improvement of its
corporate governance system. In 2020,
the Company made further efforts to
align its corporate governance model
and practice with listing rules and
the recommendations of the national
Corporate Governance Code approved
by the Bank of Russia.
84
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
CORPORATE GOVERNANCE MODEL
Auditor’s report
Elected byAccountable to
Functional reporting line Functional reporting line
Approved by
Administrative
reporting line
Drafting and evaluating
the results
Accountable to
Administrative
reporting line
Communication
Appointed by Board of
Directors resolution
Appointed by Board of
Directors resolution
Supreme governing body
Audit of financial
statements (accounts)
General Meeting
Board of Directors
Executive Bodies
Corporate Secretary
Strategic Planning
and Corporate
Governance
Committee
Nomination and
Remuneration
Committee
Audit
Committee
Managing Board
External Auditor
Internal Audit
Department
CEO (PRESIDENT)
Determining strategy and
supervising executive
bodies
Audit of risk management
and internal control
Control over compliance with
corporate procedures
Sole executive body
Collegial executive body
85
MANAGEMENT STRUCTURE
General Meeting
The general meeting is the
Company’s supreme governing
body, which acts within the scope
of authority established by Russian
law and is convened by the Board
of Directors at least once a year.
Resolutions of the general meeting
are binding for the Board of Directors,
Managing Board, Chief Executive
Officer, and all employees of the
Company. Its scope of authority
includes, but is not limited to, the
following key matters:
• Election of the Board of Directors
• Approval of the auditor, Annual
Report and annual financial
statements (accounts)
• Distribution of the Company’s profit
(including payment (declaration) of
dividends) and loss based on the
results of the reporting year.
In accordance with its amended
Charter, the Company informs its
shareholders about upcoming general
meetings by publishing a notification
on its official website at https://www.
acron.ru/en/. The Company discloses
on its website other materials
(information) provided to shareholders
during preparation for a general
meeting.
In order to ensure that shareholders have equal access to information,
the Company releases information provided to persons entitled to participate
in a general meeting in both Russian and English on its corporate website.
Acron
Extraordinary
General Meeting
held on 3 April
2020
The extraordinary general meeting resolved to pay
dividends on Acron’s outstanding ordinary shares from the
retained earnings of previous years and established the
record date for persons entitled to receive dividends.
The Board of Directors proposed all agenda items and draft
resolutions.
Acron Annual
General Meeting
held on 29 May
2020
The Annual General Meeting approved the 2019 Annual
Report, financial statements, profit and loss distribution,
and the Regulation on Acron’s Board of Directors as
amended, announced dividends on the Company’s
outstanding ordinary shares for 2019 and set the record
date for persons entitled to receive dividends, elected
the Board of Directors, approved auditors to confirm the
RAS and IFRS financial statements, and resolved to pay
remuneration and reimbursement to members of the Board
of Directors.
The Board of Directors proposed all agenda items and draft
resolutions.
The Company’s shareholders proposed nominees to the
Board of Directors.
Information on Acron General Meetings
The notice on convening a meeting
and materials (information) provided
to shareholders in the course of
preparation for a general meeting are
also provided to the Company’s share
register holder for sending to the
nominee holder (central depository)
registered in the Company’s share
register.
In the reporting period, the Company
held two general meetings: one
annual and one extraordinary.
PJSC Acron Charter
Regulation on
PJSC Acron General
Meeting
86
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Alexander Popov
1969
Chairman of the Board of Directors
Senior Vice President
Vladimir Gavrikov
1960
Deputy Chairman of the Board
of Directors
Executive Director
Board of Directors
Member of Acron's Board of Directors since 2008
Membership in Board of Directors Committees
Member of the Strategic Planning and Corporate Governance Committee.
Education
Finance Academy under the Government of the Russian Federation.
Professional Experience
Alexander Popov has served as Chairman of the Board of Directors at Moscow
Stud Farm No. 1 since 2018 and MC Partomchorr since 2014. He was named
Chairman of the NWPC Board of Directors in 2013 and Chairman of the VPC Board
of Directors in 2012. Mr Popov has served as Chairman of the Board of Directors at
Acron since 2008 and at Dorogobuzh since 2010. He was appointed Senior Vice
President of both companies in 2007. Mr Popov joined the Company in 1996 and
served as Head of the Internal Audit Division under the Board of Directors, Head
of the Audit and Legal Department, and Vice President for Corporate Construction
and Financial Control.
Interest in the issuer’s authorised capital/percentage of the Company’s ordinary
shares: 0.049%
Member of Acron's Board of Directors since 2006
Membership in Board of Directors Committees
Member of the Strategic Planning and Corporate Governance Committee.
Education
Novomoskovsk branch of the Mendeleev University of Chemical Technology of
Russia.
Professional Experience
Since 2008, Vladimir Gavrikov has served as Chairman of the Novgorod Region
Union of Industrialists and Entrepreneurs, a regional association of employers.
He was appointed Acron’s Executive Director and became a member of the
Novgorod Regional Duma in 2005. He joined Acron in 1983 and served as Head
of the Office for Social and Cultural Programmes, Deputy Head of the Social
Development Office, Head of the Social Development Office, social programmes
supervisor, and Deputy CEO for HR and Social Programmes.
No interest in the issuer’s authorised capital/does not hold the Company’s
ordinary shares
Regulation on
PJSC Acron Board of
Directors
87
Vladimir Sister
1945
Independent Member of the
Board of Directors
Georgy Golukhov
1960
CEO Advisor
Member of Acron's Board of Directors since 2016
Education
Pirogov Second Moscow State Medical Institute.
Professional Experience
Since 2016, Georgy Golukhov has served as advisor to the Chairman of the
JSC Megapolis Trading Company Board of Directors. Since 2014, he has served
as CEO of Municipal Clinical Hospital No. 31, Moscow Health Department. In
2012-2014, he was minister and Head of the Moscow Health Department.
Mr Golukhov was a member of the Board of Directors of Pharmstandard
in 2011-2018. In 1988-2012, he served as chief physician at Municipal Clinical
Hospital No. 31, Moscow Health Department.
No interest in the issuer’s authorised capital/does not hold the Company’s
ordinary shares
Member of Acron’s Board of Directors since 2015
Membership in Board of Directors Committees
Member of the Audit Committee and the Nomination and Remuneration
Committee.
Education
Dzerzhinsky Institute of Chemical Technology in Dnepropetrovsk; Doctor of
Science (Engineering), Professor, corresponding member of the Russian Academy
of Sciences, full member of the Russian Academy of Natural Sciences and the
Russian Academy of Engineering (Academician).
Professional Experience
Since 2016, Vladimir Sister has chaired the Chemical Technology Processes and
Equipment Department at Moscow Polytechnic University. He has served as CEO
of the National Innovation Company since 2015. Since 2003, Mr Sister has been a
member of the editorial board of the journal Chemical Technology. In 2015-2016, he
chaired the Chemical Technology Processes and Equipment Department at Moscow
State University of Mechanical Engineering (MAMI). In 2007-2015, Mr Sister chaired
the Department of Engineering Ecology and Alternative Energy Sources at MAMI.
No interest in the issuer’s authorised capital/does not hold the Company’s
ordinary shares
Nikolai Arutyunov
1964
Senior Independent Member
of the Board of Directors
Member of Acron’s Board of Directors in 2008-2010 and since 2016
to present
Membership in Board of Directors Committees
Chairman of the Audit Committee and the Nomination and Remuneration
Committee.
Education
Lomonosov Moscow State University.
Professional Experience
In 2019, Nikolai Arutyunov headed the Department for Sales Financial Support
at Russian Helicopters. He served as advisor to the CEO of Hendel LLC in
2017-2018. In 2016-2017, Mr Arutyunov served as Executive Director and Head of
the Institutional Client Service Directorate at URALSIB Management Company,
a member of the Board of Directors of Geotech Seismic Services, and a member
of the Board of Directors of IG Seismic Services Plc. In 2013-2016, he served as
Managing Director and Head of the Sales Finance Support Centre at Sukhoi Civil
Aircraft. In 2011-2012, Mr Arutyunov was Executive Director at UBS Investment
Bank. In 2011, he served as Managing Director and Head of Research at NCH
Advisors Inc. investment fund.
No interest in the issuer’s authorised capital/does not hold the Company’s
ordinary shares
88
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Yury Malyshev
1939
Independent Member of the Board of
Directors
Alexander Dynkin
1948
CEO Advisor
Member of Acron’s Board of Directors since 2008
Membership in Board of Directors Committees
Chairman of the Strategic Planning and Corporate Governance Committee.
Education
Moscow Aviation Institute, Doctor of Science (Economics), full member of the
Russian Academy of Sciences.
Professional Experience
Since 2018, Mr Dynkin has served as the chairman of the council on priority
areas of scientific and technological development for the Russian Federation as
part of the Russian Presidential Scientific and Educational Coordination Council
on national priorities in scientific and technological development (the Russian
Academy of Sciences). In 2014-2016, Alexander Dynkin was an independent
member of the Board of Directors at Russian Helicopters. In 2013-2014, he served
as an independent member of United Engine Corporation. In 2012-2018, Mr
Dynkin was a member of the Russian Presidential Economic Council. Since 2012,
he has been a member of the Russian Presidential Commission for Strategic
Development of the Fuel and Energy Sector and Environmental Security and
chairman of the Russian Pugwash Committee of the Russian Academy of
Sciences. In 2012-2016, he sat on the Expert Advisory Council under the Chair
of the Russian Federation Council. He has been involved with the Russian
International Affairs Council, a non-profit partnership, serving as a member of the
Research Board since 2011, chairman of the Research Board in 2011-2016, and a
member of the Board of Trustees since 2012. Mr Dynkin has served as a member
the Presidium of the Russian Academy of Sciences since 2010 and as an advisor
to Acron’s CEO since 2009. In 2008-2018, he was a member of the Presidium of
the Russian Presidential Council on Science and Education. Since 2008, he has
been a member of the academic council at the Security Council of Russia. Since
2007, he has served as a member of the academic council at the Russian Foreign
Ministry. Between 2006 and 2016, Mr Dynkin served as Director of the Institute of
World Economy and International Relations at the Russian Academy of Sciences,
and he was named its President in 2016. He chaired the Economy and Finance
Department at the International University in Moscow from 2001 to 2017.
No interest in the issuer’s authorised capital/does not hold the Company’s
ordinary shares
Member of Acron’s Board of Directors since 2015
Membership in Board of Directors Committees
Member of the Audit Committee and the Nomination and Remuneration
Committee.
Education
Kemerovo Mining Institute, Doctor of Science (Engineering), Professor, full
member of the Russian Academy of Sciences.
Professional Experience
In 2017-2019, Yury Malyshev served as a member of ROSGEO Board of Directors.
In 2010-2015, he served as Director of Vernadsky State Geological Museum of
the Russian Academy of Sciences, and he has been its President since 2015.
Mr Malyshev has been an independent member of the Board of Directors at
Mechel since 2013. Since 1993, he has served as President of the Mining Science
Academy, a transregional non-governmental organisation. In 2010-2017, he
chaired the Board of Directors of the Integrated Shaft Constructing Company
Soyuzspetsstroi. In 1999-2013, he served as President of Russia’s Mining
Industrialists, a non-profit partnership, and has been its Honorary President and a
member of the Supreme Mining Council since 2013.
No interest in the issuer’s authorised capital/does not hold the Company’s
ordinary shares
89
FOUNDING PRINCIPLES AND STRUCTURE OF THE
BOARD OF DIRECTORS
The Board of Directors is the
Company’s standing collegial
governing body that controls its
executive bodies and performs
strategic management of its
business. The Board of Directors also
exercises other functions assigned to
it by law and the Company’s Charter.
The Board of Directors is elected by
and accountable to the Company’s
general meeting. Information
about the structure and operation
of the Board of Directors and its
committees is provided to the
Company’s shareholders in annual
reports and disclosed on the
Company’s website.
In accordance with its scope of
authority set forth in the Company’s
Charter, the Board of Directors
is responsible for the following
matters concerning the Company’s
management:
• Determining priority segments
for the Company’s business
and development strategy and
monitoring their implementation
by executive bodies
• Establishing risk management
and internal control policies and
evaluating their effectiveness
• Establishing the internal audit
policy and monitoring compliance
with it
• Approving the Dividend Policy
and making recommendations on
dividend payment
• Approving the Company’s
information policy and monitoring
compliance with it
• Evaluating the effectiveness of
the corporate governance system
and adopting resolutions to
improve the Company’s corporate
governance practices
• Approving major transactions and
related-party transactions
• Other matters under the
Company’s Charter and applicable
Russian laws
A critical function of the Board of
Directors is to establish effective
executive bodies and monitor their
operation. In order to perform this
function, the Company’s Charter
provides the Board of Directors with
the following powers: establishing
the Company’s executive bodies
and terminating their powers ahead
of schedule; approving the terms
and conditions of the employment
agreement with the person serving
as sole executive body and with
members of the collegial executive
body, including remuneration
and other payments, determining
requirements for their experience,
setting their remuneration; and
representing the Company’s
interests and exercising its rights
as employer in relations with the
person acting as the sole executing
body.
The Regulation on Acron’s Board of
Directors comprehensively defines
the rights and obligations of its
members, the powers of the Chair
and Senior Independent Director,
and the procedure for convening and
holding Board meetings.
The principles for forming the Board
of Directors are set forth in the
Company’s Charter and bylaws and
comply with applicable corporate
laws, listing rules applicable to the
Company, and the recommendations
of the Russian Corporate Governance
Code. For instance, to ensure that
the Board of Directors effectively
supervises management and works
to prevent conflicts of interests:
• No more than one-quarter of
the Board of Directors members
may also be members of the
Company’s executive bodies, and
no member of an executive body
may be elected Chair of the Board
of Directors.
• The Board of Directors includes at
least three independent members
who are not affiliated with the
Company, the government,
the Company’s competitors,
substantial shareholders, or other
significant counterparties.
The current Board of Directors
was elected at the Annual General
Meeting held on 29 May 2020.
The Board of Directors includes
the following members: Alexander
Popov (Chairman), Vladimir Gavrikov
(Deputy Chairman), Nikolai Arutyunov
(Senior Independent Director), Yury
Malyshev (Independent Director),
Vladimir Sister (Independent
Director), Georgy Golukhov, and
Alexander Dynkin.
The Board of Directors qualified three
of the seven members elected by
the Annual General Meeting in May
2020 as independent directors. This
means that in 2020, the number of
independent directors on the Board
of Directors remained at the record
90
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
BOARD OF DIRECTORS PERFORMANCE REPORT
high level achieved from 2015 to
2018. Further information about
independent directors and their role
on the Board of Directors is provided
below in the correspondent section.
As of 31 December 2020, Acron’s
Board of Directors included three
independent directors and four
non-executive directors who were
not members of the Company’s
executive bodies.
a
d
a 3 Independent Directors
d 4 Non-executive Directors
Board of Directors Structure (number of people)
7 7
members
3434
matters
13 13 meetings
The Board of Directors has
The Board held
and addressed
• Determining the Board’s position
on agenda items for the Company’s
general meetings
• Convening annual and
extraordinary general meetings,
considering proposals and
approving general meeting
agendas and documents,
regulating the preparation and
holding of general meetings, and
appointing the meeting secretary
• Reviewing 2019 annual financial
statements (accounts)
• Considering recommendations on
profit and loss distribution, including
dividend distribution for 2019
• Considering recommendations on
payment of dividends from Acron’s
retained earnings of previous years
• Considering recommendations
on payment of remuneration and
reimbursements to the members
of the Board of Directors
• Considering Acron’s 2019 Annual
Report
In 2020, Acron’s Board of Directors
held 13 meetings (all were absentee
votes), addressed 34 matters, and
passed 34 resolutions.
In 2020, Acron’s Board of Directors
addressed the following matters:
• Approving nominees to the Board
of Directors
• Selecting auditors for the Company
• Electing the Chairman and Deputy
Chairman and appointing a
Secretary for the Board of Directors
• Assessing Board members’
compliance with independence
criteria and electing the Senior
Independent Director
• Establishing the sole executive
body and collegial executive body,
approving the concurrent service
of members of executive bodies
in management bodies of other
organisations
• Forming committees of the Board
of Directors
91
• Considering the auditor’s report
• Approving the report on the
Company’s compliance with the
Corporate Governance Code
• Approving related-party
transactions
• Considering the report on Acron’s
related-party transactions in 2019
• Considering priority activities for
Acron
• Considering the Company’s
auditor fee
Independence Board of
Directors
Audit
Committee
Strategic Planning
and Corporate
Governance Committee
Nomination
and Remuneration
Committee
Alexander Popov 13/13 5/5
Nikolai Arutyunov
13/13 3/3 4/4
Vladimir Gavrikov 13/13 5/5
Georgy Golukhov 13/13
Alexander Dynkin 13/13 5/5
Yury Malyshev
13/13 3/3 4/4
Vladimir Sister
13/13 3/3 4/4
Attendance at Meetings of the Board of Directors and Board Committees
• Approving the terms and
conditions of the supplementary
agreement to the register
maintenance agreement with
Acron’s registrar
• Approving the terms and
conditions of the agreement
with the Acron’s Registrar on
performing the functions of a
counting commission at the
Company’s general meetings
• Considering a draft Regulation
on Acron’s Board of Directors as
amended.
Information on Changes to
Board Members’ Stakes in
Acron’s Authorised Capital and
Ownership of the Company’s
Ordinary Shares
In the reporting period, members of the
Board of Directors did not execute any
transactions to acquire or dispose of the
Company’s shares. There were no changes
to their stakes in Acron’s authorised capital
or ownership of the Company’s ordinary
shares. Information on shares of Acron
and its subsidiaries held by members of
Acron’s Board of Directors is available in
the Investor and Shareholder Information
section of this Annual Report.
92
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
INDEPENDENT DIRECTORS
Independent directors play a
special role in ensuring objective
assessment by the Board of Directors
of the Company’s state of affairs and
outlining ways to further its business
strategies.
For this reason, the Company
carefully examines the expertise of
nominees proposed by shareholders
for the Board of Directors and strictly
applies the independence criteria.
The Company assesses a nominee’s
independence using both the
Moscow Exchange listing rules and
the stricter recommendations of the
Corporate Governance Code.
Acron’s Board of Directors
Nomination and Remuneration
Committee conducts a preliminary
assessment of nominees’
compliance with independence
criteria and submits its finding based
on the results of the assessment.
The final resolution regarding the
independence of an elected member
of the Board of Directors is adopted
at a Board of Directors meeting with
due consideration for the Nomination
and Remuneration Committee’s
finding.
Acron’s Board of Directors currently
has three independent directors:
Nikolai Arutyunov, Yury Malyshev,
and Vladimir Sister, each of whom
met all the criteria of the Moscow
Exchange listing rules and the
Russian Corporate Governance Code.
In 2020, Nikolai Arutyunov signed
a declaration attesting to his
independence as a nominee to/
member of the Board of Directors.
At its meeting on 1 June 2020,
the Company’s Board of Directors
resolved to recognise Mr Arutyunov
as an independent member of the
Board of Directors.
The independent directors on
the Board of Directors represent
a well-balanced combination of
experience, knowledge, and business
proficiency. Yury Malyshev and
Vladimir Sister have the significant
managerial expertise required for
the Company’s business; they
know the industry well and have
specific work experience in the
segments where the Company and
its subsidiaries operate. Nikolai
Arutyunov has experience working
with the Russian and international
investment community, which is
very important for an independent
director, and he has knowledge and
skills in preparing and analysing
financial statements (accounts) and
consolidated financial statements.
The experience of serving on the
Board helps independent directors
gain comprehensive knowledge
about significant matters and
complex issues (risks) affecting the
Company’s business. They also have
time to access complete information
about the corporate governance
system, the risk management
system, internal control, and the
distribution of responsibilities
between the Company’s executive
and other bodies.
Under the Company’s bylaws, a
member of the Board of Directors
qualified as an independent director
must refrain from actions that may
cause them to lose independence. An
independent director also must notify
the Nomination and Remuneration
Committee immediately about any
circumstances that may affect their
independence. The Company is
required to disclose an independent
director’s loss of independent status
when that fact is confirmed by the
Nomination and Remuneration
Committee. In the reporting year,
none of the independent directors
lost their status.
Because the Company has a
sufficient number of independent
directors on the Board, the
Nomination and Remuneration
Committee and the Audit Committee
consist solely of independent
directors, which is consistent with
the best practices in corporate
governance. This means that
both committees are able to
independently determine their work
plans and develop agendas on the
most pressing issues without any
influence by management.
In the reporting year, the Board’s
committees consisting of
independent directors held seven
meetings (Audit Committee:
three meetings, Nomination and
Remuneration Committee: four
meetings). In 2020, these committees
reviewed management reports on
the following issues: the Company’s
compliance with applicable laws
and listing rules of Russian and
foreign stock exchanges; the
Company’s practice of incentives and
professional development for key
executive staff; and the Company’s
practice of applying the Corporate
Governance Code and counteracting
corruption. These committees also
discussed the following matters: the
effectiveness of the Company’s risk
management and internal control
system; IT resource efficiency, IT
risk management, and measures to
mitigate IT risks; defining criteria to
select nominees for management
and control bodies and assessing
nominees; and other matters.
Acron’s independent directors are
proactive on the Board of Directors
and its committees, contributing
objective opinions on matters related
to corporate governance and helping
the Board reach well-balanced
decisions that take into account
the interests of all shareholders,
regardless of the size of their stake.
Recognising the important role
independent directors play in
improving corporate governance, the
Company follows the internationally
recognised practice of electing a
Senior Independent Director.
Declaration by Candidate/
Director Acknowledged as
Independent
93
In reporting period, Nikolai Arutyunov
served as the Senior Independent
Director by resolution of the Board of
Directors.
The Company continues to pursue
the vector of corporate governance
improvements it has outlined for
itself. The practice of electing a
Senior Independent Director was
adopted previously in response to
recommendations of the Corporate
Governance Code, and it was
formalised in the Regulation on
the Company’s Board of Directors,
including a description of the
Senior Independent Director’s role
in coordinating the efforts of the
independent directors and cooperating
with the Chair of the Board of Directors
in order to develop resolutions on
how the Board can function most
effectively. This Regulation also
directly states the powers of the
Senior Independent Director, including
holding meetings with independent
directors regarding matters that
require separate opinions (positions)
by the independent directors.
Additionally, the Regulation gives
the independent directors and other
directors the right to request and
receive additional information they
deem necessary about the Company
and legal entities controlled by the
Company.
The Company appreciates the
performance of its independent
directors in the reporting year and
will continue providing independent
directors with the resources they need
to carry out their mission, including
through the assignment of additional
powers based on actual needs.
CORPORATE SECRETARY
Nikolay Fefelov
In the reporting period, Nikolay Fefelov served as Corporate Secretary.
In February 2018, the Board of Directors appointed Nikolay Fefelov as Acron’s Corporate Secretary.
From October 2011 to February 2018, Mr Fefelov served as Acron’s legal advisor, leading legal advisor, and Head of the
Corporate Law Department.
In 2015, Mr Fefelov graduated from the National Research University Higher School of Economics with a Bachelor of
Economics degree under the Stock Market and Investments programme.
In 2006, he graduated from the Gubkin Russian State University of Oil and Gas with a degree in law.
Mr Fefelov was born in 1984 in Baku.
He has no interest in the authorised capital of Acron or in the legal entities under its control.
He is not an affiliate of Acron, the entity controlling the Company or any member of Acron’s executive bodies.
The Corporate Secretary is the officer
who ensures that the Company
complies with those provisions of
Russian law, the Charter, and bylaws
that guarantee that shareholders can
exercise their rights and legitimate
interests.
The Corporate Secretary’s efforts
are focused on improving the
effectiveness of the Company’s
corporate governance for the benefit
of its shareholders, the Company’s
investment potential, and its share
price.
In order to meet these goals, the
Corporate Secretary ensures that
the Company cooperates efficiently
with shareholders, state agencies
regulating corporate relations,
trade organisers on Russian and
international stock exchanges, the
Regulation on
PJSC Acron Corporate
Secretary
94
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
In the reporting year, the Company’s
Board of Directors did not pass
any resolutions contradicting the
recommendations of its committees,
which reflects well on the level
at which issues are addressed in
committees.
Audit Committee
The main objective of the Audit
Committee is to give preliminary
consideration to matters related to
control over the Company’s business
and to prepare recommendations for
the Company’s Board of Directors
related to financial statements
(accounts) and consolidated financial
statements, risk management and
internal control, internal and external
audit, and counteracting illegal or
unfair actions by the Company’s
officers (employees) and third
parties.
The Board of Directors forms the
Audit Committee (elects its members
and Chairman) from among the
independent members of the Board of
Directors.
BOARD OF DIRECTORS COMMITTEES
Acron’s Board of Directors includes
the Audit Committee, the Nomination
and Remuneration Committee, and
the Strategic Planning and Corporate
Governance Committee. These
committees play an important role
in forming an advanced corporate
governance system, ensuring
preliminary consideration of the most
important matters of the Company’s
business within the scope of authority
of the Board of Directors and preparing
recommendations for the Board of
Directors regarding key matters.
If a Board resolution contradicts the
committees’ recommendations,
the Board of Directors must explain
why it decided to act against the
recommendations. This explanation is
included in the minutes of the Board of
Directors meeting.
Audit Committee Elected
on 29 May 2020
The Committee consists of three
independent directors:
• Nikolai Arutyunov (Chairman)
• Yury Malyshev
• Vladimir Sister
Audit Committee Track
Record
In 2020, the Audit Committee
held three meetings (all of
which were absentee votes)
and addressed three matters,
including the following:
• Considering the audit
report on Acron’s 2019
IFRS consolidated financial
statements
• Assessing the nominees
for auditor and presenting
relevant recommendations
• Assessing the reports on
Acron’s 2019 Annual Financial
Statements (Accounts) and
Annual Consolidated Financial
Statements issued by external
auditors
Company’s share register holder,
and other professional securities
market participants.
The Corporate Secretary is
also involved in improving the
Company’s corporate governance
system and practices based on
the recommendations of the
Corporate Governance Code and
The Corporate Secretary is appointed
and relieved from their duties by the
Chief Executive Officer by resolution of
the Board of Directors.
The Corporate Secretary is directly
accountable to the Board of Directors
(Chairman of the Board of Directors)
and reports on their performance to
the Board of Directors.
33
3 3
meetings held
matters addressed
internationally accepted standards of
corporate governance.
The Corporate Secretary is responsible
for coordinating the Company’s actions
to protect the rights and interests of
its shareholders, prevent corporate
conflicts, and support the efficient
functioning of the Board of Directors
and the Company’s general meetings.
Regulation on the
PJSC Acron Board of
Directors Audit Committee
95
Strategic Planning and
Corporate Governance
Committee
The main tasks of the Strategic
Planning and Corporate Governance
Committee are to give preliminary
consideration to strategic development
(planning) and the Company’s
corporate governance and to prepare
recommendations for the Board of
Directors related to priority business
areas, the Company’s development
strategy, and improving the corporate
governance system and practices.
The Board of Directors forms the
Strategic Planning and Corporate
Governance Committee (elects its
members and Chair) from among any
members of the Company’s Board of
Directors who have the expertise and
experience required to serve on this
committee.
Strategic Planning and
Corporate Governance
Committee Elected on
29 May 2020
• Alexander Dynkin (Chairman)
• Vladimir Gavrikov
• Alexander Popov
Strategic Planning and
Corporate Governance
Committee Track Record
In 2020, the Strategic Planning and
Corporate Governance Committee
held five meetings (all of which
were absentee votes) to address ten
matters, including the following:
• Recommendations on convening
the general meeting and approving
the documents required to prepare
and hold the general meeting
• Preliminary consideration of
the report on the Company’s
compliance with the Corporate
Governance Code in 2019
• Preliminary consideration of the
Board of Directors’ position on the
agenda for general meetings and
the rationale behind resolutions
• Recommendations on distribution
of profit and loss for 2019
• Recommendations on dividend
payment for 2019 and from Acron’s
retained earnings of previous years
• Recommendations on approval of
Company’s 2019 Annual Report
• Preliminary consideration of the
Report on Acron’s 2019 related-
party transactions
• Preliminary consideration of draft
Regulation on Acron’s Board of
Directors as amended
Nomination and
Remuneration
Committee
The key tasks of the Nomination and
Remuneration Committee are to give
preliminary consideration to matters
and to prepare recommendations
for Company’s Board of Directors
concerning effective human resources
and remuneration policy, short-term
and long-term incentive programmes
for the members of the Company’s
executive bodies and other key
senior officers, and approval of the
terms and conditions of employment
agreements with members of the
Company’s executive bodies and other
key senior officers.
55
1010
meetings held
matters
addressed
44
44
meetings held
matters
addressed
Regulation on the
PJSC Acron Board of
Directors Strategic
Planning and Corporate
Governance Committee
Regulation on the
PJSC Acron Board of
Directors Nomination and
Remuneration Committee
96
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Nomination and
Remuneration Committee
Elected on 29 May 2020
The Committee consists of
independent directors:
• Nikolai Arutyunov (Chairman)
• Yury Malyshev
• Vladimir Sister
Nomination and
Remuneration Committee
Track Record
In the reporting year, the Nomination
and Remuneration Committee held
four meetings (all of which were
absentee votes) and addressed four
matters, including the following:
• Recommendations on remuneration
and reimbursements paid to
members of the Board of Directors
• Preliminary assessment of
nominees to the Board of Directors
and presenting relevant findings
and recommendations
• Assessment of nominees’
compliance with independence
criteria and presenting relevant
findings and recommendations
• Assessment of the effectiveness
of Acron’s executive bodies in
2019, analysis of the professional
expertise of the members
of Acron’s executive bodies,
and recommendations on the
structure of Acron’s executive
bodies
97
Vladimir Kunitsky
1948
Chairman of the Managing Board,
Chief Executive Officer (President)
Dmitry Balandin
1980
Member of the Managing Board, Vice
President for Finance and Economics
Alexander Lebedev
1986
Member of the Managing Board,
Vice President for Domestic Business
and Agricultural Projects
Managing Board
Vladimir Kunitsky has served as Acron’s CEO (President) since 2011.
He was Acron’s Vice President between 2006 and 2011.
Mr Kunitsky has been with the Company since 1983. His previous offices include
deputy head of AN operations, head of NPK operations, and director general of
Dorogobuzh Minudobreniya Production Association.
He began his career in the chemical industry at the Krasnouralsk Copper
Smelting Plant, where he worked from 1971 to 1983.
Mr Kunitsky was born in 1948. In 1971, he graduated from the Gorky Urals State
University with a degree in Chemistry.
Mr Kunitsky was named Honoured Chemist of the Russian Federation and
received the Merit in Labour Medal.
Interest in the issuer’s authorised capital/percentage of the Company’s ordinary
shares: 0.043%
In December 2018, Dmitry Balandin was appointed Acron’s Vice President for
Finance and Economics.
He has been with the Company since 2013, working as corporate finance director.
In 2006-2013, Mr Balandin worked at Gazprom Neftekhim Salavat at a senior
management level.
Mr Balandin was born in 1980. He graduated from Kurgan State University in
2002 with a degree in finance and credit and a law degree.
In 2006, he received his Ph.D. in economics from the Graduate School of
Management at St. Petersburg State University.
No interest in the issuer’s authorised capital/does not hold ordinary shares
Since January 2019, Mr Lebedev has served as Acron’s Vice President for
Domestic Business and Agricultural Projects. He has been a member of the
JSC Zvyaginki Board of Directors since 2020. In November-December 2018, he
was named Acron’s Vice President for Domestic Business.
Mr Lebedev has worked at Acron since 2011, serving as a sales department
specialist, head of the organic and non-organic chemical product sales team,
deputy head of the sales department, and head of the sales department.
In 2007-2011, he was employed at NPP Macromer.
Alexander Lebedev was born in 1986. In 2008, he graduated from Vladimir State
University with a degree in marketing.
Mr Lebedev received a gold medal for his contribution to the development of
Russia’s agro-industrial complex.
No interest in the issuer’s authorised capital/does not hold ordinary shares
Regulation on
PJSC Acron Managing
Board
98
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Alexei Milenkov
1973
Member of the Managing Board,
Finance Director
Irina Raber
1949
Member of the Managing Board,
Vice President for Human Resources
and Special Projects
Dmitry Khabrat
1970
Member of the Managing Board,
Vice President Overseas
In 2008, Alexei Milenkov was appointed Acron’s Finance Director.
He has been with the Company since 2002, working as head of the information
and research division.
Mr Milenkov was born in 1973. In 1995, he graduated from Togliatti Engineering
Institute with a degree in automotive engineering. He is a fellow member of the
Association of Chartered Certified Accountants.
Interest in the issuer’s authorised capital/percentage of the Company’s ordinary
shares: 0.002%.
Dmitry Khabrat was appointed Acron’s Vice President Overseas in 2012. In 2010,
he was appointed head of Acron’s Foreign Trade Division and was elected to the
Dorogobuzh Board of Directors. He sat on Acron’s Board of Directors in 2011.
Mr Khabrat has been with Acron since 1993. He worked as international market
exports engineer, assistant deputy chairman of the Board of Directors, and
consulting centre expert. In 2006-2010, he was deputy head of Acron’s Foreign
Trade Division.
Mr Khabrat was born in 1970. He graduated in 1993 from the Novgorod
Polytechnic Institute with a degree in mechanical engineering. In 1998, he
graduated from the St. Petersburg State Academy of Engineering and Economics
with a degree in economics and chemical enterprise management.
Mr Khabrat received a medal for his contribution to social and economic
development in Novgorod region.
No interest in the issuer’s authorised capital/does not hold ordinary shares
In 2011, Irina Raber was appointed Vice President for Human Resources and
Special Projects at Acron.
Since 2020, Ms Raber has served as a member of the Board of Directors of Joint
Stock Company Moscow Stud Farm No. 1. She has been vice president of the
Figure Skating Federation of Russia since 2006 and has led the Figure Skating
Federation of Moscow since 2005.
In 2000-2010, Ms Raber was Prefect of the North-East Administrative District of
Moscow in the rank of a Moscow Government Minister.
In 1991-2000, she headed the economics department of a prefecture in the
North-East Administrative District of Moscow and was promoted to deputy
prefect and senior deputy prefect of the district.
Ms Raber was born in 1949. In 1972, she graduated from the Moscow
Electrical Engineering Institute of Communications with a degree in electrical
communications engineering. Ms Raber also graduated from the All-Union
Extramural Polytechnic Institute specialising in production management in 1991
and from the MGIMO Institute of State Management with a degree in law in the
sphere of state construction and management in 1996.
Ms Raber holds the Order of Friendship and the Order of Honour. The Russian
Orthodox Church awarded her the Order of St. Olga and the Order of St. Sergius
of Radonezh. She also has a Valorous Labour medal, a medal in commemoration
of the 100
th
anniversary of the birth of Lenin, and a medal in commemoration of
Moscow’s 850
th
anniversary.
No interest in the issuer’s authorised capital/does not hold ordinary shares
99
The Managing Board is the Company’s
standing collegial executive body that
directs day-to-day operations.
The scope of authority of the
Managing Board includes the
following matters:
• Development and preliminary
consideration of the Company’s
business plan and development
strategy
• Development of the Company’s
production plan and output
• Consideration of matters related to
new production lines, overhauls, and
technical upgrades
• Management of operations at
the Company’s business units
and their effective cooperation
in implementing the Company’s
business plan and development
strategy
• Staff recruitment
• Consideration of matters related to
the Company’s social development
programmes
The Managing Board is formed by
the Board of Directors and consists
of six members (Chair and members
of the Managing Board). The Board
of Directors and its Nomination
and Remuneration Committee
outline the criteria for selecting
and assessing nominees to the
Managing Board.
The Managing Board adopts
resolutions on matters within its
scope of authority at its meetings,
which are held as needed. The
meetings of the Managing Board are
convened by the Chair or by request
of a Managing Board member.
The Board of Directors controls the
Company’s executive bodies.
The Chair of the Managing Board is
also the Company’s CEO (President),
who is elected and terminated by the
Board of Directors.
The CEO represents the Company’s
interests, acts on behalf of the
Company without power of attorney,
and has all powers required for direct
management of the Company’s
business in accordance with
applicable laws and the Charter.
6 6 members
2323 matters
17 17 meetings
The Managing Board consists of
The Managing Board held
and addressed
The CEO is also a key person
who works to ensure compliance
with the provisions and policies
governing the Company’s corporate
governance system. In particular, the
CEO implements the internal audit
policy, risk management and internal
control policy, and anti-corruption
and information policy. The CEO
ensures that members of the Board
of Directors, Managing Board, and the
Company’s shareholders receive the
information they request.
CEO (CHAIR OF THE
MANAGING BOARD)
Vladimir Kunitsky has served as
Acron’s CEO since 2011.
PJSC Acron Corporate
Documents
100
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Composition of the
Managing Board
All members of the Managing Board
have years of successful experience
in the mineral fertiliser industry,
professional backgrounds in a relevant
area, and work for the good of the
Company, which has a positive effect
on the Company’s financial and
economic performance.
Members of the Managing Board have
the obligation to act reasonably, in
good faith, and in the interests of the
Company and its shareholders based
on sufficient information and with due
diligence.
Members of the Managing Board
will refrain from any actions that
could cause a conflict between
their interests and the Company’s
interests. They have confidentiality
obligations regarding information
classified as the Company’s
commercial secrets, and they are
subject to restrictions on using the
Company’s insider information.
On 29 May 2020, Acron’s Board of
Directors retained the same Managing
Board based on the Company’s
performance. The six members are
Vladimir Kunitsky, Dmitry Balandin,
Alexander Lebedev, Alexei Milenkov,
Irina Raber, and Dmitry Khabrat.
Changes in Managing Board
members’ stakes in Acron’s
share capital and the number
of the Company’s ordinary
shares they own
During the reporting year, no Managing
Board member made any transactions
to purchase or dispose of shares. There
were no other changes to Managing
Board members’ stakes in Acron’s
share capital or the number of ordinary
shares they own. Information about
the number of shares of Acron and
its subsidiaries held by members of
the Managing Board is available in
the Information for Shareholders and
Investors section of this Annual Report.
Managing Board
Performance Results
In 2020, Acron’s Managing Board held
17 meetings (seven in-person and ten
as absentee votes). These meetings
considered 23 matters and passed 52
resolutions.
In particular, in the reporting year the
Managing Board:
• Reviewed and approved the
changes to Acron Group’s capex
budget for 2020
• Reviewed Acron Group’s capex
budget for 2021
• Reviewed the budget for repair and
maintenance of Acron Group’s fixed
assets in 2021
• Approved transactions
101
A total of RUB 1,316.6 million was
paid to the Acron Group’s top
management (members of the Board
of Directors and the Managing Board
as well as other key management)
in 2020, up 15% year-on-year.
These payments increased due to
the successful implementation of
several investment projects and the
higher US dollar exchange rate, since
the remuneration of the Group's
management is partly denominated
in dollars. In 2020, the average US
dollar to Russian rouble exchange
rate increased 11.5% year-on-year.
General Information about
the Company’s Policy on
Remuneration
Acron’s Policy on Remuneration
and Reimbursement of Expenses to
Members of the Board of Directors,
Executive Bodies, and Other Key
Managing Officers (the ‘Policy’)
was drafted in accordance with
the current laws of the Russian
Federation and the Charter and
bylaws of the Public Joint Stock
Company Acron, and taking into
account the listing rules of the
trade organiser that admitted the
Company’s securities to organised
trading, as well as the instructions
of the Corporate Governance Code
recommended for use at joint
stock companies by the Bank of
Russia.
The Policy was developed and
approved by Acron’s Board
of Directors (Minutes No. 590
dated 29 December 2017), and it
incorporates the recommendations
and proposals of the Nomination
and Remuneration Committee of
the Board of Directors.
This Policy applies to members of
the Board of Directors, Managing
Board, and other key managing
officers. Company’s key managing
officers (employees) are defined
as the sole executive body (CEO)
and all members of the collegial
executive body (Managing Board),
because they hold significant
positions in the structure of the
Company’s executive management
and have direct impact on
its financial and economic
performance.
Acron’s Policy on Remuneration
and Reimbursement of Expenses
to Members of the Board of
Directors, Executive Bodies, and
Other Key Managing Officers
is available here: https://
www.acron.ru/en/investors/
corporate-governance/
corporate-documents-acron/
the-current-edition/.
Remuneration and
Reimbursement to the Members
of the Board of Directors and
Managing Board
Key Principles of the
Company’s Remuneration
Policy
The system of remuneration and
reimbursement of expenses to
members of the Board of Directors,
executive bodies, and other key
managing officers is based on the
following principles:
Transparency of the system of
remuneration and reimbursement
of expenses to key managers
of the Company. The Company
determines all key elements of
remuneration of key managers,
specifies the list of reimbursable
expenses, and establishes the
level of service that key managers
may claim.
Alignment of key managers’
financial interests and
shareholders’ long-term interests.
The Company has designed its
Remuneration Policy and other
forms of motivation to align
key managers’ interests with
the interests of the Company's
shareholders, including by making
remuneration dependent on
the Company’s performance as
a whole and on the personal
contribution of key leaders to
achieving those results.
Sufficiency and adequacy of
remuneration to reflect the
Company's goals, as well as
Policy on Remuneration
and Reimbursement of
Expenses to Members
of the Board of Directors,
Executive Bodies and Other
Key Managing Officers of
PJSC Acron
102
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
the responsibility and level of
risks assumed by the Company’s
key managers. The Company
strives to ensure that the level
of remuneration is sufficient to
attract, motivate, and retain persons
with the necessary competence
and qualifications. The Company
adjusts its Remuneration Policy to
respond to the current stage of the
Company’s development, the nature
and scope of its activities, and risk
level. Pay levels are determined
through a comparative analysis of
remuneration at similar companies,
factoring in the Company’s
development strategy and key
managers’ responsibilities.
Shareholder oversight. The
Company discloses to shareholders
information about the remuneration
and reimbursement system and
practices.
Remuneration and
Reimbursement of Expenses
to Members of the Board of
Directors
By resolution of the general meeting,
members of the Board of Directors
may be remunerated during their
term of office and/or reimbursed
for expenses incurred related to the
discharge of their duties as members
of Company’s Board of Directors.
The amount of remuneration and
reimbursement is established by
resolution of the Company’s general
meeting.
Proposals to approve remuneration
and reimbursement are submitted
to the general meeting by the
Board of Directors based on the
recommendation of the Nomination
and Remuneration Committee, subject
to the provisions of the Policy.
The fixed annual remuneration of a
member of the Board of Directors
is determined by resolution of the
general meeting. This is the only
form of monetary remuneration for
Board members.
Remuneration is paid on a monthly
basis in equal parts starting from
the date of the general meeting
resolution. Payments are made
by wire transfer using the bank
details provided by the Board
member.
Board members must attend
a certain number of meetings
to receive subsequent monthly
payments. The Company may
withhold payment of a member’s
fixed annual remuneration if the
member participates in fewer than
2/3 of the total number of Board
meetings from the time of the
member’s election to through the
date of the next monthly payment.
If the general meeting resolves
that only independent directors
will be remunerated for discharge
of duties as members of the Board
of Directors, such remuneration
will be paid to members of the
Board of Directors who meet
independence requirements
(clause 3.1 of the Regulation on
Board of Directors). If a member
of the Board of Directors ceases
to meet the independence
requirements, the remuneration
established by general meeting
resolution will be paid to that
member through the end of the
month in which the member
ceased to meet the requirements.
When preparing proposals to
approve the amount of fixed
annual remuneration, the Board
of Directors (Nomination and
Remuneration Committee)
takes into account the expected
time and effort Board members
will invest in preparing for and
participating in meetings of the
Board of Directors and their duties
and responsibilities.
The Company strives to ensure
that the level of remuneration
paid to members of the Board of
Directors is sufficient to attract,
retain, and motivate Board
members with the professional
expertise and experience
necessary to effectively manage
the Company. For these purposes,
the Company compares the
remuneration of peer companies’
board members and takes into
account the level of remuneration
that has been established in the
Company and the industry as a
whole.
The Company does not pay any
additional remuneration to Board
members for participation in
individual meetings of the Board
of Directors or its committees, or
for discharging the duties of Chair
of the Board of Directors, member
or chair of a committee, or Senior
Independent Director.
Members of the Board of Directors
are not eligible for any other short-
term or long-term monetary or
other incentives.
The Company does not provide
its shares (stock option plans) to
members of the Board of Directors.
At the same time, the Company
welcomes ownership of its shares
by members of the Board of
Directors, as this facilitates the
alignment of the financial interests
of Board members and the long-
term interests of the Company’s
shareholders.
The Company does not pay
any additional remuneration or
reimbursement to Board members
in the event of early termination
of their powers in connection with
the transfer of control over the
Company or other circumstances.
103
Remuneration 2020 2019 2018
ACRON GROUP*
Remuneration paid for participation in a managing body 6,600 6,600 6,600
Salary 94,383 93,680 89,242
Bonuses 239,024 207,368 195,860
Fees 0 0 0
Reimbursement for expenses related to performing duties as
members of managing bodies
0 0 0
Other types of remuneration 143 326 298
Acron Group total 340,150 307,974 291,999
INCLUDING ACRON VELIKY NOVGOROD
Remuneration paid for participation in a managing body 6,600 6,600 6,600
Salary 69,127 64,907 62,833
Bonuses 151,266 124,590 120,670
Fees 0 0 0
Reimbursement for expenses related to performing duties as
members of managing bodies
0 0 0
Other types of remuneration 143 326 298
Acron (Veliky Novgorod) total 227,136 196,424 190,401
Remuneration of Board of Directors Members (RUB, ‘000)
* Excluding contributions to pension and social funds. Including Acron and Dorogobuzh
The Company maintains liability
insurance for members of the Board of
Directors at its own expense.
The following expenses are also subject
to reimbursement for Board members:
• The cost of round-trip business-
class travel to the venue for an
in-person meeting of the Board
of Directors, including the use of
business and VIP lounges
• Single accommodation at
four- or five-star hotels during
in-person meetings of the Board
of Directors
• The cost of other trips taken in order
to discharge their duties (functions)
The Company does not provide
additional corporate opportunities
(benefits and privileges) for Board
members or reimbursement of
expenses other than as outlined
above.
104
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Remuneration 2020 2019 2018
ACRON GROUP*
Remuneration paid for participation in a managing body 0 0 0
Salary 206,500 197,311 207,344
Bonuses 344,450 255,109 268,374
Fees 0 0 0
Reimbursement for expenses related to performing duties as
members of managing bodies
0 0 11,195
Other types of remuneration 147 1,210 3,853
Acron Group total 551,097 453,630 490,766
INCLUDING ACRON VELIKY NOVGOROD
Remuneration paid for participation in a managing body 0 0 0
Salary 103,281 98,652 107,826
Bonuses 172,544 127,559 139,526
Fees 0 0 0
Reimbursement for expenses related to performing duties as
members of managing bodies
0 0 0
Other types of remuneration 145 1,205 2,591
Acron (Veliky Novgorod) total 275,970 227,416 249,943
Remuneration of Managing Board members and the CEO (RUB, ‘000)
* Excluding contributions to pension and social funds. Including Acron and Dorogobuzh
Remuneration 2020 2019 2018
Remuneration paid for participation in a managing body 0 0 0
Salary 146,318 145,235 112,616
Bonuses 265,289 223,952 183,895
Fees 0 0 0
Reimbursement for expenses related to performing duties as
members of managing bodies
0 0 4,916
Other types of remuneration 13,764 15,756 13,690
Acron Group total 425,370 384,973 315,118
Remuneration of the Company’s Other Key Management (RUB, ‘000)*
* Excluding contributions to pension and social funds. Including Acron, Dorogobuzh, and NWPC
105
Remuneration and
Reimbursement of Expenses
to Members of Executive
Bodies and Other Key
Managing Officers
The remuneration of members of
executive bodies and other key
managing officers is dependent on
the Company’s operating results and
their personal contributions to those
results.
The Company strives to ensure
that the level of remuneration paid
to members of executive bodies
and other key managing officers
creates sufficient motivation
for their effective performance,
allowing the Company to attract
and retain competent and qualified
specialists. At the same time, the
Company avoids establishing excess
remuneration or an unreasonably
large gap between the remuneration
level of such persons and the
Company’s other employees. For
these purposes, the Company
performs a comparative analysis
of how similar persons are paid
at peer companies and takes into
account the established level of
remuneration of such persons in
the Company and the industry as a
whole.
When determining the remuneration
of members of executive bodies
and other key managing officers,
the Company strives to ensure a
reasonable and justified ratio of
fixed and variable remuneration
depending on Company’s operating
results and the person’s individual
contribution to achieving those
results.
Components of the
Remuneration System for
Members of Executive Bodies
and Other Key Managing
Officers
Fixed Portion (official salary)
The official salary is the basic
element of remuneration for
members of executive bodies and
other key managing officers. This
fixed amount is paid to the person
for discharging duties of a certain
complexity during a calendar month,
not including bonuses and other
incentive payments.
When setting a person’s official
salary, the Company takes into
account the person’s level of
competence and qualification,
individual skills, and experience as
a key manager, as well as the scope
and volume of responsibility and the
level of risks assumed.
The final amount of the official
salary is established in the officer’s
employment agreement in
accordance with bylaws regulating
the remuneration system, as well
as with the Regulation on Grading
Employee Positions.
Variable Portion (bonuses and
other incentive payments)
Bonuses and other incentive
payments are the variable portion of
the remuneration paid to members
of the Company’s executive bodies
and other key managing officers,
which aligns their interests with the
Company’s development strategies
and business plans. Variable
remuneration depends on the
Company’s long-term and short-
term performance in general and the
amount of each officer’s individual
contribution to the ultimate result.
The variable portion of the
remuneration paid to members of
the Company’s executive bodies and
other key managing officers may
include the following components:
• Short-term component (monthly
bonus)
• Mid-term component (annual
bonus)
• Long-term component (bonuses
under incentive programmes
tied to a certain period of
the Company’s development
or effective during the
implementation of a certain
investment or other project)
Bonuses and other incentive
payments are established and paid
in accordance with the officer’s
employment agreement based on
the Company’s applicable bylaws
outlining the remuneration system
and incentive programmes.
In order to ensure a good balance
between short-term and long-term
incentives, the Company may defer
payment of variable remuneration
based on the results for the year,
paying it out in equal instalments
over a period of years.
The Company maintains liability
insurance for members of the
Company’s executive bodies and
other key managing officers.
106
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
In order to improve the performance
of members of the Company’s
executive bodies and other key
managing officers, the Company
provides them with additional
corporate opportunities (benefits
and privileges) depending on
their level of office (grade). In
particular, in accordance with the
Company’s applicable bylaws and
the Regulation on Grading Employee
Positions, these persons are provided
with the following additional
corporate opportunities (benefits
and privileges) at the Company’s
expense:
• Use of corporate mobile
communications and Internet
access
• Voluntary health insurance and
international health insurance
• Use of corporate car, including
personal corporate car with a
designated driver
• Use of fitness centres
• Business-class round-trip travel
for business purposes, use of
business-class and VIP lounges
• Single suite accommodation in
four- and five-star hotels during
business trips
• Use of corporate bank cards to pay
for travel expenses, entertainment
expenses, and other expenses
directly related to official duties
• Higher per diem established by
the Company’s bylaws to cover
additional expenses related to
accommodations away from
home during trips in the Russian
Federation and abroad
The Company periodically
revises the additional corporate
opportunities (benefits and
privileges) provided to members
of the Company’s executive bodies
and other key managing officers
to ensure their accessibility and
competitiveness.
The Company reimburses expenses
incurred by members of the
Company’s executive bodies and
other key managing officers while
performing their official duties.
Reimbursement is subject to the
procedure stipulated by applicable
laws and the Company’s bylaws.
In particular, the following expenses
of members of the Company’s
executive bodies and other key
managing officers are reimbursed:
• Expenses related to
business trips (round-trip
travel, accommodations,
additional expenses related to
accommodations away from
home (per diem) and other
expenses incurred with the
consent or knowledge of the
Company)
• Relocation expenses (cost of
relocation for employee and
their family, transportation
of their property and cost of
living arrangements in the new
location, including rent)
• Entertainment expenses
related to the official reception
of and/or services provided
to representatives of other
organisations during negotiations
to establish and/or maintain
cooperation and to participants
arriving at a meeting of the Board
of Directors, Managing Board or
other governing body, regardless
of the venue
• Cost of postal, telephone,
telegraph and other similar
services, telecom services,
including the cost of facsimile
and satellite communication,
email, Internet access and use of
required information systems
• Other expenses related to the
performance of their official
duties, subject to the procedure
stipulated by applicable laws and
the Company’s bylaws.
Monitoring the Policy’s
Implementation and
Evaluating its Effectiveness
The Board of Directors and its
Nomination and Remuneration
Committee monitor the practical
implementation of the Company’s
Remuneration Policy.
The Board of Directors relies
on recommendations from the
Nomination and Remuneration
Committee when it assesses the
effectiveness of the Remuneration
Policy and the associated
remuneration and reimbursement
system.
Management and Officers
Liability Insurance (D&O)
Under corporate laws and the
Company’s bylaws, the CEO
and members of the Company’s
107
collegial bodies must act reasonably
and in good faith based on sufficient
information and with due diligence
in the interests of the Company.
Because managing the Company
is such a complex process, there is
a risk that managers and directors
may, while acting reasonably and
in good faith, make decisions that
result in negative consequences for
the Company or its shareholders.
In order to address liabilities
arising unintentionally from
incorrect management decisions,
the Company has carried liability
insurance for members of its
managing bodies and other officers
and employees since 2013. In
addition to providing coverage for
losses incurred by the Company
or third parties, this insurance
helps attract the most qualified
specialists to the Board of Directors
and the Managing Board, providing
them with guarantees to protect
their property interests in case
they unintentionally make wrong
decisions.
In the reporting year, the liability
of the Company and its controlled
entities, all members of executive
bodies and members of the
Company’s Board of Directors
(controlled entities), as well as
certain other officers was insured
under an insurance agreement
covering the liability of directors
and officers. A major portion of this
insurance programme (more than
75%) was reinsured in the global
insurance market with highly
reliable insurers (AIG, Chubb) and
Sberbank Insurance served as a
fronting insurer in Russia. Total
coverage under the agreement
is EUR 30 million. Certificates of
insurance are also issued locally
in Canada, Estonia, Switzerland,
France, China, the US, Argentina,
and Brazil, with total coverage of
EUR 3 million each.
The Corporate Governance Code
recommends that members of the
Board of Directors and executive
bodies have liability insurance. Such
insurance is also general practice at
public joint stock companies, which
have greater risks of property and
other claims due to the scale of
their operations.
108
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Internal Control
Acron’s internal control system is
a set of procedures for conducting
financial and business transactions
and for identifying, preventing,
and managing risks within the
Company’s operations. The internal
control system is implemented by
the Company’s bodies and business
units in accordance with their
authority.
The Company’s internal control
system directs its internal control
bodies to develop, approve, and
implement procedures for internal
control and assess the effectiveness
of these procedures in achieving the
goals of internal control.
This system of internal control
over the Company’s financial and
business activity was developed
in accordance with Russian laws.
It operates in compliance with the
Company’s Charter and its bylaws,
and with consideration for applicable
listing rules and the Corporate
Governance Code recommended by
the Bank of Russia.
In order to ensure that the internal
control system functions effectively,
the Company is guided by its
Regulation on the Internal Control
System for Financial and Business
Activity and its Regulation on
Internal Audit, which set out the
goals, objectives, and principles for
internal control bodies. Additional
powers of the Company’s internal
control bodies are set forth in the
Company’s regulations on the
relevant bodies.
Internal Audit
Control System
Board of Directors
Participates in developing risk management and
internal control policy, supervises implementation, and
participates in evaluating business risks and developing
risk management recommendations
Internal Audit
Department
Assesses the reliability and effectiveness of the
Company’s risk management and internal control
system and conducts scheduled and random audits
in order to provide the Company’s managing bodies
with independent and unbiased assessments of the
Company’s risk management and internal control system
CEO
Responsible for implementation of risk management and
internal control policy, the creation and maintenance of an
efficient risk management and internal control system at
the Company, and ensures that the rules and standards
of financial and business operations and internal control
procedures are followed
Key Participants in the Company’s Internal Control System
Vasily Litvinchuk
Head of Internal Audit Department
In the reporting period, Vasily Litvinchuk served as the Head of the Internal Audit
Department
He was appointed to the post in 2004.
Education
All-Russian Distance-Learning Institute of Finance and Economics
Record
Mr Litvinchuk has worked at Acron since 2000, serving as Deputy Head of the
Internal Audit Division under the Board of Directors and Head of the Internal
Audit Division under the Audit and Legal Department.
He was named Head of the Internal Audit Department at Dorogobuzh in 2004.
In 2012, Mr Litvinchuk was elected to the Board of Directors of Moscow Stud
Farm No. 1.
Interest in the issuer’s authorised capital/percentage of the Company’s ordinary
shares: 0.001%
PJSC Acron Regulation on
Internal Control
109
The Company organises internal
audits to provide a systematic,
independent evaluation of the
reliability and effectiveness of its risk
management and internal control
system.
The goals, objectives, and functions
of the Company’s internal audits
are described in the Regulation on
Acron’s Internal Audit, approved by
the Board of Directors.
All of the Company’s financial and
business operations and projects are
subject to internal audit, including the
financial and business operations and
projects of the Company’s controlled
legal entities.
All internal auditing functions
are handled by the Internal Audit
Department.
The goal of the Internal Audit
Department is to contribute
to improving the Company’s
operations and to provide the
Company’s managing bodies
with independent and unbiased
assessments, guarantees, and
consultations regarding the
efficiency and effectiveness of the
Company’s operations, the accuracy
and timeliness of the Company’s
accounting (financial) and other
statements, and the Company’s
compliance with applicable laws.
In order to ensure the independence
of the Internal Audit Department,
its functional and administrative
accountability are separated.
Functionally, the Internal Audit
Department is subordinate and
accountable to the Board of Directors.
Administratively, it is subordinate and
accountable directly to the CEO. The
head of the department is appointed
and relieved from their duties by the
CEO at the resolution of the Board of
Directors.
Internal auditing is conducted
through scheduled and random
audits. Additionally, the Internal Audit
Department provides consultations
and opinions on matters related to
the organisation and efficiency of the
risk management and internal control
system, the Company’s operating
activity, and corporate information
systems in response to requests from
the Company’s bodies and officers
(employees).
External Audit
Each year, Acron engages an external
auditor that has no property interests
in the Company or its shareholders to
audit and confirm the accuracy of its
RAS and IFRS financial statements
(accounts).
A nominated auditor is put up
for preliminary discussion at a
meeting of the Audit Committee.
The Audit Committee prepares
recommendations for the Board of
Directors regarding the proposed
external auditor and the price of its
services for the next reporting year.
Based on the recommendation by
the Audit Committee, the Board of
Directors proposes the nominee to
the Annual General Meeting and sets
the price of its services.
When selecting nominees, the
Audit Committee takes into account
the auditor’s general and industry
experience, the qualifications of its
employees, and the quality and cost
of its auditing services.
On 29 May 2020, the general meeting
approved Crowe Russaudit LLC to
audit the Company’s RAS financial
statements (accounts) and KPMG to
audit its IFRS consolidated financial
statements.
The external auditors received the
following fees (without overhead
and VAT) for auditing the Company’s
performance in the last ended
financial year (2020):
• Crowe Russaudit:
— Acron (Veliky Novgorod) –
RUB 3.5 million: RUB 3.2 million
for auditing services and
RUB 0.3 million for other services
— Acron Group – RUB 10.3 million:
RUB 10.0 million for auditing
services and RUB 0.3 million for
other services
• KPMG (and other members of KPMG
International network):
— Acron (Veliky Novgorod) –
RUB 32.4 million: RUB 27.2 million
for auditing services and
RUB 5.2 million for other services
— Acron Group – RUB 57.6 million:
RUB 45.7 million for auditing
services and RUB 11.9 million for
other services
Anti-Corruption Activity
Acron pays close attention to anti-
corruption matters and pursues a
transparency policy that governs
employee and management
interactions with third parties.
In designing its anti-corruption
measures, the Company follows the
provisions of the Code of Business
Conduct, adopted in 2013, which
includes fundamental business
ethics established in accordance with
Acron’s ethical values and applicable
laws. The Code is recommended
for use at all Acron’s subsidiaries.
The Company’s management has
made the Code mandatory for all
its subsidiaries where financial
and business activity is associated
with elevated corruption risks.
The Company is dedicated to
developing corporate relationships
and practicing fair business conduct
at its subsidiaries and aims for
deeper implementation of the
Code’s regulations in its subsidiaries’
operations.
Acron’s Regulation on Anti-corruption
Policy is an essential part of the
Code. It lists the Company’s major
Regulation on
PJSC Acron Internal
Audit
110
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
• 153 phone calls, of which
— 135 were spam calls (advertising
or not related to corruption)
— 18 resulted in reviews
Some reviewed materials show
various abuses or other negative
actions performed both at enterprises
and by employees. All reviewed cases
were investigated, and appropriate
measures were taken.
Performance Assessment
for Management Bodies
The Nomination and Remuneration
Committee carries out a preliminary
assessment of the performance of
the Company’s executive bodies
and other key managing officers at
the year-end, taking into account
the criteria provided for in the
Remuneration Policy, as well as a
preliminary assessment of their
achievement of the set goals.
In 2020, the Nomination and
Remuneration Committee held
a meeting by absentee vote to
preliminarily assess the performance of
the Company's executive bodies in 2019.
principles on anti-corruption
measures and is founded on zero
tolerance for corruption. Employees
and managers are specifically
prohibited from participating in any
corrupt activity, whether directly or
indirectly, on their own or through
third parties.
Acron’s anti-corruption strategy
requires that employees and
managers comply with all principles
of Acron’s Code and the Regulation
on Anti-corruption Policy. The
strategy also calls for regular
comprehensive assessments
of compliance with the Code’s
provisions in order to detect and
prevent violations and develop
relevant recommendations.
In order to mitigate the risks of
corruption-related violations, Acron
carefully chooses its counterparties,
follows the principles of fair
competition, and closely monitors
all actions by business partners that
may lead to negative consequences.
The Company’s Ethics and Anti-
corruption Committee exercises the
following powers:
• Monitoring compliance with the
Regulation on Anti-corruption Policy
• Performing preliminary assessment
of corruption and corporate
integrity risks and designing tools to
prevent such risks
• Providing the Company’s employees
with recommendations on
counteracting corruption and on
complying with and implementing
the Code and the Regulation on Anti-
Corruption Policy
• Investigating allegations of corruption,
ethical misconduct and proven or
alleged violations of the Code and
the Regulation on Anti-corruption
Policy reported by employees and
other interested persons, conducting
necessary investigations, and
providing recommendations to the
Company’s relevant executive bodies
and officers
In order to promote compliance
with the provisions of the Code of
Business Conduct and the Regulation
on Anti-corruption Policy, the
Company maintains a hotline that
employees can use to contact the
commission, the Business Security
Department, and the Credit and
Investment Committee.
In 2020, the hotline received:
• 57 messages, of which:
— 23 did not describe specific
cases of abuse by Acron Group
employees
— 34 resulted in reviews
PJSC Acron Code of
Business Conduct and
the Regulation on the
Ethics and Anti-corruption
Committee
111
Procurement
Acron Group’s procurement is
focused on each company’s internal
needs and designed to deliver high-
quality goods to the production sites
quickly and cost-effectively.
Procurement is conducted on a
competitive basis in accordance with
Russian laws, corporate standards
for supply contracts, and other
bylaws. The key procurement areas
are feedstock, auxiliary materials,
equipment, and spare parts.
The Group adheres to the following
principles in its procurement:
Transparency
• New companies with positive
reputations as suppliers to
chemical and related companies
can bid alongside companies
that have previously supplied the
Group.
Competitive Bidding
• Quotes are considered on a
discrimination-free basis that
focuses on prices, quality, and
warranty obligations, as well as
delivery and payment terms.
Requirements for
Service Providers
• Feedstock and materials must
comply with regulatory documents
(safety and health certificates for
feedstock, technical standards).
• Engineering devices, equipment,
and spare parts for hazardous
operations must comply with
the requirements of technical
regulations.
• Goods and materials supply
contracts must include
requirements that protect
employee health and safety
(certificates of conformity, safety
certificates, etc.).
Targeted and Cost-effective
Use of Funds
• The Group continually monitors
how well its procurement efforts
meet production needs and
financial targets. Commercial
advantages of transactions,
product quality, product
compliance with technical and
other requirements, and supplier
reliability are also monitored on a
continual basis.
Acron Group’s management
has confidence in its multilevel
procurement control system for
ensuring effective procurement.
As a rule, procurement at the
Group’s facilities is governed by
procedures described in the bylaws.
The procurement process at Acron
is supported by and operates under
a quality management system
that is certified by the international
certification body DNV GL for
compliance with ISO 9001. In the
reporting period, a procurement
management system was
introduced at Dorogobuzh to track
the progress of material supply bids
at all stages.
The Procurement Department,
the Group’s single operational
equipment and material
procurement control centre,
optimises the procurement process,
maintains a consolidated inventory
list for all of the Group’s companies,
and implements centralised
development of procurement.
The Procurement Department
drafted a procurement strategy
for the Group, created a unified
goods and materials directory,
and developed a concept for
improvements to the procurement
system.
In 2020, the Group introduced a
unified electronic trading platform
(etp.acron.ru) that will eventually
take over the process of collecting
suppliers’ quotes.
The Equipment and Material
Procurement Division introduced a
procedure for electronic review of
market research results, which are
submitted to the Group’s offices for
use and feedback.
The Group’s Business Security
Department performs additional
spot inspections of certain tender
procedures and the performance of
contractual obligations.
The Group’s Credit and Investment
Committee meets regularly to
consider matters related to the
purchase contracts for specific
goods and materials (equipment,
raw materials, spare parts, and
vehicles), as well as contracts
for design, construction and
installation, repair, and other
services required by the Company.
The Control and Analysis Division’s
office, performing the functions
of the Credit and Investment
Committee, verifies and monitors
the pricing of all contracts
112
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
and agreements worth over
RUB 300,000. In 2020, the Credit and
Investment Committee reviewed
approximately 8,000 matters
verified by the Control and Analysis
Department.
As part of the Group’s corporate IT
strategy, the Credit and Investment
Committee’s activities, including
submitting procurement documents
to be reviewed by the Credit and
Investment Committee, minutes
of meetings, voting and passing
resolutions, were digitalised and are
now reflected both in the applicant’s
account and the production facilities’
core digital systems (ERP and SRM
systems).
113
Sustainability
SUSTAINABILITY APPROACH
The Group’s general approach to
sustainability is based on the principle
of responsible operations in all the
regions where we have a presence.
We invest in the professional growth
of our employees, providing them
with competitive salaries and social
support. Acron Group contributes to
the social and economic development
of our footprint regions and cooperates
closely with stakeholders, working to
balance the Group’s interests and the
needs of local communities.
The Group continually invests in
improving its business efficiency
and introducing advanced
practices in occupational and
industrial safety.
In our operations, we use natural
resources as carefully as possible,
developing and introducing
environmentally friendly and
innovative technologies. The Group
follows environmental standards
that ensure compliance with
legal requirements and help reduce
the environmental impact of our
production facilities.
Acron Group’s key sustainable
development activities include
responsibility for personnel,
occupational and industrial safety,
environmental measures, and local
community involvement.
In 2020, the Group allocated
RUB 2.3 billion to sustainability measures.
650
RUB mn
RESPONSIBILITY FOR PERSONNEL
338
RUB mn
ENVIRONMENTAL MEASURES
674
RUB mn
LOCAL COMMUNITY INVOLVEMENT
640
RUB mn
OCCUPATIONAL AND INDUSTRIAL
SAFETY
The Group's Investments in
Sustainability by Activity, %
a
b
c
d
a 15 Environmental measures
b 28 Responsibility for personnel
c 28 Occupational and industrial safety
d 29 Local community involvement
114
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Responsibility for Personnel
• Healthcare, medical services and insurance for
personnel
• Personnel training and development
• Implementing goal-oriented social programmes
• Promoting sports and healthy lifestyles
• Engaging and retaining highly professional
personnel, cooperation with educational institutions
Occupational and Industrial Safety
• Improving working conditions
• Ensuring continuous and safe operation of production
facilities
• Minimising injury rate and number of accidents
• Liability insurance
Environmental Measures
• Reducing negative environmental impact by designing
and implementing efficient and environmentally safe
processes and innovative technologies
• Implementing environmental measures in the
following areas:
• Air protection
• Water protection
• Waste treatment
• Energy efficiency
Local Community Involvement
• Contributing to social and economic development
in footprint regions
• Implementing and supporting charitable
programmes
ACRON GROUP’S KEY SUSTAINABLE
DEVELOPMENT MEASURES
115
Responsibility for Personnel
We believe that our employees are the
backbone of the Group’s operations,
which is why our human resources
policy focuses on improving their
effectiveness and increasing their
personal interest in the Group’s
performance.
COVID-19
In 2020, Acron Group took consistent
measures to secure continued process
flows at our mining and production
facilities and to curb coronavirus
infections among its personnel, their
families, and communities in its
footprint regions.
With the health of employees
at the forefront, Acron Group
acted proactively in its footprint
regions and followed official
COVID-19 recommendations of
Rospotrebnadzor:
• Self-isolation for employees over 65
and pregnant people
• Providing employees with
personal protective equipment and
disinfectants
• Taking temperatures and checking
for respiratory symptoms
• Transitioning many employees to
remote work
• Restricting personal contacts and
social distancing for employees
• Shifting to electronic document flow
• Vaccination
The Group also implemented
measures beyond the official
recommendations:
• Establishing a COVID-19 emergency
response centre to prevent
infections, monitor community
transmission, and inform the
Group’s decision-making
• Monitoring infection rates at the
Group’s facilities
• Transitioning canteens to delivery
• Self-isolation and COVID-19 testing
for employees and contractors
arriving from other facilities
• Setting up observation and
isolation facilities
• Equipping large gathering rooms
with sanitising equipment
• Disinfecting company vehicles,
turnstiles, and checkpoint safety
barriers; washing asphalt
• Curtailing business trips and
restricting travel abroad
• Accepting shifts remotely, dividing
people into smaller groups at
checkpoints, packing food in
lunchboxes
• Updating employees regularly on
facility statistics
• Providing administrative, legal,
and psychological support to
employees affected by lockdown
measures
• Offering rehabilitation for
employees recovering from
COVID-19
These measures allowed the Group to
prevent outbreaks at its facilities. The
vaccination campaign was launched
in the first quarter of 2021.
Regardless of certain restrictions,
the Group continued to contribute to
social and economic development in
its footprint regions, cooperate with
educational institutions, and provide
charitable support to NGOs and social
entities, including RUB 95.3 million
allocated to curb the spread of
COVID-19.
Acron among Best Russian
Employers
HeadHunter, a respected recruiting
website (hh.ru), named Acron Group
one of the top 100 large Russian
employers. The Group ranked 51st
among companies employing
over 5,000 people. In 2020, over
500 of Russia’s largest companies
across a variety of industries were
assessed. The Group was specifically
recognised for its concern for each
and every one of its employees.
We are committed to continual
improvement of our human
resources policies and processes and
to maintaining a positive working
environment and an effective
incentive system.
Best Practices: Asking for
Feedback and Employees’
Opinions
In 2020, the Group’s facilities adopted
a new employee survey for collecting
independent feedback.
Due to pandemic-related restrictions,
the Group also asked for employees’
opinions about its COVID-19
response.
As part of the best employers
rating, the Group was assessed
on its Net Promoter Score, where
the employees indicated their
willingness to recommend the Group
as an employer to their friends and
relatives.
116
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
STAFF COMPOSITION AND NUMBERS
Over the past several years, our staff
composition has remained stable
and meets the Group’s needs. Our
human resources policy aims to
expertly combine the talents of young
specialists and the expertise of the
Group’s respected veterans.
Number of Acron Group
Employees in 2016–2020
(based on IFRS data)
Employees by Gender, %
a
b
c
a 72 Male
b 28 Female
Number of Employees by
Company, number of people
a
b
c
d
a 4,986 Acron
b 2,635 Dorogobuzh
c 1,927 NWPC
d 1,881 Other
The Group benefits from low staff
turnover due to positive working
conditions, an attractive social
benefits package, and social activities
for employees. In 2020, the staff
turnover rate was 6.6%.
In the reporting year, the Group’s
average payroll count was 11,429
people, and the average employee
age was 42 years.
11,429
people
Average payroll count in 2020
2020
11,429
11,205
2019
10,696
2018
10,8832017
11,201
2016
117
The Group’s human resources policy
is designed to create a favourable
work environment and implement an
effective incentive programme.
The Group annually adjusts salaries
so that they remain competitive
in their footprint regions. In 2020,
salaries at Acron Group’s facilities
were adjusted by 3.8%.
The average monthly salary at
the Group's production facilities is
higher than across Russia’s chemical
industry, at RUB 65,100 in 2020
(industry average: RUB 56,800).
Employees’ salaries include
compensation, incentive payments,
and performance bonuses.
The Group instituted a system for
targeted revision of base pay to
make remuneration competitive,
differentiate remuneration levels
based on performance, and improve
employees’ qualification.
Base pay may be revised subject to:
• Higher remuneration in the labour
market for rare professions and
skills in demand
• Promotion
• Increased duties (scope and
complexity)
• Horizontal change of position
within a unit or between units
• Higher productivity and significant
contribution to the unit’s
performance
Acron Group provides meal
allowances to employees at its
facilities, which are adjusted
annually.
INCENTIVE PROGRAMME
by 3.8%
Salaries at Acron Group companies
were adjusted
1,860
employees
of Acron Group received industy,
regional, local, and corporate
awards
5 employees
were awarded the title of Honoured
Chemist of the Russian Federation
in recognition of their contribution
to the development of the chemical
industry and outstanding work over
many years
Acron (Veliky Novgorod)
Novgorod region
Dorogobuzh (Smolensk region)
Smolensk region
NWPC (Murmansk region)
Murmansk region
Average Monthly Salary at Acron,
RUB '000
Average Monthly Salary at
Dorogobuzh, RUB '000
Average Monthly Salary at NWPC,
RUB '000
2020 2020 2020
60 51.7 93.2
31.8 35.8 66.6
57.1 49.3 89.6
54.2 43.9 81.8
49.3 42.8 77.4
50.4 41.7
75.7
31.7 34.2 61.1
31.3 32.3 57.6
29.2 29.0 51.5
27.9 27.8 48.1
2019 2019 2019
2018 2018 2018
2017 2017 2017
2016 2016 2016
118
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Individual Performance
Management System
In 2018, Acron Group introduced
the personal performance
management system in order to
increase employees’ productivity and
personal efficiency. In 2020, more
than 550 employees participated
in the programme, including over
300 executives at the Group’s
key production and medium-size
facilities and the Corporate Centre.
The Company's management
strives to ensure that employees
understand the Group’s strategy,
associate themselves with the
Group’s future, and see the
connection between their own tasks
and the Group’s goals.
Feedback from managers to
employees is a key element of the
personal performance management
system, which provides increased
efficiency. Additionally, each
participant in the system is
assessed on an annual basis. These
assessments provide a personal
performance coefficient, which plays
a role in many personnel decisions
and the amount of employees’
variable remuneration.
Incentive Programme
Development
The Group developed and introduced
new incentive mechanisms
to motivate employees. These
mechanisms include quarterly
bonuses for the efficient use of
production capacity at most of
Acron’s and Dorogobuzh’s production
units: ammonia, nitric acid, urea, AN,
and NPK. Since 2019, Acron (Veliky
Novgorod) has also paid bonuses to
maintenance personnel.
Bonuses are tied to units’
performance indicators. Additional
attention is paid to personal
performance: employees with
high coefficients receive larger
bonuses.
In 2020, NWPC revised monthly
bonuses to make them
transparently dependent on the
facility’s overall performance and
the performance of each unit.
119
SOCIAL BENEFITS AND GUARANTEES
Since 2011, the Group has
implemented the Fair Work
programme aimed at balancing
relations between the employer
and personnel and protecting their
rights and interests. The programme
is based on a holistic approach
to creating a positive working
environment for employees in every
aspect, from remuneration, social
benefits, and occupational safety to
sustainability, working conditions,
and quality.
Acron Group provides an extended
package of social benefits and
guarantees aimed at improving the
quality of life for employees and
their families. These benefits and
guarantees are integral parts of
the Fair Work programme and are
updated on a regular basis:
• Compensation, incentive
payments
• Voluntary health insurance
• Health resorts
• Entertainment events for
employees and their children
• Housing assistance, including a
corporate mortgage assistance
programme
• Interest-free loans
• Financial assistance to employees
and unemployed retirees
Revised Collective
Agreements
In late 2020, Acron, Dorogobuzh,
NWPC, and Aron Engineering
executed new collective agreements
that will run through 2023.
The new agreements preserve all
the main guarantees and benefits
and lay the groundwork for aligning
and systematising all of the Group’s
collective agreements:
• A unified social ratio was introduced
for calculations and payments under
the agreement
• Retirement benefits were
standardised
• Irrelevant incentives and benefits
were excluded
• Electronic pay slips were introduced
• Industrial accident payments were
standardised
Management, trade union leaders,
and facility teams will work closely
to continue to improve the incentives
and benefits system.
Acron Group Implements
Several Social Programmes
Employee Healthcare
Programme
Employee health is a top priority at
Acron Group. Each year, the Group
allocates significant funds to cover
employee medical care, wellness,
and athletics facilities and events.
Employees can receive medical
treatment at on-site health centres
with modern medical and diagnostic
equipment. The social package also
includes voluntary health insurance,
in which the Group invested RUB 88.9
million in 2020.
Acron Group provides employees and
their children with access to health
resorts and recreation camps on
discounted terms and partially pays
for the cost of attending recreation
camps. The Group allocated RUB 88.0
million for such programmes in 2020.
Promoting healthy lifestyles is an
important component of the Group’s
human resources policy. The Group’s
facilities have stadiums, swimming
pools, fitness centres, and youth sports
clubs. The athletics and cultural centres
hold annual athletics tournaments and
entertainment events, and organise
amateur talent groups, workshops, and
COVID-19. To prevent the spread of the new
coronavirus infection, we have minimised sporting
events, with only 3,500 Acron Group employees
taking part in 2020.
120
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
clubs for employees and their families,
and the Group rents a variety of sports
facilities from third parties. Each year,
employees compete in large-scale
sports competitions.
Acron Group was a finalist in the
national nomination for promoting
sports in the 2020 Best Corporate
Practices in Investing in the
Development of a Healthy Country
competition.
Programme to Support
Families with Children
Employees at the Novgorod-based
Acron facility and at Dorogobuzh
receive lump-sum payments for the
birth of a child and monthly cash
assistance for parental leave to care
for children under the age of three. The
Group supports sports initiatives and
organises leisure activities for children,
as well as joint events for parents
and children. Additionally, the Group
subsidises vouchers for employees to
attend a summer health camp.
Young Specialist Support
Programme
Acron Group goes to great lengths
to attract young specialists in its
footprint regions. The Group provides
young specialists with paid training
leave and wedding bonuses. It
also organises a variety of training
programmes and sports and
recreation events.
In 2010, the Group’s Veliky-
Novgorod-based facility introduced
a mortgage assistance programme
in order to reduce the risk of key
personnel turnover, especially young
professionals, which was renewed in
2018. In 2020, a corporate mortgage
programme was introduced at
Dorogobuzh, as well. In the reporting
year, 110 employees participated in
this programme, receiving a total
of RUB 15.7 million in mortgage
assistance.
The mortgage assistance programme
provides young and key employees
with partial repayment of interest on
mortgage loans. The new terms of the
programme include financing of the
down payment for certain categories
of employees.
The Group also runs a housing
programme, which includes relocation
assistance, financial aid for rent, and
corporate housing. In 2020, Acron
Group allocated RUB 10.8 million for
this purpose.
Retiree Support Programme
Acron and Dorogobuzh provide
assistance to retired employees,
including lump-sum payments upon
retirement and regular financial
assistance. Retirees retain the right
to corporate medical services and
discounted vouchers to resorts.
Unemployed retirees continue using
outpatient clinics and athletic and
cultural centres on the same terms as
employees. They are also invited to
special events, including receptions,
guided tours, dance parties, concerts,
and sports events.
COVID-19. In the reporting year, summer health
camps were closed due to pandemic.
In the reporting year, the Group’s financial aid to its
unemployed retirees totalled RUB 47.7 million.
121
In 2020, the Timiryazev
Russian State Agrarian
University opened
an Acron Classroom
to train agricultural
specialists.
Acron Group pays special attention to
the training of technical experts with
in-depth knowledge and the ability to
solve unique challenges in chemical
processes.
The Group adapts its training system
for employees to meet the unique
needs of the Group’s facilities.
The Group’s employees are
involved in professional retraining
programmes on a regular basis. In
2020, 1,529 employees completed
advanced training courses.
Additionally, all employees complete
annual occupational health and
industrial safety programmes.
Acron Group invested a total of
RUB 29 million in personnel training
and development.
Acron Group invested a total of
RUB 650 million in professional
training, social benefits and
guarantees, and social programmes
for its employees.
Talent Pool
Acron Group gives preferences to
existing employees when filling key
vacancies at its facilities.
Management encourages employees
to advance professionally and
creates opportunities and favourable
conditions for professional and career
growth. Specialists with creative and
leadership potential are invited to the
talent pool, increasing their chances
of being promoted to managerial
positions. Acron Group’s talent
PERSONNEL TRAINING AND DEVELOPMENT
pool base is updated quarterly and
included 331 employees as of the end
of 2020.
The goal of Talent Pool School is
to create a well-prepared pool of
employees and managers inside the
Group’s companies to promote the
principle of succession in corporate
governance.
A manager must provide justification
for considering an outside candidate
when there is a succession pool
member available.
The talent pool formation process
starts with the Group’s cooperation
with educational institutions and
continues after young specialists join
the facilities. As part of management
training, three Group executives
passed competitive admissions and
started studying management at
Yaroslav-the-Wise Novgorod State
University.
In order to create a talent pool for the
underground mine, NWPC organised
a vocational programme for its 38
employees to train maintenance and
repair wiremen, conveyor operators,
underground miners, and operators
for Atlas Copco’s SIMBA L/M 6C
drilling rig.
Career Guide for
Secondary Students
The talent pool is a key component
for building a sustainable staff
training system. In cooperation with
educational institutions, the Group
attracts young people to its production
facilities by offering a career guidance
programme that includes in-depth
studies of vocation-related subjects
COVID-19. Due to the pandemic,
Dorogobuzh cancelled all professional
trainings in 2020.
Acron Group Employees by
Category, %
a
b
c
d
a 71 Workers
b 16 Specialists
c 13 Managers
d 0 Office staff
Types of Training Provided
by Acron Group , number of
persons
a
b
a 730 Advanced training
b 799 Professional training and retraining
122
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
In 2020, the Acron Group project Our Hope took
the bronze medal at the Graduate Awards-2020,
a national contest for projects that benefit
graduates and young specialists.
COVID-19. Acron Group career guide events, including conferences,
exhibitions, job fairs, and meetings with the high-school graduates, were held
mostly online.
in specialised classrooms, as well
as guided tours of the production
facilities, city job fairs, school
competitions, open-house days, and
workshops.
In 2020, Acron Group held the
following events as part of its career
guidance programme:
• Cooperation with the Institute of
Agriculture and Natural Resources
of the Novgorod State University
and Novgorod Chemical Industrial
College to participate in the
Education. Employment. Career.
event
• Cooperation with the Veliky
Novgorod Education Committee to
hold the annual official ceremony
recognising the winners of Our
Hopes school Olympiads in
chemistry, physics, mathematics,
and computer science
• Young Professionals tournament
as part of the Young Professionals
project (WorldSkills Russia)
183 secondary
and post-secondary
students
attended guided tours of the Group’s
chemical production facilities
• Cooperation with local schools to
organise career guidance events for
school students in Smolensk region
• Participation in the Education
and Career (Safonovo) job fair
for young specialists and career
fair for graduates of the Ivanovo
State University of Chemistry and
Technology
• Participation in the all-Russian
ProfStories project to raise students’
awareness about professions and
employers
• Inauguration of the Kvantolab mini
tech park in Apatity
• Providing expert commission
members for the Mining
Technology — 3D Modelling
competition as part of the Young
Science of the Arctic Region Forum
in Apatity
Programmes for
Students and Graduates
Over the past several years, Acron
has awarded grants to the best
chemistry and physics teachers
123
in Veliky Novgorod as part of a
programme called Achieving
Success in Education and a Career
with Acron.
To attract and hire students from
specialised industrial schools, the
Group’s companies cooperate with
the leading Russian technology
universities and colleges in their
footprint regions. This programme
is intended to help students at
post-secondary and vocational
schools whose professions are in
demand at the Group’s facilities.
Students and graduates may sign
up for apprenticeships to learn about
working conditions, labour discipline,
and corporate culture. Students who
complete apprenticeships adapt
faster once they are hired full time
and pass the certification exam for
independent work at higher rates.
The Group has longstanding
partners in the professional training
programme:
• Yaroslav-the-Wise Novgorod State
University
• Ivanovo State University of
Chemistry and Technology
• Ivanovo Power Engineering
University
• Smolensk Regional Engineering
Academy
• Smolensk Branch of the Moscow
Power Engineering Institute
• Murmansk Arctic State University
• Murmansk State Technical
University
• St. Petersburg Mining University
• St. Petersburg State Technical
University
• Pskov State University
The Group also partners with the
following vocational schools:
• Novgorod Chemical Industrial
College
• Industrial College at Novgorod State
University
• Novgorod Construction College
• Verkhnedneprovsky Technology
College
• Safonovo Branch of Smolensk
Academy of Professional Education
• Safonovo Industrial College
• Vyazma Engineering College
• Apatity Engineering College
In the reporting year, 256 students
at post-secondary and vocational
schools participated in apprenticeship
programmes at the Group’s facilities;
of those, 83 students signed
contracts.
In 2020, Dorogobuzh held first competition for
school teachers called Academic Success —
Career at Dorogobuzh and allocated a total of
RUB 720,000 for grants in two nominations:
Best Chemistry Teacher and Best Physics
Teacher
124
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Occupational and
Industrial Safety
Fundamental Elements of Acron Group’s Policy for
Occupational and Industrial Safety
Creating a safe
and healthy work
environment
Reducing the number
of industrial accidents
and occupational
diseases
Taking preventive measures
to optimise occupational
risks (including measures to
prevent occupational injuries
and diseases)
Acron Group’s management realises its great responsibility for the continuous
and safe operation of its facilities, the occupational safety of its employees, and
the health and safety of people living in the Group’s footprint regions. To meet
these goals, the Group’s facilities have a comprehensive occupational and
industrial safety policy.
The Group uses high-tech equipment
to construct new and upgrade existing
production lines, runs equipment
diagnostics to ensure occupational
safety in the operation of equipment
and process flow, and tests the safety
of feedstock and materials used in
operations. The Group’s production
facilities take measures to improve
labour conditions and protect
personnel.
Accident prevention is a key priority
in the Group’s occupational and
industrial safety policy. In the event
of an accident, Acron Group conducts
an investigation, develops standards
based on an analysis of the causes, and
takes measures to mitigate the risk
of reoccurrence. At all of its facilities,
Acron Group provides occupational and
industrial safety instructions and trains
and tests employees, managers, and
specialists. The Group also monitors
the development of emergency
containment and recovery measures.
Personnel in the occupational,
industrial, fire and environmental safety
departments conduct comprehensive
targeted and unscheduled inspections
on a regular basis.
Under Russian laws, the Group
conducts special assessments at
its production facilities in order to
improve labour conditions and protect
personnel from occupational hazards.
All employees at the Group’s production
facilities must undergo preliminary
and regular medical examinations and
receive personal protective equipment.
Equipment diagnostics are run regularly
to ensure the safety of personnel during
equipment operation and production
processes. The Group executes
agreements with professional rescue
teams for mine rescue and emergency
rescue services and fire protection
at the Group’s hazardous production
facilities.
Employees at the Group’s facilities
who work in a hazardous environment
are provided with healthy meals, at a
cost of RUB 71.3 million in 2020.
125
In 2020, NWPC recorded 13 minor
accidents due to unsafe employee
practices, after which the Company
developed actionably measures with
deadlines to eliminate the causes of
those accidents.
The number of accidents at the
Group’s facilities increased from 12
to 15.
In the reporting year, Acron spent
more on workplace and industrial
safety and introduced systems
(devices) for automated and
remote control and management
of production equipment,
technological processes, and lifting
and transport devices used on
the mineral fertiliser production
lines, at the nitric acid shop, at the
instrumentation and automation
shop, and at the centralised repair
and maintenance shop. In addition,
the Company revised and enacted
regulations on workplace safety.
In order to increase employees’
awareness of and compliance with
workplace and industrial safety
regulations, a business coach from
Novmarket (Veliky Novgorod) provided
a training series on how to reduce the
injury rate by improving the social and
psychological climate at work.
In 2020, NWPC signed an agreement
with the mine rescue team from
Russia’s EMERCOM to provide mine
rescue services and prepare auxiliary
mine emergency rescue teams for
certification. EMERCOM certified
the auxiliary mine rescue teams to
conduct mine rescue operations in
the underground and open-pit mines.
As at the moment, the auxiliary mine
rescue teams consist of 56 trained and
certified responders.
In the reporting year, 10,776 Group
employees completed occupational
and industrial safety training,
including 2,302 managers and
specialists and 8,474 workers.
The Group’s investments in
occupational and industrial safety
totalled RUB 640 million.
Liability Insurance
Acron Group holds liability insurance
designed for hazardous production
facilities for its Russian operations.
The 15 hazardous production units at
Acron, 12 at Dorogobuzh, and nine at
NWPC are listed on the State Register
of Hazardous Production Facilities.
All of them have liability insurance,
and all of the Group’s employees
are insured against accidents and
occupational diseases.
Acron
0.22
(unchanged)
None Unchanged
– 5 cases
+9 cases
1
1
13
None
2 cases
recorded
0.40
(–82% YOY)
6.47
(120% YOY)
Dorogobuzh
NWPC
Facility
Accident Frequency Index
per 1,000 Employees
Number of
Occupational Diseases
Number of Accidents
in 2020
Accident
Increase/
Decrease YOY
126
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Environmental Efforts
Acron Group’s environmental strategy is aimed at reducing its
environmental impact, managing natural resources sustainably, and
introducing new equipment and cutting-edge technology.
Russian laws and technical
standards regulate the Group’s
environmental efforts. Acron Group
conducts continuous industrial
environmental monitoring and
environmental assessment of its
facilities.
Acron Group’s environmental policy
includes air and water protection,
environmental impact reduction, and
energy efficiency improvements.
In 2020, the Group’s Russian
facilities paid RUB 25.4 million in
environmental impact fees.
The Group invested an additional
RUB 338.1 million in measures to
protect the environment.
338 RUB mn
invested by Acron Group in protecting
the environment
ENVIRONMENTAL PERFORMANCE
Index Unit 2020 2019
Air pollutant emissions ‘000 t 39.8 32.8
NO emissions (in terms of NO
2
) ‘000 t 6.9 6.5
SO
2
emissions ‘000 t 0.9 0.9
CO emissions ‘000 t 20.3 15.4
Other emissions ‘000 t 11.7 10.0
Greenhouse gas emissions* ‘000 t 5,538 4,924
CO
2
emissions ‘000 t 3,602 3,436
N
2
O emissions (in terms of
2
equivalent) ‘000 t 1,936 1,487
CH
4
emissions (in terms of
2
equivalent) ‘000 t 0 0
Commercial products output ‘000 t 7,976 7,458
Greenhouse gas emission factor per 1 t of commercial product t/t 0.69 0.66
Water consumption
Total water intake, incl.: mn l 56,664 51,811
municipal water use mn l 1,648 1,534
groundwater intake mn l 258 258
surface water intake mn l 54,758 50,020
Water consumption for in-plant use mn l 47,036 43,434
For transfer to a third party mn l 8,536 8,377
127
Index Unit 2020 2019
Total circulating water mn l 949,037 927,179
Wastewater mn m
3
26.4 27.4
Pollutant effluents to open water ‘000 t 12.2 10.61
Standards ‘000 t 28.8 28.9
Total waste ‘000 t 29,064.2 36,480.7
Hazardous waste (hazard class 1-4) ‘000 t 35.4 37.5
Other waste (hazard class 5), incl.: ‘000 t 29,028.8 36,443.1
waste disposed of (mainly overburden waste) ‘000 t 28,986.2 36,402.8
* Direct emissions of greenhouse gases from sources, meaning emissions that originate directly from the production facilities of the organisation and
the ongoing production processes (Scope 1 in international terminology).
AIR PROTECTION
Reducing air pollutant emissions
from its operations is one of the
Group’s key environmental objectives.
The Group has launched a large-
scale programme of upgrades and
overhauls at its production facilities
and is increasingly manufacturing
environmentally friendly products.
The Group’s production facilities
conduct ongoing air and industrial
emission monitoring at the borders
of their sanitary protection zones
and analyse the emissions from their
operating facilities.
In 2020, the Group’s chemical
facilities upgraded equipment in their
main shops in order to improve the
environmental safety of processes and
products.
The Acron facility in Veliky Novgorod
conducted technical upgrades
at the AN, NPK, and nitric acid
shops to ensure sustainable and
efficient operation of production
and gas treatment units and to
comply with air pollutant emission
standards. Dorogobuzh brought
some engineering improvements
to the AN and NPK shops aimed at
ensuring sustainable and efficient
operations of the gas treatment
units and compliance with emission
standards. These improvements
included developing draft standards
for permissible emissions; replacing
the scrubber tent filter cloths at the
AN shop and gas treatment unit filter
elements at the AN shop and the
mineral fertiliser shipment facility;
purchasing devices for environmental
monitoring by a research laboratory.
At the Oleniy Ruchey mine (Murmansk
region), employees monitored air
conditions at the licence areas, used
dust-control measures, and watered
the surfaces of dumps and access
roads during the dry season. In
addition, NWPC performed quantitative
and qualitative monitoring of industrial
emissions from stationary sources.
In 2020, gross atmospheric pollutant
emissions from all of Acron Group’s
Russian production facilities totalled
39,800 tonnes, up 21.3% year-on-year.
Emissions did not exceed legal limits.
Gross emissions were up due to the
increased number of emission sources
(new production) and increased
capacity at existing production
facilities.
18 RUB mn
invested in reducing air pollutant
emissions
Air Pollutant Emissions
and Limits, ‘000 t
Emissions Limits
19.326.7
15.812.44.6
4.6
Acron
Dorogobuzh
NWPC
128
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Greenhouse Gases
Greenhouse gases include carbon
dioxide, nitrogen oxides, methane, and
others. Acron Group’s operations emit
greenhouse gases — mainly carbon
dioxide and nitric oxide.
The volume of greenhouse gas
emissions at the Group's facilities
is calculated using the procedure
approved by the Russian Ministry
of Natural Resources (Order No. 300
dated 30 June 2015). The limits for
quantified emissions include direct
emissions of greenhouse gases
from sources, meaning emissions
that originate directly from the
organisation's production facilities and
ongoing production processes (Scope
1 in international terminology).
The main source of carbon dioxide
emission is ammonia production, but
that carbon dioxide is used by the
Group’s facilities to produce urea and
NPK fertilisers. Additionally, both the
Acron and Dorogobuzh production
facilities produce liquid carbon dioxide,
a feedstock for the food industry.
These arrangements help keep the
Group’s overall greenhouse gas
emission per tonne of commercial
output at a relatively low level,
approximately 2-3 times lower than
greenhouse gas emissions from heavy
industrial facilities.
The main greenhouse gas emitted
by stationary sources at NWPC
is CO
2
, which is generated by
burning fuel oil at the boiler house
and processing plant. In 2020,
this indicator was 78,500 tonnes.
The main measures to reduce
CO
2
emissions from stationary
sources are the adjustment of the
combustion mode and constant
monitoring of the tightness of
combustion equipment.
In 2020, Acron Group increased its
greenhouse gas emissions 12.5%
year-on-year to 5,538,000 tonnes
(in terms of CO
2
equivalent), mainly
due to increased output of AN and
ammonia.
The Group’s commercial output was
up 6.9% to 7,976,000 tonnes, and
greenhouse emissions per tonne of
commercial product increased 5%
from 0.66 to 0.69 tonnes per tonne.
129
PROTECTION OF WATER RESOURCES
Efficient use of water resources in
our footprint regions is an important
component of Acron Group’s
environmental policy.
The Group’s production facilities
monitor the quality of potable water,
the quality of wastewater before and
after treatment, and the condition of
water bodies. Wastewater is treated
and decontaminated at all of the
Group’s facilities.
In 2020, Acron conducted repairs
at the water supply and sewage
units, the biological treatment
facility, and the urea and NPK units
in order to ensure sustainable
equipment operation and comply
with requirements for wastewater
treatment. Acron’s water discharge
was up 10.4% year-on-year to
21,300 cubic m3. The rate of water
consumption for technical use was
up 12.6% to 37,700 m3. The increase
in water waste and the consumption
rate was due to commissioning of new
production facilities and increasing the
capacity of existing units.
Acron commissioned a new integrated
wastewater treatment unit at its urea
shop, with investments totalling RUB
275 million.
Most of the measures to protect
surface water implemented by
Dorogobuzh (repairs and replacement
of old equipment and piping) were
aimed at ensuring the accident-free
operations of the biological treatment
facility and hydraulic facilities.
Dorogobuzh’s water discharge was
down 24.7% year-on-year to 4,600 m3
due to an increase in returned treated
wastewater.
Wastewater is handled one of
two ways at NWPC’s production
facilities: the sewage treatment
units treat domestic wastewater
without discharging it to a water
body, and the open-pit and shaft
water treatment complex treats
water before discharging it into a
water body under two regulatory
documents: the Resolution on the
Provision of the Right to Use a Water
Body for Wastewater Discharge, and
the Approval to Discharge Pollutants
into a Water Body. Accredited
laboratories monitor the quality of
wastewater discharged by NWPC.
They also continually monitor the
quality of natural water from the
reservoirs regardless of wastewater
discharge. In-house specialists
and accredited centres regularly
monitor morphometric parameters
at Komarinoye Lake and its water
protection zone. No wastewater
from the open-pit and shaft water
treatment complex was discharged
into Komarinoye Lake between June
and September 2020.
In August 2020, NWPC used its own
resources to conduct scheduled
repairs at its open-pit and shaft water
treatment complex, which included
replacing the filter elements on one of
sedimentation tanks at the complex,
fully updating the feed system for
the advanced treatment pools, and
levelling and grading work, all aimed
at improving the quality of wastewater
treatment. In September 2020, a new
water treatment agent produced by
Nalco was tested at the open-pit and
shaft water treatment complex as
part of experimental and industrial
trials. The test results showed fewer
suspended solids in the wastewater
treated by the new agent.
NWPC also continued to counteract
any impacts on aquatic biological
resources caused by the expansion
of its facilities. In the reporting year,
15,600 fish fry were released into a
tributary of the Umba River (White Sea
basin); investments totalled RUB 3.6
million. In 2021, NWPC will continue
implementing these measures with
estimated funding the same as in
2020.
In the reporting year, Acron Group’s
facilities discharged a total of 26.4
million m3 of wastewater, down 3.6%
year-on-year.
Pollutant effluents to open water
increased 15.1% year-on-year to
12,200 tonnes as capacity increased
at the AN, NPK, and nitric acid units,
as well as following the construction
of new facilities at the Acron site’s
urea workshop. None of these figures
exceed legal limits.
307 RUB mn
invested in reducing open water
pollution
Pollutant Effluents to Open Water
and Limits, ‘000 t
Effluents Limits
0.13 14.1
0.05
2.3
9.9
14.6
Acron
Dorogobuzh
NWPC
130
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
WASTE MANAGEMENT
The Group’s waste management
practices include reducing the
amount of waste, introducing waste
reduction technology, minimising the
amount of non-recyclable waste, and
disposing of it in accordance with
applicable laws.
In 2020, the total volume of waste
generated by Acron increased 1.7%
year-on-year to 76,500 tonnes due
to construction of new units. Hazard
class 1-2 waste at Acron remained flat
at less than 0.01%.
In the reporting year, Dorogobuzh saw
its waste go down 70% year-on-year
to 3,200 tonnes (hazard class 1-4
waste).
In addition to waste from its chemical
facilities, the Group generates
waste at the Oleniy Ruchey mine,
mainly during the production and
processing of apatite and nepheline
ores (overburden rocks and process
tailings of apatite-nepheline ores),
which is disposed of at special
facilities (overload dumps and
tailings). Other waste from the mine
is treated under annual agreements
with companies licensed to transport,
decontaminate, treat, and dispose of
hazard class 1-4 waste.
NWPC is also focused on the
environmentally friendly treatment
of oily waste, mainly represented
by such moderately hazardous
waste (hazard class 3) as oil waste,
pipelines, tanks, oil separation units,
and oil filters for motor vehicles. In
2020, a total of 70.6 tonnes of oily
waste were generated.
NWPC generated a total of 29 million
tonnes of waste in 2020, mainly
low-hazard and non-hazardous waste
(overburden rocks and tailings).
In the reporting year, all the
Group’s facilities took measures to
comply with Russian sanitary and
environmental laws on handling
waste generated during biological
water treatment and the operation of
waste disposal facilities.
Acron continued developing design
documentation on environmental
compliance.
Dorogobuzh developed individual
standards for water consumption
and disposal and draft standards
for discharge of water pollutants.
It also designed projects to repair
underground utilities, a section of
a pipeline that supplies river water
from the water supply and sewage
unit to the industrial wastewater
treatment unit, and a pipeline used
to dilute blow-down water from
recovery boilers in a bubbler tank.
A project was also designed to use
circulating water instead of river
water. Dorogobuzh drafted design
documentation for the installation
of an additional process condensate
stripping tower and selected reagents
used to prepare treated wastewater
from the industrial wastewater
treatment unit so that it could be
used in the AK-72 water-recycling
cycle to produce nitric acid.
Acron Group’s Russian facilities
invested a total of RUB 5 million in
waste management efforts.
2020 Waste Classes, t
Class 1 Class 2 Class 3 Class 4 Class 5
Acron 3.3 1.2 370.7 34,117 42,056
Dorogobuzh 1.2 0.1 73.0 465 2,625
NWPC 0.9 10.6 71.4 318 28,984,087
Total for the
Group
5.4 11.9 515.1 34,900 29,028,768
Waste Generation, ‘000 t
Waste
Generation
Limits
6.1 125.7
3.2 76.5
Acron
Dorogobuzh
131
ENERGY EFFICIENCY
Energy conservation and
improved energy efficiency are
important parts of Acron Group’s
general strategy to minimise
Facility Measure Effect
Acron
Converted the equipment in buildings 156 and
226 to operate on heating water instead of
P-10 steam
Reducing consumptive use of steam
Acron
Installed frequency convertors to replace fluid
couplings and replaced the electric pump
engines in the urea shop
Reducing electricity consumption
Dorogobuzh
Ensured steady operations of the turbine
generator station
Using surplus steam pressure and temperature
from the production shops to generate
electricity
Dorogobuzh
Installed frequency convertors on pumping
and induced-draft equipment
Reducing electricity consumption
Dorogobuzh
Replaced mercury-vapour lamps with LED
lamps
Reducing electricity consumption
NWPC
Upgraded the lighting system at the tailings
dam to LED lights
Reducing electricity consumption
NWPC
Installed distribution substation RP-22 and
five divisional step-down substations
Improving the quality and reliability of the
power supply to the mine and the crushing and
conveyor shop
NWPC
Installed power-factor correction equipment at
the processing plant’s distribution substations
Reducing the number of voltage dips and
equipment shutdowns during thunderstorms
and other voltage swells in the grid
Specific Natural Gas Consump-
tion at Ammonia Units, m
3
per t
2020
1,061
1,109
1,059
1,038
1,032
1,104
1,096
1,008
2019
2018
2017
2016
1,034
1,107
Acron
Dorogobuzh
environmental impact, preserve
energy resources, and reduce the
share of energy costs in the overall
cost of production.
Each of the Group’s production
facilities develops an annual energy
conservation programme. The table
below shows the most important
measures taken in 2020.
In addition to electrical and thermal
energy, Acron Group consumes a
significant volume of natural gas as
the main feedstock for producing
ammonia. In 2020, the average gas
consumption at the Novgorod-
based Acron facility’s ammonia
units continued to decrease, falling
to 1,032 cubic metres per tonne due
to upgrades at Ammonia-4 that
reduced the unit’s gas consumption
to 989 cubic metres per tonne. Acron
plans to upgrade the other ammonia
units, as well, further cutting
average natural gas consumption.
In 2020, Dorogobuzh reduced its
natural gas consumption to 1,008
cubic metres per tonne of ammonia
following upgrades to the unit
made in 2019.
Acron Group’s energy consumption
highlights are in the tables below. In
2020, overall energy consumption
went up with output, while specific
consumption decreased.
132
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
2020 Acron Group Energy Consumption
2019 Acron Group Energy Consumption
Natural
gas, ‘000
m3
Electricity,
‘000 kWh
Thermal
energy,
Gcal
Gasoline, l Diesel
fuel, l
Fuel
oil, t
Gross consumption, incl. 3,391,835 1,665,216 6,066,923 570,168 25,269,970 25,213
in-house – 69,694 4,584,056 – – –
purchased 3,391,835 1,595,522 1,482,867 570,168 25,269,970 25,213
Specific consumption per tonne
of product
0.425 0.209 0.761 0.071 3.168 0.003
Natural
gas, ‘000
m3
Electricity,
‘000 kWh
Thermal
energy,
Gcal
Gasoline, l Diesel
fuel, l
Fuel
oil, t
Gross consumption, incl. 3,349,349 1,582,559 5,644,315 745,667 25,011,227 23,160
in-house – 93,791 4,271,347 – – –
purchased 3,349,349 1,488,768 1,372,968 745,667 25,011,227 23,160
Specific consumption per tonne
of product
0.449 0.212 0.757 0.100 3.354 0.003
133
Social Involvement
Acron Group makes a significant
contribution to the social and
economic development of its
footprint regions. The Group is an
attractive employer and responsible
taxpayer that stays deeply involved
in these regions’ economies,
improving the quality of life for its
employees, their families, and local
residents.
We are engaged in ongoing
constructive dialogue with
stakeholders to learn about their
needs, taking into account the
interests of the Group and local
communities. Acron Group actively
invests in local infrastructure,
healthcare, education, culture, arts,
and sports institutions, implements
social and charitable programmes,
and supports non-governmental
organisations and local communities.
Being actively involved in the life
of local communities, Acron Group
is committed to creating and
maintaining a favourable social
environment and values and to
developing the Group’s footprint
regions.
Acron and Veliky Novgorod
administration signed a new
social and economic cooperation
agreement in the reporting year,
under which the city administration
and the facility continue working
together to solve pressing social
and economic issues and to ensure
the sustainable development of
the Novgorod region administrative
centre. In 2020, Acron invested a
total of RUB 240 million in social
and economic development and
RUB 82 million in charities.
Under the cooperation agreement
with Veliky Novgorod administration,
the Acron facility allocated
RUB 30.6 million in the reporting year
Acron Group supports local communities in compliance with
the following principles:
Projects must have great social
significance
The interests of the majority of
residents must take priority
Assistance must be targeted
Recipients must be transparent
and accountable and use funds
as intended
132 RUB mn
Acron Group's charitable giving
542 RUB mn
total social investments in Acron
Group's footprint regions
to repairs and purchasing furniture
and modern equipment for chemistry
classrooms in eight local schools,
hosting the Young Professionals
championship at Novgorod Chemical
Industrial College, where Acron is a
permanent partner, and purchasing
special cleaning machinery for Veliky
Novgorod. For many years, Acron has
participated in the Christmas Gift
marathon for charity, which supports
families with children.
In late 2020, the War Veterans
Hospital in Veliky Novgorod opened
the doors to its new, modern
geriatric centre, financed by Acron.
Additionally, geriatric primary care
facilities were opened in three district
seats (Staraya Russa, Borovichi, and
Pestovo). Investments in the project
totalled RUB 129.9 million.
Acron also sponsored renovations to
the Fyodor Dostoyevsky Academic
Drama Theatre in Veliky Novgorod.
Dorogobuzh spent RUB 50.9 million
on social and economic development
in its footprint region and on charity.
In 2020, Dorogobuzh and the
administration of Dorogobuzh
district (Smolensk region) signed a
new social partnership agreement,
under which the Company financed
repairs of kindergartens and schools,
purchased equipment for a chemistry
laboratory at Verkhnedneprovsky
Engineering College, and invested in
other initiatives.
In the reporting year, NWPC renewed
its social and economic partnership
and cooperation agreement with the
134
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Kirovsk urban district and transferred
approximately RUB 148 million to
the city budget. These funds were
allocated to supporting education,
culture, and sports institutions,
including in Koashva settlement,
maintenance of public roads and urban
landscaping, and financing of Kirovsk’s
Procurement and Service Centre.
In 2020, NWPC participated for
the first time in a Week Without
Turnstiles, a national career
guidance event aimed at promoting
engineering professions in the
industry.
NWPC signed a cooperation
agreement with Apatity Preparatory
School No. 1 to provide facilities
and resources for supplementary
education and to support student
involvement in research activities.
NWPC also teamed up with
Murmansk Regional Blood
Transfusion Station to hold an offsite
blood donation campaign, in which
30 Company employees took part.
In 2020, Partomchorr Mining
Company (a member of Acron Group)
and the Apatity city administration
signed an agreement on social
and economic partnership and
cooperation in order to develop
and maintain social and public
infrastructure. Under this agreement,
the Company transferred over
RUB 152 million to the city budget.
In the reporting year, Acron Group’s
production facilities allocated a
total of RUB 674.4 million, up almost
100% year-on-year, to support social
and economic development in their
footprint regions and to charity.
Corporate Volunteering
In the late 1960s, one of Russia’s
first volunteer search clubs, called
Sokol (Falcon), was founded at Acron
by Nikolay Orlov. Later, the regional
search expedition was named after
him. Several generations of Acron
employees have participated in the
Memory Watch commemorative
event, setting an example of good
citizenship for their colleagues. The
search club excavates the remains
of fallen and unburied Red Army
soldiers, commemorating their
sacrifice and informing their relatives
of their fate.
In 2020, Acron employees from Sokol
recovered and solemnly laid to rest
the remains of the pilots of a night
bomber that went missing near
Veliky Novgorod in 1942.
Members of the club use data from
the Defence Ministry archive to find
information about relatives of the
fallen soldiers.
For decades, Acron’s employees have
commemorated the fallen soldiers of
the 2nd Shock Army and maintained
their monuments. Children and
grandchildren of Acron employees
join them in the Sokol search club.
Acron’s Museum of Military and
Labour Glory is recognised one
of Russia’ best. It carefully stores
unique historical artefacts of World
War II located by search club
members at the sites of horrible
battles across Novgorod region.
Sokol is well known in Russia
and abroad, and members of
the search movement are highly
regarded in Veliky Novgorod for their
contributions to historical memory.
Recently, young Acron employees
have joined the search movement.
In November 2020, Sokol’s members
participated in the burial of over 700
remains of Red Army soldiers found
in Novgorod region in the reporting
year. The burial, organised by the
Nikolay Orlov search expedition, took
place at the memorial cemetery in
Myasnoy Bor village.
In 2020, Sokol’s volunteers won
recognition:
• The Heritage of Novgorod Land
Contest for historical and patriotic
war museums established
by educational institutions,
companies, and organisations
• The award for Best Corporate
Museum at the 2020 Silver
Threads National Corporate Media
Contest
• The award for Best Corporate
Video (a film about the Sokol
search club and its hunt for
information about relatives of the
fallen pilots) at the 2020 Silver
Threads National Corporate Media
Contest
135
Cooperation
with Stakeholders
Acron Group conducts its business
with consideration for the interests
of all stakeholders. The Group
believes that only such close
cooperation can develop productive,
long-term relationships and foster
an environment in which we can
promptly respond to requests from
local communities in rapidly changing
conditions.
Acron Group used the materiality
criterion to identify stakeholders,
taking into account the impact
of the Group’s business on these
groups, the impact of these groups
on the Group’s sustainability,
and the existence of statutory
obligations or obligations under any
other regulations.
Goals of cooperation Cooperation tools 2020 events and results
Shareholders
and investors
• Ensure the Group’s value
grows over the long run
• Provide information about
the Group’s development
strategy
• Increase the quality of
corporate governance
• Maintain liquidity level and
share price
• Conferences for investors
• Individual meetings with
investors
• Conference calls
• Press releases and other
materials within the scope of
required disclosure
• Regular contact with analysts
• Annual general meetings and
mandatory reports
• Corporate website
• Visits to production facilities
for analysts and investors
• One annual shareholder
meeting and one
extraordinary shareholder
meeting were held
• Share value up 24%
• Regular cooperation with
investment bank analysts
• 120 messages and price
sensitive information
statements published on
disclosure portals
Federal
and local
government
authorities
in footprint
regions
• Promote social and economic
development in footprint
regions
• Address social and
environmental issues
• Analysing specific needs of
residents in footprint regions
and executing social and
economic agreements to
meet such needs
• Meetings with
representatives of regional
government and local
residents
• Support for local public and
athletic organisations
• Placement programme for
young professionals
• Agreements on social and
economic cooperation
executed by Acron,
Dorogobuzh, NWPC, Mining
Company Partomchorr with
local authorities for a total of
RUB 542 million
• Acron Group facilities
invested RUB 132 million in
charitable projects.
136
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Goals of cooperation Cooperation tools 2020 events and results
Media • Establish a positive image of
the Group
• Strengthen the Group’s
reputation in the business
community
• Improve disclosure and
transparency
• Relations with media through
meetings, interviews, press
releases and other materials
published and distributed on
the Group’s website, visits to
production facilities
• Participation in contests,
ratings and awards
• 96 press releases
• In 2020, Acron Group earned
several awards:
— Acron: Annual Report
Awards organised by
Moscow Exchange, Best
Corporate Website Design
and Navigation nomination
— Acron: Five Stars. Chemical
Industry Leaders national
competition, Best Project of
the Year nomination for the
development of three nitric
acid production units with
a total capacity of 405,000
tpa
— Acron: third place at the
Graduate Awards 2020, fifth
annual national competition
of projects related to work
with graduates and young
specialists
— Dorogobuzh: Best Group
of Chemical Production
Facilities in Smolensk
Region
Local
communities
• Implement programmes
to support young people,
education and athletic
development
• Cooperation with secondary
schools, leading Russian
technical institutions of
higher education, and
technical colleges
• Specialised classes with
advanced curriculum on
industrial subjects involving
faculty from higher education
institutions
• Signing mutual obligation
agreements with students
who receive scholarships
• Allocating funds for
specialised literature for
students
• Organising athletic events
• Acron Classroom opened
at the Timiryazev Russian
State Agrarian University to
train specialists for Russian
agricultural industry.
• Remote vocational guidance
programmes for students
in the footprint regions:
conferences, exhibitions, job
fairs, online meetings with
graduation-year pupils of
secondary schools
• Approximately 200 pupils
and students attended
guided tours at the Group’s
chemical production facilities.
• 256 students from vocational
schools and universities
participated in the
apprenticeship programme
at the Group’s chemical
production facilities, and 83
of them were subsequently
hired.
137
Goals of cooperation Cooperation tools 2020 events and results
Employees and
trade unions
• Create conditions for
professional growth
and social wellbeing of
employees
• Ensure workplace safety
• Improve social and work
environment
• Enhance remuneration
system
• Improve social partnership
system
• Increase personnel
motivation
• Provide social support for
employees and retirees
• Develop effective corporate
culture
• Use human resources
efficiently
• Ensure labour safety
• Personnel development
programmes, including talent
pool programme
• Intranet information portal
for personnel
• Meetings between
personnel and the Group’s
management
• Professional skills
competitions for employees
• Training events
• Employee healthcare
programme
• Updates to the Collective
Agreement
• Social benefits provided
under the Collective
Agreement
• Meetings and consultations
between trade union
leaders and the Group’s
management
• Annual conferences of the
primary trade union attended
by the Group’s management
• Joint work on the Labour
Dispute Committee
• Acron Group was voted
one of the top 100 large
Russian employers by users
of HeadHunter, a respected
recruiting website (hh.ru).
• By the end of 2020, Acron
Group’s talent pool included
331 employees.
• 3,500 employees participated
in athletic events.
• 1,860 employees received
industry and Company
awards.
• Over 700 employees took
various training classes.
• Primary trade unions held
annual conferences online.
• Acron, Dorogobuzh, NWPC
and Acron Engineering
signed new collective
agreements with employees
through 2023.
Consumers,
partners,
and service
providers
• Guarantee safe, high-quality
products for consumers
• Expand sales markets and
product range
• Improve reliability and safety
of processes and equipment
• Mitigate accident risks
at hazardous production
facilities
• Development and production
of new products meeting
market demands
• Long-term mutually
beneficial partnerships based
on trust
• Equal tender conditions for
suppliers and contractors
• Timely fulfilment of mutual
obligations
• Anti-corruption efforts,
ethical compliance
• Improvement of the certified
management systems at
Acron and NWPC
• Audits performed by
consumers
• Attendance at forums,
specialised exhibitions and
industry conferences
• Membership and
involvement in industry
organisations (Association of
Russian Fertiliser Producers,
IFA, Fertilizers Europe)
• Participation in industry
conferences
• Transfer of procurement to
in-house electronic trading
platform
• Centralised procurement
• Signed seven mineral
fertiliser supply agreements
with regional departments of
agriculture
138
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Goals of cooperation Cooperation tools 2020 events and results
Rating agencies • Improve the Group’s credit
rating
• Annual meetings with
analysts
• Fitch Ratings confirmed
Acron Group’s BB- credit
rating with a Stable Outlook
• Moody’s Investors Service
confirmed Acron Group’s Ba3
credit rating with a Stable
outlook
• Expert RA agency confirmed
Acron Group’s ruA+ credit
rating with Stable Outlook
Banks • Provide required credit
resources to the Group’s
companies
• Obtaining/repaying loans • Refinanced RUB 39 billion in
debt
139
Financial
Statements
Responsibility Statement
Management Responsibility Statement Regarding Preparation and
Approval of Consolidated Financial Statements
We confirm that to the best of our knowledge:
• The Group’s IFRS consolidated financial statements present an accurate and impartial picture of its assets, liabilities,
financial position, profit and loss accounts, and of the consolidated companies as a whole.
• This Annual Report provides an impartial description of the business and position of the Group and of the consolidated
companies as a whole, along with a description of the key risks and uncertainties to which they are subject.
On behalf of the Board of Directors
Alexander Popov
Chairman of the Board of Directors
140
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF PUBLIC
JOINT STOCK COMPANY “ACRON”
Opinion
We have audited the consolidated financial statements of PJSC “Acron” (the “Company”) and its subsidiaries (the “Group”),
which comprise the consolidated statement of financial position as at 31 December 2020, 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 2020, 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 Ethics
Standards Board for Accountants International Code of Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the
requirements in the Russian Federation and the IESBA Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Independent
Auditors’ Report
Audited entity: PJSC “Acron”.
Registration No. in the Unified State Register of
Legal Entities 1025300786610.
Veliky Novgorod, Russia
Independent auditor: JSC “KPMG”, a company incorporated under the Laws of the Russian
Federation, a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited (“KPMG International”), a private English company
limited by guarantee.
Registration number in the Unified State Register of Legal Entities: No. 1027700125628.
Member of the Self-regulatory Organization of Auditors Association “Sodruzhestvo” (SRO AAS).
Principal registration number of the entry in the Register of Auditors and Audit Organizations:
No. 12006020351
141
The key audit matter How the matter was addressed in our audit
The Group has derivative financial
instruments - call and put options for
ordinary shares of JSC Verkhnekamsk
Potash Company, a subsidiary of the
Group that holds a license to develop a
potash deposit.
The primary input for determining the
fair value of the options recognised
in the Group’s consolidated financial
statements is the fair value of the
underlying asset - shares of JSC
Verkhnekamsk Potash Company, which
is estimated using the discounted cash
flow model.
We focused our attention on the issue
of assessing the fair value of options
due to the following:
• there is an inherent risk of uncertainty
in forecasting and discounting future
cash flows;
• the use of significant unobservable
valuation inputs increases the degree
of uncertainty in the calculations;
• financial model includes specific
parameters and subjective estimates,
requiring management to apply
significant professional judgment.
We have gained an understanding of the Group’s internal controls over the
valuation process.
We assessed independence and professional competence of the appraiser
engaged by the Group to perform fair value calculation of the underlying asset.
We involved our valuation specialists and conducted a critical analysis of
the key assumptions underlying the discounted cash flow forecast used to
determine the fair value of JSC Verkhnekamsk Potash Company’s shares by
comparing them to external industry, economic and financial data and other
available information.
We checked the mathematical accuracy of the calculations.
We assessed whether the applied methodology is in line with the specific
conditions of the Group, as well as the generally accepted valuation practice.
We checked the accuracy and completeness of the relevant disclosures in the
consolidated financial statements.
Fair value of derivative financial instruments
Please refer to the Notes 10, 12, 27 in the consolidated financial statements.
Other Information
Management is responsible for the other information. The other information comprises the information included in
the Annual report of PJSC “Acron” 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.
142
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
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 auditors’
report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
143
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditors’ report is:
Andrei V. Ryazantsev
JSC “KPMG”
Moscow, Russia
17 March 2021
144
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Consolidated
Financial Statements
Public Joint Stock Company “Acron”
Consolidated Statement of Financial Position at 31 December 2020
(in millions of Russian Roubles)
| Note | 31 December 2020 | 31 December 2019 | |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 9 |
|
|
| Subsoil licences and related costs | 10 |
|
|
| Investment in equity instruments measured at fair value through other comprehensive income | 11 |
|
|
| Long-term derivative financial instruments | 12 |
|
|
| Right-of-use assets | 17 |
|
|
| Deferred tax assets | 24 |
|
|
| Other non-current assets |
|
|
|
| Total non-current assets |
|
|
|
| Current assets | |||
| Inventories | 8 |
|
|
| Accounts receivable | 7 |
|
|
| Cash and cash equivalents | 6 |
|
|
| Short-term derivative financial instruments | 12 |
|
|
| Other current assets |
|
|
|
| Total current assets |
|
|
|
| TOTAL ASSETS |
|
|
|
| EQUITY | |||
| Share capital | 15 |
|
|
| Treasury shares |
( |
( |
|
| Retained earnings |
|
|
|
| Revaluation reserve |
( |
( |
|
| Other reserves |
( |
( |
|
| Cumulative currency translation difference |
|
|
|
| Equity attributable to the Company's owners |
|
|
|
| Non-controlling interests | 16 |
|
|
| TOTAL EQUITY |
|
|
|
| LIABILITIES | |||
| Non-current liabilities | |||
| Long-term borrowings | 14 |
|
|
| Long-term derivative financial instruments | 12 |
|
|
| Long-term lease liabilities | 17 |
|
|
| Deferred tax liabilities | 24 |
|
|
| Other non-current liabilities |
|
|
|
| Total non-current liabilities |
|
|
|
| Current liabilities | |||
| Accounts payable | 13 |
|
|
| Short-term derivative financial instruments | 12 |
|
|
| Short-term borrowings | 14 |
|
|
| Advances received |
|
|
|
| Short-term lease liabilities | 17 |
|
|
| Other current liabilities |
|
|
|
| Other current liabilities |
|
|
|
| TOTAL LIABILITIES |
|
|
|
| TOTAL LIABILITIES AND EQUITY |
|
|
The Consolidated Financial Statements were approved for issue on 17 March 2021.
V.Y. Kunitskiy
President
A.V. Milenkov
Finance Director
145
Public Joint Stock Company “Acron”
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 December 2020
(in millions of Russian Roubles, except for per share amounts)
| Note | 2020 | 2019 | |
| Revenue | 4 |
|
|
| Cost of sales | 18 |
( |
( |
| Gross profit |
|
|
|
| Transportation expenses | 20 |
( |
( |
| Selling, general and administrative expenses | 19 |
( |
( |
| Profit on sale of potash leases | 10 |
|
|
| Other operating income/(expenses), net | 22 |
|
( |
| Operating profit |
|
|
|
| Finance (expenses)/income, net | 21 |
( |
|
| Interest expense |
( |
( |
|
| (Loss)/gain on derivatives, net |
( |
|
|
| Profit before taxation |
|
|
|
| Income tax expense | 24 |
( |
( |
| Profit for the year |
|
|
|
| Other comprehensive income/(loss) on items that will not be reclassified to profit or loss: | |||
| Investment in equity instruments measured at fair value through other comprehensive income: | |||
| - Gain/(loss) arising during the year | 11 |
|
( |
| Other comprehensive income/(loss) on items that are or may be reclassified to profit or loss | |||
| Currency translation differences |
|
( |
|
| Other comprehensive income/(loss) for the year |
|
( |
|
| Total comprehensive income for the year |
|
|
|
| Profit is attributable to: | |||
| Owners of the Company |
|
|
|
| Non-controlling interests |
|
|
|
| Profit for the year |
|
|
|
| Total comprehensive income is attributable to: | |||
| Owners of the Company |
|
|
|
| Non-controlling interests |
|
|
|
| Total comprehensive income for the year |
|
|
|
| Earnings per share | |||
| Basic (expressed in Russian Roubles) | 23 |
|
|
| Diluted (expressed in Russian Roubles) | 23 |
|
|
146
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Public Joint Stock Company “Acron”
Consolidated Statement of Cash Flows
for the year ended 31 December 2020
(in millions of Russian Roubles)
| Note | 2020 | 2019 | |
| Cash flows from operating activities | |||
| Profit for the period |
|
|
|
| Adjustments for: | |||
| Income tax expense | 24 |
|
|
| Depreciation and amortisation | 9 |
|
|
| Provision for inventory obsolescence |
|
|
|
| Provision for impairment of accounts receivable |
|
|
|
| Loss on disposal of property, plant and equipment | 22 |
|
|
| Interest expense |
|
|
|
| Interest income | 21 |
|
|
| Loss/(gain) on derivatives, net |
|
( |
|
| Dividend income | 21 |
( |
|
| Profit on sale of potash leases | 10 |
( |
|
| Unrealised foreign exchange effect on non-operating balances |
|
( |
|
| Operating cash flows before working capital changes |
|
|
|
| (Increase)/decrease in gross trade receivables |
( |
|
|
| (Increase)/decrease in advances to suppliers |
( |
|
|
| Decrease/(increase) in other receivables |
|
( |
|
| (Increase)/decrease in inventories |
( |
|
|
| Increase in other current assets |
|
( |
|
| Increase in trade payables |
|
|
|
| Increase/(decrease) in other payables |
|
( |
|
| Increase in advances from customers |
|
|
|
| Increase/(decrease) in other current liabilities |
|
( |
|
| Cash generated from operations |
|
|
|
| Income taxes paid |
( |
( |
|
| Interest paid |
( |
( |
|
| Net cash from operating activities |
|
|
|
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment and intangible assets |
( |
( |
|
| Proceeds from sale of potash leases |
|
|
|
| Interest received |
|
|
|
| Dividend received |
|
|
|
| Purchase of investment in equity instruments measured at fair value through other comprehensive income |
( |
( |
|
| Net change in other non-current assets and liabilities |
( |
( |
|
| Net cash used in investing activities |
( |
( |
147
Public Joint Stock Company “Acron”
Consolidated Statement of Cash Flows
for the year ended 31 December 2020
(in millions of Russian Roubles)
| Note | 2020 | 2019 | |
| Cash flows from financing activities | |||
| Acquisition of non-controlling interest | ( |
( |
|
| Purchase of shares of subsidiary | 16 | ( |
|
| Proceeds from sale of shares of subsidiary | 16 | ||
| Extension of options on shares of subsidiary | ( |
||
| Acquisition and redemption of treasury shares | ( |
( |
|
| Contribution of non-controlling shareholder | |||
| Dividend paid to shareholders | ( |
( |
|
| Dividend paid to non-controlling shareholders | ( |
( |
|
| Proceeds from borrowings | 14 | ||
| Repayment of borrowings | 14 | ( |
( |
| Payment of lease liabilities | 17 | ( |
( |
| Net cash used in financing activities | ( |
( |
|
| Net increase in cash and cash equivalents | |||
| Cash and cash equivalents at 1 January | |||
| Effect of movements in exchange rates on cash and cash equivalents | ( |
||
| Cash and cash equivalents at 31 December | 6 |
148
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Public Joint Stock Company “Acron”
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
(in millions of Russian Roubles)
| Capital and reserves attributable to the Company’s owners | ||||||||
| Share capital | Treasury shares | Retained earnings | Revaluation reserve | Other reserves | Cumulative currency translation difference | Non-controlling interests | Total equity | |
| Balance at 1 January 2019 | ( |
( |
( |
|||||
| Total comprehensive income | ||||||||
| Profit for the year | - | - | - | - | - | |||
| Other comprehensive loss | ||||||||
| Loss on investment in equity instruments measured at fair value through other comprehensive income (Note 11) | - | - | - | ( |
- | - | - | ( |
| Currency translation differences | - | - | - | - | - | ( |
( |
( |
| Total other comprehensive loss | - | - | - | ( |
- | ( |
( |
( |
| Total comprehensive income for the year | - | - | ( |
- | ( |
|||
| Acquisition of non-controlling interest | - | - | - | - | - | ( |
||
| Acquisition and redemption of treasury shares | - | ( |
- | - | ( |
- | - | ( |
| Contribution of non-controlling shareholder | - | - | - | - | - | - | ||
| Dividend declared | - | ( |
- | - | - | ( |
( |
|
| Provision for previous years obligations | - | - | ( |
- | - | - | - | ( |
| Other | - | - | ( |
- | - | - | - | ( |
| Total transactions with Company’s owners | - | ( |
( |
- | ( |
- | ( |
( |
| Balance at 31 December 2019 | ( |
( |
( |
|||||
149
Public Joint Stock Company “Acron”
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
(in millions of Russian Roubles)
| Capital and reserves attributable to the Company’s owners | ||||||||
| Share capital | Treasury shares | Retained earnings | Revaluation reserve | Other reserves | Cumulative currency translation difference | Non-controlling interests | Total equity | |
| Balance at 1 January 2020 | ( |
( |
( |
|||||
| Total comprehensive income | ||||||||
| Profit for the year | - | - | - | - | - | |||
| Other comprehensive income | ||||||||
| Gain on investment in equity instruments measured at fair value through other comprehensive income (Note 11) | - | - | - | - | - | - | ||
| Currency translation differences | - | - | - | - | - | |||
| Total other comprehensive income | - | - | - | - | ||||
| Total comprehensive income for the year | - | - | - | |||||
| Dividend declared | - | - | ( |
- | - | - | ( |
( |
| Acquisition of treasury shares | - | ( |
- | - | ( |
- | - | ( |
| Sale of non-controlling interest (Note 16) | - | - | - | - | ||||
| Acquisition of non-controlling interest (Note 16) | ( |
- | - | - | - | ( |
||
| Provision for previous years obligations | - | - | ( |
- | - | - | - | ( |
| Other | - | - | ( |
- | - | - | ( |
|
| Total transactions with Company’s owners | - | ( |
( |
- | ( |
- | ( |
|
| Balance at 31 December 2020 | ( |
( |
( |
|||||
150
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
(in millions of Russian Roubles, except for per share amounts)
1 Acron Group and its Operations
These consolidated financial statements for the year ended 31 December 2020 comprise Public Joint Stock Company “Acron”
(the “Company” or “Acron”) and its subsidiaries (together referred to as the “Group” or “Acron Group”). The Company’s shares
are traded on the Moscow and London Stock Exchange.
The Group’s principal activities include the manufacture, distribution and sale of chemical fertilisers and related mineral
primary and by-products. The Group’s manufacturing facilities are primarily based in the Novgorodskaya, Smolenskaya, and
Murmanskaya regions of Russia.
The Company’s registered office is at Veliky Novgorod, Russian Federation, 173012.
As at 31 December 2020, the Group`s immediate parent company is JSC Acron Group (Russian Federation) (until February
2021, called JSC Acronagroservice, Note 30). Until November 2020, the Group`s immediate parent company was Redbrick
Investments S.a.r.l. (Luxembourg). The Group’s ultimate parent is Terasta Enterprises Limited (The Republic of Cyprus). In 2020
and 2019, the Group is ultimately controlled by Mr. Viatcheslav Kantor.
2 Basis of accounting
Basis of preparation. These consolidated financial statements have been prepared in accordance with, and comply with,
International Financial Reporting Standards (“IFRS”) under the historical cost convention except as modified by the fair
value revaluation of derivative financial instruments, investments in equity instruments measured at fair value through
other comprehensive income.
Functional and presentation currency. Functional currency of the Group's consolidated financial statements is
the currency of the primary economic environment in which the Group operates. Company's functional currency and
presentation currency is the national currency of the Russian Federation - Russian Rouble (RUB).
Unless otherwise indicated, all financial information presented in these consolidated financial statements are presented
in millions of Russian Roubles (RUB). These consolidated financial statements have been prepared based on the statutory
records, with adjustments and reclassifications recorded for the fair presentation in accordance with IFRS.
3 Critical Accounting Estimates, and Judgments in Applying Accounting Policies
The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from those estimates.
Estimates and judgements are continually evaluated and are based on management’s experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. Management also
makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies.
Judgements that have the most significant effect on the amounts recognised in the financial statements and estimates
that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year.
Information about critical judgments in applying accounting policies that have the most significant effect on the amounts
recognised in the consolidated financial statements is included in the following notes:
151
Evaluation of put/call options for JSC Verkhnekamsk potash company (JSC VPC) shares. The fair value of stock
options is estimated based on Black–Scholes Option Pricing Model which was developed for use in estimating the fair value
of options on quoted shares. Option pricing method requires use of subjective inputs and assumptions including expected
volatility of the share price and share spot price at the date of valuation. Since JSC VPC shares are not publicly traded,
expected volatility was determined based on historical stock quotes of companies in the same industry and estimates. The
estimate of the current fair value price of the shares was made on the basis of discounted cash flows attributable to JSC
VPC adjusted for non-controlling discount (Notes 12 and 27).
Accounting treatment for put options, that will be settled by the Company’s shares. In 2017, 2018, and 2020, the
Group sold shares of JSC VPC to the non-controlling shareholders linked to put options, which gave the right to the non-
controlling shareholders to sell their shares back to the Group in exchange for the variable amount of shares in PJSC Acron.
Because at the option exercise date the Group does not have obligation to deliver cash or another financial asset, the
subsidiary’s shares that are held by non-controlling interest holders were presented in equity as non-controlling interests
and the put options were recognised as derivative financial liabilities (Note 16).
Impairment of subsoil licences and related costs. The Group performed annual impairment test of mining licence and
related costs of JSC VPC. The recoverable amount of the cash-generating unit (CGU) was determined based on value in use
calculations as at 31 December 2020. These calculations used cash flow projections based on financial budgets approved by
management and incorporating expected market prices for key fertilisers for the same period according to leading industry
publications. The growth rate did not exceed the long-term average growth rate for the business sector of the economy in
which the CGU operates. The discount rate used reflected the risks inherent in this CGU, as further disclosed in Note 10.
Capitalisation of borrowing costs for subsoil licences. Subsoil licences represent part of investment projects for
development of mineral deposits that necessarily take a substantial time to get ready for intended use. Accordingly,
management considers exploration rights as qualifying assets for capitalisation of borrowing costs. Management assesses
whether capitalisation of borrowing costs shall be continued during periods when active development is interrupted while
substantial design or technical work is carried out (Note 10).
Functional currency of foreign operation. Operations of related foreign legal entities registered in Luxembourg and
Cyprus in substance represent a passive activity related to holding investment portfolio within the economic environment
of the Company. With regard to the above, management concluded that the functional currency of these entities should be
the Russian Rouble.
4 Segment Information
The Group prepares its segment analysis in accordance with IFRS 8, Operating Segments. Operating segments are
components that engage in business activities that capable to earn revenues or incur expenses, whose operating results
are regularly reviewed by the chief operating decision maker(s) (“CODM”) and for which discrete financial information is
available. The CODM is the person or group of persons who allocates resources and assesses the performance for the entity.
The functions of CODM are performed by the Management Board of the Group.
The development and approval of strategies, market situation analysis, the risk assessment, investment focus,
technological process changes, goals and priorities are set and assessed in line with the current segment structure of the
Group:
• Acron – representing manufacturing and distribution of chemical fertilisers by PJSC Acron;
• Dorogobuzh – representing manufacturing and distribution of chemical fertilisers by PJSC Dorogobuzh;
152
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
• Logistics – representing transportation an logistic services rendered by Estonian ports of the Group and some minor
transportation companies in Russia. Comprises such entities as AS DBT, LLC Andrex. Constitutes an aggregation of a
number of operating segments;
• Trading – representing overseas & domestic distribution companies of the Group;
• Mining NWPC – representing production of apatite-nepheline ore and subsequent processing in apatite concentrate;
• Mining excluding NWPC - comprise mining entities JSC VPC, JSC Mining Company Partomchorr, North Atlantic Potash Inc.,
and other assets in Canada being at the stage of development, exploration and evaluation;
• Other – representing certain logistic (other than included in logistic segment), service, agriculture and management
operations.
The Group’s segments are strategic business units that focus on different customers. They are managed separately
because each business unit has significant business and risk profile.
Segment financial information is presented and reviewed by the CODM based on the IFRS and includes revenues from
sales and EBITDA.
The CODM evaluates performance of each segment based on measure of operating profit adjusted by depreciation and
amortisation, foreign exchange gain or loss, other non-cash and extraordinary items (EBITDA). Since this term is not a
standard IFRS measure Acron Group’s definition of EBITDA may differ from that of other companies.
Segment sales Eliminable
intersegment sales
External sales EBITDA
Acron 66,469 (59,136) 7,333 20,110
Dorogobuzh 26,617 (25,545) 1,072 6,144
Logistics 3,233 (3,026) 207 951
Trading 114,059 (4,487) 109,572 4,451
Mining NWPC 11,302 (11,248) 54 2,948
Other 2,600 (974) 1,626 707
Total 224,280 (104,416) 119,864 35,311
Information for the reportable segments for the year ended 31 December 2020 is set out below:
153
Segment sales Eliminable
intersegment sales
External sales EBITDA
Acron 67,112 (58,109) 9,003 25,944
Dorogobuzh 21,629 (19,669) 1,960 3,922
Logistics 4,772 (3,767) 1,005 2,221
Trading 105,533 (3,418) 102,115 1,190
Mining NWPC 11,003 (10,948) 55 2,543
Other 1,670 (973) 697 (71)
Total 211,719 (96,884) 114,835 35,749
Information for the reportable segments for the year ended 31 December 2019 is set out below:
Reconciliation of EBITDA to Profit Before Tax:
Information about geographical areas:
The geographic information below analyses the Group’s revenue on external sales and non-current assets. In presenting
the following information, segment revenue has been based on the geographic location of customers and segment
assets were based on the geographic location of the assets.
2020 2019
Operating Profit 26,029 23,401
Depreciation and amortisation 12,106 11,344
Foreign currency (profit)/ loss on operating transactions, net (2,184) 799
Profit on sale of potash leases (891) -
Loss on disposal of property, plant and equipment 251 205
Total consolidated EBITDA 35,311 35,749
154
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
2020 2019
Revenue
Latin America 38,036 28,547
Russia 23,939 17,179
European Union 16,071 22,707
USA and Canada 13,256 17,395
Asia (excluding PRC) 12,791 12,373
PRC 7,743 7,133
Other regions 6,316 6,271
Commonwealth of Independent States 1,712 3,230
Total 119,864 114,835
2020 2019
Non-current assets
Russia 146,579 136,765
Canada 5,604 4,657
Estonia 5,607 4,885
Total 157,790 146,307
Non-current assets represent non-current assets other than financial instruments and deferred tax assets.
For 2020, revenues from logistics activities representing a separate performance obligation under IFRS 15 amounted to RUB
8,499 (2019: RUB 6,491). Adjustment associated with price changes under IFRS 15 amounted to RUB 12 (2019: RUB (45.
This revenue was accounted for as part of the Trading in Information for the reportable segments for the year ended 31
December 2020.
In the reporting period, there is one individual export customer in Trading segment in European Union contributing 10% to
the total revenue (2019: 14%).
5 Balances and Transactions with Related Parties
Related parties are defined in IAS 24, Related Party Disclosures. Parties are generally considered to be related if one party
has the ability to control the other party, is under common control, or can exercise significant influence or joint control
over the other party in making financial and operational decisions. In considering each possible related party relationship,
attention is directed to the substance of the relationship, not merely the legal form.
155
2020 2019
Cash on hand and bank balances denominated in RUB 3,841 2,157
Bank balances denominated in USD 9,513 5,570
Bank balances denominated in EUR 1,455 3,291
Bank balances denominated in CNY 548 143
Bank balances denominated in other foreign currencies 180 195
Total cash and cash equivalents 15,537 11,356
The nature of the related party relationships for those related parties with whom the Group entered into significant
transactions or had significant balances outstanding at 31 December 2020 or 2019 are detailed below.
The following turnovers and balances arise from transactions with related parties:
Statement of financial position caption Note Relationship 2020 2019
Trade receivables, gross 7 Companies under common control 3 5
Trade payables 13 Companies under common control (5) (8)
ii Transactions with related parties
Note Relationship 2020 2019
Sales of chemical fertilisers 4 Companies under common control 8 14
Purchases of raw materials Companies under common control (77) (90)
Charity expenses 22 Companies under common control - (70)
i Balances with related parties
iii Key management personnel compensation
Total key management personnel compensation in the amount of RUB 1,317 (2019: RUB 1,147) was recorded in general
and administrative expenses. Related state social and pension costs included in this amount equalled to RUB 203 (2019:
RUB 179).
6 Cash and Cash Equivalents
156
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Cash and cash equivalents include term deposits of RUB 2,591 (2019: RUB 3,338).
The fair value of cash and cash equivalents is equal to their carrying amount. All bank balances and term deposits are
neither past due nor impaired. Analysis of the credit quality of bank balances and term deposits is as follows:
2020 2019
A to AAA* rated 4,748 3,310
BBB- to BBB+* rated 7,478 7,226
BBB-*** rated 1,522 -
Baa3** 678 490
Ba2** 540 5
Unrated 571 273
BB- to BB+* rated - 52
Total 15,537 11,356
2020 2019
Trade accounts receivable 6,240 3,151
Notes receivable 307 262
Other accounts receivable 168 378
Impairment provision (39) (39)
Total financial assets 6,676 3,752
Advances to suppliers 1,609 1,454
Value-added tax recoverable 3,212 4,194
Income tax prepayments 432 722
Other taxes receivable 540 787
Impairment provision (31) (31)
Total accounts receivable 12,438 10,878
* Based on the credit ratings of Fitch Ratings, an independent rating agency.
** Based on the credit ratings of Moody’s, an independent rating agency.
*** Based on the credit ratings of Standard & Poor’s, an independent rating agency.
7 Accounts Receivable
157
2020 2019
Provision for impairment at 1 January (39) (43)
Provision for impairment (5) (2)
Provision used 5 6
Provision for impairment at 31 December (39) (39)
2020 2019
Raw materials and spare parts 10,289 8,560
Work in progress 510 779
Finished products 8,502 7,039
19,301 16,378
Gross
2020
Impairment
2020
Gross
2019
Impairment
2019
Not past due 6,348 - 3,471 -
Past due for less than 3 months - - - -
Past due from 3 to 9 months 21 (3) 17 (1)
Past due from 9 to 12 months 5 (5) 4 (4)
Past due over 12 months 34 (31) 37 (34)
Total 6,408 (39) 3,529 (39)
The movements in the provision for impairment of trade and other accounts receivable are as follows:
The fair value of accounts receivable does not differ significantly from their carrying amounts.
As at 31 December 2020, trade and other accounts receivable of RUB 39 (31 December 2019: RUB 39) were individually
impaired and an impairment provision was recognised. Not past due receivables are not credit-impaired under IFRS 9.
Exposure to credit risk is minimal due to high turnover.
The aging of trade and other accounts receivable is as follows:
As at 31 December 2020 and 2019, the Group hold no collateral as security for trade receivable.
Besides trade accounts receivable and advances to suppliers, the other classes within accounts receivable do not contain
impaired assets.
8 Inventories
Raw materials are shown net of obsolescence provision of RUB 285 (2019: RUB 280). No inventory was pledged as
security at 31 December 2020 and 2019.
158
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Buildings and
constructions
Plant and
equipment
Transport Other Land Mining and
primary ore
dressing
assets
Mining assets
under
construction
Assets
under
construction
Total
Cost
Balance at
1 January 2020 44,365 50,201 4,893 3,522 2,633 39,162 17,252 13,029 175,057
Additions - - - - - - 7,597 11,405 19,002
Reclassification 2,942 9,336 41 228 15 6,116 (6,116) (12,562) -
Disposals (29) (315) (23) (25) (119) (200) - - (711)
Translation
difference 1,534 900 59 31 - - - - 2,524
Balance at
31 December 2020 48,812 60,122 4,970 3,756 2,529 45,078 18,733 11,872 195,872
Accumulated Depreciation
Balance at
1 January 2020 22,700 31,181 2,485 1,782 - 14,752 - - 72,900
Depreciation
charge 2,626 5,268 237 231 - 2,992 - - 11,354
Disposals (27) (249) (16) (12) - (156) - - (460)
Translation
difference 728 670 52 27 - - - - 1,477
Balance at
31 December 2020 26,027 36,870 2,758 2,028 - 17,588 - - 85,271
Net Book Value
Balance at
1 January 2020 21,665 19,020 2,408 1,740 2,633 24,410 17,252 13,029 102,157
Balance at
31 December 2020 22,785 23,252 2,212 1,728 2,529 27,490 18,733 11,872 110,601
9 Property, Plant and Equipment
159
Buildings and
constructions
Plant and
equipment
Transport Other Land Mining and
primary ore
dressing
assets
Mining assets
under
construction
Assets
under
construction
Total
Cost
Balance at
1 January 2019 41,904 46,665 4,826 3,096 2,614 35,050 13,352 9,244 156,751
Additions - - - - - - 8,241 11,918 20,159
Reclassification 3,195 4,148 178 515 94 4,341 (4,341) (8,130) -
Disposals (17) (187) (81) (75) (75) (229) - - (664)
Translation
difference (717) (425) (30) (14) - - - (3) (1,189)
Balance at
31 December 2019 44,365 50,201 4,893 3,522 2,633 39,162 17,252 13,029 175,057
Accumulated Depreciation
Balance at
1 January 2019 20,355 27,465 2,341 1,571 - 11,487 - - 63,219
Depreciation
charge 2,682 4,199 241 233 - 3,445 - - 10,800
Disposals (16) (183) (70) (10) - (180) - - (459)
Translation
difference (321) (300) (27) (12) - - - - (660)
Balance at
31 December 2019 22,700 31,181 2,485 1,782 - 14,752 - - 72,900
Net Book Value
Balance at
1 January 2019 21,549 19,200 2,485 1,525 2,614 23,563 13,352 9,244 93,532
Balance at
31 December 2019 21,665 19,020 2,408 1,740 2,633 24,410 17,252 13,029 102,157
Included in the 2020 additions to assets under constructions and mining assets under construction, related to JSC VPC and
JSC NWPC, is approximately RUB 1,427 of capitalised borrowing costs in accordance with IAS 23, Borrowing costs (2019:
RUB 1,525) at the borrowing rate from 4.84% to 8.0% (2019: from 5.25% to 10.2%).
At 31 December 2020 and 2019, no pledges over property, plant and equipment.
No impairment loss in respect of individual assets was recognised in 2020 and 2019.
160
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Non-current assets impairment test. Cash-generating units (CGUs) represent the lowest level within the Group at which
the goodwill is monitored by management and which are not larger than a segment.
Management concluded that there were no impairment indicators for CGUs as at on 31 December 2020, except for JSC VPC
(Note 10), where development phase determines the necessity to perform impairment testing.
10 Subsoil Licences and Related Costs
Licence of JSC Verkhnekamsk potash company (JSC VPC)
In May 2008, the Group’s subsidiary, JSC VPC, following an auction process, acquired a licence for the exploration and
development of the Talitsky section of the Verkhnekamsk potash deposit, located in Perm region, Russian Federation. The
licence expires in April 2053. In 2016 JSC VPC agreed on a technical project for the development of the Talitsky section. In
accordance with the amended conditions of the licence changed in 2016 JSC VPC has the commitment that no later than
2028 the mine output shall be brought to a designed capacity levels.
In 2018 the Group resumed active construction of the mining and processing enterprise JSC VPC. Therefore capitalised
borrowing costs in amount of RUB 1,972 (2019: RUB 2,892) in the reporting period and applied borrowing rate of 8.0% (2019:
10,2%). Mining assets under construction related to JSC VPC also include capitalised borrowing costs in amount of RUB 860
(2019: RUB 974).
Exploration Licences in Canada
In 2020, the Group continued exploration of potash deposits in the Canadian province of Saskatchewan. The term of permits
expired in 2016, and the Group exercised the pre-emptive right for registration of exploration licences. In May 2020, the
Group sold potash leases in the Canadian province of Saskatchewan with carrying amount of RUB 217 resulting profit on
sale in the amount of RUB 891. As of 31 December 2020, the Group holds 11 exploration licences on potash deposits for RUB
5,604 (31 December 2019: RUB 4,657).
2020 2019
Cost
Balance at 1 January 40,690 37,733
Additions 2,343 3,288
Disposal (217) -
Currency translation difference 998 (331)
Balance at 31 December 43,814 40,690
Accumulated Amortisation and Impairment Loss
Balance at 1 January (1,188) (1,176)
Amortisation charge (12) (12)
Balance at 31 December (1,200) (1,188)
Net Book Value
Balance at 1 January 39,502 36,557
Balance at 31 December 42,614 39,502
161
Impairment test of JSC VPC
Since the assets of JSC VPC are under development, Management of the Group performed an annual testing of this cash-
generating unit (CGU) for impairment as at 31 December 2020.
The recoverable amount of each CGU is determined as the highest of the fair value less costs to sell and value in use. The
management of the Group attracted an independent appraiser JSC NEO Center to determine the fair value of JSC VPC
shares as of 31 December 2020. These calculations used cash flow forecast prepared in nominal terms, based on financial
budgets approved by management. Growth rates do not exceed the long-term average growth rates projected for the
sector of the economy in which the CGU operates.
Based on these estimates, management of the Group concluded that no impairment charge is required. The main
assumptions for calculating the value in use are presented below:
Management determined the target EBITDA based on its most realistic expectations regarding market development.
The weighted average growth rates used in the calculations are in line with the forecast calculations in industry reports.
Discount rates used are post-tax rates reflecting the specific risks inherent in the CGU and estimated on the basis of the
weighted average cost of capital.
The estimated recoverable amount of the CGU exceeded its carrying value by approximately RUB 53,662. Management
identified that the recoverable amount strongly depends on changes in export prices expressed in roubles and discount
rates. Decrease of over 24% in the export prices or increase by 4.0 percentage points in the discount rate used would have
caused the recoverable amount to equal the carrying amount.
2020 2019
Apatite-nepheline deposits (production/development stage) 788 800
Potash deposits (development stage) 34,580 32,608
Exploration licences 5,604 4,657
Licence and expenditure on deposit in exploration and evaluation stage 1,287 1,134
Asset related to the discharge of licence obligations 355 303
42,614 39,502
31 December 2020 31 December 2019
EBITDA margin range over the forecast period
after reaching the designed capacity 79-81% 77-81%
Revenue growth rate beyond forecast period 3.1% 3.6%
Start of production 2025 2023
Discount rate 12.2-12.6% 12.7-13.2%
Subsoil licences and related costs comprise of:
162
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
11 Investment in Equity Instruments Measured
at Fair Value through Other Comprehensive Income
2020 2019
Balance at 1 January 9,784 11,670
Fair value gain/(loss) recognised directly in OCI 1,420 (1,946)
Additions 60 60
Balance at 31 December 11,264 9,784
The Group has investments in the following companies:
The fair value of investment in Grupa Azoty S.A. was determined by reference to their quoted market prices as at the
reporting date. As at 31 December 2020, the share price of Grupa Azoty S.A. on Warsaw Stock Exchange was RUB 549.21 (31
December 2019: RUB 475.44).
12 Derivative Financial Assets and Liabilities
In June and September 2020, it was decided to extend the term of Sberbank Investments LLC participation in the potash
project. At the same time, the Group compensated the partner for the accumulated profitability. The effect from the
extension was recognised in the statement of profit or loss as (Loss)/gain on derivatives.
In June 2020, the Group also sold 10.1% stake in JSC VPC to OTKRITIE Asset Management Ltd. setting up a number of option
agreements with conditions similar to existing option agreements. The effect from initial recognition of the options and the
effect from the sale of related share were recognised in equity.
In September 2020, in accordance with the option agreement, the Group bought back 10% of the shares of JSC VPC from
Sberbank Investments LLC. The Group sold this stake to VTB Bank (Europe) SE, having entered into a number of option
agreements on the same terms as the current options. The effect of the initial recognition of options, as well as the effects
of the buyback and resale of interest, are reflected in equity.
Name Activity Country of registration 31 December
2020
31 December
2019
Non-current
Grupa Azoty S.A. Fertilisers manufacture Poland 10,796 9,376
Other Russia 468 408
Total non-current 11,264 9,784
Total 11,264 9,784
163
13 Accounts Payable
2020 2019
Trade accounts payable 7,619 7,023
Dividend payable 121 188
Total financial payables 7,740 7,211
Payables to employees 1,869 1,419
Accrued liabilities and other creditors 966 984
Other taxes payable 1,655 903
Total accounts payable and accrued expenses 12,230 10,517
31 December 2020
Assets Liabilities
Non-Current Current Non-Current Current
Put/call options on JSC VPC shares 2,030 - (1,560) -
2,030 - (1,560) -
31 December 2019
Assets Liabilities
Non-Current Current Non-Current Current
Put/call options on JSC VPC shares - 3,093 - (679)
- 3,093 - (679)
Options for the purchase and sale of shares are recognised as part of a transaction to sell shares of JSC VPC to holders
of non-controlling interests. The net assets as at 31 December 2020 are represented by four call options, which give to
the Group the right to purchase from non-controlling shareholders the 30% stakes in JSC VPC up to June 2023, 10% -
September 2024, 9.99% - September 2025 and four put options that give non-controlling shareholders the right to sell to
the Group their stakes of interest in JSC VPC in the period from June 2023 to September 2025.
164
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
14 Short-Term and Long-Term Borrowings
Borrowings consist of the following:
The Group’s borrowings mature as follows:
The Group’s borrowings are denominated in currencies as follows:
The Group did not enter into any hedging arrangements in respect of its foreign currency obligations or interest rate
exposures.
At 31 December 2020, unused credit lines available under the long-term loan facilities were RUB 100,847
(31 December 2019: RUB 54,706). The terms and conditions of unused credit lines are consistent with other borrowings.
2020 2019
Bonds issued 23,266 23,772
Credit lines 19,976 3,185
Term loans 73,081 59,584
116,323 86,541
2020 2019
Borrowings due:
• within 1 year 36,911 13,288
• between 1 and 5 years 79,412 73,037
• after 5 years - 216
116,323 86,541
2020 2019
Borrowings denominated in:
• RUB 41,956 28,510
• EUR 11,794 8,325
• USD 62,573 49,706
116,323 86,541
165
2020 2019
Short-term borrowings
RUB
Bonds with fixed interest rate from 6.5% to 8.6%
(2019: from 9.55% to 10.2%) per annum 8,772 8,772
Loans with floating interest rates from 90% of the key rate of the Bank of Russia+1.8% to
90% of the key rate of the Bank of Russia+2%
(2019: from 90% of the key rate of the Bank of Russia+1.8% to 90% of the key rate of the
Bank of Russia+2.275%) per annum 715 343
Loans with fixed interest rates from 7.35% to 8.34% per annum 5,950 -
EUR
Loans with floating interest rates from 6M EURIBOR+0.65% to 6M EURIBOR+1.9%
per annum 473 361
Loans with floating interest rate of 3M EURIBOR+1.25%
(2019: 3M EURIBOR+1.7%) per annum 7,799 1,026
Loans with fixed interest rate of 0.99% per annum 2,720 -
USD
Loans with floating interest rate of 1M LIBOR+2.5%
(2019: 1M LIBOR+2.1%) per annum 10,482 2,786
Total short-term borrowings 36,911 13,288
Bank commission - -
Total short-term liabilities 36,911 13,288
2020 2019
Long-term borrowings
RUB
Bonds with fixed interest rates from 5.9% to 7.25%
(2019: from 7.25% to 8.6%) per annum 14,494 15,000
Loans with floating interest rate: from the key rate of the Bank of Russia +1.35% to
the key rate of the Bank of Russia +2%
(2019: : the key rate of the Bank of Russia +2%) per annum 12,025 1,445
Loans with fixed interest rate of 7.35% per annum - 2,950
EUR
Loans with floating interest rates from 6M EURIBOR+0.65%
to 6M EURIBOR+1.9% per annum 802 975
Loans with floating interest rates from 3M EURIBOR+1.25%
to 3M EURIBOR+1.7% per annum - 5,963
USD
Loans with floating interest rates from 1M LIBOR+2.5% to 1M LIBOR+4.5%
(2019: from 1M LIBOR+2% to 1M LIBOR+4.5%) per annum 49,136 46,920
Loans with fixed interest rate of 2.6% per annum 2,955 -
Total long-term borrowings 79,412 73,253
Bank commission (1,207) -
Total long-term liabilities 78,205 73,253
The details of the significant short-term loan balances are summarised below:
The details of the significant long-term loan balances are summarised below:
166
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
In May 2011, the Group placed through an offering to the public under an open subscription RUB non-convertible bonds with
a face value of RUB 7,500 to be redeemed in May 2021. In 2012, the Group redeemed bonds in the amount of RUB 3,377. The
holders of this bond issue were granted an option to redeem the bonds in May 2015 and May 2016 which resulted in early
redemption of bonds for RUB 1,354. The Group further placed the bonds of this issue for RUB 1,354. At 31 December 2020,
the Group’s subsidiary PJSC Dorogobuzh held bonds in the amount of RUB 351.
In October 2016, the Group placed non-convertible interest-bearing documentary bonds in the amount of RUB 5,000 to be
redeemed in September 2026. The bonds were placed at 9.55% per annum with the option of early redemption in October
2020 which resulted in early redemption of bonds for RUB 506.
In June 2017, the Group placed non-convertible interest-bearing documentary bonds in the amount of RUB 5,000 to be
redeemed in May 2027. The bonds were placed at 8.6% per annum with the option of early redemption in December 2021.
In October 2019, the Group placed non-convertible interest-bearing documentary bonds in the amount of RUB 10,000 to be
redeemed in April 2023. The bonds were placed at 7.25% per annum without the option of early redemption.
All of the above bonds were admitted to the quotation list B and are traded on Moscow Stock Exchange. The fair value of
the outstanding bonds as at 31 December 2020 was RUB 23,942 with reference to Moscow Stock Exchange quotations as of
this date (31 December 2019: RUB 24,506).
Significant loan agreements contain certain covenants including those which require the Group and the Group entities
to maintain a minimum level of net assets, net debt/EBITDA ratio, and EBITDA/interest expense ratio. One of the loan
agreements provides for the borrower's obligation to maintain the required level of inflows through the accounts opened
with the lending banks. The loan agreements also contains a number of covenants and acceleration clause in case of the
borrower’s failure to fulfil its obligations under the loan agreements which include restrictions on significant transactions
with assets. Also, these covenants permit the respective banks to directly debit the accounts opened by the debtors with
the banks to ensure repayment of the loans. The Group is in compliance with these covenants.
Reconciliation of movements of liabilities to cash flows arising from financing activities:
Loans Bonds Total
Balance at 1 January 2020 62,769 23,772 86,541
Changes from financing cash flows
Proceeds from borrowings 39,235 - 39,235
Repayment of borrowings (22,251) (506) (22,757)
Total changes from financing cash flows 79,753 23,266 103,019
The effect of changes in foreign exchange rates 13,304 - 13,304
Bank commission (1,207) - (1,207)
Balance at 31 December 2020 91,850 23,266 115,116
167
In April 2020, the Group declared and paid dividend for previous years in the amount of RUB 157 per ordinary share.
In May 2020, the Group declared and paid dividend for 2019 in the amount of RUB 275 per ordinary share.
Shares issue to non-controlling interest
In accordance with the agreements with the banks the Group has unconditional right to discharge of obligations by
transferring to option holders Company’s own shares (ordinary shares of PJSC Acron) in amount, calculated based on the
total amount of obligation and own shares fair value to be transferred at a future date. As at 31 December 2020, related
financing received by the Group was recorded in the Group’s equity as non-controlling interest in amount of RUB 24,031 (31
December 2019: RUB 18,873).
Derivative financial instruments related to above share issues are disclosed in Note 12.
15 Capital and Reserves
The total authorised number of ordinary shares is 40,534,000 shares (31 December 2019: 40,534,000) with a par value of
RUB 5 per share. All authorised shares have been issued and fully paid.
Total number of outstanding shares comprises (par value is expressed in roubles per one share):
No. of
outstanding
ordinary shares
No. of treasury
shares
Total share
capital
Treasury share
capital
Outstanding
share capital
At 1 January 2019 40,534,000 (1,285,800) 3,046 (6) 3,040
Redemption of treasury
shares - 91,662 - - -
Acquisition of treasury shares - (382,792) - (2) (2)
At 31 December 2019 40,534,000 (1,576,930) 3,046 (8) 3,038
Acquisition of treasury shares - (1,741,398) - (9) (9)
At 31 December 2020 40,534,000 (3,318,328) 3,046 (17) 3,029
168
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
16 Non-controlling Interests
The following table summarises the information relating to each of the Group’s subsidiaries that has material non-
controlling interest, before any intra group eliminations.
As at 31 December 2020
JSC VPC PJSC
Dorogobuzh
Other individually
immaterial
subsidiaries
Intra-group
elimination
Total
Non-controlling interest percentage 49.9% 3.27%
Non-current assets 50,330 32,355
Current assets 443 16,092
Long-term liabilities (2,251) (10,713)
Current liabilities (363) (4,182)
Net assets 48,159 33,552
Carrying amount of non-control
interests 24,031 1,097 972 - 26,100
Revenue - 26,617
Profit and total comprehensive income 859 5,018
Profit attributed to non-controlling
interest 400 164 (38) - 526
Cash flows (used in)/from operating
activities (128) 7,939
Cash flows used in investment
activities (83) (1,988)
Cash flows used in financing activities
(dividend to non-controlling interests
PJSC Dorogobuzh: 372) - (7,450)
Net increase in cash and cash
equivalents (211) (1,499)
Effect of exchange rate changes 9 425
169
JSC VPC PJSC
Dorogobuzh
Other
individually
immaterial
subsidiaries
Intra-group
elimination
Total
Non-controlling interest percentage 39.9% 3.27%
Non-current assets 48,685 20,101
Current assets 1,329 27,687
Long-term liabilities (2,044) (516)
Current liabilities (670) (6,531)
Net assets 47,300 40,741
Carrying amount of non-control
interests 18,873 1,332 759 - 20,964
Revenue - 21,629
Profit and total comprehensive income 1,245 3,680 - -
Profit attributed to non-controlling
interest 497 120 (50) - 567
Cash flows (used in)/from operating
activities
(182) 5,305
Cash flows from investment activities 296 6,261
Cash flows used in financing activities
(dividend to non-controlling interests
PJSC Dorogobuzh: 296) - (8,998)
Net decrease in cash and cash
equivalents 114 2,568
Effect of exchange rate changes (8) (178)
As at 31 December 2019
Changes in Non-controlling Interests
In June 2020, the Group sold 10.1% in JSC VPC, reducing its stake from 60.1% to 50% + 1 share. The Group recognised an
increase in non-controlling interest of RUB 4,774 and an increase in retained earnings in the amount of RUB 968 in the line
«Sale of non-controlling interest».
In September 2020, the Group bought out 10% in JSC VPC and sold it in the same period, accordingly, the Group's share did
not change at the reporting date. The Group recognized a decrease in retained earnings in the line «Acquisition of non-
controlling interest» in the amount of RUB 3,276, as well as an increase in the line «Sale of non-controlling interest» in the
amount of RUB 1,273.
170
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Below is a summary of the impact of changes in the Group's share in JSC VPC, which did not result in the loss of control, on
the capital attributable to the Group:
Changes in non-controlling interests in other companies of the Group in the amount of RUB 38 are also reflected in the line
«Sale of non-controlling interest».
17 Lease
(i) Leases as a lessee
The Group leases warehouse and factory facilities. The leases typically run for a period of 10 years, with an option to renew
the lease after that date. Some leases provide for additional rent payments that are based on changes in local price indices.
For certain leases, the Group is restricted from entering into any sub-lease arrangements.
The warehouse and factory leases were entered into many years ago as combined leases of land and buildings. Previously,
these leases were classified as operating leases under IAS 17.
(ii) Right-of-use assets
Right-of-use assets related to leased properties that do not meet the definition of investment property are presented in
consolidated statement of financial position separate from other assets.
2020
The Group’s share at 1 January 28,427
Net effect of Group’s share decrease (4,774)
Share in comprehensive income 475
The Group’s share at 31 December 24,128
Buildings and
construction
Land Total
2020
Balance at 1 January 1,352 1,338 2,690
Depreciation charge for the year (484) (59) (543)
Cumulative currency translation difference - 155 155
Balance at 31 December 868 1,434 2,302
171
(iii) Lease liability
(iv) Amounts recognised in profit or loss
(v) Amounts recognised in statement of cash flows
2020 2019
Short-term lease liabilities
In RUB with interest rate of 9% 123 139
In EUR with interest rate from 1.4% to 7% 124 80
In USD with interest rate from 4.2% to 7% 199 289
In other currency with interest rate from 1.5% to 3.35% 10 39
Total short-term lease liabilities 456 547
2020 2019
Interest on lease liabilities 177 125
Depreciation charge for the year 543 453
2020 2019
Total cash outflow for leases (607) (474)
2020 2019
Long-term lease liabilities
In RUB with interest rate of 9% 421 550
In EUR with interest rate from 1.4% to 7% 1,512 1,159
In USD with interest rate from 4.2% to 7% 272 226
In other currency with interest rate from 1.5% to 3.35% 44 112
Total long-term lease liabilities 2,249 2,047
172
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
(vi) Extension options
Some property leases contain extension options exercisable by the Group up to one year before the end of the non-
cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to provide
operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group
assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group
reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in
circumstances within its control.
The Group has estimated that the potential future lease payments, should it exercise the extension option, would result in
an increase in lease liability of RUB 377.
18 Cost of Sales
19 Selling, General and Administrative Expenses
2020 2019
Natural gas 16,304 15,550
Depreciation and amortisation 12,106 11,344
Fuel and energy 8,637 8,661
Staff costs 7,554 7,309
Other materials and components 7,165 4,018
Potash used in production 7,062 6,925
Repairs and maintenance 3,639 2,993
Services 960 840
Drilling and blasting 925 857
Social expenditure 777 629
Production overheads 688 658
65,817 59,784
2020 2019
Staff costs 5,522 4,697
Taxes other than income tax 868 822
Other expenses 556 324
Audit, legal and consulting services 484 448
Security 391 384
Representation expenses 340 537
Buildings maintenance and rent 267 245
Commission fees 194 434
Marketing services 117 144
Insurance 96 107
Bank services 74 49
Business trip expenses 73 267
Telecommunication costs 64 74
Change in provision for bad debts 2 28
9,048 8,560
173
20 Transportation Expenses
21 Finance (Expenses) / Income, net
22 Other Operating Income / (Expenses), net
2020 2019
Ocean freight 7,192 6,955
Handling of goods 5,067 5,068
Railway tariff 4,073 4,205
Container transportation 2,174 1,908
Railcar lease 1,826 1,892
Other 771 646
Maintenance of rolling stock 539 842
21,642 21,516
2020 2019
Weighted average number of shares outstanding 40,534,000 40,534,000
Adjusted for weighted average number of treasury shares (2,794,876) (1,460,177)
Weighted average number of shares outstanding (basic) 37,739,124 39,073,823
Effect of right to settle in own ordinary shares 9,994 90,406
Weighted average number of shares outstanding (diluted) 37,749,118 39,164,229
Profit attributable to the equity holders of the Company 3,310 24,219
Basic (in Russian Roubles) 87.71 619.83
Diluted (in Russian Roubles) 87.68 618.40
2020 2019
Foreign exchange (loss)/gain on financial transactions, net (12,919) 7,812
Commission expense (115) (476)
Other finance costs (13) (192)
Interest income from loans provided and term deposits 107 92
Dividend income 4 -
(12,936) 7,236
2020 2019
Foreign exchange gain/(loss) on operating transactions, net 2,184 (799)
Charity expenses (589) (386)
Loss on disposal of property, plant and equipment (251) (205)
Other operating income/(costs) 437 (184)
1,781 (1,574)
23 Earnings per Share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year, excluding treasury shares. As at 31 December 2020 and 2019,
ordinary shares of the Company have a potential dilutive effect associated with the right to exercise obligations under the
redemption put-options by transferring its own ordinary shares (Note 15).
174
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
24 Income Tax
2020 2019
Income tax expense – current 1,743 4,511
Deferred tax charge – origination and reversal of temporary differences (169) 1,670
Income tax charge 1,574 6,181
Profit before taxation for financial reporting purposes is reconciled to tax charge as follows:
In the context of the Group’s current structure, tax losses and current tax assets of different group subsidiaries may not be
offset against current tax liabilities and taxable profits of other group companies and, accordingly, taxes may accrue even
where there is a consolidated tax loss. Therefore, deferred tax assets and liabilities are offset only when they relate to the
same taxable entity. Differences between IFRS and Russian and other countries statutory taxation regulations give rise to
temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax
bases. The tax effect of the movements in these temporary differences is detailed below and is recorded for major Russian
subsidiaries at the rate of 20% (2019: 20%).
Unrecognised deferred tax liabilities
At 31 December 2020, a deferred tax liability of RUB 11,703 (31 December 2019: RUB 13,212) for temporary differences of
RUB 58,513 (31 December 2019: RUB 66,059) related to an investment in a subsidiary was not recognised because the
Company controls whether the liability will be incurred and it is satisfied that it will not be incurred in the foreseeable future.
Unrecognised deferred tax assets
At 31 December 2020, a deferred tax asset of RUB 1,147 (31 December 2019: RUB 0) for recognised tax losses of RUB 5,736
(31 December 2019: RUB 0) related to the sale of shares in a subsidiary was not recognised because that it is not probable
that future tax profits will be available from which the Group could use these tax benefits. Deductible temporary differences
do not expire under applicable tax laws.
2020 2020 2019 2019
Profit before taxation 5,410 100% 30,967 100%
Theoretical tax charge at statutory rate of 20% 1,082 20% 6,193 20%
Effects of different tax rates 61 1% 131 0%
Tax effect of items which are not deductible or assessable
for taxation purposes 424 8% (35) 0%
Change in unrecognised deductible temporary differences 7 0% (108) 0%
Income tax charge 1,574 29% 6,181 20%
175
Substantially all deferred assets and liabilities presented in the consolidated statement of financial position are expected to be
realised after more than 12 months from the reporting date.
25 Contingencies, Commitments and Operating Risks
i Contractual commitments and guarantees
As at 31 December 2020, the Group had outstanding capital commitments in relation to property, plant and equipment for
the amount of RUB 9,333 (31 December 2019: RUB 11,220).
In accordance with the conditions of the exploration licences the Group has to commence the extraction of certain mineral
resources by certain dates as stipulated by licence agreements (Note 10).
The Group has already allocated the necessary resources in respect of these commitments. The Group believes that future
net income and funding will be sufficient to cover this and any similar such commitments.
Guarantees are irrevocable assurances that the Group will make payments in the event that another party cannot meet its
obligations. As at 31 December 2020 and 2019, the Group had no issued guarantees.
1 January
2019
Charged
to profit or
loss
31 December
2019
Charged
to profit or
loss
31 December
2020
Property, plant and equipment 2,965 35 3,000 116 3,116
Subsoil licences and related costs
4,741 866 5,607 837 6,444
Inventory (676) 561 (115) (167) (282)
Financial instruments 189 289 478 (879) (401)
Tax loss carry-forwards
(215) (82) (297) 16 (281)
Accounts receivable 43 32 75 (175) (100)
Accounts payable (103) (4) (107) (58) (165)
Staff costs payable
(30) - (30) - (30)
Other temporary differences (127) (27) (154) 141 (13)
Net deferred tax (asset)/liability
6,787 1,670 8,457 (169) 8,288
Recognised deferred tax asset (164) (37) (201) 22 (179)
Recognised deferred tax liability 6,951 1,707 8,658 (191) 8,467
Net deferred tax (asset)/liability 6,787 1,670 8,457 (169) 8,288
Movement in deferred tax balances
176
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
ii Legal proceedings
From time to time and in the normal course of business, claims against the Group are received. On the basis of its own
estimates and both internal and external professional advice the Management is of the opinion that no material losses will
be incurred in respect of claims.
iii Business environment
The Group’s operations are primarily located in the Russian Federation, also the Group has distribution companies in the
countries of European Union, USA, Asia and Latin America. Consequently, the Group is exposed not only to the economic and
financial markets of the Russian Federation which display characteristics of an emerging market, but also is exposed both
to macroeconomic indicators and specific requirements of local regulators in other countries where the Group operates.
The legal, tax and regulatory frameworks in the Russian Federation 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.
Starting in 2014, the United States of America, the European Union and some other countries have imposed and gradually
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.
In the current period the global market has experienced significant turmoil triggered by the outbreak of coronavirus.
Together with other factors, this has resulted in a sharp decrease in the oil prices, the stock market indices, foreign exchange
rates of Russian Rubble and overall decrease of prices on mineral fertilizers. These developments are further increasing
the level of uncertainty in the Russian business environment and may have a potential negative effect on the availability
and cost of borrowed funds, as well as on the volatility of assets and liabilities measured at fair value. The situation with
the spread of coronavirus and quarantine measures taken by countries does not yet have a significant impact on fertilizer
demand. Management believes that if the situation worsens, the need for food security will support the demand for mineral
fertilisers worldwide. According to the management estimate, current situation does not have significant impact on the
Group’s ability to continue as a going concern and meet its obligations in the foreseeable future. At the moment the impact
on accounts receivable and its turnover also have not been revealed. The Group does not expect further deterioration
triggered by the outbreak of coronavirus.
The Group's approach to liquidity risk management remains unchanged and is to maintain sufficient reserves of quick cash
to meet liquidity requirements at all times. At 31 December 2020, unused credit lines available under the loan facilities were
RUB 100,847 (31 December 2019: RUB 54,706).
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.
iv Taxation contingencies in Russian Federation
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.
177
Current Russian transfer pricing legislation requires transfer pricing analysis for the majority of cross-border intercompany
and major domestic intercompany transactions. Starting from 2020, 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.
In addition, changes aimed at regulating tax consequences of transactions with foreign companies have been introduced,
such as concept of beneficial ownership of income, taxation of controlled foreign companies, tax residency rules, etc. These
changes may potentially impact the Group’s tax position and create additional tax risks.
All these circumstances may create tax risks in the Russian Federation that are substantially more significant than in
other countries. Management believes that it has provided adequately for the tax liabilities based on its interpretations
of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the
tax authorities and courts could differ and the effect on these consolidated financial statements, if the tax authorities are
successful in enforcing their interpretations, could be significant, but will not exceed 1% of Revenue.
The amount of possible tax liabilities related to uncertainties in practical application of legislation could be material, but
cannot be determined with sufficient reliability. However, management believes that its interpretation of the relevant
legislation is generally appropriate, and the Group's tax, currency and customs positions will be sustained. Management
believes that all necessary provisions in respect of probable tax risks were recognised as liabilities.
v Environmental matters
The environmental regulation in the Russian Federation continues to evolve. The Group periodically evaluates its
obligations under environmental regulations. As obligations are determined, they are recognised immediately.
Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot
be estimated but could be material. In the current climate under existing legislation, management believes that there
are no significant liabilities for environmental damage.
178
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
26 Financial and Capital Risk Management
26.1. Financial risk management
Presentation of Financial Instruments by Measurement Category
The following table provides a reconciliation of financial assets with these measurement categories
as at 31 December 2020:
All of the Group’s financial liabilities except for derivatives are carried at amortised cost.
The following table provides a reconciliation of financial assets with these measurement categories
as at 31 December 2019:
Financial assets
at amortised cost
Fair value through
other comprehensive
income - equity
instruments
Fair value through
profit or loss
Total
ASSETS
Cash and cash equivalents (Note 6)
• Cash on hand and bank balances 15,537 - - 15,537
Trade and other receivables (Note 7)
• Trade receivables, net of provision 6,201 - - 6,201
• Notes receivable 307 - - 307
• Other financial receivables 168 - - 168
Investments in equity instruments (Note 11)
• Corporate shares - 11,264 - 11,264
Derivative nancial instruments
(Note 12) - - 2,030 2,030
TOTAL FINANCIAL ASSETS 22,213 11,264 2,030 35,507
Financial
assets at
amortised
cost
Fair value
through other
comprehensive
income - equity
instruments
Fair value through
profit or loss
Total
ASSETS
Cash and cash equivalents (Note 6)
• Cash on hand and bank balances 11,356 - - 11,356
Trade and other receivables (Note 7)
• Trade receivables, net of provision 3,112 - - 3 112
• Notes receivable 262 - - 262
• Other financial receivables 378 - - 378
Investments in equity instruments (Note 11)
• Corporate shares - 9,784 - 9,784
Derivative nancial instruments
(Note 12)
- - 5,783 5,783
TOTAL FINANCIAL ASSETS 15,108 9,784 5,783 30,675
179
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency exchange risk, interest
rate risk and price risk), credit risk and liquidity risk. The overall risk management programme seeks to minimise potential
adverse effects on the financial performance of the Group.
(a) Market risk
(i) Foreign currency risk
Foreign currency risk is the risk of losses resulting from adverse movements in different currency exchange rates against
the Group functional currency. Foreign currency risk arises from the international operations of the Group, future commercial
transactions in foreign currencies, including repayment of foreign currency denominated borrowings and recognition of
assets and liabilities denominated in a currency which is not a functional currency of the Group.
The objective of the Group’s foreign exchange risk management activities is to minimise the volatility of the Group’s
financial results by matching the same foreign currency denominated assets and liabilities.
The Group relies on export sales to generate foreign currency earnings. As the Group sells approximately 84% of its
production outside the Russian Federation, it is exposed to foreign currency risk arising primarily on volatility of USD rate.
Since the Group’s major operational expenses are denominated in Russian Roubles the benefit from the weak Rouble
exchange rate is partially offset by the growth of borrowing costs and foreign exchange differences on the Group’s loans
which presumably denominated in USD.
Group’s policies for attracting foreign exchange denominated borrowings depend on current and forward rates of foreign
currencies to Russian Rouble. Credit lines denominated in various currencies allow the Group to be flexible in reaction to
foreign currency rate shocks and minimise foreign currency exposure.
The tables below summarise the Group’s exposure to foreign currency exchange rate risk at the reporting date:
At 31 December 2020 USD EUR CNY
Financial assets:
Cash and cash equivalents 9,513 1,455 548
Accounts receivable 5,476 240 106
14,989 1,695 654
Financial liabilities:
Accounts payable and other liabilities (351) (466) (5)
Borrowings and notes payable (62,573) (11,794) -
(62,924) (12,260) (5)
Net position (47,935) (10,565) 649
At 31 December 2019 USD EUR CNY
Financial assets:
Cash and cash equivalents 5,570 3,291 143
Accounts receivable 2,507 231 91
8,077 3,522 234
Financial liabilities:
Accounts payable and other liabilities (473) (658) (3)
Borrowings and notes payable (49,706) (8,325) -
(50,179) (8,983) (3)
Net position (42,102) (5,461) 231
180
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange risk exposure and primarily
arises from accounts receivable, cash and cash equivalents, borrowings, accounts payable, derivative financial assets and
liabilities denominated in US dollars.
Since the Group does not hold any foreign currency denominated equity securities and other financial instruments revalued
through equity, the effect of a change in the exchange rate on equity would be the same as that on the post-tax profit.
(ii) Interest rate risk
Interest rate risk arises from movements in interest rates which could affect the Group’s financial results or the value of the
Group’s equity. A change in interest rates may cause variations in interest income and expense. The primary objective of
the Group’s interest rate management is to protect the net interest result. Interest risk management is carried out by the
corporate finance and corporate treasury functions of the Group.
All entities of the Group obtain any required financing through the corporate treasury function of the Group in the form of
loans. Generally, the same concept is adopted for deposits of cash generated by the units.
Monitoring of current market interest rates and analysis of the Group’s interest-bearing position is performed by the
corporate treasury and corporate finance functions as a part of interest rate risk management procedures. Monitoring is
performed taking into consideration refinancing, renewal of existing positions and alternative financing.
The Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group
interest rate risk arises from various debt facilities. Borrowings at variable rates expose the Group’s cash flow to an interest
rate risk. At 31 December 2020 and 2019 borrowings at variable rates amounted to RUB 81,432 and RUB 59,819 respectively
(Note 14).
At 31 December 2020, if interest rates at that date had been 5 percentage points higher with all other variables held
constant, profit for the year would have been RUB 4,575 (2019: RUB 3,340) lower, mainly as a result of higher interest
expense on variable interest liabilities. The effect of a change for the year in the interest rate on equity would be the same
as that on post-tax profit.
(iii) Price risk
From time to time the Group makes investments in entities with high upside market potential. Investments are assessed by
corporate treasury department and accepted provided that internal rate of return for investment exceeds current weighted
average cost of capital.
The Group does not enter into any transactions with financial instruments whose value is exposed to the value of any
commodities traded on a public market.
(b) Credit risk
Credit risk arises from the possibility that counterparties to transactions may default on their obligations, causing financial
losses for the Group. Financial assets, which potentially subject Group entities to credit risk, consist principally of trade
receivables, cash and bank deposits. The objective of managing credit risk is to prevent losses of liquid funds deposited with
or invested in financial institutions or the loss in value of receivables.
The maximum exposure to credit risk of RUB 22,213 (2019: RUB 15,108) resulting from financial assets is equal to the
carrying amount of the Group’s financial assets, including loans receivable, cash and cash equivalents. The amount does not
include equity investments disclosed in Note 26.1.
As at 31 December 2020, cash and cash equivalents in the amount RUB 1,522 were held in Russian bank with credit rating
2020 2019
Impact on post-tax profit and on equity of:
USD strengthening by 20% (7,670) (6,736)
USD weakening by 20% 7,670 6,736
181
BBB- based on the credit ratings of Standard & Poor’s (2019: RUB 0) and RUB 989 were held in Russian banks with credit
rating BBB- based on the credit ratings of Fitch Ratings (2019: RUB 485), RUB 678 was held in Russian bank with credit
rating Baa3 (2019: RUB 490), and RUB 573 were held in bank without credit rating (2019: RUB 273). The Group has no
significant concentrations of credit risk for other financial assets.
Cash and cash equivalents. Cash and short-term deposits are placed in major multinational and Russian banks with
independent credit ratings and Chinese banks with top internal credit ratings. All bank balances and term deposits are
neither past due nor impaired. See analysis by credit quality of bank balances and term deposits in Note 6.
Trade receivables. Trade receivables and loans receivable are subject to a policy of active credit risk management
which focuses on an assessment of ongoing credit evaluation and account monitoring procedures. The objective of the
management of receivables is to sustain the growth and profitability of the Group by optimising asset utilisation whilst
maintaining risk at an acceptable level.
The monitoring and controlling of credit risk is performed by the corporate treasury function of the Group. The credit
policy requires the performance of credit evaluations and ratings of customers or borrowers. The credit quality of each
new customer is analysed before the Group provides it with the standard terms of goods supply and payments. The
credit quality of new borrowers is analysed before the Group provides it with the loan. The credit quality of customers and
borrowers is assessed taking into account their financial position, past experience and other factors. Customers which do
not meet the credit quality requirements are supplied on a prepayment basis only.
Management monitors and discloses concentrations of credit risk by obtaining reports listing exposures to counterparties
with aggregated balances in excess of 10% of the Group’s gross accounts receivable balances. At 31 December 2020, the
Group has 1 counterparty with aggregated receivables balances in excess of 10% of the Group’s gross accounts receivable
balances (2019: 1 counterparty).
Although the collection of receivables could be influenced by economic factors, management believes that there is no
significant risk of loss to the Group beyond the provision already recorded (Note 7).
(c) Liquidity risk
Liquidity risk results from the Group’s potential inability to meet its financial liabilities, such as settlements of financial debt
and payments to suppliers. The Group’s approach to liquidity risk management is to maintain sufficient readily available
reserves in order to meet its liquidity requirements at any point in time.
The Group seeks to maintain a stable funding base primarily consisting of borrowing, trade and other payables and debt
securities. The Group invests the funds in diversified portfolios of liquid assets, in order to be able to respond quickly and
smoothly to unforeseen liquidity requirements. The Group’s liquidity portfolio comprises cash and cash equivalents (Note 6),
investment in equity instruments measured at fair value through other comprehensive income (Note 11). Management
estimates that the liquidity portfolio can be realised in cash within a day in order to meet unforeseen liquidity requirements.
Weekly liquidity planning is performed by the corporate treasury function and reported to the management of the Group.
Beyond cash management, the Group mitigates liquidity risk by keeping committed credit lines available.
The table below analyses the Group’s financial liabilities into the relevant maturity groupings based on the time remaining
from the reporting date to the contractual maturity date.
182
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
The Group controls the minimum required level of cash balances available for short-term payments in accordance with
the financial policy of the Group. Such cash balances are represented by current cash balances on bank accounts and
bank deposits. Group’s policy for financing its working capital is aimed at maximum reliance on own operating cash flows,
availability of short-term bank and other external financing to maintain sufficient liquidity.
At 31 December 2020, the Group's current liabilities exceed current assets by RUB 11,844.
At 31 December 2020, the Group has the following sources of financing to meet its current obligations:
• unused credit lines available under long-term loan facilities were RUB 100,847 (2019: RUB 54,706);
• expected positive cash flows from operating activities in 2021;
• the Group's management believes that in the event of a need for additional financing, it can be attracted from external sources.
Carrying
amount
On demand
and less than 3
months
From 3 to
12 months
From 1 to
2 years
From 2 to
5 years
Over 5
years
Total
As at 31 December 2020
Bonds issued*
23,266 411 9,841 5,421 10,220 - 25,893
Credit lines* 19,976 3,213 6,287 8,746 2,971 - 21,217
Term loans* 73,081 721 20,436 23,035 32,228 - 76,420
Lease liabilities 2,705 137 319 346 759 1,144 2,705
Trade payables 10,575 10,575 - - - - 10,575
Derivatives 1,560 - - - 1,560 - 1,560
Total 131,163 15,057 36,883 37,548 47,738 1,144 138,370
Carrying
amount
On demand
and less than 3
months
From 3 to
12 months
From 1 to
2 years
From 2 to
5 years
Over 5
years
Total
As at 31 December 2019
Bonds issued*
23,772 496 9,945 6,122 10,945 - 27,508
Credit lines* 3,185 289 164 3,003 - - 3,456
Term loans* 59,584 600 5,611 17,499 41,076 218 65,004
Lease liabilities 2,594 141 406 395 775 877 2,594
Trade payables 9,614 9,614 - - - - 9,614
Derivatives 679 - 679 - - - 679
Total 99,428 11,140 16,805 27,019 52,796 1,095 108,855
* The table above shows undiscounted cash outflows for financial liabilities (including interest together with the borrowings) based on conditions
existing as at 31 December 2020 and 31 December 2019, respectively.
183
26.2. Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, to provide returns
for shareholders and benefits for other stakeholders, to have available the necessary financial resources for investing
activities and to maintain an optimal capital structure in order to reduce the cost of capital.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by total capital
under management. The Group considers total capital under management to be equity as shown in the IFRS consolidated
statement of financial position. This is considered more appropriate than alternative methods available, such as the value
of equity shown in the Company’s statutory financial (accounting) reports. In 2020, the Group’s strategy, as in 2019, was to
maintain the gearing ratio at the level not exceeding 150%.
The gearing ratio as at 31 December 2020 and 31 December 2019 is shown in the table below:
The Group also maintains an optimal capital structure by tracing certain capital requirements based on the minimum level
of EBITDA/net interest expense ratio.
In 2020, the Group’s strategy, which was unchanged from 2010, was to maintain EBITDA/net interest expense ratio at the
level not lower than 3.5:1. For this purpose EBITDA is defined as earnings before tax, interest, depreciation and amortisation
adjusted for operating foreign exchange gain or loss, result on disposal of property, plant and equipment and investments
and extraordinary items. Net interest expense is defined as interest expense less interest income. This ratio is included as a
covenant in the loan agreements (Note 14).
The ratios of EBITDA over net interest expense are shown in the table below:
2020 2019
Long-term borrowings 78,205 73,252
Short-term borrowings 36,911 13,288
Total debt 115,116 86,541
Shareholders’ equity 68,803 81,965
Gearing ratio, % 167% 106%
2020 2019
EBITDA 35,311 35,749
Interest income (Note 21) (107) (92)
Interest expense 3,285 1,115
Interest expense capitalised (Notes 9 and 10) 2,049 3,423
Net interest expense 5,227 4,446
EBITDA/Net interest expense 6.8:1 8:1
184
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
The Group’s capital management includes compliance with the externally imposed minimum capital requirements arising
from the Group’s borrowings (Note 14) and imposed by the statutory legislation of the Russian Federation and Estonia. Since
EBITDA is not standard IFRS measure the Group’s definition of EBITDA may differ from that of other companies.
27 Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The best evidence of fair value is the price in an active market.
The estimated fair values of financial instruments have been determined by the Group using available market information,
where it exists, and appropriate valuation methodologies. However, judgement is necessarily required to interpret
market data to determine the estimated fair value. The Russian Federation continues to display some characteristics of
an emerging market and economic conditions continue to limit the volume of activity in the financial markets. Market
quotations may be outdated or reflect distress sale transactions and therefore not represent fair values of financial
instruments. Management has used all available market information in estimating the fair value of financial instruments.
Financial instruments carried at fair value. Investment in equity instruments measured at fair value through other
comprehensive income, and derivatives are carried in the consolidated statement of financial position at their fair value.
This Group discloses the value of financial instruments that are measured in the consolidated statement of financial
position at fair value by three levels in accordance with IFRS 13, Fair values.
The level in the fair value hierarchy into which the fair values are categorised as one of the three categories:
Level 1: quoted price in an active market;
Level 2: valuation technique with inputs observable in markets;
Level 3: valuation technique with significant non-observable inputs.
Investment in equity instruments was included in level 1 category in the amount of RUB 10,796 (31 December 2019:
RUB 9,376).
All liabilities on bonds issued were included in level 1 category in the amount of RUB 23,266 (31 December 2019: RUB 23,772).
The fair value of the call/put options on shares of JSC VPC was determined based on the Black–Scholes Option Pricing
Model with the adjustments and using of unobservable inputs, and included in level 3.
The spot price of JSC VPC is one of the inputs to the valuation using Black–Scholes Option Pricing Model. Since the shares
are not quoted, management applied discounted cash flows method attracting an independent appraiser.
The appraisal model provides for the calculation of the present value of the JSC VPC CGU using the risk-adjusted discount
rate. The calculation was based on the cash flow forecast prepared in nominal terms and derived from financial budgets.
185
Significant unobservable inputs Inter-relationship between significant unobservable inputs data and fair value
measurement
• Forecast annual revenue growth rate:
3.1%.
• Forecast EBITDA margin after reaching
the designed capacity: 79-81%.
• Risk-adjusted discount rate: 12.2-12.6%.
• Production start year: 2025.
• Non-controlling discount: 16.58%.
The estimated fair value of the shares of JSC VPC would increase
(decrease) if:
• The annual revenue growth rate were higher (lower);
• The EBITDA margin were higher (lower); or
• risk-adjusted discount rate were lower (higher) ; or
• production began earlier (later); or
• non-controlling discount were lower (higher).
Generally, EBITDA margin follows any changes in the trend set by the annual
revenue growth rate.
Significant unobservable inputs of Black–Scholes Option Pricing Model are shown in the following table:
Financial instrument Significant unobservable inputs Inter-relationship between significant
unobservable inputs data and estimate of
fair value
Put option on shares of JSC VPC
(liability)
• The current fair value of the shares
(calculated as above)
• Volatility: 38.6%.
• Risk-free rate of return: (0.46)%.
• No dividend assumed
The estimated fair value would increase
(decrease) if:
• current fair value of the shares were
lower (higher);
• volatility were higher (lower); or
• the risk-free rate of return were lower
(higher).
Financial assets carried at amortised cost. The fair value of floating rate instruments is normally their carrying amount.
The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be received
discounted at current interest rates for new instruments with similar credit risk and remaining maturity. Discount rates
used depend on credit risk of the counterparty. Carrying amounts of trade receivables and loans receivable approximate fair
values.
Liabilities carried at amortised cost. The fair value of floating rate liabilities is normally their carrying amount. The fair
value is based on quoted market prices, if available. The estimated fair value of fixed interest rate instruments with stated
maturity, for which a quoted market price is not available, was estimated based on expected cash flows discounted at
current interest rates for new instruments with similar credit risk and remaining maturity. At 31 December 2020, the fair
value of borrowings was RUB 669 higher than their carrying amounts. At 31 December 2019, the fair value of borrowings was
RUB 136 higher than their carrying amounts.
The fair value of payables does not differ significantly from their carrying amounts.
28 Significant Accounting Policies
28.1. Group accounting
Consolidated financial statements. Subsidiaries are those companies and other entities (including special purpose
entities) in which the Group, directly or indirectly, has an interest of more than one half of the voting rights or otherwise
has power to govern the financial and operating policies so as to obtain benefits. The existence of possibility when the
Group has existing rights that give it the current ability to direct the relevant activities of other entity, i.e. the activities that
significantly affect the other entity’s returns, is considered when assessing whether the Group controls another entity.
186
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
The Group can have power over other entity even if other entities have existing rights that give them the current ability
to participate in the direction of the relevant activities. Subsidiaries are consolidated from the date on which control is
transferred to the Group (acquisition date) and are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries except for those acquired as the
result of the business combinations under common control. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured at their fair values at the acquisition date, irrespective of the
extent of any non-controlling interest. The Group measures non-controlling interest that represents present ownership
interest and entitles the holder to a proportionate share of net assets in the event of liquidation on a transaction by
transaction basis, either at: (a) fair value, or (b) the non-controlling interest's proportionate share of net assets of the
acquiree.
Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferred
for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquiree held
immediately before the acquisition date. Any negative amount (“negative goodwill”) is recognised in profit or loss, after
management reassesses whether it identified all the assets acquired and all liabilities and contingent liabilities assumed
and reviews appropriateness of their measurement.
The consideration transferred for the acquiree is measured at the fair value of the assets given up, equity instruments
issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent consideration
arrangements but excludes acquisition related costs such as advisory, legal, valuation and similar professional services.
Transaction costs related to the acquisition and incurred for issuing equity instruments are deducted from equity;
transaction costs incurred for issuing debt as part of the business combination are deducted from the carrying amount of
the debt and all other transaction costs associated with the acquisition are expensed.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated;
unrealised losses are also eliminated unless the cost cannot be recovered. The Company and all of its subsidiaries use
uniform accounting policies consistent with the Group’s policies.
Non-controlling interest is that part of the net results and of the net assets of a subsidiary, which is attributable to interests
which are not owned, directly or indirectly, by the Company. Non-controlling interest forms a separate component of the
Group’s equity.
Purchases of non-controlling interests. The Group applies economic entity model to account for transactions with non-
controlling shareholders. Any difference between the purchase consideration and the carrying amount of non-controlling
interest acquired is recorded as capital transaction directly in equity.
Purchases of subsidiaries from parties under common control. Purchases of subsidiaries as the result of business
combinations under common control are accounted for using the predecessor values method. Under this method the
financial statements of the combined entity are presented as if the businesses had been combined from the beginning of
the earliest period presented or, if later, the date when the combining entities were first brought under common control. The
assets and liabilities of the subsidiary transferred under common control are at the predecessor entity’s carrying amounts.
The predecessor entity is considered to be the highest reporting entity in which the subsidiary’s IFRS financial information
was consolidated. Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded in these
financial statements. The consideration paid is accounted for in these consolidated financial statements as an adjustment
to equity.
Investments in associates. Associates are entities over which the Group has significant influence (directly or indirectly),
but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in
associates are accounted for by the equity method of accounting and are initially recognised at cost. The carrying amount of
associates includes goodwill identified on acquisition less accumulated impairment losses, if any. The Group’s share of the
post-acquisition profits or losses of associates is recorded in profit or loss for the year as share of result of associates.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest
in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
187
Disposals of subsidiaries, associates or joint ventures. When the Group ceases to have control or significant influence,
any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in profit or
loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an
associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income
in respect of that entity, are accounted for as if the Group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are recycled to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the
amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
28.2. Discontinued operations
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group and which:
• represents a separate major line of business or geographical area of operations;
• is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
• is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as
held for sale, if earlier.
When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is
re-presented as if the operation had been discontinued from the start of the comparative period.
28.3. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid
investments with original maturities of three months or less. Cash and cash equivalents are carried at amortised cost using
the effective interest method. Bank overdrafts are shown within borrowings in the current liabilities statement of financial
position. Restricted balances are excluded from cash and cash equivalents for the purposes of the cash flow statement.
Balances restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date are
included in other non-current assets.
28.4. Trade and other receivables
Trade and other receivables are carried at amortised cost using the effective interest method. A trade receivable without a
significant financing component is initially measured at the transaction price.
Loss allowances for trade receivables are measured at an amount equal to lifetime expected credit losses (ECLs). Lifetime
ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. ECLs are a
probability-weighted estimate. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to
receive). The Group takes into account credit risk of each debtor based on data that is determined to be predictive of the risk
of loss (including external ratings) applying experienced credit judgement and actual credit loss experience.
Loss allowances for trade and other receivables are deducted from the gross carrying amount of the assets.
188
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
28.5. Value added tax
Output value added tax related to sales is payable to tax authorities on the earlier of (a) collection of the receivables
from customers or (b) delivery of goods or services to customers. Input VAT is generally recoverable against output VAT
upon receipt of the VAT invoice. The tax authorities permit the settlement of VAT on a net basis. VAT related to sales and
purchases is recognised in the statement of financial position on a gross basis and disclosed separately as an asset and
liability. Where provision has been made for impairment of receivables, impairment loss is recorded for the gross amount of
the debtor, including VAT.
28.6. Inventories
Inventories comprise raw materials, finished goods, work in progress, catalytic agents, spare parts and other materials
and supplies. Inventories are recorded at the lower of cost and net realisable value. Cost of inventory is determined on the
weighted average basis. The cost of finished goods and work in progress comprises raw material, direct labour, other direct
costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable
value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.
28.7. Property, plant and equipment
Property, plant and equipment are recorded at cost, restated where applicable to the equivalent purchasing power of
the Russian Rouble at 31 December 2002 for assets acquired prior to 1 January 2003, less accumulated depreciation and
provision for impairment, where required.
At each reporting date management assesses whether there is any indication of impairment of property, plant and
equipment. If any such indication exists, the management estimates the recoverable amount, which is determined as
the higher of an asset’s fair value less cost to sell and its value in use. The carrying amount is reduced to the recoverable
amount and the difference is recognised as an expense (impairment loss) in the statement of profit or loss and other
comprehensive income. An impairment loss recognised for an asset in prior years is reversed if there has been a change in
the estimates used to determine the assets recoverable amount. Gains and losses on disposals determined by comparing
proceeds with carrying amount are recognised in the profit or loss.
Land is not depreciated. Depreciation on other items of property, plant and equipment is calculated to allocate cost of
property, plant and equipment to their residual values on a straight-line basis. The depreciation periods, which approximate
the estimated useful economic lives of the respective assets, are as follows:
Number of years
Buildings 40 to 50
Plant and machinery 10 to 20
Other equipment and motor vehicles 5 to 20
The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the asset
less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its
useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
189
Management assesses the remaining useful life of property, plant and equipment in accordance with the current technical
conditions of assets and the estimated period during which these assets will bring economic benefit to the Group.
Repair and maintenance expenditure is expensed as incurred. Major renewals and improvements are capitalised and the
assets replaced are retired. Gains and losses arising from the retirement or disposal of property, plant and equipment are
included in profit or loss.
Borrowing costs on specific or general funds borrowed to finance the construction of qualifying asset are capitalised, during
the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are
expensed.
28.8. Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the
Group uses the definition of a lease in IFRS 16.
This policy is applied to contracts entered into, on or after 1 January 2019.
(i) As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration
in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property
the Group has elected not to separate non-lease components and account for the lease and non-lease components as a
single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the
end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease
term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-
use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of
property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted
for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment
made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there
is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group
changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include
renewal options, the assessment of whether the Group is reasonably certain to exercise, such options impacts the lease
term, which significantly affects the amount of lease liabilities and right-of-use assets recognised.
190
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
In determining the enforceable period (i.e. the maximum lease term), the Group considers whether both it and the lessor
has a right to terminate the lease without permission from the other party and, if so, whether that termination would result
in more than an insignificantly penalty. If a more than insignificant penalty exists, then the enforceable period extends until
the point at which a no more than an insignificant penalty exists.
In accordance with IFRS 16 variable payments which do not depend on index or rate, e. g. which do not reflect changes in
market rental rates, should not be included in the measurement of lease liability. In respect of municipal or federal land
leases where lease payments are based on cadastral value of the land plot and do not change until the next revision of
that value or the applicable rates (or both) by the authorities, the Group has determined that, under the current revision
mechanism, the land lease payments cannot be considered as either variable that depend on index or rate or in-substance
fixed, and therefore these payments are not included in the measurement of the lease liability.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the
amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will
exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-
of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-
term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense
on a straight-line basis over the lease term.
(ii) As a lessor
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the
contract to each lease component on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating
lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks
and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then
it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for
the major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It
assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not
with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption
described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in
the contract.
The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. The Group
further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease
term as part of ‘other revenue’.
Generally, the accounting policies applicable to the Group as a lessor in the comparative period were not different from IFRS
16 except for the classification of the sub-lease entered into during current reporting period that resulted in a finance lease
classification.
191
28.9. Amortisation of exploration and evaluation licences and expenditure
Exploration and evaluation licences and expenditure are amortised on a straight-line basis over expected term of site
development, commencing upon readiness of processing facilities to produce ore usable for production of complex mineral
fertilizers or for external sale.
28.10. Borrowings
Borrowings are stated at amortised cost using the effective interest method; any difference between fair value of the
proceeds (net of transaction costs) and the redemption amount is recognised as interest expense over the period of the
borrowings.
Capitalisation of borrowing costs. Borrowing costs directly attributable to the acquisition, construction or production
of assets that necessarily take a substantial time to get ready for intended use or sale (qualifying assets) are capitalised
as part of the costs of those assets. Capitalisation of borrowing costs continues up to the date when the assets are
substantially ready for their use or sale.
The Group capitalises borrowing costs that could have been avoided if it had not made capital expenditure on qualifying
assets. Borrowing costs capitalised are calculated at the group’s average funding cost (the weighted average interest cost
is applied to the expenditures on the qualifying assets), except to the extent that funds are borrowed specifically for the
purpose of obtaining a qualifying asset. Where this occurs, actual borrowing costs incurred less any investment income on
the temporary investment of those borrowings are capitalised. Foreign exchange differences regarded as an adjustment to
interest costs are included in borrowing costs capitalised in the qualifying asset. The adjustment includes the amount of
additional interest that would have been incurred on a borrowing with identical terms in the entity’s functional currency.
28.11. Income tax
Income taxes have been provided for in the consolidated financial statements in accordance with the legislation of the
countries, where most significant subsidiaries of the Group are located, enacted or substantively enacted by the end of
the reporting period. The income tax charge comprises current tax and deferred tax and is recognised in the profit or loss
except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also
recognised, in the same or a different period, in other comprehensive income or directly in equity.
Current income tax is the amount expected to be paid to or recovered from the taxation authorities in respect of taxable
profits or losses for the current and prior periods. Taxes, other than on income, are recorded within operating expenses.
Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on
initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially
recorded, affects neither accounting nor taxable profit. Deferred tax liabilities are not recorded for temporary differences on
initial recognition of goodwill and subsequently for goodwill which is not deductible for tax purposes. Deferred tax balances
are measured at tax rates enacted or substantively enacted at the reporting date, which are expected to apply to the period
when the temporary differences will reverse or the tax loss carry forwards will be utilised. Deferred tax assets and liabilities
are netted only within the individual companies of the Group. Deferred tax assets for deductible temporary differences and
tax loss carry forwards are recorded only to the extent that it is probable that future taxable profit will be available against
which the deductions can be utilised.
Deferred income tax is provided on post acquisition retained earnings of subsidiaries, except where the Group controls the
subsidiary’s dividend policy and it is probable that the difference will not reverse through dividends or otherwise in the
foreseeable future.
192
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
The Group’s uncertain tax positions are reassessed by management at the end of each reporting period. Liabilities are
recorded for income tax positions that are determined by management as more likely than not to result in additional taxes
being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation
of tax laws that have been enacted or substantively enacted by the end of the reporting period and any known court or
other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognised based on
management’s best estimate of the expenditure required to settle the obligations at the end of the reporting period.
28.12. Foreign currency transactions
Foreign currency translation. For the Company and its subsidiaries monetary assets and liabilities are translated into
each entity’s functional currency at the official exchange rate of the Central Bank at the respective ends of the reporting
periods. Foreign exchange gains and losses resulting from the settlement of the transactions and from the translation of
monetary assets and liabilities into each entity’s functional currency at year-end official exchange rates of the Central Bank
are recognised in profit or loss. Translation at year-end rates does not apply to non-monetary items. Effects of exchange rate
changes on the fair value of equity securities are recorded as part of the fair value gain or loss.
Foreign exchange gains and losses on operating items are presented within other operating expenses, foreign exchange
gain and losses on finance items are presented within net finance income.
Translation from functional to presentation currency. The results and financial position of each group entity (functional
currency of none of which is a currency of a hyperinflationary economy) are translated into the presentation currency as
follows:
(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of
that statement of financial position;
(ii) income and expenses for each statement of profit or loss and other comprehensive income are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
(iii) components of equity are translated at the historic rate; and
(iv) all resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate. When a subsidiary is disposed of through sale, liquidation, repayment of
share capital or abandonment of all, or part of, that entity, the exchange differences deferred in equity are reclassified from
other comprehensive income to profit or loss.
At 31 December 2020 the principal rate of exchange used for translating foreign currency balances was
USD 1 = RUB 73.8757, USD 1 = CNY 6.5249, EUR 1 = RUB 90.6824 (31 December 2019: USD 1 = RUB 61.9057,
USD 1 = CNY 6.9762, EUR 1 = RUB 69.3406). Exchange restrictions and controls exist relating to converting
Russian Roubles into other currencies.
193
28.13. Provisions for liabilities and charges
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be
made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement
is recognised as a separate asset but only when the reimbursement is virtually certain.
Provisions are evaluated and re-estimated annually, and are included in the financial statements at their expected net
present values using discount rates appropriate to the Company or its subsidiaries in applicable economic environment at
each end of the reporting period.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the reporting date. Provisions are reassessed annually and changes in provisions resulting from the
passage of time are reflected in the consolidated income statement each year within interest expense. Other changes in
provisions related to a change in the expected repayment plan, in the estimated amount of the obligation or in the discount
rates, are treated as a change in an accounting estimate in the period of the change and, with the exception of provision for
restoration liabilities, reflected in the consolidated income statement.
Provisions for restoration liability are recognised when the Group has a present legal or constructive obligation to dismantle,
remove and restore items of property, plant and equipment. The amount of the provision is the present value of the
estimated expenditures expected to be required to settle the liability, determined using pretax risk free discount rates
adjusted for risks specific to the liability. Changes in the provision resulting from the passage of time are recognised as
interest expense. Changes in the provision, which is reassessed at each reporting date, related to a change in the expected
pattern of settlement of the liability, or in the estimated amount of the provision or in the discount rates, are treated as a
change in an accounting estimate in the period of change. Such changes are reflected as adjustments to the carrying value
of property, plant and equipment and the corresponding liability
28.14. Shareholders’ equity
Share capital. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are
shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of consideration received over the
par value of shares issued is presented in the notes as a share premium.
Treasury shares. Where any Group company purchases the Company’s equity share capital, the consideration paid,
including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the
Company’s owners until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or
reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income
tax effects, is included in equity attributable to the Company’s owners.
Dividends. Dividends are recognised as a liability and deducted from equity at the reporting date only if they are declared
and approved before or on the reporting date. Dividends are disclosed when they are proposed before the reporting date or
proposed or declared after the balance sheet date but before the financial statements are authorised for issue.
Accounting treatment for put options to be settled in shares of Company. The subsidiaries sell to non-controlling
shareholders own shares linked to put option. This gives to non-controlling shareholders the right to sell the Group those
shares in exchange for a variable number of Company’s shares. If at the option exercise date the Group has no obligation
to deliver cash or another financial asset, the subsidiary’s shares that are held by non-controlling interest holders are
presented as equity and the put options are recognised as derivative financial liabilities. Such options are accounted at fair
value with changes recognised in profit or loss for the period in accordance with IAS 39.
194
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
On initial recognition of the liability, the debit entry it to other equity. The interests of non-controlling shareholders that
hold the written put options or forwards (in respect of those shares) are not derecognised when the financial liability is
recognised.
Accounting treatment for call options over subsidiary shares. The Group buys the call options issued by third parties,
which entitle to buy (from this third party) the shares in a subsidiary. Initially the call option is recognised in capital of the
owner’s of the Company for credit side and on as a derivative financial asset for debit side. Further it is accounted at fair
value with changes are recognised in profit or loss in accordance with IAS 39.
28.15. Revenue recognition
Revenues from sales of chemical fertilisers and related by-products are recognised at the point when control of the goods
passes to the customer. Control passes to the customer at the point of transfer of risks and rewards of ownership of the
goods normally when the goods are shipped.
Sales are shown net of VAT, custom duties and discounts, and after eliminating sales within the Group.
The Group has initially adopted IFRS 15 Revenue from Contracts with Customers from 1 January 2018.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It
replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations.
The Group has adopted IFRS 15 using the cumulative effect method (without practical expedients). The effect of initially
applying this standard at the date of initial application (i.e. 1 January 2018) is estimated as inconsequential. Accordingly, the
information presented for 2017 has not been restated – i.e. it is presented, as previously reported, under IAS 18, IAS 11 and
related interpretations.
The Group assessed the impact of the new standard on the Group’s performance and financial position. The Group identified
that under contract conditions related to significant portion of fertilisers sales the Group promises to provide shipping and
other freight services after the date when control of the goods passes to the customer at the loading port. Under IAS 18, the
Group recognised revenue for such services and associated costs in full immediately after loading as revenue from trading
activities. Under IFRS 15 such revenue is expected to be a separate performance obligation and shall be recognised over
time of shipping as revenue from logistic services. However, the Group recognises revenue from logistic services at a point
in time at the end of shipping due to the fact that potential impact was calculated and estimated as inconsequential.
The Group has also assessed the impact of the new standard on revenue disclosures. The Group concluded that existing
disclosures are consistent with the new requirements. The Group will continue monitoring the impact of treating logistic
services as a separate performance obligation and will adjust its accounting policies as appropriate in the future if and
when such impact becomes material.
28.16. Mutual cancellations
A portion of sales and purchases are settled by mutual settlements or non-cash settlements. These transactions are
generally in the form of direct settlements through cancellation of mutual trade receivables and payables balances within
the operational contracts. Non-cash settlements include promissory notes or bills of exchange, which are negotiable debt
obligations. Sales and purchases that are expected to be settled by mutual settlements or other non-cash settlements
are recognised based on the estimate of the fair value to be received or given up in non-cash settlements. The fair value is
determined with reference to various market information. Non-cash transactions have been excluded from the consolidated
cash flow statement, so investing activities, financing activities and the total of operating activities represent actual cash
transactions.
195
The Group also accepts bills of exchange from its customers (both issued by customers and third parties) as a settlement
of receivables. A provision for impairment of bills of exchange is established when there is objective evidence that the Group
will not be able to collect all amounts due according to the original terms. The amount of the provision is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate.
28.17. Employee benefits
Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid annual leave and sick
leave, bonuses, and non-monetary benefits (such as health services and kindergarten services) are accrued in the year in which
the associated services are rendered by the employees of the Group and are included within labour costs in operating expenses.
Social costs. The Group incurs significant costs on social activities. These costs include the provision of health services,
kindergartens, and the subsidy of worker holidays. These amounts represent an implicit cost of employing principally production
workers and other staff and, accordingly, have been charged to operating expenses.
Pension costs. In the normal course of business the Group contributes to state pension schemes on behalf of its employees.
Mandatory contributions to the governmental pension scheme are accrued in the year in which the associated services are
rendered by the employees of the Group. The Group recognises these contributions as part of labour costs.
28.18. Financial assets and liabilities
Recognition and initial measurement. Trade receivables and debt securities issued are initially recognised when they are
originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the
contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially
measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or
issue.
Classification and subsequent measurement. On initial recognition, a financial asset is classified as measured at:
amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for
managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at
FVTPL:
• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
196
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present
subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL.
The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level
because this best reflects the way the business is managed and information is provided to management.
Financial assets – Subsequent measurement and gains and losses
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including
any interest or dividend income, are recognised in profit or loss.
Financial assets at amortised
cost
These assets are subsequently measured at amortised cost using the effective interest
method. The amortised cost is reduced by impairment losses. Interest income, foreign
exchange gains and losses and impairment are recognised in profit or loss. Any gain or
loss on derecognition is recognised in profit or loss.
Debt investments at FVOCI
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. Other net gains and losses are recognised in OCI. On
derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI
These assets are subsequently measured at fair value. Dividends are recognised as
income in profit or loss unless the dividend clearly represents a recovery of part of the
cost of the investment. Other net gains and losses are recognised in OCI and are never
reclassified to profit or loss.
Financial liabilities – Classification, subsequent measurement and gains and losses. Financial liabilities are classified
as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is
a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently
measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses
are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
Derecognition
Financial assets. The Group derecognises a financial asset when the contractual rights to the cash flows from the financial
asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains
substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
197
The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains
either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are
not derecognised.
Financial liabilities. The Group derecognises a financial liability when its contractual obligations are discharged or
cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of
the modified liability are substantially different, in which case a new financial liability based on the modified terms is
recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration
paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Derivative financial instruments. As part of its financing activities the Group is also party to derivative financial
instruments including foreign currency and interest rate swap contracts and put/call option on shares. The Group's policy
is to measure these instruments at fair value with resultant gains or losses being reported within the profit and loss. The
fair value of derivative financial instruments is determined using actual market data information and valuation techniques
based on prevailing market interest rate for similar instruments as appropriate. All derivative instruments are carried as
assets when fair value is positive and as liabilities when fair value is negative. The Group has no derivatives accounted for
as hedges.
28.19. 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. 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
share repurchase option.
28.20. 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 Group’s chief operating decision
maker to make decisions about resources to be allocated to the segment and assess its performance.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable
basis.
Operating segments which external and inter-segment sales, assets, profit and loss are 10% or more from appropriate
operational segments measure are reported separately.
28.21. Exploration and evaluation expenditure
Exploration and evaluation costs are capitalized. Capitalized costs are directly related to exploration and evaluation
activities in the relevant area of interest and include acquisition of rights to explore, including cost related to compliance
with licence terms; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching and
sampling; and activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral
resource. In accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources, exploration assets are measured
applying the cost model described in IAS 16, Property, Plant and Equipment, after initial recognition. Exploration assets are
not depreciated until the production phase.
198
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
The stripping costs associated with future production are capitalized prior to the start of the production stage.
The Group tests exploration and evaluation assets for impairment when there are facts and circumstances that suggest
that the carrying value of the asset may not be recoverable.
28.22. Development expenditure
Development expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest in
which economically recoverable resources have been identified. Such expenditure comprises cost directly attributable to
the construction of a mine and the related infrastructure. Once a development decision has been taken, the expenditure in
respect of the area of interest is classified in “mining assets under construction” category and separately disclosed in Note 9.
Costs incurred are tested for impairment upon commencement of development phase.
Development expenditure is reclassified as a “Mining and primary ore dressing assets” at the end of the commissioning
phase, when the mine and surface infrastructure are capable of operating in the manner intended by management. No
depreciation is recognised in respect of development expenditures until they are reclassified as “Mining and primary ore
dressing assets”.
29 New Standards and Interpretations not yet adopted
A number of new standards are effective for annual periods beginning after 1 January 2020 and earlier application is
permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated
financial statements.
Onerous contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
The amendments specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of
assessing whether the contract is onerous. The amendments apply for annual reporting periods beginning on or after 1
January 2022 to contracts existing at the date when the amendments are first applied. At the date of initial application, the
cumulative effect of applying the amendments is recognised as an opening balance adjustment to retained earnings or
other components of equity, as appropriate. The comparatives are not restated. The Group has determined that all contracts
existing at 31 December 2020 will be completed before the amendments become effective.
Interest Rate Benchmark Reform – Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The amendments address issues that might affect financial reporting as a result of the reform of an interest rate
benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the
replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief
from certain requirements in IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 relating to:
• changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities; and
• hedge accounting.
The amendments will require an entity to account for a change in the basis for determining the contractual cash flows of a
financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate
of the financial asset or financial liability.
The Group is in the process of assessing the effect of the new standard on its financial performance and financial position.
199
The amendments will require the Group to disclose additional information about the entity’s exposure to risks arising from
interest rate benchmark reform and related risk management activities.
The Group plans to apply the amendments commencing with the condensed interim financial information for the six
months ended 30 June 2021. Application will not affect amounts reported for 2020 or prior periods.
Other standards
The following new and amended standards are not expected to have a significant impact on the Group’s consolidated
financial statements.
• COVID-19-Related Rent Concessions (Amendment to IFRS 16).
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).
• Reference to Conceptual Framework (Amendments to IFRS 3).
• Classification of Liabilities as Current or Non-current (Amendments to IAS 1).
• IFRS 17 Insurance Contracts.
Although new or amended standards that will have no or no material effect on the financial statements need not be
provided, the Group has included all new or amended standards and their possible impact on the consolidated financial
statements for illustrative purposes only.
30 Subsequent Events
JSC Acronagroservice holding 55% of PJSC Acron shares has changed its name to JSC Acron Group.
200
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
RAS Financial
Statement
Acron’s complete 2020 RAS Financial Statement including Independent Auditor’s Report is in
Appendix 5. Below is the Balance Sheet as of 31 December 2020 and the 2020 Profit and Loss
Statement.
Notes Item Code As of
31 December 2020
As of
31 December 2019
As of
31 December 2018
ASSETS
I. NON-CURRENT ASSETS
2.2 Intangible assets 1110 82,404 78,970 75,811
Research and development costs 1120 - - -
Intangible development assets 1130 - - -
Tangible development assets 1140 - - -
2.1 Fixed assets 1150 44,077,362 39,894,196 39,341,253
Income-bearing investment in
tangible assets
1160 - - -
2.8 Financial investments 1170 90,622,052 99,492,209 90,559,047
2.18 Deferred tax assets 1180 1,092,934 269,242 264,118
2.4 Other non-current assets 1190 101,772 1,039,379 655,786
Total under Section I 1100 135,976,524 140,773,996 130,896,015
II. CURRENT ASSETS
2.3 Inventory 1210 7,511,022 6,803,712 6,795,557
VAT on purchased items 1220 45,120 49,498 78,461
2.5 Accounts receivable 1230 8,006,397 6,275,526 9,689,871
2.8
Financial investments (less cash
equivalents)
1240 14,387 10,911 12,313
2.6 Cash and cash equivalents 1250 6,178,720 2,581,009 4,409,642
2.7 Other current assets 1260 54,377 28,067 31,670
Total under Section II 1200 21,810,023 15,748,723 21,017,514
GRAND TOTAL 1600 157,786,547 156,522,719 151,913,529
Acron’s Balance Sheet as of 31 December 2020, RUB ‘000
201
Notes Item Code As of
31 December 2020
As of
31 December 2019
As of
31 December 2018
LIABILITIES
III. EQUITY
2.11
Charter capital (pooled
capital, charter fund, partners’
contributions)
1310 202,670 202,670 202,670
Treasury stock 1320 (-) (-) (-)
2.11 Non-current asset revaluation 1340 934,095 936,533 938,268
Capital surplus (less revaluation) 1350 - - 6 846
2.11 Capital reserve 1360 30,401 30,401 30,401
Retained profit (loss) 1370 11,290,764 23,103,543 18,389,603
Total under Section III 1300 12,457,930 24,273,147 19,567,788
IV. NON-CURRENT LIABILITIES
2.10 Borrowings 1410 101,621,845 98,665,780 65,682,055
2.18 Deferred tax liabilities 1420 6,916,421 6,892,222 6,823,028
Estimated liabilities 1430 - - -
Other liabilities 1450 - - -
Total under Section IV 1400 108,538,266 105,558,002 72,505,083
V. CURRENT LIABILITIES
2.10 Borrowings 1510 28,596,482 18,078,659 56,149,942
2.9 Accounts payable 1520 7,678,464 8,181,207 3,217,312
Deferred revenue 1530 60,958 64,458 67,667
2.12 Estimated liabilities 1540 454,447 367,246 335,944
2.13 Other liabilities 1550 - - 69,793
Total under Section V 1500 36,790,351 26,691,570 59,840,658
GRAND TOTAL 1700 157,786,547 156,522,719 151,913,529
Chief Executive Officer Vladimir Kunitsky
Chief Accountant Nadezhda Pavlova
26 March 2021
202
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Acron’s 2020 Profit and Loss Statement, RUB ‘000
Chief Executive Officer Vladimir Kunitsky
Chief Accountant Nadezhda Pavlova
26 March 2021
Notes Item Code 2020 2019
2.15 Revenue 2110 66,469,414 67,112,310
2.16 Cost of goods sold 2120 (41,523,169) (40,731,147)
Gross profit (loss) 2100 24,946,245 26,381,163
2.16 Selling expenses 2210 (4,651,922) (5,049,555)
2.16 Administrative expenses 2220 (3,888,617) (3,743,361)
Sales profit (loss) 2200 16,405,706 17,588,247
Profit from shareholdings in other companies 2310 11,592,078 9,600,540
Interest income 2320 18,900 33,578
Interest expense 2330 (6,389,710) (6,776,359)
2.15 Other income 2340 5,875,727 6,529,962
2.16 Other expenses 2350 (22,615,283) (4,171,060)
Profit (loss) before tax 2300 4,887,418 22,804,908
2.18 Income tax 2410 799,493 (3,257,424)
2.18 incl. current income tax 2411 - (3,193,354)
2.18 deferred income tax 2412 799,493 (64,069)
2.18 Other 2460 (1,366) (16,691)
2.18 Incl. income tax from previous periods 2461 (1,366) (16,691)
Net profit (loss) 2400 5,685,545 19,530,793
Effect from revaluation of non-current assets not
included in the net profit (loss) of the period
2510 - -
Effect from other operations not included in the net
profit (loss) of the period
2520 - -
Income tax on other operations not included in the net
profit (loss) of the period
2530 - -
Total financial result of the period 2500 5,685,545 19,530,793
FOR REFERENCE
2.17 Basic earnings (loss) per share 2900 0.140 0.482
Diluted earnings (loss) per share 2910 - -
203
Appendices
Appendix 1.
List of Major and Related-Party
Transactions
List of Acron’s transactions in 2020 that are recognised as major transactions under the Federal Law On
Joint Stock Companies, and other transactions that Acron’s Charter subjects to the procedure for major
transaction approval.
In 2020, Acron did not execute any transaction recognised as major transaction in accordance with the Federal Law On
Joint Stock Companies.
List of Acron’s transactions in 2020 that are recognised as related-party transactions under the Federal Law
On Joint Stock Companies.
Detailed information on these transactions is included in a separate document, the Report on Related-Party Transactions
Executed by Acron in 2020 (approved by the Board of Directors on 22 April 2021), in accordance with Paragraph 9, Clause
70.3 of the Regulation on Information Disclosure by Issuers of Equity Securities approved by the Bank of Russia.
Acron’s Report on Related-Party Transactions Executed in 2020 prior to approval of this Annual Report will be available
for the persons entitled to participate in the Annual General Meeting as part of the information (materials) to be provided
to such persons in the course of preparation for the Group’s Annual General Meeting, including on the issuer’s website
used for information disclosure at https://www.acron.ru/en/ (section: Investors → Shareholder Information → General
Meeting. The full webpage address is https://www.acron.ru/en/investors/acron-shareholders/meeting/).
Additionally, Acron’s Report on Related-Party Transactions Executed in 2020 will be available to all related parties after
approval of this Annual Report:
On the issuer’s website used for information disclosure at https://www.acron.ru/en/ (section: Investors → Statements →
Financial Statements → Acron → Annual Reports → 2020. The full webpage address is
https://www.acron.ru/en/investors/financial-statements/?brand=1988&type=197&year=2020)
On the Company’s corporate disclosure page in the Interfax Company Disclosure System at
http://www.e-disclosure.ru/portal/company.aspx?id=357 (section: Reporting → Annual Reporting. The full webpage address is
https://www.e-disclosure.ru/portal/files.aspx?id=357&type=2.
204
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Appendix 2.
Group Structure
Note: The data are shown as of 31 December
2020, as percentage of the charter capital held
directly or through subsidiaries. The chart shows
main companies of the Group. Full list of affiliates
is available in the Information Disclosure section
on the corporate website.
CHEMICAL PRODUCTION
MINING LOGISTICS
ENGINEERING
DISTRIBUTION
AGRICULTURE
PORTFOLIO
INVESTMENTS
Acron
NWPC
(phosphate raw
material produc-
tion)
VPC
(potash mining
project)
North Atlantic
Potash Inc.
(potash mining
leases)
AS DBT
(two port
terminals)
Acron Engineering Research
and Design Centre
Agronova
(Russian
distribution network)
Grupa Azoty
(Polish fertiliser
producer)
Plodorodie
(agribusiness holding)
Dorogobuzh
Andrex
(port terminal)
Acron USA Inc.
Acron Switzerland AG
Acron France SAS
Acron Brasil Ltda
Acron Argentina S.R.L.
Acron Colombia SAS
(international traders and
regional distributors)
Beijing Yong Sheng
Feng AMP Co., Ltd.
(distribution network in China)
96.7%
100%
100%
100%
100%
100%
19.8%
50%
+ 1 share
100%
100%
100%
100%
205
Appendix 3.
Report on Energy Consumption
Consumption and cost data for each energy resource used by Acron in the reporting year (nuclear energy, thermal energy,
electric energy, electromagnetic energy, oil, motor gasoline, diesel fuel, heating oil, natural gas, coal, oil shale, peat, and others)
2020 2019
Consumption Cost, RUB ‘000 Consumption Cost, RUB ‘000
Natural gas, mn m
3
2,481 11,929,402 2,618 12,403,246
Electricity, mn KWt*h 1,113 4,171,419 1,048 3,960,604
Thermal energy, ‘000 Gcal 1,483 1,543,474 1,373 1,435,940
Motor gasoline, ‘000 litres 187 6,826 267 9,717
Diesel fuel,‘000 litres 1,383 49,539 1,440 52,553
Data on energy resources derived from external sources
Energy Consumption by Acron (Veliky Novgorod)
In the reporting year, Acron did not use nuclear energy, electromagnetic energy, oil, heating oil, coal, oil shale, peat, or any
other energy resources
206
ACRON 2020 Annual Report
Strategic Report Corporate Governance Sustainability Financial Statements AppendicesCompany Overview
Contacts
Company Information
Acron Head Office
12 Krasnopresnenskaya Naberezhnaya
Moscow 123610, Russia
Phone: +7 495 745 77 45, +7 495 411 55 94
Email: info@acron.ru
Acron Production Site
Phone: +7 8162 99 61 09
Email: root@vnov.acron.ru
Shareholder Information
Nadezhda Bashkirtseva
Head of Securities Circulation
Phone: +7 8162 99 67 63
Investor Information
Ilya Popov
Head of Investor Relations
Phone: +7 495 745 77 45 (ext. 5252)
GDR Programme Depositary Bank
Deutsche Bank Trust Company Americas
Depositary Receipts Department
60 Wall Street, New York, NY 10005, USA
Corporate Actions, New York: +1 212 250 15 04
GDR Issue Department, London/Broker Services Group, London:
+44 (0) 207 547 65 00
DR Department, Moscow: +7 495 642 06 16
Auditor for RAS
Financial Statements
LLC Crowe Russaudit (PSRN 1037700117949)
Office VIII, 5A, bldg. 8 Novodmitrovskaya Street
Moscow 127015, Russia
Phone: +7 495 783 88 00
Auditor for Consolidated
Financial Statements
JSC KPMG (PSRN 1027700125628)
10 Presnenskaya Naberezhnaya
Moscow 123112, Russia
Phone: +7 495 937 44 77
Registrar
JSC IRC R.O.S.T.
18, bldg. 5B Stromynka Street,
Moscow 107076, Russia
Phone: +7 495 780 73 63; +7 495 989 76 50
Licence: No. 045-13976-000001 dated 3 December 2002
(for an indefinite term)
For information about Acron and its subsidiaries please visit
https://www.acron.ru/en/.
Forward-looking Statements
This Annual Report 2020 of Public Joint Stock Company Acron and its subsidiaries (hereinafter “Acron Group”) contains certain forward-looking
statements in relation to the Group’s operations and its expected results, economic performance, financial conditions, projects, and growth
prospects. All statements other than statements of historical facts as of the date of this Annual Report are forward-looking statements.
Words and expressions, such as ‘may’, ‘will’, ‘expect’, ‘estimate’, ‘plan’, ‘forecast’, ‘assume’, ‘continue’, ‘strive’, ‘consider’, and other similar words
or expressions or their negative (positive) forms, identify forward-looking statements based on assumptions and estimates which the Group
believes are reasonable as of the date of this Annual Report 2020.
These forward-looking statements in relation to the future are subject to uncertainties, assumptions and inherent risks, both of a general nature
and specific to the Group’s business. There is a possibility that assumptions, intents and other forward-looking statements will not be achieved.
The Group hereby informs that its actual performance may differ from forecasts, which are only valid as of the date of this Annual Report 2020.
The Group neither represents nor warrants that its forecasted performance will be achieved or should be considered the most probable scenario.
207
