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NORNICKEL REPORTS FIRST HALF 2019 INTERIM CONSOLIDATED IFRS FINANCIAL RESULTS

MMC Norilsk Nickel (MNOD) 
NORNICKEL REPORTS FIRST HALF 2019 INTERIM CONSOLIDATED IFRS FINANCIAL 
RESULTS 
 
20-Aug-2019 / 14:31 MSK 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
           PRESS RELEASE 
 
       Public Joint Stock Company «Mining and Metallurgical Company «NORILSK 
            NICKEL» 
 
       (PJSC «MMC «NORILSK NICKEL», «Nornickel», the «Company», the «Group») 
 
   NORNICKEL REPORTS FIRST HALF 2019 INTERIM CONSOLIDATED IFRS FINANCIAL 
     RESULTS 
 
      Moscow, August 20, 2019 - PJSC MMC Norilsk Nickel, the largest refined 
  nickel and palladium producer in the world, reports IFRS financial results 
           for six months ended June 30, 2019. 
 
           1H2019 HIGHLIGHTS 
 
  · Consolidated revenue increased 8% y-o-y to USD 6.3 billion owing to 
  output growth of all key metals and higher palladium price; 
 
  · EBITDA expanded 21% y-o-y to USD 3.7 billion owing to higher metal 
  revenue and the ramp-up of the Bystrinsky copper project, with EBITDA 
  margin reaching 59%; 
 
  · CAPEX was almost unchanged from last year amounting to USD 0.5 billion. 
  The Company made final investment decisions on strategic growth projects 
  such as the expansion of the Talnakh concentrator (TOF-3 project) and the 
  South Cluster mining project, with the active construction phase scheduled 
  to start in 2H19; 
 
  · Net working capital temporarily increased to USD 1.3 billion as a result 
  of scheduled amortization of advance payments for delivered metals from 
  customers; 
 
  · Free cash flow amounted to USD 2.2 billion; 
 
  · Net debt/EBITDA ratio decreased to 0.8x as of June 30, 2019; 
 
  · Cash interest paid decreased 23% to USD 202 million owing to the ongoing 
  optimization of debt portfolio; 
 
  · On February 12, 2019, Moody's upgraded the Company's credit rating to 
  "Baa2" with a "Stable" outlook in the wake of raising Russia's sovereign 
  ceiling for foreign currency debt to "Baa2" and upgrade of Russia's 
  sovereign rating to investment grade level of "Baa3" with "Stable" 
  outlook. 
 
           RECENT DEVELOPMENTS 
 
  · On July 1, 2019, the Company paid final dividend for 2018 in the amount 
  of RUB 792.52 (approximately USD 12.56) per ordinary share for the total 
  amount of approximately USD 2.0 billion; 
 
  · On August 20, 2019, the Company's Board of Directors recommended to the 
  General Meeting of shareholders (EGM) to approve interim dividend for the 
  first half of 2019 in the amount of RUB 883.93 per share (USD 13.27 at the 
  RUB/USD exchange rate the Russian Central Bank as of August 20, 2019) for 
  the total amount of USD 2.1 billion. The Board of Directors set the date 
  of the EGM on September 26, 2019 and the EGM record (the list of 
  shareholders eligible to vote) date on September 2, 2019. The Board of 
  Directors proposed to set the dividend record date (the list of 
  shareholders entitled to the dividend) on October 7, 2019. 
 
           KEY CORPORATE HIGHLIGHTS 
 
USD million (unless stated otherwise) 1H2019 1H2018 Change,% 
Revenue                                6,292  5,834       8% 
EBITDA¹                                3,719  3,079      21% 
EBITDA margin                            59%    53%   6 p.p. 
Net profit                             2,997  1,653      81% 
Capital expenditures                     500    536     (7%) 
Free cash flow²                        2,206  2,600    (15%) 
Net working capital²                   1,282   8674      48% 
Net debt²                              5,357  70514    (24%) 
Net debt/12M EBITDA                     0.8x  1.1x4   (0.3x) 
Dividends paid per share (USD)³            -      -       0% 
 
           1) A non-IFRS measure, for the calculation see the notes below. 
 
2) A non-IFRS measure, 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) Paid during the current period 
 
           4) Reported as of December 31, 2018 
 
           MANAGEMENT DISCUSSION AND ANALYSIS 
 
     The President of Nornickel, Vladimir Potanin, commented on the results, 
 
      "The first half of 2019 was marked by weak global macro environment as 
  investors' sentiment was dominated by concerns over the slowdown of global 
         economy and unfavorable outcome of the US-China trade negotiations. 
           Therefore, prices on all our key metals except for palladium went 
           substantially down. 
 
    Amid these challenging market conditions, our Company managed to deliver 
 solid financial performance owing to operating efficiency gains, which were 
   further supported by strong palladium market. Output and sales of all our 
     key metals increased and, importantly, the operating cost inflation was 
           maintained below the Russian CPI. 
 
     As result, the first half of 2019 revenue increased 8% y-o-y to USD 6.3 
 billion, while EBITDA was up 21% to USD 3.7 billion including about USD 160 
million contributed by the Bystrinsky project that continued to ramp up. Our 
  leading position among global diversified mining majors in terms of EBITDA 
           margin was sustained. 
 
      The Company continued to execute its key investment projects including 
      construction of Bystrinsky copper project and upgrade of Kola refining 
     capacity, which are nearing their completion. In the second half of the 
   year, we plan to enter the active construction phase of recently approved 
       South Cluster and third stage of Talnakh Concentrator upgrade (TOF-3) 
     projects. We also reiterate our firm commitment to radically reduce the 
  environmental footprint in the regions of our operations and implement the 
   projects aiming at a substantial reduction of sulfur dioxide emissions in 
           Norilsk and at Kola Peninsula. 
 
   Taking into consideration USD 2.2 billion free cash flow and conservative 
    leverage with net debt/EBITDA ratio down to 0.8x, the Board of Directors 
 recommended for the shareholders' approval an interim dividend in the total 
           amount of USD 2.1 billion". 
 
HEALTH AND SAFETY 
 
 The lost time injury frequency rate (LTIFR) marginally increased 4% to 0.28 
       in 1H2019 from 0.27 in 1H2018, remaining well below the global mining 
    industry average. At the same time, the number of lost time injuries was 
  flat y-o-y, but dropped more than three times (from 43 to 15) since 1?2015 
        driven the by the roll-out of cardinal basic safety rules, launch of 
    video-information system, introduction of electronic medical examination 
     systems, improvement of labour safety management system and a number of 
           other initiatives. 
 
 Regretfully, in 1H2019 Company suffered four fatal injuries. The management 
       considers the health and safety of its employees as the key strategic 
     priority and reiterates its commitment to target zero fatality rate and 
        continues to implement a wide range of initiatives aiming at further 
           improvement of the health and safety records. In 1H2019, selected 
           initiatives included the following: 
 
· 44 internal audits of HSE management system; 
 
· 70 employees fired for violation of cardinal health and safety rules 
(versus 33 in 1H2018). 
 
           In May 2019, Bain & Company Russia Consulting conducted an annual 
      independent assessment of the current level of the occupational safety 
  culture as well as changes to the HSE systems of the Group made during the 
 year. According to this assessment, the company's integral score was raised 
  to 2.8 points (out of the maximum of 4) in 2019 up from 2.6 points in 2017 
           (and compared to 1.4 points in 2014). 
 
           METAL MARKETS 
 
      Nickel in 1H2019 - market was in deficit as strong Chinese demand from 
         stainless and battery sectors was negatively offset by surge in NPI 
       production; exchange inventories were down another 40 thousand tonnes 
year-to-date helping to cover some of the deficit; LME nickel price was down 
    11% y-o-y as bearish macroeconomic sentiment and China-US trade tensions 
     continued to negatively affect the market expectations despite positive 
           sector-specific developments. 
 
        In 1H2019, nickel price was quite volatile as the macro backdrop was 
negative due to trade tensions between the US and China as well as weakening 
   global manufacturing PMI. On the other hand, sector-specific developments 
      were positive, including the shutdown of Onça Puma, major upward capex 
    revision of Tsingshan's HPAL project at Morowali in Indonesia and robust 
          demand from Chinese stainless sector. At the very end of June, the 
  Indonesian government reaffirmed its intention to reinstate the ban on the 
     export of nickel ore as previously planned in 2022. If enforced the ban 
      could wipe away almost 10% of global nickel supply. The market reacted 
  positive to this news taking the metal price above USD 14,000 per tonne in 
           July. 
 
     In 1H2019, the LME nickel price averaged USD 12,315 per tonne, down 11% 
           y-o-y. 
 
Developments on the supply side in 1H2019 were dominated by strong expansion 
     of NPI output in China and Indonesia, which combined were up almost 25% 
  y-o-y driven by the availability of relatively cheap high-grade ore, which 
  additionally benefited NPI smelters' margins. At the same time, production 
   of ferro-nickel was lower owing to the closure of Onça Puma in Brazil and 
       underperformance of Koniambo and Doniambo in New Caledonia, while the 
   production of high-grade nickel products was flattish as higher output by 

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August 20, 2019 07:32 ET (11:32 GMT)

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