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MMC Norilsk Nickel / Annual Financial Report MMC Norilsk Nickel: MMC NORILSK NICKEL REPORTS FULL YEAR 2016 AUDITED CONSOLIDATED IFRS FINANCIAL RESULTS 15-March-2017 / 12:45 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EquityStory.RS, LLC - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. *PRESS RELEASE* *15 March 2017* *Public Joint Stock Company «Mining and Metallurgical Company «NORILSK NICKEL»* (PJSC «MMC «NORILSK NICKEL», «Nornickel», the «Company», the «Group») *MMC NORILSK NICKEL REPORTS FULL YEAR 2016 AUDITED CONSOLIDATED IFRS FINANCIAL RESULTS* Moscow - PJSC MMC Norilsk Nickel, a largest refined nickel and palladium producer in the world, today reports IFRS financial results for the full year ended December 31, 2016. *FY2016 HIGHLIGHTS * *- *Consolidated revenue decreased 3% year-on-year to USD 8.3 billion on the back of lower realized prices of the company's metal basket (down 13% y-o-y). Lower metal prices and a one-off decrease of production volumes owing to the downstream reconfiguration were partly offset by the sales of metal stock accumulated in 4Q2015. - EBITDA amounted to USD 3.9 billion, down 9% y-o-y, posting a global mining industry leading EBITDA margin of 47%. - Net profit increased 47% y-o-y to USD 2.5 billion mainly due to appreciation of RUB as of the end of the reported period. - CAPEX was practically unchanged y-o-y (up 2%) at USD 1.7 billion and was in line with the average capex level for the last 3 years. Major investments in 2016 included projects related to the shutdown of Nickel Plant, capacity expansion and modernization of Talnakh Concentrator and Nadezhda Plant as well as an active construction phase of the Bystrinsky (Chita) project. - Normalized net working capital decreased 28% y-o-y to USD 0.7 billion (or to USD 0.4 billion including the one-off increase of short-term payables resulting from concentrate purchase from Rostec) driven mainly by the saleable metal inventory release. - Free cash flow amounted to USD 1.6 billion with FCF/revenue ratio reaching the global mining industry-leading 19%. - Balance sheet remained conservative with net debt/EBITDA ratio of 1.2x as of December 31, 2016. Solid financial standing of Norilsk Nickel is confirmed by investment grade credit ratings from Standard & Poor's and Fitch credit rating agencies. - The Company remained one of the highest dividend-yielding stocks in the global mining industry. The Company paid interim dividend for 9M 2016 of a total USD1.2 billion or USD 7.4 per share. - The shutdown of the outdated Nickel Plant in August 2016 marked the completion of the Company's environmental program phase one. - In November 2016, the Company joined the United Nations Global Compact, a major UN initiative in corporate social responsibility and sustainable development. In December 2016, Nornickel was confirmed as a FTSE4Good Emerging Index constituent. - In line with the strategy of de-risking the greenfield Bystinsky (Chita) project, the Company arranged an 8-year USD 800 million project financing facility from Sberbank CIB. - In July 2016, the Group sold 10.67% stake in Bystrinsky (Chita) project to a Chinese investor Highland Fund. - In December 2016, the Company entered into a transaction to buy 1.5 million tonnes of copper concentrate from Russia state-controlled corporation, Rostec, for approximately 67.5 billion rubles. *RECENT DEVELOPMENTS* *- *On 24 January 2017, the Company's Board of Directors approved the sale of up to 39.32% stake in the Bystrinskiy (Chita) Project to CIS Natural Resources Fund. The closing of the transaction is subject to certain conditions and regulatory approvals and expected by the year end 2017. *K EY CORPORATE HIGHLIGTS* _USD million (unless stated otherwise)_ *2016* *2015* *Change,%* Revenue 8,259 8,542 (3%) EBITDA1 3,899 4,296 (9%) EBITDA margin 47% 50% (3 p.p.) Net profit 2,531 1,716 47% Capital expenditures 1,695 1,654 2% Free cash flow2 1,591 2,405 (34%) Normalised net working capital3 739 1,030 (28%) Net debt2 4,551 4,212 8% Net debt /EBITDA 1.2x 1.0x 0.2x Dividends paid per share (USD) 4 7.8 18.1 (57%) 1) A non-IFRS figure, for the calculation see the notes below. 2) A non-IFRS figure, for the calculation see an analytical review document ('Data book') available in conjunction with Consolidated IFRS Financial Results on the Company's web site. 3) A non-IFRS figure, for the calculation see Attachment D 4) Paid during the current period *MANAGEMENT DISCUSSION AND ANALYSIS* The President of Nornickel, Vladimir Potanin, commented on the results: «The last year marked as very challenging for the commodity industry as many metal prices touched their multi-year lows, while further exhibiting extreme volatility alongside exchange rates. This unavoidably affected our Company's financial results. In spite of adverse macro conditions, the Company retained a global mining industry leading EBITDA margin of 47%. The company's strong profitability was supported by favourable movement in exchange rates, cost controls as well as the exit from non-core and international assets. Our capital investments programme has been also retained. CAPEX amounted to USD 1.7 billion and was in line with the average level for the last three years. Our large-scale asset modernization programme launched in 2014 entered its most active phase. In 2016, we launched into production new capacities at Talnakh concentrator and completed most of upgrades at Nadezhda smelter. In August, we idled Nickel plant ahead of schedule. Since then all high-grade nickel matte produced at Polar Division is shipped for further processing to Kola MMC and NN Harjavlata, which enables us to almost completely stop purchasing semi-products from third parties. Worth highlighting that the last year marked an important milestone in the implementation of our environmental programme. Modernization of downstream assets and the shutdown of Nickel plant should deliver an over 30% reduction of sulfur dioxide emissions in the city of Norilsk residential area. We also continued to actively develop the most efficient solution for the 'Sulfur project', comprising the core of the second phase of our environmental programme. In April, in response to challenging commodity markets the Company's Board of Directors amended the dividend targets by linking them to the company's leverage, which should support solid balance sheet while providing shareholders with sustained dividend payouts. As of the end of 2016, Nornickel's net debt/EBITDA ratio remained as one of the industry's lowest at 1.2x and, thus, we expect that the dividend for the year 2016 will be calculated in the amount of 60% of EBITDA. Overall, our Company maintained very strong financial standing, which has been proved by investment grade credit ratings reiterated by two major rating agencies». *HEALTH AND SAFETY* The lost time injury frequency rate (LTIFR) decreased from 0.62 in 2015 to 0.33 in 2016, while number of lost time injuries dropped 40% y-o-y following the implementation of Cardinal Safety Rules, new corporate standard for change management and a number of other standards and policies. Sadly, in 2016 the Company suffered 13 fatal injuries. Each accident has been reported to the Board of Directors and has been thoroughly investigated in order to prevent fatalities in future. The Company's management considers the health and safety of its personnel with a zero fatality rate as the key strategic priority and continues to implement a wide range of initiatives to prevent the occupational injuries. 2016 initiatives included the following: - new HSE standards 'Work at height', 'Isolation of energy sources' and 'Transports and pedestrians' approved; - additional trainings for 4,334 employees with less than three years of experience conducted; - 37 internal audits for HSE management system held; - 81 employees fired for violation of health and safety regulations. In the beginning of 2017, Dupont Science and Technology LLC conducted an independent assessment of the current level of the occupational safety culture as well as changes to the HSE systems on the Group level made during 2016. According to this assessment, the company's integral score has been raised to 2.7 in 2016 from 2.5 in 2015. *METAL MARKETS* *Nickel in 2016 - high price volatility as market balance was moving from a surplus into a deficit; strong demand growth was driven by solid Chinese stainless output, supply was affected by tighter ore market.* Nickel price in 2016 was extremely volatile. After falling to its 12-year low of USD 7,710 per tonne in 1Q2016 nickel price recovered to USD 9,400 per tonne at the end of June and then rallied above USD 11,700 per tonne in November on the back of looming Filipino supply risk and the expectations of Trump-related infrastructure stimulus in the US. The average LME nickel price in 2016 was USD 9,609 per tonne, 19% lower y-o-y. The year 2016 was a truly transitional year for the nickel market marking its turning point. After 5 years of structural surpluses the market moved into a deficit driven by a combination of both demand and supply developments. Primary nickel consumption in China beat all expectations delivering a 12% annual growth with stainless steel output increasing 10% y-o-y. On the supply side, Philippines surprised the market by launching an environmental audit of mines, as result of which the Department of
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March 15, 2017 07:46 ET (11:46 GMT)