DJ NORNICKEL REPORTS FULL YEAR 2019 AUDITED CONSOLIDATED IFRS FINANCIAL RESULTS
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.
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" 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
Nickel in 2019 - market deficit narrowed to 42 kt as strong Chinese
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DJ NORNICKEL REPORTS FULL YEAR 2019 AUDITED -2-
stainless demand (+13% y-o-y) was negatively offset by soft nickel
consumption in stainless steel elsewhere; supply from Indonesia accelerated
driven by continued ramp-up of NPI production and surge of nickel ore
shipments in Q4 ahead of the export ban; exchange inventories were down 31
kt y-o-y to 191 kt; LME nickel price was up 6% y-o-y as on the news that
Indonesian ore export ban would be brought forward built positive momentum
in Q3.
In 1H2019, nickel price was under pressure from overall negative macro
sentiment due to trade tensions between the US and China as well as
weakening global manufacturing PMI. The market sentiment changed in August
when the Indonesian government announced that the export ban on nickel ore
would be brought forward by two years to January 1, 2020 as it wanted to
push the investors to process more of the country's ore resources onshore.
The price surged to a multi-year record of USD 18,625 per tonne in
September, but in October-December the rally lost all its steam due to the
stagnation of global stainless demand, soft EV sales in China and collapse
of nickel premiums.
In 2019, average LME nickel price increased 6% y-o-y to USD 13,936 per
tonne.
Developments on the supply side in 2019 were dominated by strong expansion
of NPI (nickel pig iron) output in China and Indonesia, which combined were
up almost 32% y-o-y driven by the availability of relatively cheap
high-grade ore. Following the announcement of the ore export ban Indonesian
ore shipments to China in 4Q2019 almost doubled y-o-y as the Chinese
consumers tried to stockpile the feed. High-grade nickel production was up
1% y-o-y mainly driven by higher production from Nornickel, Jinchuan and
BHP.
Demand dynamics was mixed across various geographies. The stainless steel
nickel demand in China was up +13% y-o-y with a noticeable slowdown in the
second half of the year. Stainless consumption by stainless producers in
other regions was weak owing to the contraction of global PMI: Europe was
down 7% y-o-y, Japan - down -10%, while South Korea was flat. Indonesia that
had been expected to become one of the main drivers of the global stainless
growth in 2019, did not increase its stainless output and thus nickel
consumption as it struggled to penetrate export markets following
introduction of trade barriers against Indonesian stainless in China, India
and the USA.
Battery industry demand was up 38% y-o-y in 1H2019, where China was leading
the growth with NCM cathode material production increasing by 50%. However,
in 2H2019, as government subsidies for NEVs (new energy vehicles, including
battery cars and all kinds of hybrids) in China reduced, NEV sales
contracted sharply, leading to the annual electric car sales in 2019 of just
1.2 mln units, falling 40% short of initially expected 2 mln vehicles. Total
global consumption of nickel in the battery sector reached 179 kt, +26% up
y-o-y.
Nickel demand in other industries was almost flat. Specialty steels and
alloys sector increased nickel consumption by 2% y-o-y, while plating was
down 1%.
Combined nickel inventories at LME and SHFE decreased -16% y-o-y to 191 kt
by the year-end reflecting the market being in deficit. However, the
withdrawal of nickel from exchanges reversed in 4Q2019 when almost 90 kt
were delivered back to LME warehouses. In our view, the key drivers for
taking the metal off-warrant were expected growth in demand from the battery
sector in 2020-21, Indonesian export ore ban and delays in the construction
of Morowali HPAL project. However, dismal EV sales and stagnant stainless
market in 2H2019 together with accumulation of ample nickel ore stocks in
China ahead of the Indonesian ore ban pushed nickel price down. As paper
gains of speculators started to evaporate and cost of carrying massive
physical longs became too expensive, we believe that it was decided to
return the metal to the exchange warehouses in order to free up cash. In
1Q2020, this trend intensified with combined LME and SHFE stocks increasing
60 thousand tonnes YTD.
Nickel outlook - neutral; we expect balanced market in 2020 as Indonesia
continues growing its NPI production, while Chinese NPI is anticipated to be
modestly down; Indonesian ban on the export of ore effected from January 1,
2020, is not expected to have a substantial effect on the market in the
short-term, but should have a more material impact on the global supply in
the medium-term, in our opinion; batteries for electric vehicles are
expected to continue to be the key demand growth driver in the medium- and
long-term supported by the roll out of regulations in most major car markets
stimulating transition to carbon free cars; coronavirus outbreak in China
has negatively affected the market sentiment and created short-term market
uncertainty both on the demand and supply side.
We expect nickel market to be balanced in 2020 as Indonesia continues
ramping up and commissioning of its NPI projects, which are expected to
bring additional 150 kt of nickel units. Although Indonesian export ban will
reduce the availability of ore feed to Chinese NPI smelters, the ore
inventories (14 mln tonnes) accumulated in the country ahead of the ban and
a potential increase of ore supply from the Philippines should mitigate this
negative effect in the short-term, in our view. Thus, we expect Chinese NPI
to decrease approximately 75 kt in 2020.
Production of high-grade nickel is also expected to increase in 2020, with
nickel chemicals expected to grow by 16 kt mainly due to the commissioning
of NiSO4 production by BHP and Jinchuan, and refined nickel growing by 41 kt
reflecting the recent upward revisions of production guidance by Sherritt
and Eramet.
Primary nickel consumption is expected to increase by 85 kt (+3%) to 2,538
kt in 2020. Primary nickel demand in Chinese stainless is expected to
moderate to a 2% growth as the GDP growth rate is forecasted to slow down.
Stainless demand in the rest of Asia is anticipated to increase +10% (as
Delong should start to ramp up its capacities in Indonesia), while European
consumption of nickel in stainless is expected to decrease 4% y-o-y as local
producers, in our view, will continue to face strong competition from Asia
with the local end use demand staying weak. The US nickel consumption is
expected to slightly recover (+1% y-o-y) on the back of stable stainless
output supported by effective import tariffs.
The growth rate of global nickel demand from battery material producers
should moderate, in our view, to 17% y-o-y (down from 26% in 2019) reaching
a combined volume of 210 kt in China, Japan and South Korea. The growth in
EV penetration in 2019 in China was grossly disappointing with NEV sales
posting a 4% reduction to 1.2 mln units (December 2019 monthly sales were
down 31% y-o-y). The Chinese government goal to reach 5 million NEV sales by
2025, in our view, is now looking a bit stretched. Nevertheless, the shift
to nickel-intensive NCM 8:1:1 chemistry in battery cathodes is well under
way, with this technology expected to become mainstream in the next five
years, which should support the steady growth of demand for nickel. Europe
should also boost its EV production, in our view, as major OEMs will have to
meet new emission legislation requirements and CO2 targets.
However, the recent outbreak of coronavirus in China poses a downside risk
to our assumptions. While there are some signs that epidemic might be on a
decline, major uncertainty remains. The Chinese government restrictions on
mobility, extended work holidays and mandatory closures have imposed a
significant disruption to the supply chain and already had a significant
impact on end consumption. The extent of demand disruption makes it unlikely
that the Q1 2020 losses can be fully recouped in 2Q and 3Q 2020, as the
supply is also yet to recover as many migrant workers should return to mines
and smelters. In addition, the ramp-up of new NPI capacity in Indonesia
could be also delayed as according to on-the-ground sources, Chinese workers
involved in the construction of NPI smelters and HPAL facilities in
Indonesia have been put on a quarantine.
Copper in 2019 - balanced market amidst volatile macro environment; weak
first and end-use consumption coupled with demand uncertainty due to
geopolitical tensions, while supply disruption rate was running at 4% below
historical average, put a downward pressure on the price that decreased 8%
y-o-y.
Throughout 2019 copper price was trending lower due to weakening global
manufacturing sector and disappointing grid investment in China, but
remained bound within a range of USD 5,500-6,500 per tonne. In December,
copper attempted to recover above USD 6,000 per tonne level as market
sentiment improved owing to a Phase-1 trade deal between the US and China
was signed. Nonetheless, the market sentiment abruptly deteriorated in the
first weeks of 2020 due to the outbreak of the new coronavirus in China,
which threatened the global economic growth as a result copper price went
below USD 5,500 in the end of January.
The average LME copper price in 2019 decreased 8% y-o-y to USD 6,000 per
tonne.
In terms of fundamentals, copper market in 2019 was by and large balanced,
recording a marginal deficit of just 50 kt (accounting for approximately
0.2% of total market). Global refined copper demand increased just 80 kt (or
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DJ NORNICKEL REPORTS FULL YEAR 2019 AUDITED -3-
+0.3% y-o-y), on our estimates, to 23.6 mln tonnes as a very modest
consumption growth in China (120 kt), the rest of Asia (40 kt) and Americas
(40 kt) was accompanied by for a major contraction in Europe (-120 kt).
Expectations that China would boost its grid investments in 2H2019 did not
materialize as the State Grid mandated its regional branches to be more
rational about capital expenditures. In Europe manufacturing sector was weak
owing to the soft demand from automotive and electrical industries.
In 2019, the refined copper production increased by 100 kt (+0.3% y-o-y) to
23.6 mln tonnes. The increase was driven by the ramp-up of new mines in
Russia and Panama, brownfield expansions in Latin America and African copper
belt and destocking of copper concentrates. Mine disruptions amounted to
approximately 4% of global supply falling short of the 5-6% historic
average, leading to global supply running slightly above market
expectations.
Exchange stocks remained flat at 304 kt reflecting a well-balanced market
overall.
Copper outlook - neutral; the market to remain balanced in 2020, in our
view; the coronavirus epidemic has already had a negative impact on the
commodity markets sentiment pushing down the prices of metals; the timing
and the pace of economic recovery from coronavirus is likely to be a major
swing factor for both supply and demand in 2020.
We anticipate that copper market will remain largely balanced in the
near-term running a marginal deficit of less than 0.2% (or 50 kt) of the
global consumption. The refined copper demand is expected to increase by 0.4
mln tonnes (+1.5% y-o-y) to 24.0 mln tonnes.
We expect China to lead this growth increasing its copper consumption by 100
kt in 2020. As of 1 January 2020, the Chinese Ministry of Finance approved
the issue of RMB 1 trillion worth of special local government bonds to
finance infrastructure investments including such copper-intensive sectors
as railways and electrical grid. In addition, we believe that, the
development of 5G infrastructure should also become a material growth driver
of copper consumption this year. European and American consumption should
also rebound from the low of 2019 increasing by approximately a combined of
approximately 150 kt in 2020 led by robust demand in end-use products.
We admit, however, that the coronavirus poses a downside risk for the pace
of demand recovery and undermine our demand assumptions, particularly, in
1Q2020. At the moment, due to large uncertainty about the duration and the
ultimate health impact of the epidemic, we cannot quantify its impact on
copper demand and supply, neither can time the market recovery. If the virus
is contained by the end of this March, we find it reasonable to assume that
the consumption losses could be recovered during the rest of this year,
given that China has plenty of spare capacities across all coper-consuming
value chain.
Supply is expected to increase 1.5% y-o-y to 23.9 mln tonnes in 2020 and
almost match the copper demand.
Production, on our estimates, will increase following the ramp-up of new
mines (Cobre Panama, Bystrinskoe, Sentinel) as well as brownfield expansions
in Chile (Escondida, Collahuasi, El Abra, Caserones, Ministro Hales),
Indonesia (Grasberg), DRC (Kamoto, Metalkol) and Zambia (Nchanga). We do not
expect any major (above the historical average of 5% of mined production)
supply disruptions that could materially affect market balance in 2020.
Palladium in 2019 - strong rally through the year with price setting record
highs almost on a daily basis and reaching almost USD 2,800 per ounce in
February 2020; despite premium to platinum expanding to more than USD 1,700
per ounce, the widely-discussed substitution still has not been happening;
market continued to be in a structural deficit driven by strong automotive
sector demand owing to tightening of emission legislation in all major car
producing markets.
Palladium price delivered another year of exceptionally strong performance
reaching almost USD 2,000 per ounce by the end of 2019 and then skyrocketing
further to USD 2,800 per ounce in February 2020.
The average LBMA palladium price in 2019 increased 50% y-o-y to USD 1,538
per ounce.
In 2019, we estimate the market deficit at 550 koz. Industrial consumption
increased 5% y-o-y (or by 440 koz) to 11.5 mln ounces driven by robust
demand from the automotive industry following the rollout of stricter
environmental regulations in practically all largest car markets, including
China 6 in China, Tier 3 in the US, Euro 6d in the EU, and Bharat 6 in
India. The spot market continued to be extremely tight with leasing rates
jumping from 5% in January 2019 to 30-40% in January 2020. Nonetheless,
since the price rally did not result in any inflows into palladium ETFs,
this indicates, in our view, that the price surge was predominantly driven
by industrial consumers, not speculative buyers.
Palladium premium to platinum ranged USD 400-1,000 per ounce in 2019, but
widened to as much as USD 1,700 per ounce in Feb 2020. Widely held
expectations of the past two years that the substitution of palladium with
platinum in autocatalysts was imminent still have not materialized.
Platinum-based formulations proved to be inefficient at operating at high
temperatures, which are common for the modern gasoline car engines, and at
neutralization of CH, CO and NOx emissions. On top of that, as far as we
understand, OEMs are too busy with a transition of their internal combustion
engines to EV technologies and thus do not want to spend both engineering,
research and financial resources on new auto catalyst technologies.
In 2019, primary palladium supply increased 6% y-o-y to 7.3 mln ounces
driven mainly by the release of work-in-progress inventory by Nornickel and
South African producers. Recycled volumes increased 11% y-o-y to 3.5 mln
ounces with processing capacities being fully utilized, on our estimates, in
2019.
Palladium outlook - positive; market deficit to reach 0.5 mln ounces in 2020
driven by continuing increase in loadings in autocatalysts on the back of
further roll-out of China-6 standard and introduction of RDE tests in
Europe; substitution with platinum is expected to be limited as an effective
technical solution is not available; physical shortage of rhodium may lead
to extra demand for palladium.
We expect industrial palladium consumption to increase by 100 koz in 2020 as
growing automotive demand (+300 koz) will be offset negatively by the
substitution that is taking place in more price sensitive industries such as
jewelry, dental and electronics. In spite of a downward revision of global
car sales forecasts by 3-5%, we estimate palladium loadings in light-duty
petrol (gasoline) vehicles to increase by approximately 5-7% y-o-y following
the nationwide adaptation of China 6 emission standard and introduction of
real-drive emission (RDE) tests for European automakers.
We do not anticipate any major palladium substitution with platinum in the
near term, owing to the technological challenges related with the
differences in certain chemical properties of the two metals, making them
not fully interchangeable in the modern autocatalysts. According to our
industry knowledge, currently, automakers have a little appetite for changes
in the catalysts chemistry as their engineering resources are focused on
meeting new tighter emission legislation and RDE testing, and they do not
have enough resources to conduct new catalyst formulation testing.
In 2020, primary palladium supply is likely to decrease 2% y-o-y to 7.1 mln
ounces, in our view, due to lower output in Russia and South Africa
following very strong production volumes in 2019 driven by the one-off
release of work-in-progress inventories. Recycling is expected to remain
flat at approximately 3.5 mln ounces as capacity constraints do not allow to
increase processing volumes.
Platinum in 2019 - market surplus was offset by healthy investment demand;
industrial consumption remained soft due to automotive and jewelry sectors.
Platinum price was relatively stable throughout 2019, with a modest rally in
the end of the year spilling over into January 2020, when the price climbed
above USD 1,000 per ounce for the first time since 2017. The price was
supported by strong investment demand as ETF inflows amounted to 1.4 mln
ounces in 2019.
Fundamental factors, however, were rather weak as diesel share of new car
sales in Europe continued to shrink and jewelry demand (particularly in
China) was subdued. Total industrial consumption of platinum decreased 3%
y-o-y to 7.8 mln ounces.
Primary refined production increased 3% y-o-y to 6.3 mln ounces, while
recycling was up 8% y-o-y to 2.3 mln ounces.
The average LBMA platinum price decreased 2% y-o-y to USD 863 per ounce.
Platinum outlook - neutral; weak automotive demand to persist; substitution
of palladium in autocatalysts is not happening; rationalization of supply in
South Africa is expected to be put on the back burner due to strong PGM
basket price owing to rhodium and palladium prices.
In 2020, we expect platinum demand to be flattish y-o-y at 7.8 mln ounces.
The automotive demand will remain soft as the global car market is
stagnating and the diesel ratio in Europe should continue to decrease, in
our opinion. Jewelry sector demand in China will also continue to struggle
(MORE TO FOLLOW) Dow Jones Newswires
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DJ NORNICKEL REPORTS FULL YEAR 2019 AUDITED -4-
as platinum is no longer considered a premium metal by local consumers. We
expect glass industry to be the only sector to increase platinum demand in
2020.
Primary supply is expected to decrease 3% y-o-y to 8.4 mln ounces driven
mostly by higher base in 2019, when Nornickel and South African producers
released substantial volumes of PGMs from work-in-progress inventory.
Although we may see some supply rationalization by Sibanye following its
recent acquisition of Lonmin, we do not expect any major steps in this
direction from other South African producers as the rally in palladium and
rhodium prices resulted in a dramatic improvement of their cash flows.
KEY SEGMENTAL HIGHLIGHTS1
USD million (unless stated otherwise) 2019 2018 Change,%
Revenue 13,563 11,670 16%
GMK Group 13,836 9,742 42%
South cluster 864 - p.p.
KGMK Group 3,115 911 3x
NN Harjavalta 1,172 1,026 14%
GRK Bystrinskoye 201 8 n.a.
Other mining 133 108 23%
Other non-metallurgical 1,412 1,514 (7%)
Eliminations (7,170) (1,639) 4x
EBITDA 7,923 6,231 27%
GMK Group 9,522 6,602 44%
South cluster 475 - n.a.
KGMK Group 58 190 (69%)
NN Harjavalta 74 71 4%
GRK Bystrinskoye 349 96 4x
Other mining (31) (6) 5x
Other non-metallurgical 31 50 (38%)
Eliminations (1,770) (13) n.a.
Unallocated (785) (759) 3%
EBITDA margin 58% 53% 5 p.p.
GMK Group 69% 68% 1 p.p.
South cluster 55% n.a. n.a.
KGMK Group 2% 21% (19 p.p.)
NN Harjavalta 6% 7% (1 p.p.)
GRK Bystrinskoye n.a. n.a. n.a.
Other mining (23%) (6%) (17 p.p)
Other non-metallurgical 2% 3% (1 p.p.)
1) Segments are defined in the consolidated financial statements
In 2H2019, the Group updated its management accounting system in line with
business changes. As a result, the South Cluster segment was separated from
GMK Group segment in 2019.
In 2019, revenue of Group GMK segment increased 42% to USD 13,836 million.
This was primarily driven by the growth of intersegmental sales revenue due
to the launch of direct sales of semi-products to KGMK Group, which was
additionally supported by higher refined metals production volumes and
palladium price.
The revenue of South cluster segment amounted to USD 864 million.
The revenue of Group KGMK segment increased more than three times to USD
3,115 million due to the launch of direct sales of semi-products supplied by
GMK Group segment.
Revenue of NN Harjavalta increased 14% to USD 1,172 million. Higher sales
volumes were supported by higher nickel price.
Revenue of GRK Bystrinskoye amounted to USD 201 million, which included
sales of semi-products since the full commissioning of Bystrinsky project in
September 2019.
Revenue of Other mining segment increased 23% to USD 133 million mostly
driven by higher semi-products sales volumes and palladium price.
Revenue of Other non-metallurgical segment decreased 7% to USD 1,412
million. Lower sales volumes of Palladium Fund were partly compensated by
higher palladium prices.
In 2019, EBITDA of GMK Group segment increased 44% to USD 9,522 million
owing primarily to higher revenue and depreciation of Russian rouble. EBITDA
of GMK Group segment included profit from the sale of semi-products to Group
KGMK segment, which was eliminated from EBITDA of the Group.
The EBITDA of South cluster segment amounted to USD 475 million.
EBITDA of Group KGMK segment decreased 69% to USD 58 million primarily owing
to the start of direct purchases of GMK Group segment semi-products.
EBITDA of NN Harjavalta increased by USD 3 million to USD 74 million.
EBITDA of GRK Bystrinskoye segment increased by USD 253 million and amounted
to USD 349 million due to higher production volumes.
EBITDA of Other non-metallurgical segment decreased 38% to USD 31 million
following one-off expenses in 2019.
EBITDA of Unallocated segment insignificantly changed 3% to a negative USD
785 million.
SALES VOLUME AND REVENUE 2019 2018 Change,%
Metal sales
Group
Nickel, thousand tonnes¹ 230 217 6%
from own Russian feed 213 208 2%
from 3d parties feed 3 2 50%
in semi-products³ 14 7 2x
Copper, thousand tonnes¹,² 479 455 5%
from own Russian feed 433 431 0%
in semi-products³ 46 24 92%
Palladium, koz¹ 2,988 2,974 0%
from own Russian feed 2,890 2,913 (1%)
in semi-products³ 98 61 61%
Platinum, koz¹ 714 668 7%
from own Russian feed 698 657 6%
in semi-products³ 16 11 45%
Rhodium, koz¹ 78 62 26%
from own Russian feed 69 62 11%
in semi-products³ 9 - 100%
Cobalt, thousand tonnes ¹ 7 4 75%
from own Russian feed 5 3 67%
from 3d parties feed 2 1 2x
Gold, koz¹,² 235 161 46%
from own Russian feed 184 155 19%
in semi-products³ 51 6 9x
Average realized prices of refined metals produced by the
Group
Metal
Nickel (USD per tonne) 14,355 13,531 6%
Copper (USD per tonne) 6,047 6,566 (8%)
Palladium (USD per oz) 1,524 1,025 49%
Platinum (USD per oz) 862 877 (2%)
Rhodium (USD per oz) 3,948 2,194 80%
Cobalt (USD per tonne) 26,756 68,604 (61%)
Gold (USD per oz) 1,393 1,264 10%
Revenue, USD million4
Nickel 3,388 3,013 12%
including semi-products 285 175 63%
Copper 2,877 2,977 (3%)
including semi-products 257 144 78%
Palladium 5,043 3,674 37%
including semi-products 194 98 98%
Platinum 628 596 5%
including semi-products 27 20 35%
Other metals 915 702 30%
including semi-products 172 55 3x
Revenue from metal sales 12,851 10,962 17%
Revenue from other sales 712 708 1%
Total revenue 13,563 11,670 16%
1) All information is reported on the 100% basis, excluding sales of refined
metals purchased from third parties and semi-products purchased from
Nkomati.
2) Includes semi-products, produced by GRK "Bystrynskoe" after ramp-up of
Bystrinsky project that was fully commissioned in September 2019.
3) Metal volumes represent metals contained in semi-products.
4) Includes metals and semi-products purchased from third parties and
Nkomati. Includes revenue from semi-products, produced by GRK "Bystrynskoe",
after ramp-up of Bystrinsky project that was fully commissioned in September
2019.
Nickel
Nickel sales contributed 26% to the Group's total metal revenue in 2019,
down from 27% in 2018. A 1 p.p. decrease was driven by palladium price that
outperformed nickel price in the reported period.
In 2019, nickel revenue was up by 12% amounting to USD 3,388 million. The
growth was driven both by higher realized nickel price (+USD 188 million)
and increase in sales volume (+USD 187 million).
The average realized price of refined nickel increased 6% to USD 14,355 per
tonne in 2019 vs USD 13,531 per tonne in 2018.
Sales volume of refined nickel produced from own Russian feed, increased by
2% (or +5 thousand tonnes) to 213 thousand tonnes owing to higher production
volumes.
Sales volume of nickel produced from third-party feed increased 50% to 3
thousand tonnes primarily due to the increased processing of third-party
feed at Harjavalta refinery.
In 2019, sales of nickel in semi-products increased 63% to USD 285 million
primarily owing to higher sales volume of semi-products.
Copper
In 2019, copper sales accounted for 22% of the Group's total metal sales,
decreasing 3% (or -USD 100 million) to USD 2,877 million primarily owing to
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lower realized price (-USD 227 million) which was partly compensated by
higher sales volume (+USD 127 million).
The average realized price of refined copper decreased 8% from USD 6,566 per
tonne in 2018 to USD 6,047 per tonne in 2019.
Physical volume of refined copper sales from the Company's own Russian feed
remained unchanged at 433 thousand tons.
Revenue from copper in semi-products in 2019 increased 78% to USD 257
million primarily due to the ramp-up of Bystrinsky project that was fully
commissioned in September 2019.
Palladium
In 2019, palladium accounted for 39% of total metal revenue, increasing 5
p.p. y-o-y. Palladium revenue increased 37% (or +USD 1,369 million) to USD
5,043 million due to higher realized price (+USD 1,484 million) and
increased sales volume (+USD 34 million).
The average realized price of refined palladium increased 49% from USD 1,025
per troy ounce in 2018 to USD 1,524 per troy ounce in 2019.
Physical volume of refined palladium sales from the Company's own Russian
feed remained stable y-o-y and amounted to 2,890 thousand troy ounces in
2019. Higher base effect in 2018 (from the sale of metal from stock
accumulated in the Company's Palladium Fund in 2017) was compensated by
higher sales volume in 2019 due to release of work-in-progress inventory.
Revenue of palladium in semi-products increased 98% to USD 194 million in
2019 primarily owing to higher sales volume of semi-products.
In 2019, revenue from the resale of palladium purchased from third parties
amounted to USD 444 million (vs USD 593 million in 2018).
Platinum
In 2019, platinum sales increased 5% (or +USD 32 million) to USD 628 million
and remained at 5% of the Group's total metal revenue. The higher sales
volume (+USD 42 million) was partly compensated by decline of realized
platinum price (-USD 10 million).
Physical volume of refined platinum sales from the Company's own Russian
feed in 2019 increased 6% (or +41 thousand troy ounces) to 698 thousand troy
ounces primarily due to release of PGM work-in-progress inventory.
Revenue of platinum in semi-products in 2019 increased 35% to USD 27 million
primarily due to higher sales volume of semi-products.
Other metals
In 2019, revenue from other metals increased 30% (or +USD 213 million) to
USD 915 million. This was primarily due to higher revenue from gold (+USD
123 million) mainly due to the ramp-up of Bystrinsky project, higher revenue
from rhodium (+USD 155 million) resulting from the increase in price, which
was partly negatively compensated by decrease in cobalt revenue (-USD 108
million) primarily due to price decrease.
Other sales
In 2019, other sales increased 1% to USD 712 million. Revenue growth in real
terms that was primarily driven by higher fuel sales volumes was offset by
the negative effect of Russian rouble depreciation.
COST OF SALES
Cost of metal sales
In 2019, the cost of metal sales was unchanged and amounted to USD 4,509
million. Main factors contributing to it were as follows:
· Increase in cash operating costs by 2% (or +USD 75 million);
· Increase in depreciation and amortisation by 13% (or +USD 82 million);
· Change in metal inventories y-o-y leading to cost of metal sales
decrease of USD 153 million.
Cash operating costs
In 2019, total cash operating costs increased 2% (or +USD 75 million) to USD
3,818 million.
The positive effect of Russian rouble depreciation was fully offset by
inflationary growth of cash operating costs.
Cash operating costs related to Bystrinsky project after its full
commissioning amounted to USD 62 million in 2019.
USD million 2019 2018 Change,
%
Labour 1,295 1,283 1%
Materials and supplies 712 727 (2%)
Purchases of refined metals for resale 438 430 2%
Purchases of raw materials and 402 436 (8%)
semi-products
Third party services 239 200 20%
Mineral extraction tax and other levies 221 212 4%
Electricity and heat energy 155 143 8%
Fuel 101 87 16%
Transportation expenses 88 70 26%
Sundry costs 167 155 8%
Total cash operating costs 3,818 3,743 2%
Depreciation and amortisation 735 653 13%
(Increase)/decrease in metal inventories (44) 109 n.a.
Total cost of metal sales 4,509 4,505 0%
Labour
In 2019, labour costs increased 1% (or USD 12 million) to USD 1,295 million
amounting to 34% of the Group's total cash operating costs driven by the
following:
· -USD 44 million - cost decrease owing to the Russian rouble depreciation
against US Dollar;
· +USD 52 million - increase in real terms primarily driven by the
indexation of salaries and wages in line with the terms of collective
bargaining agreement;
· +USD 15 million - cost increase driven by ramp-up of Bystrinsky project
that was fully commissioned in September 2019;
· -USD 15 million - cost decrease following the decrease of production
staff headcount primarily due to disposal of a subsidiary.
Purchases of raw materials and semi-products
In 2019, purchases of raw materials and semi-products decreased 8% (or USD
34 million) to USD 402 million driven by the following:
· -USD 15 million - cost decrease owing to the Russian rouble depreciation
against US Dollar;
· -USD 73 million - cost decrease owing to lower volumes of Rostec
concentrate processing;
· +USD 29 million - cost increase owing to higher volumes of purchased
semi-products from Boliden for processing at NN Harjavalta;
· +USD 24 million - cost increase driven by higher purchases of Nkomati
concentrate.
Purchases of refined metals for resale
In 2019, expenses related to purchase of refined metals for resale increased
2% to USD 438 million owing to the increase in palladium price, most of
which was offset negatively by decrease of purchased volume.
Materials and supplies
In 2019, materials and supplies decreased 2% (or USD 15 million) to USD 712
million driven by the following factors:
· -USD 18 million - positive effect of the Russian rouble depreciation;
· +USD 13 million - cost increase driven by commissioning of Bystrinsky
project;
· -USD 10 million - lower materials and supplies expenses primarily
related to lower consumption of materials, which was partly offset by
inflationary growth of expenses.
Third-party services
In 2019, cost of third party services increased 20% (or USD 39 million) to
USD 239 million mainly driven by:
· -USD 7 million - positive effect of the Russian rouble depreciation;
· +USD 15 million - costs increase primarily due to higher PGM refining
costs due to release of PGM work-in-progress inventory and tariffs
revision;
· +USD 10 million - cost increase owing to the commissioning of Bystrinsky
project;
· +USD 13 million - cost increase mainly driven by higher Nkomati
stripping costs.
Mineral extraction tax and other levies
In 2019, mineral extraction tax and other levies increased by 4% (or USD 9
million) to USD 221 million driven by the following:
· -USD 7 million - positive effect of the Russian rouble depreciation;
· +USD 13 million - cost increase driven by higher volumes of ore mined.
Electricity and heat energy
In 2019, electricity and heat energy expenses increased by USD 12 million to
USD 155 million driven by the following:
· -USD 7 million - positive effect of the Russian rouble depreciation;
· +USD 14 million - cost increase driven by inflationary growth of
expenses;
· +USD 3 million - cost increase owing to the commissioning of Bystrinsky
project.
Fuel
In 2019, fuel expenses increased 16% (or USD 14 million) to USD 101 million
driven by the following:
· -USD 3 million - positive effect of the Russian rouble depreciation;
· +USD 6 million - higher oil price;
· +USD 5 million - cost increase driven by commissioning of Bystrinsky
project.
Transportation expenses
In 2019, transportation expenses increased 26% (or +USD 18 million) to
USD 88 million driven by the following:
· -USD 1 million - positive effect of the Russian rouble depreciation;
· +USD 9 million - costs increase driven by higher volumes of third-party
transportation services in Norilsk industrial region;
· +USD 10 million - cost increase owing to the commissioning of Bystrinsky
project.
Sundry costs
In 2019, sundry costs increased 8% (or +USD 12 million) to USD 167 million
mainly driven by inflationary growth of expenses and commissioning of
Bystrinsky project.
Depreciation and amortisation
In 2019, depreciation and amortisation expenses increased 13% (or USD 82
million) to USD 735 million.
Positive effect of Russian rouble depreciation amounted to -USD 19 million.
Depreciation charges in real terms increased by USD 101 million mainly due
to transfers from construction in progress to production assets and full
commissioning of Bystrinsky project.
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(Increase)/decrease in metal inventories
In 2019, comparative effect of change in metal inventory amounted to -USD
153 million resulting in a decrease of cost of metal sales, primarily driven
by accumulation of work -in-process and semi-products in 2019 excluding the
changes in Rostec concentrate.
COST OF OTHER SALES
In 2019, cost of other sales increased by USD 62 million to USD 684 million.
Cost of other sales increased primarily due to higher fuel sales, higher
repairs and inflationary cost growth, which were partly positively
compensated by the Russian rouble depreciation.
SELLING AND DISTRIBUTION EXPENSES
USD million 2019 2018 Change,%
Marketing expenses 45 31 45%
Transportation expenses 43 39 10%
Staff costs 15 14 7%
Other 14 8 75%
Total 117 92 27%
In 2019, selling and distribution expenses increased 27% (or USD 25 million)
to USD 117 million primarily due to increase in marketing expenses (USD 14
million).
GENERAL AND ADMINISTRATIVE EXPENSES
USD million 2019 2018 Change,%
Staff costs 601 569 6%
Third party services 117 96 22%
Taxes other than mineral extraction tax and 77 103 (25%)
income tax
Depreciation and amortisation 69 38 82%
Transportation expenses 15 9 67%
Rent expenses 5 23 (78%)
Other 54 52 4%
Total 938 890 5%
In 2019, general and administrative expenses increased 5% (or USD 48
million) to USD 938 million. Positive effect of Russian rouble depreciation
amounted to -USD 24 million. Changes of the general and administrative
expenses in real terms were primarily driven by the following:
· +USD 48 million - increase in staff costs mainly due to one-off payments
related to management bonuses, as well as salaries indexation;
· +USD 23 million - increase of third party services related to the
automatization of production processes and roll out of digital
technologies;
· -USD 24 million - reduction of property tax owing to changes in tax
legislation in 2019.
OTHER OPERATING EXPENSES, net
USD million 2019 2018 Change,%
Social expenses 224 207 8%
Provision on production facilities shut 190 - 100%
down
Change in other provisions 39 21 86%
Net income earned during the (192) (106) 81%
pre-commissioning stage
Other, net 42 (27) n.a.
Total 303 95 3x
In 2019, other operating expenses, net increased by USD 208 million to
USD 303 million driven by the following factors:
· Provision related to shut down of certain production facilities located
at Kolskaya GMK (+USD 190 million);
· Net income generated by GRK "Bystrinskoye" from products sale during the
hot commissioning stage (-USD 86 million);
· Change in other provisions, primarily including provision for obsolete
and slow-moving inventory (+USD 18 million).
FINANCE COSTS, NET
USD million 2019 2018 Change,%
Interest expense, net of amounts capitalised 340 382 (11%)
Unwinding of discount on provisions and 84 100 (16%)
payables
Changes in fair value of non-current 64 46 39%
liabilities
Interest expense on lease liabilities 12 2 6x
Fair value (gain)/loss on the cross-currency (199) 51 n.a.
interest rate swap
Other, net 5 (1) n.a.
Total 306 580 (47%)
The 47% decrease in finance costs in 2019 was primarily attributed to a
change in the fair value of cross-currency interest rate swaps due to
appreciation of Russian ruble against the US dollar as of December 31, 2019
as compared to the exchange rate as of December 31, 2018.
Furthermore, despite the increase in total debt, the average cost of the
Group's debt portfolio decreased moderately owing to the monetary policies
easing undertaken by the Federal Reserve of the USA and the Bank of Russia,
both of which had a positive impact on debt obligations with a floating
interest rate.
In 2019, Nornickel continued to optimize its debt portfolio aiming at the
extension of debt maturity, which allowed to optimize a number of the
Group's bilateral credit facilities totaling USD 962 million.
INCOME TAX EXPENSE
In 2019 income tax expense increased 85% to USD 1 558 million driven mostly
by the increase of taxable profit.
The effective income tax rate in 2019 of 20.7% was above the Russian
statutory tax rate of 20%, which was primarily driven by non-deductible
social expenses.
The breakdown of the income tax expense:
USD million 2019 2018 Change,%
Current income tax expense 1,924 812 2x
Deferred tax (benefit)/expense (366) 31 n.a.
Total 1,558 843 85%
The breakdown of the current income tax
expense by tax jurisdictions:
USD million 2019 2018 Change,%
Russian Federation 1,883 789 2x
Finland 16 11 45%
Rest of the world 25 12 2x
Total 1,924 812 2x
EBITDA
USD million 2019 2018 Change,%
Operating profit 7,036 5,416 30%
Depreciation and amortisation 911 765 19%
Impairment of non-financial assets (24) 50 n.a.
EBITDA 7,923 6,231 27%
EBITDA margin 58% 53% 5 p.p.
In 2019, EBITD? increased 27% (or +USD 1,692 million) to USD 7,923 million
with the EBITDA margin amounting to 58% (up from 53% in 2018) owing to
higher metal revenue and stringent cost control.
STATEMENT OF CASH FLOWS
USD million 2019 2018 Change,%
Cash generated from operations before 8,226 6,339 30%
changes in working capital and income
tax
Movements in working capital (307) 941 n.a.
Income tax paid (1,910) (787) 2x
Net cash generated from operating 6,009 6,493 (7%)
activities
Capital expenditure (1,324) (1,553) (15%)
Other investing activities 204 (9) n.a.
Net cash used in investing activities (1,120) (1,562) (28%)
Free cash flow 4,889 4,931 (1%)
Interest paid (460) (551) (17%)
Dividends paid (4,166) (3,369) 24%
Other financing activities 1,003 (384) n.a.
Net cash used in financing activities (3,623) (4,304) (16%)
Effects of foreign exchange differences 130 (91) n.a.
on balances of cash and cash
equivalents
Net change in cash and cash equivalents 1,396 536 3x
In 2019, free cash flow remained stable at approximately USD 4.9 billion.
Lower cash generated from operating activities was almost offset by lower
cash used in investing activities.
In 2019, net cash generated from operating activities decreased 7% to USD
6.0 billion primarily driven by comparative effect of working capital
increase in 2019 (versus decrease in 2018) and increase in income tax
payments due to higher taxable profit and changes in intra-group operations
which was partly positively offset by increase in EBITDA in 2019.
Interest paid reduced 17% to USD 460 million as a result of the optimization
of debt portfolio.
Reconciliation of the net working capital changes between the balance sheet
and cash flow statement is presented below.
USD million 2019 2018
Change of the net working capital in the balance (118) 1,282
sheet
Foreign exchange differences 112 (277)
Change in income tax payable (26) (5)
Change of long term components of working capital (158) 131
included in CFS
Settlement of tax reserves (9) (143)
Other changes including reserves (108) (47)
Change of working capital per cash flow (307) 941
Capital investments breakdown by project is presented below:
USD million 2019 2018 Change,%
Polar Division, including: 502 696 (28%)
Skalisty mine 58 218 (73%)
Taymirsky mine 67 71 (6%)
Komsomolsky mine 54 44 23%
Oktyabrsky mine 27 40 (33%)
Talnakh Concentrator 14 29 (52%)
Sulfur project 24 36 (33%)
Other Polar Division project 258 258 0%
Kola MMC 221 292 (24%)
Bystrinsky (Bystrinsky) project 103 168 (39%)
Other production projects 489 386 27%
Other non-production assets 9 11 (18%)
Total 1,324 1,553 (15%)
In 2019, CAPEX decreased 15% (-USD 229 million) primarily due to adjustment
of sulfur project schedule and optimization of certain production projects
investment schedules.
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DJ NORNICKEL REPORTS FULL YEAR 2019 AUDITED -7-
DEBT AND LIQUIDITY MANAGEMENT
USD million As of 31 As of 31 Change, Change,%
December December
2019 2018
USD million
Non-current loans 8,533 8,208 325 4%
and borrowings
Current loans and 1,087 209 878 5x
borrowings
Lease liabilities 224 22 202 10x
Total debt 9,844 8,439 1,405 17%
Cash and cash 2,784 1,388 1,396 2x
equivalents
Net debt 7,060 7,051 9 0%
Net debt /12M 0.9x 1.1x (0.2x)
EBITDA
As of December 31, 2019, the Company's total debt increased by 17% (or USD
+1,405 million) to USD 9,844 million as compared to December 31, 2018. The
increase of total debt owed to new debt raised in the second half of 2019 in
the form of two bond issues on the Russian and international debt capital
markets, respectively, for a total amount of more than USD 1.1 billion, and
recognition of obligations under lease contracts stemming from application
of IFRS 16 Leases, which became effective on January 1, 2019.
In spite of the increase in total debt, the Company's net debt remained
virtually unchanged due to doubling of the amount of cash and cash
equivalents. Net debt/12M EBITDA ratio decreased from 1.1x as of December
31, 2018 to 0.9x as of the end of 2019 entirely due to an increase in 12M
EBITDA.
On February 12, 2019, international rating agency Moody's upgraded the
Company's credit rating from "Baa3" with "Positive" outlook to "Baa2" with
"Stable" outlook in the wake of change of Russia's credit rating to
investment grade "Baa3" with "Stable" outlook. As of December 31, 2019,
Nornickel had investment grade credit ratings assigned from all three
international rating agencies Fitch, Moody's and S&P Global, and Russian
rating agency "Expert RA".
Attachment A
CONSOLIDATED INCOME STATEMENT
FOR THE YEARS ENDED 31 DECEMBER 2019, 2018 AND 2017
US Dollars million
For the year ended 31 December
2019 2018 2017
Revenue
Metal sales 12,851 10,962 8,415
Other sales 712 708 731
Total revenue 13,563 11,670 9,146
Cost of metal (4,509) (4,505) (3,939)
sales
Cost of other (684) (622) (632)
sales
Gross profit 8,370 6,543 4,575
General and (938) (890) (788)
administrative
expenses
Selling and (117) (92) (75)
distribution
expenses
Impairment of 24 (50) (227)
non-financial
assets
Other operating (303) (95) (362)
expenses, net
Operating 7,036 5,416 3,123
profit
Foreign 694 (1,029) 159
exchange
gain/(loss),
net
Finance costs, (306) (580) (535)
net
Gain from 2 - 20
disposal of
subsidiaries
Income from 98 95 77
investments
Profit before 7,524 3,902 2,844
tax
Income tax (1,558) (843) (721)
expense
Profit for the 5,966 3,059 2,123
year
Attributable
to:
Shareholders of 5,782 3,085 2,129
the parent
company
Non-controlling 184 (26) (6)
interests
5,966 3,059 2,123
EARNINGS PER
SHARE
Basic and
diluted
earnings per
share
attributable to
shareholders of 36.5 19.5 13.5
the parent
company (US
Dollars per
share)
Attachment B
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2019, 2018 and 2017
US Dollars million
At 31 December
2019 2018 2017
ASSETS
Non-current
assets
Property, plant 11,993 9,934 10,960
and equipment
Intangible 215 163 148
assets
Other financial 223 141 192
assets
Deferred tax 98 73 77
assets
Other 370 386 732
non-current
assets
12,899 10,697 12,109
Current assets
Inventories 2,475 2,280 2,689
Trade and other 362 204 327
receivables
Advances paid 74 75 71
and prepaid
expenses
Other financial 51 147 99
assets
Income tax 68 92 82
receivable
Other taxes 644 271 296
receivable
Cash and cash 2,784 1,388 852
equivalents
Other current 117 97 110
assets
6,575 4,554 4,526
TOTAL ASSETS 19,474 15,251 16,635
EQUITY AND
LIABILITIES
Capital and
reserves
Share capital 6 6 6
Share premium 1,254 1,254 1,254
Translation (4,899) (5,343) (4,490)
reserve
Retained 7,452 7,306 7,557
earnings
Equity 3,813 3,223 4,327
attributable to
shareholders of
the parent
company
Non-controlling 474 250 331
interests
4,287 3,473 4,658
Non-current
liabilities
Loans and 8,533 8,208 8,212
borrowings
Lease 180 16 24
liabilities
Provisions 674 365 464
Trade and other 37 200 402
long-term
payables
Derivative - 61 -
financial
instruments
Deferred tax 60 385 407
liabilities
Other long-term 281 185 116
liabilities
9,765 9,420 9,625
Current
liabilities
Loans and 1,087 209 813
borrowings
Lease 44 6 4
liabilities
Trade and other 1,706 1,551 783
payables
Dividends 1,553 6 6
payable
Employee 393 307 377
benefit
obligations
Provisions 100 77 189
Derivative - 5 24
financial
instruments
Income tax 36 35 9
payable
Other taxes 503 162 147
payable
5,422 2,358 2,352
TOTAL 15,187 11,778 11,977
LIABILITIES
TOTAL EQUITY 19,474 15,251 16,635
AND LIABILITIES
Attachment C
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended 31 December 2019, 2018 and 2017
US Dollars million
For the year ended 31 December
2019 2018 2017
OPERATING
ACTIVITIES
Profit before tax 7,524 3,902 2,844
Adjustments for:
Depreciation and 911 765 645
amortisation
Impairment of (24) 50 227
non-financial
assets
Loss on disposal of 19 1 9
property, plant and
equipment
Gain from disposal (2) - (20)
of subsidiaries
Change in 220 61 41
provisions and
allowances
Finance costs and 208 485 458
income from
investments, net
Foreign exchange (694) 1,029 (159)
(gain)/loss, net
Other 64 46 58
8,226 6,339 4,103
Movements in
working capital:
Inventories 48 297 (346)
Trade and other (122) 102 (174)
receivables
Advances paid and 14 (5) 10
prepaid expenses
Other taxes (331) (15) (5)
receivable
Employee benefit 62 11 9
obligations
Trade and other (247) 676 (1,118)
payables
Provisions (35) (28) (48)
Other taxes payable 304 (97) 2
Cash generated from 7,919 7,280 2,433
operations
Income tax paid (1,910) (787) (670)
Net cash generated 6,009 6,493 1,763
from operating
activities
INVESTING
ACTIVITIES
Purchase of (1,262) (1,480) (1,940)
property, plant and
equipment
Purchase of (62) (73) (62)
intangible assets
Purchase of other - (104) (88)
non-current assets
Loans issued (3) (7) (18)
Proceeds from 54 13 48
repayment of loans
issued
Net change in 78 5 (80)
deposits placed
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Proceeds from sale - - 9
of other financial
assets
Proceeds from 10 3 29
disposal of
property, plant and
equipment
(Net cash
outflow)/net cash
inflow from
disposal of (20) - 99
subsidiaries
Interest and other 85 81 67
investment income
received
Net cash used in (1,120) (1,562) (1,936)
investing
activities
Attachment C
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED 31 DECEMBER 2019, 2018 AND 2017 (CONTINUED)
US Dollars million
For the year ended 31 December
2019 2018 2017
FINANCING
ACTIVITIES
Proceeds from loans 3,212 2,173 4,233
and borrowings
Repayments of loans (2,163) (2,547) (3,140)
and borrowings
Payments of lease (45) (9) (10)
liabilities
Dividends paid (4,166) (3,369) (2,971)
Dividends paid to (1) (1) (1)
non-controlling
interest
Interest paid (460) (551) (642)
Proceeds from sale - - 294
of a
non-controlling
interest in a
subsidiary
Net cash used in (3,623) (4,304) (2,237)
financing
activities
Net change in cash 1,266 627 (2,410)
and cash
equivalents
Cash and cash 1,388 852 3,325
equivalents at the
beginning of the
year
Effects of foreign
exchange
differences
on balances of cash 130 (91) (63)
and cash
equivalents
Cash and cash 2,784 1,388 852
equivalents at the
end of the year
Attachment D
NET WORKING CAPITAL
USD million 31/12/2019 31/12/2018 Change incl.
effects of
foreign
exchange
differences
Refined metals and 407 526 (119) 45
other metal products
Work-in-process and 1,334 1,134 200 136
semi-products
Materials and 734 620 114 79
supplies, net
Trade and other 362 204 158 9
receivables
Advances paid and 74 75 (1) 9
prepaid expenses
Taxes receivable 712 363 349 48
Employee benefit (393) (307) (86) (39)
obligations
Trade and other (1,706) (1,551) (155) (138)
payables*
Taxes payable (539) (197) (342) (37)
Total working capital 985 867 118 112
This announcement contains inside information in accordance with Article 7
of EU Regulation 596/2014 of 16 April 2014.
Full name and position of person making the announcement - Vladimir Zhukov,
Vice - president, Investor Relations
ABOUT THE COMPANY
PJSC «MMC «NORILSK NICKEL» is a diversified mining and metallurgical
company, the world's largest producer of palladium and high-grade metal
nickel and a major producer of platinum and copper. The company also
produces cobalt, rhodium, silver, gold, iridium, ruthenium, selenium,
tellurium, sulphur and other products.
The production units of «NORILSK NICKEL» Group are located at the Norilsk
Industrial District, on the Kola Peninsula and Zabaykalsky Krai in Russia as
well as in Finland and South Africa.
PJSC «MMC «NORILSK NICKEL» shares are listed on the Moscow and on the
Saint-Petersburg Stock Exchanges. PJSC «MMC «NORILSK NICKEL» ADRs are traded
over the counter in the US and on the London, Berlin and Frankfurt Stock
Exchanges.
Media Relations: Investor Relations:
Phone: +7 (495) 785 58 00 Phone: +7 (495) 786 83 20
Email: pr@nornik.ru Email: ir@nornik.ru
ISIN: US55315J1025
Category Code: ACS
TIDM: MNOD
Sequence No.: 48967
EQS News ID: 984031
End of Announcement EQS News Service
(END) Dow Jones Newswires
February 26, 2020 07:01 ET (12:01 GMT)
© 2020 Dow Jones News
