News

31 October 2016

Q3 and 9M 2016 NLMK Group consolidated financial results under IFRS

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 $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.

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.”