NLMK Group Q3 and 9M 2020 IFRS Financial Results
NLMK Group (LSE: NLMK, MOEX: NLMK) is pleased to announce that in Q3 2020 its revenue increased by 3% qoq to $2.2 bn, EBITDA totalled $579 m (-1% qoq). NLMK Board of Directors recommended approving Q3 2020 dividends in the amount of RUB 6.43/share.
Q3 2020 key highlights
- Revenue increased to $2.2 bn (+3% qoq) as sales of steel products grew by 2% qoq to 4.4 m t. A 13% yoy reduction was due to a drop in prices for steel products and an increase in the share of semi-finished products in the sales mix.
- EBITDA totalled $579 m (-1% qoq). An increase in sales, an improvement in the product portfolio structure, and the devaluation of the ruble offset the negative effect from production losses during the restoration of the conveyor gallery at Stoilensky in September 2020. EBITDA margin was 26% (-1 p.p. qoq; +1 p.p. yoy).
- Free cash flow totalled $239 m (-21% qoq) with higher investment spending against the backdrop of the second stage of major overhauls at NLMK Lipetsk BF and BOF operations and other Strategy 2022 projects.
- Net profit increased 4-fold qoq to $312 m against the low base of the previous quarter when investments in NBH were impaired (a non-cash transaction).
9M 2020 key highlights
- Revenue decreased by 17% yoy to $6.9 bn due to the drop in steel product prices and the increase in the share of semi-finished products in total sales by 4 p.p. to 40%.
- EBITDA decreased by 16% yoy to $1.8 bn, driven by the decrease in revenue. EBITDA margin was 26% (+1 p.p. yoy).
- Free cash flow decreased by 26% yoy to $874 m, following the decrease in EBITDA and growth of capex as part of Strategy 2022.
- Net profit decreased by 40% yoy to $678 m, against the backdrop of lower revenue and the recognition of NBH investment impairment in the amount of $120 m in Q2 2020. Without taking this non-cash transaction into account, net profit would have totalled $798 m.
Comment from NLMK Group CFO Shamil Kurmashov:
“In Q3 2020 global business activity began to recover gradually, driving an uptick in demand for steel in our traditional sales markets and an increase in steel product prices. Nonetheless, the growing amount of new COVID-19 cases in a number of regions in September and uncertainty about future measures aimed at countering the pandemic could slow the global economic recovery.
“NLMK Group demonstrated strong operating and financial results in the past quarter. Revenue grew by 3% qoq to $2.2 bn, supported by an increase in steel product sales and a higher share of finished products in the sales portfolio. EBITDA margin was 26%. Free cash flow was $239 m, supported, among other factors, by efficient working capital management.
“Structural gain from Strategy 2022 projects in 9M 2020 totalled $170 m relative to the 2019 cost base. The impact of operational efficiency programmes on EBITDA totalled $124 m; the impact of capex projects totalled $46 m.
“Net debt/EBITDA stood at 0.87x, total debt decreased by 5% qoq, and the share of short-term debt decreased due to the restructuring and extension of a part of the credit lines.
“Strong performance and current market conditions enabled the company management to recommend NLMK Board of Directors to pay Q3 2020 dividends in the amount of $500 m. This sum includes one-off dividends of $250 on top of the Dividend Policy aimed at compensating the decrease in dividends in Q4 2019 following the resolution of the Meeting of Shareholders held on 24 April 2020.”
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