Company Announcements

NLMK GROUP Q3 2020 IFRS FINANCIAL RESULTS

Source: RNS
RNS Number : 7670C
Novolipetsk Steel
21 October 2020
 

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.

Key highlights

k t/$ million

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Sales volumes

4,443

4,352

2%

4,015

11%

13,300

12,897

3%

Revenue

2,229

2,174

3%

2,576

-13%

6,860

8,242

-17%

EBITDA 2

579

582

-1%

654

-11%

1,755

2,084

-16%

EBITDA margin

26%

27%

-1 p.p.

25%

+1 p.p.

26%

25%

+1 p.p.

Profit for the period 3

312

77

4.1x

343

-9%

678

1,139

-40%

Free cash flow 4

239

304

-21%

249

-4%

874

1,185

-26%

Net debt 5

1,946

1,830

6%

1,736

12%

1,946

1,736

12%

Net debt/EBITDA 5

0.87x

0.79x

 

0.59x

 

0.87x

0.59x

 

 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).

 

Investor relations contact:

Dmitry Kolomytsyn, CFA

+7 (495) 504 0504

ir@nlmk.com

Media relations contact:

Maria Simonova

+7 (915) 322 62 25

simonova_mn@nlmk.com

1 Consolidated financial results are prepared under IFRS. Reporting periods of the Company are 3M, 6M, 9M and 12M. Quarterly figures are obtained by calculation, including in the segment reporting. Figures for comparable periods may differ from figures posted earlier because of rounding off to integers.

2 EBITDA is the operating profit before equity share in financial results of joint ventures, impairment of capital assets and losses from retirement of fixed assets, allowed for amortization and depreciation. EBITDA calculations and further details are presented in the Appendix.

3 Profit for the period attributable to NLMK shareholders.

4 Free cash flow is determined as net cash from operations plus interest received net of interest paid and capital investment. Free cash flow calculations are presented in the Appendix.

5 Net debt is calculated as the sum of long-term and short-term borrowings less cash and cash equivalents, as well as short-term deposits at period end. Net debt / EBITDA is represented by net debt as at the end of the reporting period and EBITDA as last 12 months EBITDA. Net debt calculations are presented in the Appendix.

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."

 

TELECONFERENCE

 

NLMK is pleased to invite the investment community to a conference call and webcast with the management of NLMK:

Wednesday, October 21, 2020

·    10:00 am (New York)

·    3:00 pm (London)

To join the conference call, please dial:

US Number:

+1 929-477-0402 (Local access) // 888-204-4368 (Toll free)

United Kingdom Number:
+44 (0)330 336 9411 (Local access) // 0800 279 7204 (Toll free)

Russian Number:
+7 495 646 9190 (Local access) // 8 10 800 2867 5011 (Toll free)

 

Conference ID: 7391657

To join the webcast (with registration form), please follow the link https://webcasts.eqs.com/nlmk20201021 

*We recommend that participants start dialing in 10-15 minutes prior to ensure a timely start of the conference call.

 

 

MANAGEMENT COMMENTS 

Q3 2020 market review

·     Q3 2020 saw an increase in demand for steel amid a gradual recovery in global business activity. Thanks to the state support programme, China became a net importer of steel products for the first time in many years as a result of strong growth in domestic consumption. Market conditions also improved in the US, EU, and other key regions.

·     Consumption of steel products in Russia increased by 15-20% qoq*, practically reaching the Q3 2019 level, with the recovery of seasonal demand from the construction sector. Demand for rebar grew by 30% qoq. 

·     Alongside the recovery in steel demand, manufacturers around the world began to resume previously suspended operations, resulting in an average global utilization rate of more than 80%, returning to pre-crisis levels.

Q3 2020 prices

·     Raw material prices: average global coal prices dropped by 5% qoq due to weak demand from key consumer regions (Japan, India, and Europe) amid the COVID-19 pandemic and import restrictions in China; iron ore prices grew by 26% qoq, driven by a record steel output volume in China and uncertainty around supply volumes from major exporting countries.

·     Market prices** for flat steel were pressured by weak demand amid the COVID-19 pandemic, despite the high cost of the commodity basket on the global market. Prices in the US decreased by 1% qoq (-23% yoy), euro-denominated prices in Europe decreased by 1% qoq (-16% yoy), but dollar-denominated prices increased by 5% qoq (-4% yoy) due to the weakening of the US dollar. 

·     Uncoated steel prices in the Russian market denominated in dollars dropped by 3% qoq (-21% yoy).  Rebar prices in dollar terms climbed 1% qoq (-21% yoy).

·     Export slab prices (FOB Black Sea) grew by 22% qoq (+2% yoy).

 

* Data on steel consumption trends on regional markets are estimates.

** Market prices reflect the level of prices for a given calendar period and differ from the average sales prices of the Company and its segments due to the time lag of the production & sales cycle. 
 

Q3 2020 output and sales breakdown

·    Steel output* grew by 3% yoy to 3.9 m t driven by higher steel output by NLMK's Russian facilities (flat qoq). The qoq decline in steel output in the Russia Flat Products segment, related to the start of the second stage of large-scale capital repairs at NLMK Lipetsk BF and BOF operations, was offset by the recovery in utilization rates in the Russia Long Products and NLMK USA segments.

·    Sales grew by 2% qoq to 4.4 m t, the share of finished products in the sales portfolio increased amid the launch of overhauls at NLMK Lipetsk hot-end operations (see above). Year-on-year, sales volumes grew by 11% to 4.4 m t due mainly to increased demand for pig iron.

·    Sales of semi-finished products to third parties increased by 61% yoy, due to the growth of pig iron export sales. Quarter-on-quarter, sales of semi-finished products to third parties decreased by 5% to 1.4 m t with the start of overhauls at NLMK Lipetsk hot-end operations. Slab deliveries to NBH decreased by 35% qoq to 0.3 m t (-28% yoy).

·    Sales of finished products grew by 14% qoq to 2.8 m t against the backdrop of a recovery in demand for steel products on the Russian market. Year-on-year, sales of finished products grew by 1% due to higher demand for long and hot-rolled products from the construction sector in Russia.

·    Sales on 'home' markets grew by 19% qoq due to a gradual recovery in demand on the markets where NLMK Group operates.

9M 2020 output and sales breakdown

·    Steel output* remained flat year-on-year.

·    Sales increased by 3% yoy to 13.3 m t with increased demand for pig iron. Sales of semis to third parties increased by 28% yoy to 3.9 m t, due to increased export sales of pig iron. Slab sales to NBH decreased by 4% yoy to 1.5 m t.

·    Sales of finished products decreased by 5% yoy to 7.9 m t amid weak demand in April-May 2020 and sales redistribution to semi-finished products. Sales on 'home' markets reduced by 4% yoy to 8.1 m t, due to the slowdown in the US and EU sales during the economic crisis amid the COVID-19 pandemic.

* Hereinafter NLMK Group steel output and sales on home markets include NBH. Consolidated sales are given without NBH. Sales to home markets mean sales of the Group's companies in the regions, where production capacities are located in Russia, Europe, and the US.

NLMK GROUP KEY FINANCIALS

Q3 2020 revenue

·      Revenue grew by 3% qoq to $2.2 bn as sales of steel products grew by 2% qoq reaching 4.4 m t. Year-on-year, revenue was down by 13% due to a drop in prices for steel products and an increase in the share of semi-finished products in the sales mix.

·      The share of finished products increased by 5 p.p. qoq to 66%, while the share of high value-added products increased by 3 p.p. to 37%. The share of semi-finished products in the revenue decreased by 4 p.p. qoq to 29% due to reduced slab sales associated with planned overhauls and a recovery in demand for finished products in Russia.

·      The share of the Russian market in the revenue recovered to 46% (+9 p.p. qoq; +1 p.p. yoy). The share of Asian countries was 14% (-1 p.p. qoq; +13 p.p. yoy), while the EU share was down to 11% (-5 p.p. qoq; -3 p.p. yoy), and the US share was down to 14% (-1 p.p. qoq; -3 p.p. yoy).

 

 

9M 2020 revenue

·     Revenue decreased by 17% yoy to $6.9 bn, due to lower steel product prices, a higher share of semi-finished products in the sales portfolio, and low demand in the US and EU amid the pandemic.

·     The share of semi-finished products in the revenue increased by 4 p.p. yoy to 30% as a result of growing pig iron sales to third parties; the share of finished products decreased by 4 p.p. yoy to 64%. The share of revenue from high value-added products totalled 37% (-1 p.p. yoy).

·     The Russian market share in the revenue increased to 41% (+1 p.p. yoy). The US and EU shares in the consolidated revenue reduced by 3 p.p. yoy to 16% and 16%, respectively.

 

Q3 2020 EBITDA

·    EBITDA* went down by 1% qoq to $579 m (-11% yoy). Widening spreads and ruble depreciation enabled offsetting the negative impact of the incident at Stoilensky in September ($60 m) that resulted in a decrease in the share of captive iron ore in NLMK's consumption and reduced iron ore sales to third parties. Excluding this one-off effect, Q3'20 EBITDA would be $639 m.

·    Commercial expenses went down by 8% qoq (+3% yoy) to $208 m, due to lower transport costs associated with the normalization of the share of export sales for the Group's Russian companies.

·    General and administrative expenses grew by $2 m (+2% qoq; -8% yoy).

9M 2020 EBITDA

·    EBITDA went down by 16% yoy to $1.8 bn amid narrowing steel/raw material price spreads, which was partially offset by operational efficiency gains and the ruble depreciation.

·    Commercial expenses increased by 3% yoy to $647 m due to higher exports.

·    General and administrative expenses decreased by 3% yoy to $252 m.

Net profit**

·    Q3 2020 net profit recovered to $312 m (4x growth qoq; -9% yoy) due to the low base of the previous quarter, associated with the recognition of the impairment of a $120 m investment in NBH. 9M 2020 net profit decreased by 40% yoy to $678 m due to lower operating profit and impairment of the NBH investment.

 

* EBITDA used in NLMK's financial releases is calculated as 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, adjusted to depreciation and amortization. EBITDA is not an indicator of operating profit, operating activity or liquidity under IFRS, and NLMK discloses it because equivalent indicators could be used by investors and analysts. That said, NLMK's EBITDA should not be viewed on a standalone basis, or in place of profit before tax, or cash flows from operations, as defined by IFRS, or as an indicator of operational efficiency, or as the sum of free cash funds that NLMK can invest into business development. NLMK's EBITDA margin and EBITDA might not be comparable to similar indicators disclosed by other companies as there are no commonly accepted rules for calculating them. For instance, NLMK's EBITDA is calculated similar to what is termed as 'Adjusted EBITDA' in other companies, as NLMK's EBITDA excludes other profit/loss items in addition to interest payments, income tax, depreciation and amortization.

**Profit for the period, attributable to NLMK shareholders.

Q3 2020 free cash flow

·     Free cash flow went down by 21% qoq to $239 m with higher capex after the start of the active stage of NLMK Lipetsk large-scale capital repairs and amid active execution of Strategy 2022 projects. Year-on-year, free cash flow was 4% lower amid the reduction in EBITDA, which was partially offset by cash inflows from working capital.

·     Operating cash flow grew by 8% qoq to $591 m due to cash inflows from working capital.

·     Cash inflow from working capital totalled $98 m due to:

- $37 m: an increase in receivables due to higher sales prices of steel products;

+ $49 m: slab inventory reduction at NLMK USA, as well as finished products inventory, against the backdrop of strong demand in Russia and a shorter transport leg with a decrease in the export share;

+ $93 m: an increase in payables due to increased purchases of third-party raw materials.

9M 2020 free cash flow

·     Free cash flow declined by 26% yoy to $874 m due mainly to lower EBITDA and an 18% yoy increase in investment, which was partially offset by cash inflows from working capital.

·     Cash inflow from working capital totalled $240 m due to:

+ $28 m: reduction of receivables due to declining steel product prices;

+ $198 m: decrease in inventory amid lower cost of raw materials and steel products, and improved efficiency of working capital management;

+ $18 m: increase in payables in Q3 2020.

Investment

·     The Group's investment in Q3 2020 increased by 57% qoq to $344 m (+9% yoy) amid repairs at the NLMK Lipetsk blast furnace and basic oxygen furnace operations and active execution of Strategy 2022 projects.

·     The Group's investment in 9M 2020 went up by 18% yoy to $851 m.

Dividends

·     In Q3 2020, NLMK paid out $270 m in dividends.

·     On 21 October 2020, the Board of Directors recommended that shareholders approve the payment of Q3 2020 dividends in the amount of 6.43 rubles per share (for a total of $500 m). This amount includes one-off dividends on top of the Dividend Policy ($250 m) aimed at compensating the decrease in dividends in Q4 2019 following the resolution of the Meeting of Shareholders held in April 2020.

Strategy 2022 execution

·     In Q3 2020, structural EBITDA gains from Strategy 2022 execution totalled $55 m (relative to the 2019 base), including operational efficiency gains of $25 m, and capex project gains of $30 m.

·     During 9M 2020, operational efficiency improvements contributed $124 m to EBITDA, capex projects added $46 m. Projects aimed at increasing output at Stoilensky and NLMK's Briquetting Plant accounted for the bulk of the effect.

Debt management

·     Total debt in Q3 2020 went down by 5% qoq to $3.2 bn due to the repayment of a part of short-term debt in line with the payment schedule. Short-term debt in the amount of $340 m was restructured or prolonged and included into long-term debt.

·     Net debt grew by 6% qoq to $1.9 bn due to increased investment and high dividend payments. Net debt/EBITDA stood at 0.87х.

Q4 2020 outlook

·     We expect that the increase in steel output at NLMK Lipetsk in Q4 2020 following the completion of major capital repairs at the site's hot-end operations will support the achievement of the NLMK Lipetsk steel output estimate of 12.2-12.3 m t in 2020 communicated earlier. Corresponding projects form part of the modernization programme which will enable an increase in NLMK Lipetsk's steel output to 14.2 m t per year starting from 2021.

NLMK Russia Flat Products

Q3 2020 highlights

·    Sales went down by 4% qoq to 3.3 m t, following the decrease in output due to major repairs at NLMK Lipetsk. Year-on-year, sales grew by 18% due to the sale of additional pig iron volumes.

·    Revenue in the Segment decreased slightly by 1% qoq to $1.6 bn (-8% yoy) following the drop in sales, which was partially offset by an increase in average sales prices and an improvement in the product portfolio mix.

·     EBITDA went up by 1% qoq to $306 m. Improved sales mix and a weaker ruble offset the impact from the growth of the share of third party iron ore used in production.

9M 2020 highlights

·    Sales grew by 10% yoy to 10.2 m t due to strong Q1 2020 performance and a quick recovery of demand in Russia in Q3 2020.

·    Revenue was down by 11% yoy to $5 bn as steel product prices decreased, which was partially offset by higher sales.

·    EBITDA decreased by 22% yoy to $964 m amid narrowing spreads.

 

NLMK Russia Long Products

Q3 2020 highlights

·     Sales grew by 35% qoq to 0.8 m t (+16% yoy), supported by the significant growth of the Russian long products market, associated with the previous quarter's low base effect amid the COVID-19 pandemic, and the shift in the start of the construction season.

·     Revenue went up by 39% qoq to $452 m following the growth in sales. Year-on-year, revenue was down by 7% due to long product and billet prices decreasing by 18% and 13% yoy, respectively.

·     EBITDA in the Segment totalled $37 m, with higher sales and a lower share of billet in the sales mix, and wider rebar/scrap price spread.

9M 2020 highlights

·     Sales went down by 10% yoy to 2 m t amid lower demand for long products in 2020.

·     Revenue decreased by 20% yoy to $1.1 bn, following lower sales and prices.

·     EBITDA totalled $61 m (-33% yoy) due to lower sales and the change in the sales mix, and narrower rebar/scrap spreads, which was partially offset by operational efficiency programme gains.

 

 

 

Mining and Processing of Raw Materials

Q3 2020 highlights

·    Sales were down by 16% qoq to 4.1 m t (-14 % yoy) due to the accident that led to a collapse of an ore supply conveyor gallery on 7 September, 2020. On 22 September, 2020 Stoilensky resumed production of iron ore products.

·    Revenue decreased by 2% qoq to $330 m (-19% yoy) following sales, which was partially offset by ruble-denominated prices for pellets and concentrate increasing by 12% and 23% qoq, respectively.

·    EBITDA went up by 1% qoq to $250 m, driven by higher prices and operational efficiency programmes, as well as capex projects. The accident (see above) has the key constraining factor.

9M 2020 highlights

·    Sales were down by 2% yoy to 13.6 m t due to the accident (see above), which was partially offset by the growth of equipment productivity.

·    Revenue decreased to $978 m (-2% yoy) following lower sales.

·    EBITDA totalled $725 m (-1% yoy).

 

NLMK USA

Q3 2020 highlights

·    Sales increased by 11% qoq to 0.37 m t due to higher HRC shipments, supported by the completion of planned repairs at the NLMK Indiana plant and the gradual recovery of business activity on the US market. Year-on-year, sales were 33% lower due to low NLMK Pennsylvania capacity utilization rates amid the strike.

·    Revenue went down by 6% qoq to $223 m (-43% yoy) as the share of HRC in the sales mix increased and average sales prices slumped.

·    EBITDA totalled -$12 m (vs. $3 m the previous quarter) amid narrower slab/rolled steel spreads. The negative trend was partially offset by higher sales and operational efficiency programme gains.

9M 2020 highlights

·    Sales stood at 1.2 m t (-29% yoy) as steel consumption decreased in the US, pressured by the consequences of the COVID-19 pandemic.

·    Revenue dropped by 40% yoy to $838 m due to a steel price adjustment and lower sales, which was partially offset by a 3 p.p. increase in the share of high value-added products, which reached 49%.

·    EBITDA decreased to -$31 m vs. $0 m the previous year due to narrower price spreads and rolled product price adjustments.

 

 

 

NLMK DanSteel*

Q3 2020 highlights

·    Sales of plate were down by 21% qoq to 0.1 m t (-18% yoy) due to weak demand amid the COVID-19 pandemic.

·    Revenue decreased by 16% qoq to $80 m. Lower sales were partially offset by plate prices growing by 4% qoq.

·    EBITDA totalled -$3 m (flat qoq).

9M 2020 highlights

·    Sales stood at 0.38 m t (-4% yoy) as plate consumption decreased in Q2-Q3 2020 due to the pandemic.

·    Revenue was down by 20% yoy to $305 m, mainly due to the plate price adjustment.

·    EBITDA totalled $0 m (vs. $7 m the previous year) due to narrower plate/slab spreads.

 

* NLMK DanSteel and plate distribution network.

JV performance (NBH)

Q3 2020 highlights

·    NBH sales remained almost flat qoq at 0.5 m t. Year-on-year, sales decreased by 14% amid weak demand on the European market.

·    Revenue was down by 3% qoq to $299 m, following a price adjustment by an average 2% qoq.

·    EBITDA decreased to -$32 m vs. -$14 m the previous quarter due to lower finished product prices and reduced average capacity utilization rates.

9M 2020 highlights

·    NBH sales decreased by 8% yoy to 1.5 m t due to lower demand for steel products in Q2 2020 amid the COVID-19 pandemic.

·    Revenue dropped by 18% yoy to $989 m due to lower steel product sales prices and a decrease in sales.

·    EBITDA totalled -$65 m vs. -$107 m the previous year. Losses in the Segment were due to unfavourable market conditions amid low prices. The relative decrease in losses vs. the previous year was due, among other factors, to last year's accrual of non-operating provisions for NLMK Clabecq restructuring.

 

 

Appendix No. 1 Operating and financial results

 (1) Sales markets

k t

Total

Sales markets

 

Russia

ЕС

Russia

Middle
East and Turkey

Russia

Other

NLMK Group (with NBH)

4,589

1,817

677

517

589

57

932

Division sales to third parties:

 

 

 

 

 

 

 

NLMK Russia Flat

2,872

1,266

37

148

527

49

845

NLMK Russia Long

802

551

94

0

52

0

105

International subsidiaries and affiliates, incl.:

915

0

546

369

9

8

-18

NLMK USA

364

0

0

364

0

0

0

European rolling facilities (NLMK DanSteel and NBH)

580

0

524

9

7

7

33

 

(2) NLMK Russia Flat

k t/$ million

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Steel product sales, incl.:

3,281

3,432

-4%

2,776

18%

10,182

9,234

10%

external customers

2,870

2,834

1%

2,226

29%

8,204

7,006

17%

semis to NBH

308

472

-35%

430

-28%

1,514

1,580

-4%

intersegmental sales

102

126

-19%

119

-14%

464

647

-28%

Revenue, incl.:

1,600

1,624

-1%

1,741

-8%

5,012

5,640

-11%

external customers

1,425

1,384

3%

1,482

-4%

4,185

4,550

-8%

intersegmental operations

175

240

-27%

259

-32%

827

1,090

-24%

EBITDA

306

303

1%

363

-16%

964

1,242

-22%

EBITDA margin

19%

19%

0 p.p.

21%

-2 p.p.

19%

22%

-3 p.p.

 

(3) NLMK Russia Long

k t/$ million

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Steel product sales

802

594

35%

693

16%

1,965

2,176

-10%

Revenue, incl.:

452

326

39%

485

-7%

1,094

1,368

-20%

external customers

337

251

34%

359

-6%

848

1,112

-24%

intersegmental operations

115

75

53%

126

-9%

246

256

-4%

EBITDA

37

10

3,7x

46

-20%

61

91

-33%

EBITDA margin

8%

3%

+5 p.p.

9%

-1 p.p.

6%

7%

-1 p.p.

 

 

 

(4) Mining Segment

k t/$ million

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Iron ore products sales, incl.:

4,112

4,880

-16%

4,784

-14%

13,596

13,886

-2%

sales to NLMK Lipetsk

3,954

4,428

-11%

4,420

-11%

12,912

13,411

-4%

Revenue, incl.:

330

336

-2%

406

-19%

978

994

-2%

external customers

38

24

58%

42

-10%

72

62

16%

intersegmental operations

292

312

-6%

364

-20%

906

932

-3%

EBITDA

250

248

1%

314

-20%

725

736

-1%

EBITDA margin

76%

74%

+2 p.p.

77%

-1 p.p.

74%

74%

0 p.p.

 

 (5) NLMK USA

k t/$ million

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Steel product sales

366

330

11%

549

-33%

1,234

1,733

-29%

Revenue, incl.:

223

238

-6%

391

-43%

838

1,393

-40%

external customers

223

238

-6%

391

-43%

838

1,393

-40%

intersegmental operations

-

-

0%

-

0%

-

-

0%

EBITDA

(12)

3

-4x

(33)

-64%

(31)

-

-

EBITDA margin

-5%

1%

-6 p.p.

-8%

+3 p.p.

-4%

0%

-4 p.p.

 

 (6) NLMK DanSteel

k t/$ million

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Steel product sales

97

122

-21%

118

-18%

383

401

-4%

Revenue, incl.:

80

95

-16%

111

-28%

305

381

-20%

external customers

79

95

-17%

111

-29%

304

380

-20%

intersegmental operations

1.0

-

-

-

0%

1

1

0%

EBITDA

(3)

(3)

0%

1

-3x

-

7

-100%

EBITDA margin

-4%

-3%

-1 p.p.

1%

-5 p.p.

0%

2%

-2 p.p.

 

(7) NBH

k t/$ million

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Steel product sales

461

468

-1%

537

-14%

1,534

1,667

-8%

Revenue, incl.:

299

308

-3%

369

-19%

989

1,213

-18%

external customers

286

297

-4%

348

-18%

953

1,170

-19%

intersegmental operations

13.0

11.0

18%

21.0

-38%

36

43

-16%

EBITDA

(32)

(14)

2,3x

(43)

-26%

(65)

(107)

-39%

EBITDA margin

-11%

-5%

-6 p.p.

-12%

+1 p.p.

-7%

-9%

+2 p.p.



 

 (8) Sales by product 

k t

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Pig iron

389

368

292

253

54

Slabs

1,215

1,445

1,430

1,172

1,173

Thick plates

97

122

164

128

118

Hot-rolled steel

887

904

921

912

852

Cold-rolled steel

480

405

528

473

533

Galvanized steel

315

292

362

331

338

Pre-painted steel

129

96

97

113

117

Grain-oriented steel

64

65

70

66

63

Non-grain-oriented steel

66

62

72

50

75

Billet

86

116

30

1

60

Long products

642

426

474

596

568

Metalware

74

53

65

77

65

TOTAL

4,443

4,352

4,505

4,172

4,015

 

 (9) Sales by region

k t

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Russia

1,817

1,447

1,767

1,805

1,682

European Union

482

767

1,026

787

674

Middle East, including Turkey

580

553

529

556

633

North America

562

472

826

727

606

Central and South America

49

44

134

73

164

CIS

135

76

91

91

114

Asia and Oceania

794

899

23

69

21

Rest of World

25

95

108

64

122

TOTAL

4,443

4,352

4,505

4,172

4,015

 

 (10) Revenue by region

Region

Q3 2020

Q2 2020

Q1 2020

$ million

share

$ million

share

$ million

share

Russia

1,022

46%

797

37%

1,009

41%

European Union

252

11%

358

16%

505

21%

Middle East, including Turkey

246

11%

250

11%

241

10%

North America

300

13%

299

14%

485

20%

Central and South America

22

1%

23

1%

70

3%

CIS

52

2%

58

3%

75

3%

Asia and Oceania

315

14%

333

15%

29

1%

Rest of World

20

1%

57

3%

43

2%

TOTAL

2,229

100%

2,174

100%

2,457

100%



 

 (11) EBITDA calculation*

$ million

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Operating income**

437

437

439

338

512

minus:

 

 

 

 

 

Depreciation and amortization

(142)

(145)

(155)

(142)

(142)

EBITDA

579

582

594

480

654

* EBITDA used in NLMK's financial releases is calculated as 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, adjusted to depreciation and amortization. EBITDA is not an indicator of operating profit, operating activity or liquidity under IFRS, and NLMK discloses it because equivalent indicators could be used by investors and analysts. That said, NLMK's EBITDA should not be viewed on a standalone basis, or in place of profit before tax, or cash flows from operations, as defined by IFRS, or as an indicator of operational efficiency, or as the sum of free cash funds that NLMK can invest into business development. NLMK's EBITDA margin and EBITDA might not be comparable to similar indicators disclosed by other companies as there are no commonly accepted rules for calculating them. For instance, NLMK's EBITDA is calculated similar to what is termed as 'Adjusted EBITDA' in other companies, as NLMK's EBITDA excludes other profit/loss items in addition to interest payments, income tax, depreciation and amortization.

** 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

 

 (12) Free cash flow calculation

$ million

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Net cash provided operating activities

591

549

617

710

568

Interest paid

(9)

(28)

(2)

(22)

(4)

Interest received

1

2

4

9

1

Advance VAT payments on imported equipment

-

-

-

-

-

Capex

(344)

(219)

(288)

(359)

(316)

Free Cash Flow

239

304

331

338

249

 

 (13) Net debt calculation

$ million

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Short-term loans and credit lines

856

1,219

1,678

468

389

Long-term loans and credit lines

2,346

2,139

1,799

2,188

2,288

Cash and cash equivalents

(755)

(1,121)

(1,456)

(713)

(421)

Short-term bank deposits

(501)

Net debt

1,946

 

 

 

(14) Production of main products

k t

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Crude steel, incl.:

3,824

3,809

4,171

3,749

3,714

Steel Segment

2,864

3,145

3,325

2,977

2,818

Long products Segment, incl.:

786

610

659

603

719

NLMK Kaluga

361

272

256

215

256

Foreign Rolled Products Segment

173

53

188

169

176

Finished products, incl.:

2,614

2,467

2,852

2,642

2,725

Flat steel

1,957

1,978

2,240

2,058

2,071

Long steel

657

489

612

584

653

Coke (6% moisture), incl.:

1,506

1,530

1,540

1,487

1,418

NLMK Lipetsk

647

643

645

652

655

Altai-Koks

858

887

895

834

762

 (15) Slab sales, including intra-group sales to NLMK Group companies

k t

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Sales to 3rd parties, incl.:

907

973

696

648

743

Export

797

796

406

473

532

Sales to subsidiaries & associates

410

598

970

851

550

Sales to NBH

308

472

734

523

430

TOTAL

1,318

1,571

1,665

1,499

1,292

 

 (16) Export shipments of steel products from Group's Russian companies to third parties

k t

Q3 2020

Q2 2020

qoq

Q3 2019

yoy

9M 2020

9M 2019

yoy

Semi-finished products

1,271

1,280

-1%

641

98%

3,279

2,347

40%

Pig iron

389

368

6%

54

7.2x

1,048

257

4.1x

Slabs

797

796

0%

532

50%

2,000

1,797

11%

Billets

85

116

-26%

55

55%

231

293

-21%

Flat products

416

591

-30%

452

-8%

1,445

1,578

-8%

HRC

160

352

-55%

183

-13%

660

703

-6%

CRC

148

135

10%

158

-6%

442

503

-12%

HDG

8

8

8%

5

60%

32

42

-22%

Coated

1

0

2.9x

1

32%

2

4

-46%

Non-grain-oriented

47

42

13%

54

-13%

142

149

-5%

Grain-oriented

52

55

-6%

51

0%

167

177

-6%

Long products

169

110

54%

144

18%

415

422

-2%

Total

1,856

1,981

-6%

1,237

50%

5,139

4,346

18%

 

 

 

(17) Segmental information 

Q3 2020

Russian Flat Steel

Russian Long Products

Mining

NLMK USA

NLMK DanSteel and Plates Distribution Network

Investments in NBH

Totals

Intersegmental operations and balances

NBH
deconsoli-

dation

Consolidated

$ million

 

Revenue from external customers

1,425

337

38

223

79

286

2,388

-

(159)

2,229

Intersegment revenue

175

115

292

-

1

13

596

(583)

(13)

-

Gross profit

457

62

248

(16)

5

(6)

750

(18)

20

752

Operating income/(loss)

218

26

224

(26)

(6)

(47)

389

(13)

61

437

Income / (loss) before minority interest

441

24

170

(26)

(11)

(50)

548

(290)

54

312

Segment assets including goodwill

6,756

859

1,592

655

403

1,362

11,627

(1,281)

(1,128)

9,218

Balance figures presented as of 30.09.2020

Q2 2020

Russian Flat Steel

Russian Long Products

Mining

NLMK USA

NLMK DanSteel and Plates Distribution Network

Investments in NBH

Totals

Intersegmental operations and balances

NBH
deconsoli-

dation

Consolidated

$ million

 

Revenue from external customers

1,384

251

24

238

95

297

2,289

-

(115)

2,174

Intersegment revenue

240

75

312

-

-

11

638

(627)

(11)

-

Gross profit

455

34

245

1

9

15

759

26

(26)

759

Operating income/(loss)

213

(1)

221

(11)

(6)

(28)

388

32

17

437

Income / (loss) before minority interest

355

(7)

178

(11)

(7)

(30)

478

(275)

(126)

77

Segment assets including goodwill

7,196

922

1,661

724

368

1,385

12,256

(983)

(1,143)

10,130

Balance figures presented as of 30.06.2020

 

 

 

Novolipetsk Steel

Interim condensed consolidated statement of financial position (unaudited)

(millions of US dollars)

 

 

 

 

As at

30 September 2020

 

As at
31 December 2019

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

755

 

713

Short-term financial investments

 

596

 

287

Trade and other accounts receivable

 

890

 

1,047

Inventories

 

1,219

 

1,634

Other current assets

 

18

 

14

 

 

3,478

 

3,695

Non-current assets

 

 

 

 

Long-term financial investments

 

5

 

5

Investments in joint ventures

 

174

 

223

Property, plant and equipment

 

5,112

 

6,039

Goodwill

 

198

 

248

Other intangible assets

 

143

 

162

Deferred income tax assets

 

102

 

101

Other non-current assets

 

6

 

11

 

 

5,740

 

6,789

Total assets

 

9,218

 

10,484

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other accounts payable

 

937

 

1,124

Dividends payable

 

363

 

318

Short-term borrowings

 

856

 

468

Current income tax liability

 

14

 

32

Other short-term liabilities

 

5

 

-

 

 

2,175

 

1,942

Non-current liabilities

 

 

 

 

Long-term borrowings

 

2,346

 

2,188

Deferred income tax liability

 

346

 

405

Other long-term liabilities

 

38

 

2

 

 

2,730

 

2,595

Total liabilities

 

4,905

 

4,537

 

 

 

 

 

Equity attributable to Novolipetsk Steel shareholders

 

 

 

 

Common stock

 

221

 

221

Additional paid-in capital

 

9

 

9

Accumulated other comprehensive loss

 

(7,538)

 

(6,140)

Retained earnings

 

11,611

 

11,840

 

 

4,303

 

5,930

Non-controlling interests

 

10

 

17

Total equity

 

4,313

 

5,947

Total liabilities and equity

 

9,218

 

10,484

 

 

 

Novolipetsk Steel

Interim condensed consolidated statement of profit or loss (unaudited)

(millions of US dollars, unless otherwise stated)

 

 

 

 

For the nine months ended
30 September 2020

 

For the nine months ended
30 September 2019

 

For the three
months ended
30 September 2020

 

For the three
months ended
30 September 2019

 

 

 

 

 

 

 

 

 

Revenue

 

6,860

 

8,242

 

2,229

 

2,576

Cost of sales

 

(4,595)

 

(5,640)

 

(1,477)

 

(1,754)

 

 

 

 

 

 

 

 

 

Gross profit

 

2,265

 

2,602

 

752

 

822

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

(252)

 

(261)

 

(84)

 

(91)

Selling expenses

 

(647)

 

(630)

 

(208)

 

(202)

Net impairment losses on financial assets

 

(8)

 

(2)

 

(3)

 

-

Other operating income/(expenses), net

 

3

 

5

 

(6)

 

-

Taxes, other than income tax

 

(48)

 

(50)

 

(14)

 

(17)

 

 

 

 

 

 

 

 

 

Operating profit before share of results of joint ventures, impairment of non-current assets and loss on disposals of property, plant and equipment

 

1,313

 

1,664

 

437

 

512

 

 

 

 

 

 

 

 

 

Loss on disposals of property, plant and equipment

 

(4)

 

(2)

 

(2)

 

(1)

Impairment of non-current assets

 

(3)

 

(6)

 

(2)

 

(1)

Share of results of joint ventures

 

(186)

 

(45)

 

(10)

 

-

Finance income

 

7

 

13

 

2

 

5

Finance costs

 

(70)

 

(54)

 

(29)

 

(19)

Foreign currency exchange (loss)/gain, net

 

(29)

 

(53)

 

38

 

(13)

Hedging result

 

(11)

 

-

 

(7)

 

-

Expenses on operations with financial instruments

 

(31)

 

-

 

-

 

-

Other expenses, net

 

(53)

 

(19)

 

(13)

 

(2)

 

 

 

 

 

 

 

 

 

Profit before income tax

 

933

 

1,498

 

414

 

481

 

 

 

 

 

 

 

 

 

Income tax expense

 

(255)

 

(357)

 

(102)

 

(137)

 

 

 

 

 

 

 

 

 

Profit for the period

 

678

 

1,141

 

312

 

344

 

 

 

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

 

 

 

 

Novolipetsk Steel shareholders

 

678

 

1,139

 

312

 

343

Non-controlling interests

 

-

 

2

 

-

 

1

 

 

 

 

 

 

 

 

 

Earnings per share - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to
Novolipetsk Steel shareholders (US dollars)

 

0.1131

 

0.1900

 

0.0521

 

0.0572

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Novolipetsk Steel

Interim condensed consolidated statement of cash flows (unaudited)

(millions of US dollars)

 

 

 

 

For the nine months ended
30 September 2020

 

For the nine months ended
30 September 2019

Cash flows from operating activities

 

 

 

 

Profit for the period

 

678

 

1,141

Adjustments to reconcile profit for the period to net cash provided by operating activities:

 

 

 

 

Depreciation and amortisation

 

442

 

420

Loss on disposals of property, plant and equipment

 

4

 

2

Finance income

 

(7)

 

(13)

Finance costs

 

70

 

54

Share of results of joint ventures

 

186

 

45

Income tax expense

 

255

 

357

Impairment of non-current assets

 

3

 

6

Foreign currency exchange loss, net

 

29

 

53

Hedging result

 

11

 

-

Expenses on operations with financial instruments

 

31

 

-

Change in impairment allowance for inventories and credit loss allowance for accounts receivable

 

3

 

6

Changes in operating assets and liabilities

 

 

 

 

Decrease in trade and other accounts receivable

 

28

 

76

Decrease in inventories

 

198

 

193

Increase in other operating assets

 

(4)

 

(2)

Increase /(decrease) in trade and other accounts payable

 

18

 

(136)

Сash provided by operating activities

 

1,945

 

2,202

Income tax paid

 

(188)

 

(289)

Net cash provided by operating activities

 

1,757

 

1,913

Cash flows from investing activities

 

 

 

 

Purchases and construction of property, plant and equipment and intangible assets

 

(851)

 

(721)

Proceeds from sale of property, plant and equipment

 

5

 

1

Purchases of investments and loans given

 

(51)

 

(164)

Proceeds from repayment of loans given

 

85

 

-

Placement of bank deposits

 

(686)

 

(930)

Withdrawal of bank deposits

 

347

 

410

Interest received

 

7

 

20

Contribution to share capital of joint venture

 

(131)

 

-

Acquisition of non-controlling interest

 

-

 

(1)

Net cash used in investing activities

 

(1,275)

 

(1,385)

Cash flows from financing activities

 

 

 

 

Proceeds from borrowings

 

1,599

 

980

Repayment of borrowings

 

(1,118)

 

(434)

Payments on leases

 

(15)

 

(10)

Interest paid

 

(39)

 

(27)

Payments from settlement of derivative financial instruments

 

(8)

 

-

Dividends paid to Novolipetsk Steel shareholders

 

(845)

 

(1,773)

Dividends paid to non-controlling interests

 

(4)

 

-

Net cash used in financing activities

 

(430)

 

(1,264)

Net increase/(decrease) in cash and cash equivalents

 

52

 

(736)

Effect of exchange rate changes on cash and cash equivalents

 

(10)

 

(22)

Cash and cash equivalents at the beginning of the year

 

713

 

1,179

Cash and cash equivalents at the end of the period

 

755

 

421

 

 

 

 

 

 

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