31 Oct 2016 09:31
Press release
31 October 2016
Q3 AND 9M 2016 NLMK GROUP
CONSOLIDATED FINANCIAL RESULTS UNDER IFRS
In Q3, revenue increased by 19% qoq to $2.2 bn, driven by a 7% qoq growth in sales to 4.2 m t. EBITDA increased by 46% qoq to $673 m; EBITDA margin reached 30% (+5 p.p. qoq), including 18% for NLMK's international companies. Net income doubled qoq to $385 m. Net debt / EBITDA decreased to 0.4х.
Q3 2016 highlights
• Sales increased by 7% qoq to 4.2 m t (+2% yoy); with the share of finished products of 66% of total sales (+1 p.p. qoq and -2 p.p. yoy)
• Revenue grew to $2,225 m (+19% qoq and +10% yoy), driven by the increase in sales and prices for steel products
• EBITDA increased by 46% qoq to $673 m (+32% yoy)
• EBITDA margin expanded to 30% (+5 p.p. qoq and +5 p.p. yoy)
• Net income* doubled qoq to $385 m (-6% yoy)
• Capex decreased to $104 m (-35% qoq and -29% yoy)
• Free cash flow increased to $474 m (a threefold increase qoq and +28% yoy)
9M 2016 highlights
• Group sales increased by 2% yoy to 12.3 m t
• Revenue totalled $5,671 m (-11% yoy) due to the drop in average prices for steel products
• EBITDA was $1,423 m (-13% yoy)
• EBITDA margin was 25% (-1 p.p. yoy)
• Capex decrease to $384 m (-14% yoy)
• 9M 2016 free cash flow was $906 m (+2% yoy)
• Operational efficiency gains: $48 m
• Net debt fell to to $0.7 bn (-37% vs. end of 2015)
Q4 2016 Outlook
Q4 results will soften sequentially into a low season but profitability is expected to improve on a year on year basis.
TELECONFERENCE
NLMK is pleased to invite the investment community to a conference call with the management of NLMK:
Monday, 31 October 2016
· 10:00 am: USA (New York)
· 2:00 pm: Great Britain (London)
· 5:00 pm - Russia (Moscow)
To join the conference call, please, dial:
US Number:
+1719 457 2086 (Local access) // 1800 274 0251 (Toll free)
United Kingdom Number:
+44(0)20 3043 2002 (Local access) // 0800 358 6377 (Toll free)
Russian Number:
+7495 213 1767 (Local access) // 8 800 500 9283 (Toll free)
Conference ID: 6857625
To join the webcast please follow the link:
http://www.audio-webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=4033
* We recommend participants start dialing in 5-10 minutes in advance to avoid waiting.
We recommend participants download the presentation in advance from NLMK's website www.nlmk.com
Q3 AND 9M 2016 CONSOLIDATED FINANCIAL RESULTS UNDER IFRS1
Key highlights
k t/$ million | Q3 2016 | Q2 2016 | QoQ | Q3 2015 | YoY | 9M 2016 | 9M 2015 | YoY |
Sales volumes | 4,220 | 3,943 | 7% | 4,123 | 2% | 12,289 | 12,092 | 2% |
Revenue | 2,225 | 1,869 | 19% | 2,016 | 10% | 5,671 | 6,371 | -11% |
EBITDA 2 | 673 | 460 | 46% | 508 | 32% | 1,423 | 1,628 | -13% |
EBITDA margin | 30% | 25% | +5 p.p. | 25% | +5 p.p. | 25% | 26% | -1 p.p. |
Profit for the period 3 | 385 | 185 | 2,1x | 410 | -6% | 627 | 891 | -30% |
Free cash flow 4 | 474 | 158 | 3x | 372 | 28% | 906 | 886 | 2% |
Net debt 5 | 687 | 1,161 | -41% | 1,071 | -36% | 687 | 1,071 | -36% |
Net debt/EBITDA 5 | 0.39x | 0.74x | 0.47x | 0.39x | 0.47x |
Notes:
1 Consolidated financial results are prepared under IFRS. Reporting periods of the Company are 3M, 6M, 9M and 12M. Quarterly figures are derived by computational method. The same assumption applies to the calculation of segmental financial result
2 EBITDA is calculated as operating profit adjusted to loss from impairment of investments, fixed assets and intangible assets (including goodwill) and depreciation and amortization. EBITDA calculations are presented in the Appendix.
3 Net profit attributable to NLMK shareholders.
4Free cash flow is determined as net cash from operational activity (with net interest expenses) net of capital investment and changes in advances VAT payments on imported equipment. Free cash flow calculations are presented in the Appendix.
5Net debt is calculated as the sum of LT and ST credits and loans less cash and cash equivalents, as well as ST financial investments at period end.
Net debt / EBITDA is represented by net debt as at the end of the period and EBITDA is presented as Last 12 months EBITDA.
6 Net Debt/EBITDA ratios for 3Q and 9M 2015 are presented based on management accounting and might differ from the previously disclosed figures.
Comment from NLMK Group CFO Grigory Fedorishin:
"In Q3 2016, NLMK revenue grew by 19% qoq to $2.2 bn, driven by the increase in deliveries and the increase in average sales prices; and improvements to the structure of sales. The Group's local markets, Russia, the EU, and the US, accounted for approximately 66% of steel product sales.
"The increase in the revenue, coupled with operational efficiency gains, supported a 46% qoq increase in EBITDA to $673 m. Group's EBITDA margin gained 5 p.p. qoq to 30%, hitting its highest since Q2 2010. NLMK Group's international companies in the US and Europe posted a Q3 EBITDA margin of 18% on the back of improved market conditions, hitting a peak since 2008.
"Gains from operational efficiency programmes (projects not requiring capex), rolled out across all Group sites, totalled $48 m for 9M 2016 vs. 2015.
"In November 2016, Stoilensky is planning to receive the first output of pellets at its new pelletizing plant, the latter covering 100% of the Group's iron ore pellet needs. This will enable the company to achieve a reduction in steel production costs, consolidating its position as one of the most cost-efficient manufacturers in the world.
"The increase in operating cash flow (+76% qoq) supported a threefold increase in free cash flow qoq to $474 m; and a 37% decrease in net debt vs. the beginning of 2016 to $0.7 bn. Net debt to EBITDA was 0.4х.
"Q3 dividends will be recommended at a meeting of NLMK's Board of Directors on 17 November 2016."
MANAGEMENT COMMENTS
· Market overview
Global steel consumption decreased by 2% qoq to 400 m t. Exports of steel products from China fell by 5% qoq.
Apparent steel use in Europe was seasonally weak vs. the previous quarter. Compared to the same period last year, there was an ongoing recovery in demand in Europe. Demand in the US in Q3 decreased marginally due to stable demand from the construction sector.
Consumption in Russia remained flat qoq on the back of significant stocks accumulated by service companies during a period of active price growth in Q2 2016. Steel output fell by 1% qoq to 17.7 m t. Imports saw a seasonal increase of 31%.
· Prices
Prices in Europe declined insignificantly qoq due to the seasonal weakening in demand; posting an uptick in the last month of the quarter.
Prices in the US decreased throughout the quarter of the back of a high premium to Chinese export quotations; posting nonetheless a 1-5% average increase qoq.
Prices for flat products in the Russian market increased by 5-10% qoq in dollar terms, due mainly to the strengthening of the exchange rate.
· Production and sales
Q3 2016
Steel output totalled 4.04 m t (-4% qoq and -1% yoy). This decrease was due mainly to planned repairs of a blast furnace at the Lipetsk site, following which its productivity increased by 200,000 tpa. The decrease in output was partially offset by a 4% qoq increase in steel output at NLMK Russia Long Products.
Sales increased by 7% qoq (+2% yoy) to 4.22 m t, due mainly to the increase in the sales of long products (+45% qoq) and semis (+6% qoq).
Finished steel sales increased by 8% qoq to 2.78 m t (+1% yoy) driven by higher long product sales, including exports. Share of finished products totalled 66% (+1 p.p. qoq and -2 p.p. yoy). Sales of semis increased by 6% qoq to 1.44 m t (+6% yoy), driven by higher export sales of billets; and the recognition of Q2 sales to external markets.
9M 2016
9M Group steel output increased by 2% yoy to 12.3 m t, driven by the growth in output at NLMK Kaluga (+24% yoy) and NLMK USA (+18% yoy), with high output levels maintained at the Lipetsk site. Steelmaking capacity utilization rates gained 1 p.p. to 95%.
Group sales climbed 2% to a record 12.3 m t. Total finished product sales increased by 3% yoy to 7.9 m t.
· Sales markets
'000 t | Total | Sales markets | ||||
Russia | EU | North America | Middle East | Other | ||
NLMK Group | 4,220 | 1,714 | 873 | 567 | 321 | 745 |
Division deliveries to third parties:: | ||||||
Russian Flat Products | 2,287 | 1,165 | 186 | 111 | 248 | 577 |
Russian Long Products | 869 | 549 | 70 | 10 | 58 | 182 |
International subsidiaries and affiliates, incl.: | ||||||
NLMK USA | 444 | - | - | 444 | - | - |
European rolling assets (NLMK Dansteel and NBH) | 585 | - | 530 | 26 | 2 | 27 |
Local markets, i.e. Russia, the EU, and the US, where finished products are manufactured, accounted for 66% of the Group's sales (including NBH sales). A significant share of exports goes to the Middle East (including Turkey) and South East Asia.
· Strategy 2017: operational efficiency programmes
In 2016, NLMK continued to implement its operational efficiency programmes. 9M 2016 gains totalled $48 m (vs. the 2015 cost base).
· Strategy 2017: key investment projects
Pelletizing plant. Planned launch: November 2016. Production capacity: 6 mtpa (100% of the Group's needs). Total investment into the plant: RUB 41 bn ($640 m), with 80% already invested as at the end of Q3 2016. The plant's iron ore concentrate requirements will be covered by concentrate that is currently being sold off in the export market (up to 4.5 mtpa), and the expansion of iron ore concentrate production capacities (an additional 1.5 mtpa) by 2018.
Expansion of iron ore concentrate production capacity. In 2016, Stoilensky implemented high pressure grinding rollers (HPGR) at 2 of its 4 beneficiation sections, adding 800,000 tpa to its concentrate production capacity (see press release). The second HPGR implementation stage is planned for 2017, following which total concentrate production capacity will be boosted by 1.5 mtpa. 1st stage capex totalled RUB 5 bn ($75 m).
The anticipated consolidated economic impact of the Stoilensky projects on Group EBITDA is approximately $150 m per annum (at current price levels).
· Capex
Capex decreased by 35% qoq (-29% yoy) to $104 m, including $78 m maintenance capex. 9M 2016 capex totalled $384 m (-14% yoy), including $222 m maintenance capex.
Total 2016 capex are estimated at $600 m.
· Debt management
Q3 2016 net debt decreased by 41% qoq to $687 m (-37% to the beginning of 2016) due to the significant increase in free cash flow. Net debt/EBITDA as at 30 September 2016 stood at 0.4х.
Group's total debt as at 30 September 2016 decreased by 11% qoq (-7% yoy) to $2,498 m, including 15% of short-term debt comprised of ruble bonds and revolving credit lines for working capital financing. In Q3, the Group paid off series B0-11, BO-12 and BO-14 ruble bonds for a total of RUB 15 bn ($232 m) from its own funds.
Financial guarantees for NBH liabilities totalled $273 m (flat qoq).
Interest payments in Q3 2016 were $21 m, or 3% of EBITDA.
KEY FINANCIALS
· Revenue
Q3 2016
Q3 2016 revenue increased by 19% qoq to $2,225 m (+10% yoy), due to a 7% qoq increase in sales volumes (+2% yoy), improvements to the product mix, and the growth of average sales prices. Another factor with a positive impact of the revenue was the delay in the recognition of sales: with an up to 2 month after shipment delay in the recognition of sales for export operations, the revenue reflects high export prices from the end of Q2 2016.
Revenue per tonne of steel products sold was $527 (+11% qoq and +8% yoy).
The share of revenue from sales to the Russian market grew to 42% (+3 p.p. qoq, +1 p.p. yoy). The share of revenue from sales to the USA decreased to 17% (-2 p.p. qoq and -2 p.p. yoy). The share of revenue from sales to the EU was 16% (-3 p.p. qoq and -4 p.p. yoy); and 7% (-2 p.p. qoq and -1 p.p. yoy) for the Middle East and Turkey. Considering the sales of NBH subsidiaries, the share of local markets in total revenue was 66%.
9M 2016
9M 2016 revenue dropped by 11% yoy to $5,671 m due to the fall in average sales prices that were partially offset by a 2% yoy increase in sales and a 4% yoy increase in HVA deliveries.
Revenue per tonne of steel products sold fell by 12% yoy to $461, pressured by the price factor.
The share of revenue from sales to the Russian market increased by 1 p.p. to 40%; with sales to the European Union accounting for 18% (-2 p.p. yoy); and sales to the US accounting for 18% (flat yoy). The share of international sales totalled 24% (+1 p.p. yoy), 8% (-1 p.p. yoy) to the Middle East and Turkey.
· Operating profit
Q3 2016
Q3 2016 operating profit* spiked by 61% qoq to $556 m (+52% yoy) due to the widening of spreads between raw material and finished product prices; as well as operational efficiency gains.
* Operating profit before equity share in net losses of associates and other companies accounted for using the equity method of accounting, impairment and write-off of assets
The 5% qoq increase (-3% yoy) in commercial expenses was associated with the increase in steel product sales (+7% qoq).
9M 2016
9M 2016 operating profit * decreased by 8% yoy to $1,091 m to the narrowing of spreads between raw material and finished product prices. This was partially offset by operational efficiency gains and a 2% yoy increase in sales.
· Net profit*
Q3 2016 net profit was $385 m, more than double the Q2 2016 level (-6% yoy), on the back of higher profit from operating activities.
9M 2016 net profit was $627 m (-30% yoy).
* Profit for a period attributable to key shareholders
· Free cash flow
Q3 2016
Q3 2016 free cash flow increased to $474 m (x3 qoq and +28% yoy). The increase was associated with a 76% qoq (+5% yoy) growth of operating cash flow and a 35% qoq (-29% yoy) capex reduction.
Q3 working capital outflow was $1 m. The seasonal increase in raw material stocks at Russian production sites (incl. winter scrap stocks) was almost fully offset by initiatives to optimize other working capital elements.
9M 2016
9M 2016 free cash flow was $906 m (+2% yoy) on the back of conservative investment in 2016, and optimization of working capital.
Russian Flat Products*
k t/$ million | Q3 2016 | Q2 2016 | QoQ | Q3 2015 | YoY | 9M 2016 | 9M 2015 | YoY |
Steel product sales, incl.: | 3,302 | 3,241 | 2% | 3,437 | -4% | 9,770 | 9,779 | 0% |
external cutmores | 2,287 | 1,979 | 16% | 2,466 | -7% | 6,709 | 6,842 | -2% |
semis to NBH | 523 | 665 | -21% | 429 | 22% | 1,642 | 1,638 | 0% |
intersegmental sales | 492 | 596 | -17% | 543 | -9% | 1,419 | 1,298 | 9% |
Revenue, incl.: | 1,625 | 1,392 | 17% | 1,545 | 5% | 4,154 | 4,766 | -13% |
external customers | 1,254 | 992 | 26% | 1,223 | 3% | 3,173 | 3,694 | -14% |
intersegmental operations | 372 | 400 | -7% | 322 | 16% | 981 | 1,072 | -8% |
EBITDA | 476 | 309 | 54% | 403 | 18% | 1,018 | 1,308 | -22% |
EBITDA margin | 29% | 22% | +7 p.p. | 26% | +3 p.p. | 25% | 27% | -2 p.p. |
Q3 2016
Total steel product sales of the segment increased by 2% qoq to 3.3 m t (-4% yoy), driven by a 19% qoq surge in sales to the Russian market to 1.17 m t. Slab deliveries to NLMK's rolling assets in Europe and the USA dropped on the back of additional slab sales in Q2.
The increase in sales prices was the key driver behind the growth of the segment's revenue to $1.63 bn (+17% qoq and +5% yoy). Revenue from third-party sales gained 26% qoq to $1,25 bn (+3% yoy) due to higher sales and the price factor.
Segment EBITDA increased by 54% qoq to $476 m (+18% yoy) due to the widening of spreads between finished steel and raw material prices; and the increase in sales. Segment Q3 2016 EBITDA margin grew to 29%(+7 p.p. qoq and +3 p.p. yoy).
9M 2016
Segment sales remained stable at 9.77 m t, while finished product sales increased by 6% yoy to 4.48 m t on the back of a 9% yoy increase in sales to the internal market to 2.6 m t. Segment total sales in Russia gained 5% yoy to 3.26 m t.
Total revenue of the segment was $4.15 bn (-13% yoy), including $3.17 bn (-14% yoy) from third-party sales. The decrease in the revenue was associated with lower price levels in 2016.
Segment EBITDA plunged 22% yoy to $1,018 m, due to the narrowing of spreads between finished steel and raw material prices, that was partially offset by structural operational efficiency gains. Segment 9M 2016 EBITDA margin was 25% (-2 p.p. yoy).
Russian Long Products*
k t/$ million | Q3 2016 | Q2 2016 | QoQ | Q3 2015 | YoY | 9M 2016 | 9M 2015 | YoY |
Steel product sales** | 869 | 635 | 37% | 638 | 36% | 2,129 | 1,881 | 13% |
Revenue, incl.: | 410 | 329 | 24% | 308 | 33% | 929 | 943 | -2% |
external customers | 334 | 250 | 34% | 220 | 52% | 749 | 717 | 4% |
intersegmental operations | 76 | 79 | -4% | 88 | -14% | 179 | 226 | -20% |
EBITDA | 48 | 55 | -12% | 27 | 77% | 99 | 66 | 50% |
EBITDA margin | 12% | 17% | -5 p.p. | 9% | +3 p.p. | 11% | 7% | +4 p.p. |
Q3 2016
The seasonally high demand in the Russian market and stable demand in export markets supported a 37% to 0.87 m t (+36% yoy) increase in sales.
Segment's total revenue spiked by 24% qoq to $410 m (+33% yoy), driven by the increase in sales volumes (+37% qoq and +36% yoy), offsetting the negative price trend for long products. The surge in revenue from intersegmental operations is associated with the seasonal pick-up in sales from scrap deliveries to the Lipetsk site.
The 37% qoq increase in the volume of deliveries partially offset the narrowing of spreads for long steel. As a result, EBITDA decreased by 12% qoq to $48 m (+77% yoy); EBITDA margin was 12% (-5 p.p. qoq and +3 p.p. yoy).
9M 2016
Segment sales in the reporting period increased by 13% yoy to 2.13 m t, as long product exports (to the Middle East, North Africa and the EU) increased threefold to 0.77 m t (36% of total sales).
Segment's total revenue for the reporting period dropped by 2% yoy to $929 m, the increase in sales volumes only partially offsetting the low price levels seen in 2016.
EBITDA grew to $99 m (+50% yoy) supported by higher volumes (+13% qoq); the widening of spreads between long product and scrap prices; and gains from operational efficiency programmes. EBITDA margin was 11%(+4 p.p. yoy).
Mining Segment*
k t/$ million | Q3 2016 | Q2 2016 | QoQ | Q3 2015 | YoY | 9M 2016 | 9M 2015 | YoY |
Iron ore concentrate and sinter ore sales, incl.: | 4,636 | 3,989 | 16% | 4,352 | 7% | 12,928 | 12,530 | 3% |
sales to Lipetsk plant | 3,406 | 3,010 | 13% | 3,272 | 4% | 9,673 | 9,165 | 6% |
Revenue, incl.: | 170 | 145 | 17% | 143 | 19% | 422 | 444 | -5% |
external customers | 57 | 38 | 48% | 40 | 43% | 120 | 142 | -15% |
intersegmental operations | 113 | 107 | 5% | 103 | 9% | 302 | 302 | 0% |
EBITDA | 91 | 74 | 24% | 77 | 19% | 223 | 215 | 4% |
EBITDA margin | 54% | 51% | +3 p.p. | 54% | 0 p.p. | 53% | 48% | +5 p.p. |
Q3 2016
Iron ore concentrate and sinter ore sales totalled 4.64 m t (+16% qoq and +7% yoy), driven by the increase in supplies to the Lipetsk site; as well as the recognition of Q2 concentrate exports in Q3 sales.
Segment's total revenue went up by 17% qoq to $170 m (+19% yoy), supported by a 16% qoq (+7% yoy) increase sales volumes and an increase in iron ore prices.
Segment's EBITDA increased to $91 m (+24% qoq and +19% yoy) on the back of the growth in sales volumes; EBITDA margin grew to 54% (+3 p.p. qoq and flat yoy).
9M 2016
Iron ore concentrate and sinter ore sales climbed to 12.9 m t (+3% yoy), including 9.67 m t (+6% yoy) shipped to the Lipetsk site, enabled by the upgrading of beneficiation equipment, including the introduction of high pressure grinding rollers, a technology that is new for Russia.
The decline in average iron ore prices was the key factor pushing the segment's total revenue down by 5% yoy to $422 m.
9M 2016 EBITDA was $223 m (+4% yoy). The increase in sales volumes coupled with control over production costs and operational efficiency gains fully offset the decrease in product prices. EBITDA margin was 53% vs. 48% in 9M 2015.
Foreign Rolled Products Segment*
k t/$ million | Q3 2016 | Q2 2016 | QoQ | Q3 2015 | YoY | 9M 2016 | 9M 2015 | YoY |
Steel product sales | 541 | 663 | -18% | 590 | -8% | 1,794 | 1,731 | 4% |
Revenue, incl.: | 398 | 400 | -1% | 359 | 11% | 1,115 | 1,160 | -4% |
external customers | 398 | 400 | -1% | 359 | 11% | 1,115 | 1,160 | -4% |
intersegmental operations | - | - | 0% | - | 0% | - | - | 0% |
EBITDA | 74 | 56 | 31% | (12) | 6,1x | 141 | (67) | 2,1x |
EBITDA margin | 18% | 14% | +4 p.p. | -3% | +21 p.p. | 13% | -6% | +19 p.p. |
Q3 2016
Segment's sales totalled 0.54 m t (-18% qoq and -8% yoy) due to the weakening of demand on the back of the normalization of stocks in the American market and the seasonal weakening of demand in the European market.
Segment's revenue decreased by 1% qoq to $398 m (+11% yoy), with the factor of higher prices offsetting the decrease in sales volumes.
The widening of spreads between finished product and slab prices was the key driver supporting segment EBITDA growth to $74 m (+31% qoq, EBITDA loss in Q3 2015 of $12 m). Segment's EBITDA margin was 18%, hitting its highest since 2008.
9M 2016
Segment's sales grew by 4% in the reporting period to 1.79 m t, due to restocking by traders; and trade restrictions imposed on the American market against imports of rolled products.
Segment's revenue decreased by 4% yoy to $1,115 m, due to the decrease in steel product prices that was partially offset by a 4% yoy growth of sales volumes.
Segment's 9M 2016 EBITDA was $141 m (vs. a loss of $67 m in 9M 2015), supported by the widening of spreads and higher sales volumes. Segment's EBITDA margin was 13%.
NBH (associated company) results
NBH product sales dropped by 20% qoq to 0.49 m t due to the seasonal weakening in demand and pressure from imports.
NBH revenue contracted by 14% qoq to $287 m, pressured by lower sales volumes, resulting in an EBITDA loss of $3 m (vs. a $6 m EBITDA gain in Q2 2016 and a $19 m loss in Q3 2015).
NBH steel product sales in 9M 2016 grew by 5% yoy to 1.63 m t, driven by improved market conditions in Europe. The uptick in sales capped EBITDA loss at $4 m (loss in 9M 2015 was $36 m).
Appendix 1. Operating and financial results
(1) Sales by product
k t | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 |
Pig iron | 105 | 84 | 135 | 153 | 222 |
Slabs | 1,145 | 1,110 | 1,313 | 1,351 | 1,096 |
Thick plates | 97 | 141 | 121 | 111 | 94 |
Hot-rolled steel | 940 | 896 | 990 | 754 | 990 |
Cold-rolled steel | 527 | 555 | 528 | 435 | 539 |
Galvanized steel | 264 | 267 | 194 | 218 | 297 |
Pre-painted steel | 138 | 119 | 91 | 84 | 111 |
Transformer steel | 56 | 64 | 72 | 74 | 69 |
Dynamo steel | 79 | 73 | 58 | 64 | 67 |
Billet | 193 | 169 | 109 | 117 | 44 |
Long products | 607 | 401 | 456 | 317 | 521 |
Metalware | 69 | 65 | 60 | 60 | 73 |
TOTAL | 4,220 | 3,943 | 4,126 | 3,737 | 4,123 |
(2) Sales by region
k t | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 |
Russia | 1,714 | 1,327 | 1,548 | 1,413 | 1,765 |
Europe Union | 873 | 958 | 819 | 773 | 785 |
Middle East, including Turkey | 321 | 398 | 396 | 336 | 340 |
North America | 567 | 622 | 603 | 454 | 769 |
Asia and Oceania | 152 | 200 | 155 | 210 | 61 |
Rest of World | 593 | 438 | 605 | 550 | 403 |
TOTAL | 4,220 | 3,943 | 4,127 | 3,737 | 4,123 |
(3) Revenue by region
Region | Q3 2016 | Q2 2016 | Q1 2016 | |||
$ million | share | $ million | share | $ million | share | |
Russia | 944 | 42% | 720 | 39% | 588 | 37% |
Europe Union | 354 | 16% | 352 | 19% | 316 | 20% |
Middle East, including Turkey | 148 | 7% | 164 | 9% | 133 | 8% |
North America | 378 | 17% | 360 | 19% | 283 | 18% |
Asia and Oceania | 79 | 4% | 93 | 5% | 76 | 5% |
Rest of World | 322 | 14% | 181 | 10% | 182 | 12% |
TOTAL | 2,225 | 100% | 1,869 | 100% | 1,577 | 100% |
(4) EBITDA
$ million | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 |
Operating income | 556.1 | 346.1 | 189.0 | 202.0 | 366.2 |
minus: | - | - | - | - | - |
Depreciation and amortization | (116.6) | (114.0) | (101.2) | (118.8) | (141.6) |
EBITDA | 672.7 | 460.1 | 290.2 | 320.8 | 507.8 |
(5) Free cash flow
$ million | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 |
Net cash provided operating activities | 562.3 | 319.1 | 421.1 | 246.0 | 537.2 |
Interest paid | (21.4) | (10.7) | (31.7) | (7.5) | (31.1) |
Interest received | 8.5 | 8.9 | 3.4 | 19.7 | 6.7 |
Advance VAT payments on imported equipment | 28.4 | - | 2.2 | 2.6 | 3.7 |
Capex | (103.6) | (159.7) | (120.5) | (149.6) | (145.0) |
Free Cash Flow | 474.2 | 157.6 | 274.5 | 111.2 | 371.5 |
(6) Production of main products
k t | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 |
Crude steel, incl.: | 4,044 | 4,227 | 3,995 | 3,864 | 4,079 |
Steel Segment | 3,163 | 3,301 | 3,202 | 3,255 | 3,310 |
Long products Segment, incl.: | 778 | 745 | 634 | 528 | 619 |
NLMK-Kaluga | 354 | 342 | 301 | 284 | 284 |
Foreign Rolled Products Segment | 103 | 181 | 158 | 81 | 151 |
Finished products, incl.: | 2,579 | 2,703 | 2,474 | 2,236 | 2,671 |
Flat steel | 2,013 | 2,134 | 2,013 | 1,832 | 2,045 |
Long steel | 566 | 569 | 461 | 404 | 626 |
Coke (6% moisture), incl.: | 1,072 | 1,153 | 1,109 | 1,004 | 1,144 |
Novolipetsk | 657 | 647 | 652 | 655 | 646 |
Altai-Koks | 415 | 505 | 457 | 349 | 498 |
(7) Slab sales, including intra-group sales to NLMK Group companies
k t | Q3 2016 | Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 |
Sales to 3rd parties, incl.: | 622 | 444 | 860 | 901 | 667 |
Export | 427 | 253 | 609 | 703 | 415 |
Sales to subsidiaries & associates | 1,015 | 1,262 | 768 | 893 | 972 |
Sales to NBH | 523 | 665 | 453 | 450 | 429 |
TOTAL | 1,637 | 1,706 | 1,627 | 1,793 | 1,639 |
(8) Export shipments from Russian assets of the Group to third parties
k t | Q3 2016 | Q2 2016 | QoQ | Q3 2015 | YoY | 9M 2016 | 9M 2015 | YoY |
Semi-finished products | 724 | 503 | 44% | 671 | 8% | 2,078 | 1,960 | 6% |
Pig iron | 104 | 82 | 27% | 220 | -53% | 320 | 491 | -35% |
Slabs | 427 | 253 | 69% | 415 | 3% | 1,288 | 1,389 | -7% |
Billets | 193 | 169 | 14% | 36 | 5,3x | 470 | 80 | 5,8x |
Flat products | 591 | 678 | -13% | 628 | -6% | 1,872 | 1,865 | 0% |
HRC | 313 | 335 | -7% | 276 | 13% | 943 | 867 | 9% |
CRC | 155 | 216 | -28% | 207 | -25% | 563 | 608 | -7% |
HDG | 11 | 12 | -9% | 28 | -62% | 27 | 47 | -44% |
Coated | 3 | 3 | 4% | 2 | 89% | 6 | 4 | 58% |
Dynamo | 64 | 59 | 8% | 56 | 14% | 171 | 162 | 6% |
Transformer | 45 | 53 | -15% | 59 | -23% | 162 | 177 | -9% |
Long products | 135 | 97 | 39% | 40 | 3,4x | 314 | 179 | 75% |
Total | 1,450 | 1,279 | 13% | 1,339 | 8% | 4,264 | 4,004 | 6% |
(9) Segments information
Q3 2016 | Russianflatproducts | Foreign rolled products | Russianlongproducts | Mining | Investments in NBH | All other | Totals | Intersegmental operations and balances | NBHdeconsoli-dation | Consolidated |
$ million | ||||||||||
Revenue from external customers | 1,254 | 398 | 334 | 57 | 277 | 3 | 2,323 | - | (98) | 2,225 |
Intersegment revenue | 372 | - | 76 | 113 | 11 | - | 570 | (560) | (11) | 0 |
Gross profit | 611 | 82 | 80 | 109 | 12 | 1 | 895 | (42) | (12) | 841 |
Operating income/(loss) | 400 | 56 | 36 | 81 | (22) | (0) | 551 | (17) | 22 | 556 |
Income / (loss) before minority interest | 282 | 54 | 27 | 59 | (24) | (1) | 398 | (23) | 12 | 387 |
Segment assets including goodwill | 7,258 | 1,055 | 1,089 | 1,772 | 1,494 | 10 | 12,678 | (1,433) | (1,265) | 9,980 |
1 Balance figures presented as of September 30, 2016
Q2 2016 | Russianflatproducts | Foreign rolled products | Russianlongproducts | Mining | Investments in NBH | All other | Totals | Intersegmental operations and balances | NBHdeconsoli-dation | Consolidated |
$ million | ||||||||||
Revenue from external customers | 992 | 400 | 250 | 38 | 321 | 3 | 2,005 | - | (135) | 1,869 |
Intersegment revenue | 400 | - | 79 | 107 | 12 | - | 598 | (586) | (12) | (0) |
Gross profit | 456 | 66 | 85 | 93 | 14 | 1 | 713 | (63) | (14) | 637 |
Operating income/(loss) | 236 | 38 | 43 | 63 | (13) | 0 | 367 | (34) | 13 | 346 |
Income / (loss) before minority interest | 141 | 35 | 38 | 45 | (42) | 0 | 216 | (51) | 21 | 187 |
Segment assets including goodwill | 7,175 | 1,082 | 1,051 | 1,792 | 1,471 | 12 | 12,584 | (1,598) | (1,234) | 9,752 |
1 Balance figures presented as of June 30, 2016
Novolipetsk Steel
Interim condensed consolidated statement of financial position
as at 30 September 2016 (unaudited) and 31 December 2015
(millions of US dollars)
| Note | As at 30 September 2016 | As at 31 December 2015 | ||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | 4 | 527.3 | 343.0 | ||
Short-term financial investments | 5 | 1,283.6 | 1,242.6 | ||
Trade and other accounts receivable | 6 | 1,033.3 | 920.9 | ||
Inventories | 7 | 1,265.2 | 1,205.3 | ||
Other current assets | 14.5 | 8.8 | |||
4,123.9 | 3,720.6 | ||||
Non-current assets | |||||
Long-term financial investments | 5 | 87.6 | 219.8 | ||
Investments in associates and other companies accounted for using the equity method of accounting | 5 | 197.6 | 117.7 | ||
Property, plant and equipment | 8 | 5,099.7 | 4,452.3 | ||
Goodwill | 9 | 244.0 | 214.6 | ||
Other intangible assets | 9 | 123.2 | 112.3 | ||
Deferred income tax assets | 84.3 | 68.2 | |||
Other non-current assets | 20.1 | 13.9 | |||
5,856.5 | 5,198.8 | ||||
Total assets | 9,980.4 | 8,919.4 | |||
Liabilities and equity | |||||
Current liabilities | |||||
Accounts payable and other liabilities | 10 | 870.0 | 726.4 | ||
Short-term borrowings | 11 | 385.7 | 559.8 | ||
Current income tax liability | 44.7 | 27.7 | |||
1,300.4 | 1,313.9 | ||||
Non-current liabilities | |||||
Long-term borrowings | 11 | 2,112.3 | 2,116.3 | ||
Deferred income tax liability | 420.1 | 339.3 | |||
Other long-term liabilities | 13.1 | 12.2 | |||
2,545.5 | 2,467.8 | ||||
Total liabilities | 3,845.9 | 3,781.7 | |||
Equity attributable to NLMK shareholders | |||||
Common stock | 221.2 | 221.2 | |||
Additional paid-in capital | 9.9 | 9.9 | |||
Accumulated other comprehensive loss | (6,201.4) | (6,988.4) | |||
Retained earnings | 12,088.6 | 11,883.4 | |||
6,118.3 | 5,126.1 | ||||
Non-controlling interests | 16.2 | 11.6 | |||
Total equity | 6,134.5 | 5,137.7 | |||
Total liabilities and equity | 9,980.4 | 8,919.4 |
Novolipetsk Steel
Interim condensed consolidated statement of profit or loss
for the three and the nine months ended 30 September 2016 and 30 September 2015 (unaudited)
(millions of US dollars, unless otherwise stated)
Note | For the nine months ended 30 September 2016 | For the nine months ended 30 September 2015 | For the three months ended 30 September 2016 | For the three months ended 30 September 2015 | |||||
Revenue | 15 | 5,671.0 | 6,371.2 | 2,224.7 | 2,015.5 | ||||
Cost of sales | (3,783.5) | (4,310.7) | (1,383.5) | (1,381.2) | |||||
Gross profit | 1,887.5 | 2,060.5 | 841.2 | 634.3 | |||||
General and administrative expenses | (234.0) | (197.9) | (83.7) | (56.5) | |||||
Selling expenses | (523.7) | (626.0) | (192.9) | (198.0) | |||||
Other operating income | 12.7 | 8.7 | 10.3 | - | |||||
Taxes, other than income tax | (51.3) | (59.0) | (18.8) | (13.6) | |||||
Operating profit before equity share in net losses of associates and other companies accounted for using the equity method of accounting, impairment and write-off of assets | 1,091.2 | 1,186.3 | 556.1 | 366.2 | |||||
Gain / (loss) on disposals of property, plant and equipment | 1.1 | (1.3) | (6.7) | (1.7) | |||||
Impairment losses and write-off of assets | (8.3) | (1.2) | (2.3) | (0.6) | |||||
Share in net losses of associates and other companies accounted for using the equity method | (49.8) | (61.3) | (12.3) | (20.8) | |||||
(Losses) / gains on investments | 5 | (0.3) | 52.2 | (0.2) | (0.6) | ||||
Finance income | 30.9 | 38.9 | 8.9 | 14.5 | |||||
Finance costs | (87.4) | (65.4) | (23.3) | (16.7) | |||||
Foreign currency exchange (loss) / gain, net | 13 | (94.3) | 36.0 | (0.6) | 185.7 | ||||
Other expenses, net | (39.5) | (24.5) | (11.1) | (7.5) | |||||
Profit before income tax | 843.6 | 1,159.7 | 508.5 | 518.5 | |||||
Income tax expense | 14 | (213.5) | (266.4) | (121.3) | (107.5) | ||||
Profit for the period | 630.1 | 893.3 | 387.2 | 411.0 | |||||
Profit attributable to: | |||||||||
NLMK shareholders | 627.4 | 891.4 | 385.4 | 409.5 | |||||
Non-controlling interests | 2.7 | 1.9 | 1.8 | 1.5 | |||||
Earnings per share - basic and diluted: | |||||||||
Earnings attributable to NLMK shareholders per share (US dollars) | 0.1047 | 0.1487 | 0.0643 | 0.0683 | |||||
Weighted-average shares outstanding: basic and diluted (in thousands) | 12 | 5,993,227 | 5,993,227 | 5,993,227 | 5,993,227 |
Novolipetsk Steel
Interim condensed consolidated statement of comprehensive income
for the three and the nine months ended 30 September 2016 and 30 September 2015 (unaudited)
(millions of US dollars)
Note | For the nine months ended 30 September 2016 | For the nine months ended 30 September 2015 | For the three months ended 30 September 2016 | For the three months ended 30 September 2015 | |||||
Profit for the period | 630.1 | 893.3 | 387.2 | 411.0 | |||||
Other comprehensive income / (loss): | |||||||||
Items that may be reclassified subsequently to profit or loss: | |||||||||
Cumulative translation adjustment | 788.9 | (955.1) | 96.9 | (1,131.1) | |||||
Total comprehensive income / (loss) for the period attributable to | 1,419.0 | (61.8) | 484.1 | (720.1) | |||||
NLMK shareholders | 1,414.4 | (61.0) | 481.4 | (718.7) | |||||
Non-controlling interests | 4.6 | (0.8) | 2.7 | (1.4) |
Novolipetsk Steel
Interim condensed consolidated statement of changes in equity
for the nine months ended 30 September 2016 and 30 September 2015 (unaudited)
(millions of US dollars)
NLMK shareholders | ||||||||
Note | Common stock | Additional paid-in capital | Accumulated other comprehensive income / (loss) | Retained earnings | Non-controlling interest | Total equity | ||
Balance at 31 December 2014 | 221.2 | - | (5,491.9) | 11,512.7 | 14.7 | 6,256.7 | ||
Profit for the period | - | - | - | 891.4 | 1.9 | 893.3 | ||
Disposal of assets to an entity under common control | 16(e) | - | 9.9 | - | - | (0.1) | 9.8 | |
Cumulative translation adjustment | - | - | (952.4) | - | (2.7) | (955.1) | ||
Dividends to shareholders | 12 | - | - | - | (432.8) | - | (432.8) | |
Balance at 30 September 2015 | 221.2 | 9.9 | (6,444.3) | 11,971.3 | 13.8 | 5,771.9 | ||
Balance at 31 December 2015 | 221.2 | 9.9 | (6,988.4) | 11,883.4 | 11.6 | 5,137.7 | ||
Profit for the period | - | - | - | 627.4 | 2.7 | 630.1 | ||
Cumulative translation adjustment | - | - | 787.0 | - | 1.9 | 788.9 | ||
Dividends to shareholders | 12 | - | - | - | (422.2) | - | (422.2) | |
Balance at 30 September 2016 | 221.2 | 9.9 | (6,201.4) | 12,088.6 | 16.2 | 6,134.5 | ||
Novolipetsk Steel
Interim condensed consolidated statement of cash flows
for the nine months ended 30 September 2016 and 30 September 2015 (unaudited)
(millions of US dollars)
| Note | For the ninemonths ended 30 September 2016 | For the ninemonths ended 30 September 2015 |
Cash flows from operating activities | |||
Profit for the period | 630.1 | 893.3 | |
Adjustments to reconcile profit for the period to net cash provided by operating activities: | |||
Depreciation and amortization | 331.8 | 441.2 | |
(Gain) / loss on disposals of property, plant and equipment | (1.1) | 1.3 | |
Losses / (gains) on investments | 0.3 | (52.2) | |
Finance income | (30.9) | (38.9) | |
Finance costs | 87.4 | 65.4 | |
Equity in net losses of associates and other companies accounted for using the equity method | 49.8 | 61.3 | |
Deferred income tax expense | 22.1 | 19.9 | |
Impairment losses and write-off of assets | 8.3 | 1.1 | |
Unrealized losses / (gains) on foreign currency exchange | 104.9 | (74.1) | |
Other adjustments | (2.5) | (0.4) | |
Changes in operating assets and liabilities | |||
Increase in trade and other accounts receivable | (82.4) | (0.4) | |
Decrease in inventories | 62.5 | 65.2 | |
Increase in other current assets | (10.5) | (7.2) | |
Increase in trade and other accounts payable | 120.1 | 35.9 | |
Increase / (decrease) in current income tax liability | 12.6 | (6.2) | |
Net cash provided by operating activities | 1,302.5 | 1,405.2 | |
Cash flows from investing activities | |||
Purchases and construction of property, plant and equipment | (383.8) | (445.1) | |
Proceeds from sale of property, plant and equipment | 7.9 | 7.7 | |
Proceeds from sale / (purchases) of investments and loans given, net | 1.1 | (114.4) | |
Placement of bank deposits, net | (27.2) | (254.7) | |
Interest received | 20.8 | 23.9 | |
Contribution to share capital of a company accounted for using the equity method | - | (22.0) | |
Change in advance VAT payments on imported equipment | 30.6 | (26.4) | |
Net cash used in investing activities | (350.6) | (831.0) | |
Cash flows from financing activities | |||
Proceeds from borrowings | 757.4 | 178.3 | |
Repayment of borrowings | (1,012.2) | (342.9) | |
Interest paid | (63.8) | (71.9) | |
Dividends to shareholders | (478.7) | (307.7) | |
Net cash used in financing activities | (797.3) | (544.2) | |
Net increase in cash and cash equivalents | 154.6 | 30.0 | |
Effect of exchange rate changes on cash and cash equivalents | 29.7 | (86.2) | |
Cash and cash equivalents at the beginning of the year | 4 | 343.0 | 549.2 |
Cash and cash equivalents at the end of the period | 4 | 527.3 | 493.0 |
Supplemental disclosures of cash flow information: | |||
Cash paid during the period for: | |||
Income tax | (175.3) | (263.5) | |
Placements of bank deposits | (817.7) | (750.0) | |
Withdrawals of bank deposits | 790.5 | 495.2 | |
Non cash investing activities: | |||
Conversion of debt to equity | 5 | 139.4 | - |