MMC Norilsk Nickel (MNOD)
NORNICKEL REPORTS FULL YEAR 2019 AUDITED CONSOLIDATED IFRS FINANCIAL RESULTS
26-Feb-2020 / 15:01 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
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PRESS RELEASE
Public Joint Stock Company "Mining and Metallurgical Company "NORILSK
NICKEL" (PJSC "MMC "Norilsk Nickel", "Nornickel" or the "Company")
NORNICKEL REPORTS FULL YEAR 2019 AUDITED CONSOLIDATED IFRS FINANCIAL RESULTS
Moscow, February 26, 2020 - PJSC MMC Norilsk Nickel the world's largest of
palladium and high-grade nickel and a major producer of platinum and copper,
reports audited consolidated IFRS financial results for the full year ended
December 31, 2019.
2019 HIGHLIGHTS
· Consolidated revenue increased 16% y-o-y to USD 13.6 billion owing to
higher production volumes of all key metals and growth of palladium and
nickel prices;
· EBITDA expanded 27% y-o-y to USD 7.9 billion owing to higher metal
revenue and tight control of operating expenses, with EBITDA margin
reaching 58%. Reported EBITDA includes negative impact of the USD 190
million provisions accrued in respect of the upcoming shutdown of certain
production facilities at Kola Division;
· EBITDA generated by the Bystrinsky project that was fully commissioned
in September 2019 amounted to USD 349 million;
· CAPEX decreased 15% y-o-y to USD 1.3 billion owing to the completion of
large investment projects in 2018;
· The Company made final investment decisions on strategic growth projects
such as the expansion of the Talnakh concentrator (TOF-3 project) and the
development of South Cluster mining project and also updated its
environmental programme, which is scheduled to go into active construction
phase in 1H2020;
· Net working capital increased to USD 1.0 billion in line with the
medium-term target level;
· Free cash flow amounted to USD 4.9 billion, almost unchanged y-o-y;
· Net debt/EBITDA ratio decreased to 0.9x as of December 31, 2019;
· Cash interest paid decreased 17% y-o-y to USD 460 million owing to the
ongoing optimization of debt portfolio;
· At the annual Capital Markets Day in November, the Company provided its
strategic vision until 2030 with the focus on development prospects of
Taimyr mining operations, debottlenecking of downstream assets and
dramatic reduction of sulfur dioxide emissions at both key operating units
in Russia: Polar division and Kola MMC.
RECENT DEVELOPMENTS
· On January 14, 2020, the Company paid interim dividend for the nine
months of 2019 in the amount of RUB 604.09 (approximately USD 9.9) per
ordinary share for the total of approximately USD 1.6 billion;
· On February 20, 2020, the Company entered into agreement to revise terms
and conditions of the USD 2.5 billion syndicated term loan originally
signed in December 2017 with a group of international banks, whereby
increasing the total facility amount to USD 4.15 billion, reducing the
interest rate and rescheduling the repayment of outstanding amount from
the period of December 2020 - December 2022 to the period of February 2023
- February 2025.
KEY CORPORATE HIGHLIGHTS
USD million (unless stated otherwise) 2019 2018 Change,%
Revenue 13,563 11,670 16%
EBITDA¹ 7,923 6,231 27%
EBITDA margin 58% 53% 5 p.p.
Net profit 5,966 3,059 95%
Capital expenditures 1,324 1,553 (15%)
Free cash flow² 4,889 4,931 (1%)
Net working capital² 985 867 14%
Net debt² 7,060 7,051 0%
Net debt, normalized for the purpose of 4,952 5,160 (4%)
dividend calculation4
Net debt/12M EBITDA 0.9x 1.1x (0.2x)
Net debt/12M EBITDA for dividends 0.6x 0.8x (0.2x)
calculation
Dividends paid per share (USD)³ 26.3 21.3 23%
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) Normalized on interim dividends (at the rate of the Board of Directors
meeting date) and deposits with maturity of more than 90 days
MANAGEMENT DISCUSSION AND ANALYSIS
The President of Nornickel, Vladimir Potanin, commented on the results,
"2019 became one of the most successful years for our Company in the last
decade owing to a combination of strong operating performance and favorable
macro tailwinds.
Increased mining volumes, steady ramp-up of new projects and completion of
downstream reconfiguration programme drove output of all our key metals
higher. This growth combined with strong nickel and palladium prices
translated into a 16% revenue increase to 13.6 billion US dollars.
Nonetheless amidst benign macro environment we continued to execute on
operating efficiency programme and disciplined cost controls that enabled
cash operating cost to remain in line with Russian CPI. As a result, our
EBITDA increased 27% to 7.9 billion US dollars with EBITDA margin expanding
to 58%. Following the management decision to radically reduce harmful
emissions at our operations located on the Kola Peninsula, the Company
accrued a provision of almost 200 million US dollars for the upcoming
shutdown of certain production facilities of Kola MMC.
Net income almost doubled to 6 billion US dollars, while free cash flow
amounted to approximately 5 billion US dollars for the second year in a row.
Our leverage remained low with net debt/EBITDA ratio decreasing to 0.9x.
Owing to ongoing management efforts aiming at the optimization of debt
portfolio, our interest paid decreased by more than 90 million US dollars.
Overall, maintaining financial stability remains among our top strategic
priorities.
Having completed last year our 5-year strategic cycle focusing mainly on the
reconfiguration and modernization of downstream assets, we set up a solid
base for further development of our business. In November last year, the
next step was announced, when the investment community was presented with
our new 10-year strategy setting ambitious targets for organic growth and
radical reduction of environmental footprint.
By 2030, we plan to increase mined ore volumes at Talnakh deposit holding
over 2 billion tonnes of ore reserves, by 75% to 30 million tonnes. As part
of this strategy during the last year a number of key projects received
final investment approvals such as the South Cluster, Talnakh Concentrator
expansion and brownfield expansion of operating Talnakh mines.
In addition, we have approved a new holistic environmental programme that
targets to bring sulfur capturing at our assets in line with the
best-in-class global benchmarks. Upon the programme completion sulfur
dioxide emissions at the Polar division are scheduled to decrease by 90% by
2025 and at the Kola division - by 85% already by 2021.
This production growth strategy and comprehensive environmental programme
will require substantial increase in capital investments. Thus, already in
2020 we expect CAPEX to increase to 2.2-2.5 billion US dollars.
Last year we delivered again industry-leading returns to our investors."
HEALTH AND SAFETY
The lost time injury frequency rate (LTIFR) increased from 0.23 in 2018 to
0.32 in 2019, but remained well below the global mining industry average. At
the same time, lost time injuries increased 40% y-o-y (from 32 to 44).
Regretfully, in 2019 Company recorded the increase in the number of fatal
accidents (from 6 to 9), partly due to the group accident at Taymirsky mine
when we suffered 3 casualties in October 2019. According to the
investigation, this accident was let to happen due to unsatisfactory
organization of works caused by a combination of managerial and technical
issues. Each fatal accident has been duly reported to the Board of Directors
and has been thoroughly investigated in order to prevent fatalities in the
future. The Company's management considers the health and safety of
employees as the key strategic priority aiming to bring fatality rate to
zero. A wide range of programmes and various initiatives to prevent
occupational injuries and fatalities are being rolled out and implemented.
Overall, in 2019:
· 81 internal audits of HSE management system were held;
· 221 violations of cardinal safety rules were identified leading to
dismissal of 159 employees (versus 105 in 2018);
In May 2019, the Company conducted an annual independent assessment of the
current level of the occupational safety culture has been conducted and made
numerous changes to the HSE systems of the Group. According to this
assessment, the Company's integral score was raised to 2.8 points (out of
the maximum of 4 according to Bradley Curve) in 2019 up from 2.6 points in
2017 (and compared to 1.4 points in 2014), close to global mining industry
average of 3.0 points.
METAL MARKETS
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February 26, 2020 07:01 ET (12:01 GMT)
