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Novolipetsk Steel PAO

NLMK GROUP 12M AND Q4 2020 IFRS FINANCIAL RESULTS

Source: RNS
RNS Number : 7736O
Novolipetsk Steel
11 February 2021
 

NLMK Group Q4 and 12M 2020 IFRS Financial Results

 

k t/$ million

Q4 2020

Q3 2020

QoQ

Q4 2019

YoY

2020

2019

YoY

Sales volumes

4,220

4,443

-5%

4,172

1%

17,520

17,069

3%

Revenue

2,385

2,229

7%

2,312

3%

9,245

10,554

-12%

EBITDA 2

890

579

54%

480

85%

2,645

2,564

3%

EBITDA margin

37%

26%

+11 p.p.

21%

+16 p.p.

29%

24%

+5 p.p.

Profit for the period 3

558

312

79%

200

2.8x

1,236

1,339

-8%

Free cash flow 4

229

239

-4%

338

-32%

1,103

1,523

-28%

Net debt 5

2,495

1,946

28%

1,786

40%

2,495

1,786

40%

Net debt/EBITDA 5

0.94x

0.87x

 

0.70x

 

0.94x

0.70x

 

 Q4 2020 key highlights

·    Revenue increased to $2.4 bn (+7% qoq; +3% yoy), supported by a recovery in rolled product prices.

·    EBITDA grew to $890 m (+54% qoq; +85% yoy), due to the expansion of the raw material/slab price spreads, recovery of production volumes at Stoilensky after the September incident, accrued refund from the US Department of Commerce in line with the settlement agreement, and gains from Strategy 2022 projects. EBITDA margin was 37% (+11 p.p. qoq; +16 p.p. yoy).

·    Free cash flow reduced to $229 m (-4 % qoq). The increase in EBITDA was offset by the outflow of cash to replenish working capital amid growing global steel and raw material prices.

·    Net profit grew by 79% qoq to $558 m, due to an increase in operating profit.

 

 

 

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.

 

·    Revenue reduced by 12% yoy to $9.2 bn, due to a reduction in steel product prices in Q2-Q3 and an increase in the share of semi-finished products in total sales by 5 p.p. to 40%.

·    EBITDA grew by 3% yoy to $2.6 bn, supported by investment programme and operational efficiency programme gains, a weaker ruble, and refund from the US Department of Commerce under the settlement agreement. EBITDA margin reached 29% (+5 p. p. yoy).

·    Free cash flow reduced by 28% yoy to $1.1 bn, due to the high base of the previous year, when there was a significant release of cash from the working capital with a decrease in receivables and inventory reduction (for details, see p. 8, Q4 2019 Financial release).

·    Net profit reduced by 8% yoy to $1.2 bn amid increased losses in the joint ventures' performance, including due to the recognition of the NBH investment value impairment in the amount of $120 m in Q2 2020. Without the impact of this non-cash transaction, net profit would have stood at $1.4 bn (+1% yoy).

 

Comment from NLMK Group CFO Shamil Kurmashov:

"In Q4 2020, the recovery in business activity, including in the form of pent-up demand and restocking in the global supply chain coupled with a limited supply of steel products, led to a spike in steel product prices in our key regions. High iron ore prices supported this trend.

"In this context, NLMK Group increased its revenue by 7% qoq to $2.4 bn, and its EBITDA by 54% qoq to $890 m in Q4 2020. EBITDA margin grew to 37%.

"In 2020, despite the constraints of the pandemic, we maintained our capacity utilization rates and were able to achieve a 3% yoy increase in EBITDA, reaching $2.6 bn. Our flexible business model enabled a 3% yoy increase in sales to 17.5 m t. Free cash flow for 12M 2020 totalled $1.1 bn.

"Over 12M 2020, the structural gain from our Strategy projects reached $261 m vs. the 2019 base. Operational efficiency programmes contributed $176 m, with $85 m coming from investment projects. We have completed upgrades at the Lipetsk site blast furnace and steelmaking operations, which will enable an increase in steel production capacity of 1 m t pa starting from 2021. Construction of a coal charge stamping unit was completed at Altai-Koks, which will reduce NLMK Group's dependence on expensive and scarce coal grades. The full-year effect of these projects will be reflected in our financial results in 2021. 

"Net debt/EBITDA ratio stood at 0.94x, total debt was $3.5 bn.

"Solid financial performance enabled the management to recommend NLMK's Board of Directors to pay $570 as Q4 2020 dividends."

 

TELECONFERENCE

 

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

Thursday, February 11th 2021

·    09:00 am (New York)

·    2:00 pm (London)

·    5:00 pm (Moscow)

To join the conference call and webcast, please dial:

US Number:

+1 929-477-0402 (Local access) // 888-254-3590 (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: 4792848

To join the webcast, please follow the link

https://www.webcast-eqs.com/nlmk20210211

*We recommend that participants start dialing in 5-10 minutes prior to ensure a timely start of the conference call.

 

 

 

MANAGEMENT COMMENTS

·     In Q4 2020, demand for steel products in the Western markets continued to recover, albeit at an uneven pace. US steel consumption increased by 3% qoq (-15% yoy) amid limited supply from local steel producers, which led to a spike in prices. Steel demand in the EU grew by 19% qoq (+5% yoy), supported by recovering activity in the automotive sector and other metal-intensive industries.

·     In China, steel consumption decreased by 5% qoq (+11% yoy), due to the high base effect of the previous quarter, when all-time-high steel output was achieved thanks to state support measures.               

·     Steel product consumption in Russia decreased by 7% qoq as a result of the high base of the previous quarter, when the pent-up demand effect was most pronounced following the decline in April-May 2020. Year-on-year, consumption increased by 5%, due mainly to demand in the flat steel segment.

 

Q4 2020 prices

·      Raw material prices: coal price trends on the global market were multidirectional. Australian coking coal prices decreased by 3% qoq (-22% yoy) due to import restrictions imposed by China. In China, coking coal prices grew by 33% qoq (+2% yoy), driven by a limited supply of raw materials amid high demand from steel producers. Iron ore prices grew by 12% qoq (+48% yoy), driven by high steel output in China and recovering activity in other key regions.

·      Market prices** for flat steel grew by 44% qoq (+34% yoy) in the US and by 23% qoq (+29% yoy) in Europe as global demand and raw material prices continued to recover.   

·      Uncoated steel prices on the Russian market denominated in dollars grew by 11% qoq (-3% yoy), following global prices. Dollar-denominated rebar prices grew by 13% qoq (+4% yoy).

·      Export slab prices (FOB Black Sea) grew by 19% qoq (+35% 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. 
 

·    Steel output* grew by 1% qoq to 3.9 m t (+3% yoy) following the completion of upgrades at NLMK Lipetsk steelmaking operations.

·    Sales decreased to 4.2 m t (-5% qoq), as slab inventories in ports grew due to higher output and slab shipments at the end of the calendar year. Year-on-year, steel product sales increased by 1%.

·    Sales of semi-finished products declined by 4% qoq to 1.6 m t due to the growth of slab inventories and the redistribution of slab shipments to NBH. Sales to third parties declined by 25% qoq to 1 m t, while slab supplies to NBH grew by 89% qoq to 0.6 m t. Year-on-year, semi-finished product sales to third parties grew by 15% as pig iron sales increased. Slab supplies to NBH grew by 11% yoy.

·    Sales of finished products totalled 2.6 m t (-5% qoq; -5% yoy) as sales of rebar and coated steel decreased.

12M 2020 output and sales breakdown

·    Steel output* increased by 1% yoy to 15.8 m t.

·    Sales grew by 3% yoy to 17.5 m t.

·    Sales of semi-finished products to third parties grew by 25% yoy to 4.9 m t due to higher pig iron and billet exports. Slab sales to NBH remained flat yoy, at 2.1 m t.

·    Finished rolled steel sales declined by 5% yoy to 10.5 m t amid weak demand in April-May 2020 and sales redistribution to semi-finished products.

* Hereinafter NLMK Group steel output and sales in 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

·     Revenue grew by 7% qoq to $2.4 bn against the backdrop of higher steel product prices. Year-on-year, revenue increased by 3% amid higher sales volumes and steel prices.

·      The share of semi-finished products in the revenue increased by 1 p.p. to 30% due to pig iron and billet sales. The share of finished products totalled 65% (-1 p.p. qoq). The share of high value-added products decreased by 4 p.p. to 33%.

·     The share of the Russian market in the revenue totalled 42% (-4 p.p. qoq and yoy). The share of Asian countries dropped to 4% (-10 p.p. qoq; +2 p.p. yoy) due to sales being redirected to traditional markets: the EU share grew to 19% (+8 p.p. qoq; +3 p.p. yoy), while the US share reached 14% (+1 p.p. qoq;
-4 p.p. yoy).

·     Revenue decreased by 12% yoy to $9.2 bn due to lower steel product prices and a higher share of semi-finished products in the sales portfolio.

·     The share of semi-finished products in the revenue grew by 4 p.p. yoy to 30% as a result of higher pig iron sales; the share of finished products went down by 3 p.p. yoy to 65%. The share of revenue from high value-added products was 36% (-2 p.p. yoy).

·     The share of the Russian market in the revenue totalled 41% (flat yoy). The share of the EU and US in the consolidated revenue decreased to 17% and 15%, respectively (-1 p.p. yoy; -3 p.p. yoy).

·    EBITDA* grew by 54% qoq to $890 m (+85% yoy) due to the expansion of the raw material/steel price spreads, recovery of production volumes at Stoilensky after the September incident, and gains from Strategy 2022 investment and operational efficiency programmes. In addition, EBITDA growth was supported by the accrued refund of $97 m (a total of $105 m with interest) from the US Department of Commerce in line with the settlement agreement resolving NLMK's lawsuit on the exclusion of slabs from import tariffs. NLMK USA received this compensation in January 2021.

·    Commercial expenses went down by 5% qoq (-7% yoy) to $198 m due to lower sales. General and administrative expenses stood at $94 m (+12% qoq; +3% yoy).

·    EBITDA reached $2.6 bn (+3% yoy). Strategy 2022 programme gains, the accrued refund from the US Department of Commerce in line with the settlement agreement, and a weaker ruble fully offset the narrower slab/uncoated flat steel spread and the negative impact of the incident at Stoilensky in September 2020.

·    Commercial expenses totalled $647 m (flat yoy). General and administrative expenses decreased by 3% yoy to $346 m.

·    Q4 2020 net profit increased to $558 m (+79% qoq; +179% yoy) amid EBITDA growth and a lower average income tax rate (due to the financial performance of NLMK USA). 12M 2020 net profit decreased by 8% yoy to $1.2 bn, due mainly to the recognition of the NBH investment impairment in the amount of $120 m in Q2 2020. Without this factor, net profit would have amounted to $1.3 bn.

 

* 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.

Q4 2020 free cash flow

·     Free cash flow went down by 4% qoq to $229 m (-32% yoy) due to a cash outflow to finance working capital amid growing steel product and raw material prices.

·     Operating cash flow decreased by 11% qoq to $524 m.

·     Cash outflow to finance working capital totalled $256 m due to:

o  - $205 m: an increase in receivables due to higher steel product prices at the end of the year and a redistribution of sales to NBH with longer payment periods.

o  - $81 m: higher cost of raw materials and finished products in stock amid growing prices, amassed winter stocks of scrap, and more goods in transit and at ports due to higher export shipments (including to NBH) at the end of the calendar year.

o  + $28 m: an increase in payables due to higher raw material prices.

12M 2020 free cash flow

·     Free cash flow decreased by 28% yoy to $1.1 bn due to working capital financing as receivables grew.

·     Cash outflow from working capital totalled $16 m due to:

o  - $177 m: an increase in receivables due to higher prices and increased slab sales to NBH.

o  + $117 m: a decrease in raw material and finished product stocks.

o  + $46 m: an increase in payables.

Investment

·     The Group's investment in Q4 2020 decreased by 21% qoq to $273 m (-24% yoy) following the completion of large-scale upgrade projects at the NLMK Lipetsk blast furnace and steelmaking operations and projects at Stoilensky.

·     The Group's investment in 12M 2020 went up by 4% yoy to $1.1 m in line with the previous guidance.

·     In Q4 2020 NLMK paid out $0.8 bn in dividends.

·     On 11th February 2021, the Board of Directors recommended that shareholders approve the payment of Q4 2020 dividends in the amount of 7.25 rubles per share (for a total of $570 m). Consequently, the Company can accrue 12M 2020 dividends in the amount of 21.64 rubles per share.

·     In 12M 2020 operational efficiency improvements added $176 m to EBITDA, due mainly to initiatives introduced in the Russia Flat Products segment. Capex projects, mainly Stoilensky's output growth and NLMK Lipetsk Briquetting Plant, added $85 m to EBITDA.

·     Total debt in Q4 2020 grew by 9% qoq to $3.5 bn. Weighted average interest rates on loans decreased from 3% to 2.8%.

·     Net debt increased by 28% qoq to $2.5 bn due to cash outflow to Q4 2020 dividend payments, including a one-off payment of $250 m above the dividend policy aimed at compensating the lower dividends in Q4 2019, as approved by NLMK's General Meeting of Shareholders on 24th April 2020. Net debt/EBITDA was 0.94x.

·     We expect that the higher equipment productivity following upgrades and its ramp-up to full capacity will enable an increase in NLMK Lipetsk's steel output to 3.5 m t in Q1 2021, which is in line with goal of 14.2 m t of steel per year announced earlier.

·     Global steel prices in January 2021 were at multi-year highs, driven by high demand for steel amid limited supply. Considering the price increase in late Q4 2020 and the sales recognition time gap, average sales prices in Q1 2021 will be higher qoq, which have a positive impact on our financial performance.

 

·    Sales were down by 3% qoq to 3.2 m t (-2% yoy) due to lower slab sales to the market as port stocks increased in December 2020.

·    Revenue in the Segment grew by 11% qoq to $1.8 bn (+5% yoy) due to higher steel product prices. Meanwhile, as supplies of semis to NLMK Group and NBH companies increased, the share of intersegment revenue reached 20% (+9 p.p. qoq).

·     EBITDA grew by 52% qoq to $466 m (+88% yoy) due to wider price spreads, a lower share of iron ore purchases from third parties as run rates were restored at Stoilensky, investment programme gains, and a weaker ruble.

·    Sales in the Segment increased by 7% yoy to 13.4 m t as export sales of pig iron grew, along with hot-rolled steel sales on the Russian market due to higher Hot Strip Mill productivity.

·    Revenue was down by 7% yoy to $6.8 bn as steel product prices decreased, which was partially offset by higher sales.

·    EBITDA decreased by 4% yoy to $1.4 bn amid narrowing price spreads and higher personnel costs due to additional one-off payments to employees as part of COVID-19 pandemic support.

 

·     Sales decreased to 0.7 m t (-15% qoq) amid upgrades of rolling equipment, which were synched with repair works at NLMK's steelmaking facilities.

·     Revenue decreased by 2% qoq to $445 m. The higher long product prices were offset by lower sales. Year-on-year, revenue grew by 14% due to higher steel product sales and a 2% increase in rebar and metalware prices.

·     EBITDA in the Segment went down by 14% qoq to $32 m, following lower sales and a higher share of billet in the sales mix.

·     Sales went down by 7% yoy to 2.6 m t amid lower demand for long products.

·     Revenue decreased by 12% yoy to $1.5 bn, following lower sales and prices (-12% yoy on average).

·     EBITDA grew by 4% yoy to $93 m due to operational efficiency programme gains and a weaker ruble, as the share of billet exports increased.

 

·    Sales were up by 17% qoq to 4.8 m t (+6% yoy) due to the recovery of concentrate output after the incident in September. Sales of iron ore to the external market went down by 12% qoq to 139 k t.

·    Revenue increased by 28% qoq to $421 m (+31% yoy) supported by a stronger sales performance and a price increase of 24% qoq for concentrate (+47% yoy) and 2% qoq for pellets (+12% yoy).

·    EBITDA went up by 36% qoq to $339 m (+41% yoy) as prices increased, output grew, and the schedule of repairs was optimized.

·    Sales remained flat yoy at 18.4 m t.

·    Revenue increased by 6% yoy amid higher iron ore prices.

·    EBITDA increased by 9% yoy to $1.1 bn due to higher iron ore prices, a weaker ruble, and gains from investment and operational efficiency programmes that offset production losses associated with the September 2020 incident.

·    Sales increased by 1% qoq to 0.37 m t. Year-on-year, sales were 22% lower amid low NLMK Pennsylvania capacity utilization rates due to a lack of slabs available for duty-free imports, and a strike.

·    Revenue grew by 11% qoq to $248 m, due mainly to recovering hot-rolled steel prices. Year-on-year, revenue was down by 23% due to lower sales.

·    EBITDA totalled $107 m (vs -$12 m the previous quarter and -$37 in Q4 2019) due to an accrued refund in the amount of $97 m following a settlement agreement with the US Department of Commerce, and the widening of the slab/hot-rolled steel price spread. Without the accrued refund, the Segment's EBITDA was +$10 m.

·    Sales decreased by 27% yoy to 1.6 m t amid lower output and weaker steel consumption in the US due to the consequences of the COVID-19 pandemic.

·    Revenue was down by 37% yoy to $1.1 bn due a steel price adjustment and lower sales.

·    EBITDA grew to $76 m, vs. -$37 m in 2019. Without the accrued refund in line with the settlement agreement with the US Department of Commerce, the Segment's EBITDA was -$21 m amid lower output and sales.

 

·    Sales of plate increased to 0.14 m t (+47% qoq, +11% yoy) as earlier sales were recognized and demand gradually recovered.

·    Revenue increased by 19% qoq to $95 m, following higher sales. Year-on-year, revenue was down by 14% due to lower plate prices.

·    EBITDA totalled -$4 m (vs. -$3 m in Q3 2020 and $1 m in Q4 2019).

·    Sales totalled 0.52 m t (-1% yoy).

·    Revenue was down by 19% yoy to $400 m, due mainly to the plate price adjustment.

·    EBITDA decreased to -$4 m (vs. $8 m the previous year) due to lower plate prices.

 

* NLMK DanSteel and plate distribution network.

·    NBH sales grew by 19% qoq to 0.55 m t (+6% yoy) amid recovering flat product demand from automotive companies.

·    Revenue increased by 29% qoq (+10% yoy) to $385 m against the backdrop of higher steel product supplies and prices recovering by an average of 8% qoq.

·    EBITDA reached -$28 m, vs. -$32 m the previous quarter and -$27 m the previous year.

·    Sales were down by 5% yoy to 2.1 m t due to lower demand for steel products in Q2 2020 amid the COVID-19 pandemic.

·    Revenue decreased by 12% yoy to $1.4 bn due to lower steel product sales prices and a decrease in sales.

·    EBITDA totalled -$93 m vs. -$134 m the previous year. Losses in the Segment were due to low prices for end products coupled with a decrease in output and sales amid the COVID-19 pandemic. 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

EU

North America

Middle
East and Turkey

Central & South America

Other

NLMK Group (with NBH)

4 135

1 643

793

596

565

178

361

Division sales to third parties:

 

 

 

 

 

 

 

NLMK Russia Flat

2 435

1 200

45

219

535

176

259

NLMK Russia Long

677

438

114

1

25

0

99

International subsidiaries and affiliates, incl.:

1 023

5

633

376

4

2

3

NLMK USA

370

0

0

370

0

0

0

European rolling facilities (NLMK DanSteel and NBH)

652

5

633

6

4

2

3

 

(2) NLMK Russia Flat

k t/$ million

Q4 2020

Q3 2020

qoq

Q4 2019

yoy

2020

2019

yoy

Steel product sales, incl.:

3,172

3,281

-3%

3,226

-2%

13,355

12,460

7%

external customers

2,433

2,870

-15%

2,375

2%

10,637

9,381

13%

semis to NBH

582

308

89%

523

11%

2,096

2,104

0%

intersegmental sales

158

102

54%

328

-52%

621

975

-36%

Revenue, incl.:

1,776

1,600

11%

1,687

5%

6,788

7,327

-7%

external customers

1,415

1,425

-1%

1,347

5%

5,600

5,897

-5%

intersegmental operations

361

175

2,1x

340

6%

1,188

1,430

-17%

EBITDA

466

306

52%

248

88%

1,430

1,490

-4%

EBITDA margin

26%

19%

+7 p.p.

15%

+11 p.p.

21%

20%

+1 p.p.

 

(3) NLMK Russia Long

k t/$ million

Q4 2020

Q3 2020

qoq

Q4 2019

yoy

2020

2019

yoy

Steel product sales

682

802

-15%

674

1%

2,647

2,850

-7%

Revenue, incl.:

445

452

-2%

389

14%

1,539

1,757

-12%

external customers

323

337

-4%

316

2%

1,171

1,428

-18%

intersegmental operations

122

115

6%

73

67%

368

329

12%

EBITDA

32

37

-14%

(2)

-16x

93

89

4%

EBITDA margin

7%

8%

-1 p.p.

-1%

+8 p.p.

6%

5%

+1 p.p.

 

 

 

(4) Mining Segment

k t/$ million

Q4 2020

Q3 2020

qoq

Q4 2019

yoy

2020

2019

yoy

Iron ore products sales, incl.:

4,819

4,112

17%

4,560

6%

18,415

18,446

0%

sales to Lipetsk plant

4,680

3,954

18%

4,440

5%

17,592

17,850

-1%

Revenue, incl.:

421

330

28%

321

31%

1,399

1,315

6%

external customers

20

38

-47%

15

33%

92

77

19%

intersegmental operations

401

292

37%

306

31%

1,307

1,238

6%

EBITDA

339

250

36%

241

41%

1,064

977

9%

EBITDA margin

81%

76%

+5 p.p.

75%

+6 p.p.

76%

74%

+2 p.p.

 

(5) NLMK USA

k t/$ million

Q4 2020

Q3 2020

qoq

Q4 2019

yoy

2020

2019

yoy

Steel product sales

370

366

1%

472

-22%

1,604

2,205

-27%

Revenue, incl.:

248

223

11%

322

-23%

1,086

1,715

-37%

external customers

248

223

11%

322

-23%

1,086

1,715

-37%

intersegmental operations

-

-

0%

-

0%

-

-

0%

EBITDA

107

(12)

-8,9x

(37)

-2,9x

76

(37)

-2,1x

EBITDA margin

43%

-5%

+48 p.p.

-11%

+54 p.p.

7%

-2%

+9 p.p.

 

 (6) NLMK DanSteel

k t/$ million

Q4 2020

Q3 2020

qoq

Q4 2019

yoy

2020

2019

yoy

Steel product sales

142

97

47%

128

11%

524

529

-1%

Revenue, incl.:

95

80

19%

110

-14%

400

491

-19%

external customers

95

79

20%

110

-14%

399

490

-19%

intersegmental operations

-

1.0

-100%

-

0%

1

1

0%

EBITDA

(4)

(3)

33%

1

-4x

(4)

8

-0,5x

EBITDA margin

-4%

-4%

0 p.p.

1%

-5 p.p.

-1%

2%

-3 p.p.

 

(7) NBH

k t/$ million

Q4 2020

Q3 2020

qoq

Q4 2019

yoy

2020

2019

yoy

Steel product sales

549

461

19%

518

6%

2,083

2,185

-5%

Revenue, incl.:

385

299

29%

349

10%

1,374

1,562

-12%

external customers

372

286

30%

332

12%

1,325

1,502

-12%

intersegmental operations

13.0

13.0

0%

17.0

-24%

49

60

-18%

EBITDA

(28)

(32)

-13%

(27)

4%

(93)

(134)

-31%

EBITDA margin

-7%

-11%

+4 p.p.

-8%

+1 p.p.

-7%

-9%

+2 p.p.



 

 (8) Sales by product

k t

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Pig iron

437

389

368

292

253

Slabs

1,083

1,215

1,445

1,430

1,172

Thick plates

145

97

122

164

128

Hot-rolled steel

947

887

904

921

912

Cold-rolled steel

424

480

405

528

473

Galvanized steel

273

315

292

362

331

Pre-painted steel

82

129

96

97

113

Grain-oriented steel

78

64

65

70

66

Non-grain-oriented steel

68

66

62

72

50

Billet

96

86

116

30

1

Long products

522

642

426

474

596

Metalware

65

74

53

65

77

TOTAL

4,220

4,443

4,352

4,505

4,172

 

 (9) Sales by region

k t

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Russia

1,643

1,817

1,447

1,767

1,805

European Union

852

482

767

1,026

787

Middle East, including Turkey

567

580

553

529

556

North America

604

562

472

826

727

Central and South America

184

49

44

134

73

CIS

101

135

76

91

91

Asia and Oceania

190

794

899

23

69

Rest of World

79

25

95

108

64

TOTAL

4,220

4,443

4,352

4,505

4,172

 

 (10) Revenue by region

Region

Q4 2020

Q3 2020

Q2 2020

$ million

share

$ million

share

$ million

share

Russia

992

42%

1,022

46%

797

37%

European Union

447

19%

252

11%

358

16%

Middle East, including Turkey

296

12%

246

11%

250

11%

North America

342

14%

300

13%

299

14%

Central and South America

95

4%

22

1%

23

1%

CIS

64

3%

52

2%

58

3%

Asia and Oceania

103

4%

315

14%

333

15%

Rest of World

46

2%

20

1%

57

3%

TOTAL

2,385

100%

2,229

100%

2,174

100%



 

 (11) EBITDA calculation*

$ million

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Operating income**

758

437

437

439

338

minus:

 

 

 

 

 

Depreciation and amortization

(132)

(142)

(145)

(155)

(142)

EBITDA

890

579

582

594

480

* 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

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Net cash provided operating activities

524

591

549

617

710

Interest paid

(25)

(9)

(28)

(2)

(22)

Interest received

3

1

2

4

9

Advance VAT payments on imported equipment

-

-

-

-

-

Capex

(273)

(344)

(219)

(288)

(359)

Free Cash Flow

229

239

304

331

338

 

 (13) Net debt calculation

$ million

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Short-term borrowings

1,054

856

1,219

1,678

468

Long-term borrowings

2,432

2,346

2,139

1,799

2,188

Cash and cash equivalents

(842)

(755)

(1,121)

(1,456)

(713)

Short-term deposits

(149)

(501)

(407)

(251)

(157)

Net debt

2,495

1,946

1,830

1,770

1,786

 

 

(14) Production of main products

k t

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Crude steel, incl.:

3,863

3,824

3,809

4,171

3,749

Steel Segment

2,970

2,864

3,145

3,325

2,977

Long Products Segment, incl.:

708

786

610

659

603

NLMK Kaluga

349

361

272

256

215

International Rolled Products Segment

185

173

53

188

169

Finished products, incl.:

2,594

2,614

2,467

2,852

2,642

Flat steel

2,024

1,957

1,978

2,240

2,058

Long steel

570

657

489

612

584

Coke (6% moisture), incl.:

1,486

1,506

1,530

1,540

1,487

NLMK Lipetsk

647

647

643

645

652

Altai-Koks

839

858

887

895

834

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

k t

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Sales to 3rd parties, incl.:

502

907

973

696

648

Export

380

797

796

406

473

Sales to subsidiaries & associates

728

410

598

970

851

Sales to NBH

582

308

472

734

523

TOTAL

1,230

1,318

1,571

1,665

1,499

 

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

k t

Q4 2020

Q3 2020

qoq

Q4 2019

yoy

2020

2019

yoy

Semi-finished products

912

1,271

-28%

726

26%

4,191

3,073

36%

Pig iron

437

389

12%

253

73%

1,485

510

2,9x

Slabs

380

797

-52%

473

-20%

2,379

2,270

5%

Billets

96

85

12%

-

0%

327

293

11%

Flat products

428

416

3%

381

12%

1,873

1,959

-4%

HRC

203

160

27%

151

34%

863

854

1%

CRC

104

148

-30%

130

-20%

547

633

-14%

HDG

6

8

-30%

12

-52%

38

53

-29%

Coated

1

1

-24%

1

68%

3

4

-31%

Non-grain-oriented

50

47

6%

33

50%

192

182

5%

Grain-oriented

64

52

25%

54

19%

231

231

0%

Long products

148

169

-12%

138

8%

563

560

1%

Total

1,488

1,856

-20%

1,245

20%

6,627

5,591

19%

 

(17) Segmental information

Q4 2020

Russian Flat Steel

Russian Long Products

Mining

NLMK USA

NLMK DanSteel and Plates Distribution Network

Investments in NBH

Intersegmental operations and balances

NBH
deconsoli-
dation

Consolidated

$ million

Revenue from external customers

1,415

323

20

248

95

372

2,473

-

(88)

2,385

Intersegment revenue

361

122

401

-

-

13

897

(884)

(13)

-

Gross profit

609

64

332

108

7

(10)

1,110

(37)

(13)

1,060

Operating income/(loss)

387

22

313

93

(7)

(46)

762

(26)

22

758

Income / (loss) before minority interest

274

16

252

99

(7)

(53)

581

(1)

(21)

559

Segment assets including goodwill

6,957

940

1,738

749

428

1,366

12,178

(1,153)

(1,163)

9,862

 Balance figures presented as of 31.12.2020

Q3 2020

Russian Flat Steel

Russian Long Products

Mining

NLMK USA

NLMK DanSteel and Plates Distribution Network

Investments in NBH

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

 

Novolipetsk Steel

Consolidated statement of financial position

(millions of US dollars)

 

 

 

 

As at 31 December 2020

 

As at 31 December 2019

 

As at 31 December 2018

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

842

 

713

 

1,179

Short-term financial investments

 

191

 

287

 

19

Trade and other accounts receivable

 

1,148

 

1,047

 

1,326

Inventories

 

1,373

 

1,634

 

1,816

Other current assets

 

16

 

14

 

10

 

 

3,570

 

3,695

 

4,350

Non-current assets

 

 

 

 

 

 

Long-term financial investments

 

7

 

5

 

85

Investments in joint ventures

 

131

 

223

 

159

Property, plant and equipment

 

5,659

 

6,039

 

4,798

Goodwill

 

212

 

248

 

224

Other intangible assets

 

159

 

162

 

165

Deferred income tax assets

 

119

 

101

 

152

Other non-current assets

 

5

 

11

 

11

 

 

6,292

 

6,789

 

5,594

Total assets

 

9,862

 

10,484

 

9,944

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other accounts payable

 

1,065

 

1,124

 

1,122

Dividends payable

 

109

 

318

 

525

Short-term borrowings

 

1,054

 

468

 

398

Current income tax liability

 

51

 

32

 

28

Other short-term liabilities

 

3

 

-

 

-

 

 

2,282

 

1,942

 

2,073

Non-current liabilities

 

 

 

 

 

 

Long-term borrowings

 

2,432

 

2,188

 

1,677

Deferred income tax liability

 

359

 

405

 

346

Other long-term liabilities

 

48

 

2

 

14

 

 

2,839

 

2,595

 

2,037

Total liabilities

 

5,121

 

4,537

 

4,110

 

 

 

 

 

 

 

Equity attributable to Novolipetsk Steel shareholders

 

 

 

 

 

 

Common stock

 

221

 

221

 

221

Additional paid-in capital

 

8

 

9

 

10

Accumulated other comprehensive loss

 

(7,140)

 

(6,140)

 

(6,782)

Retained earnings

 

11,641

 

11,840

 

12,370

 

 

4,730

 

5,930

 

5,819

Non-controlling interests

 

11

 

17

 

15

Total equity

 

4,741

 

5,947

 

5,834

Total liabilities and equity

 

9,862

 

10,484

 

9,944
 

 

Novolipetsk Steel

Consolidated statement of profit or loss

(millions of US dollars, unless otherwise stated)

 

 

 

 

For the year ended 31 December 2020

 

For the year ended 31 December 2019

 

For the year ended 31 December 2018

 

 

 

 

 

 

 

Revenue

 

9,245

 

10,554

 

12,046

Cost of sales

 

(5,920)

 

(7,303)

 

(7,680)

 

 

 

 

 

 

 

Gross profit

 

3,325

 

3,251

 

4,366

 

 

 

 

 

 

 

General and administrative expenses

 

(346)

 

(352)

 

(375)

Selling expenses

 

(845)

 

(843)

 

(886)

Net impairment losses on financial assets

 

(8)

 

(1)

 

(1)

Other operating income/(expenses), net

 

9

 

13

 

(4)

Taxes other than income tax

 

(64)

 

(66)

 

(88)

 

 

 

 

 

 

 

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

 

2,071

 

2,002

 

3,012

 

 

 

 

 

 

 

Loss on disposals of property, plant and equipment

 

(8)

 

(4)

 

(7)

Impairment of non-current assets

 

(5)

 

(30)

 

(4)

Share of results of joint ventures and impairment of investments in joint ventures

 

(236)

 

(88)

 

(243)

Losses on investments, net

 

-

 

-

 

(2)

Finance income

 

18

 

18

 

21

Finance costs

 

(90)

 

(68)

 

(70)

Foreign currency exchange (loss)/gain, net

 

(40)

 

(6)

 

33

Hedging result

 

(24)

 

-

 

-

Expenses on operations with financial instruments

 

(39)

 

-

 

-

Other expenses, net

 

(67)

 

(30)

 

(11)

 

 

 

 

 

 

 

Profit before income tax

 

1,580

 

1,794

 

2,729

 

 

 

 

 

 

 

Income tax expense

 

(343)

 

(453)

 

(486)

 

 

 

 

 

 

 

Profit for the year

 

1,237

 

1,341

 

2,243

 

 

 

 

 

 

 

Profit is attributable to:

 

 

 

 

 

 

Novolipetsk Steel shareholders

 

1,236

 

1,339

 

2,238

Non-controlling interests

 

1

 

2

 

5

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

0.2062

 

0.2234

 

0.3734

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

basic and diluted (in thousands)

 

5,993,227

 

5,993,227

 

5,993,227
 

 

Novolipetsk Steel

Consolidated statement of cash flows

(millions of US dollars)

 

 

 

 

For the year ended 31 December 2020

 

For the year ended 31 December 2019

 

For the year ended 31 December 2018

Cash flows from operating activities

 

 

 

 

 

 

Profit for the year

 

1,237

 

1,341

 

2,243

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

 

 

 

 

 

 

Depreciation and amortisation

 

574

 

562

 

577

Loss on disposals of property, plant and equipment

 

8

 

4

 

7

Losses on investments

 

-

 

-

 

2

Finance income

 

(18)

 

(18)

 

(21)

Finance costs

 

90

 

68

 

70

Share of results of joint ventures and impairment of investments in joint ventures

 

236

 

88

 

243

Income tax expense

 

343

 

453

 

486

Impairment of non-current assets

 

5

 

30

 

4

Foreign currency exchange loss/(gain), net

 

40

 

6

 

(33)

Hedging result

 

24

 

-

 

-

Expenses on operations with financial instruments

 

39

 

-

 

-

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

 

4

 

5

 

1

Changes in operating assets and liabilities

 

 

 

 

 

 

(Increase)/decrease in trade and other accounts receivable

 

(177)

 

314

 

(258)

Decrease/(increase) in inventories

 

117

 

284

 

(187)

(Increase)/decrease in other operating assets

 

(2)

 

(1)

 

7

Increase /(decrease) in trade and other accounts payable

 

46

 

(132)

 

177

Сash provided by operations

 

2,566

 

3,004

 

3,318

Income tax paid

 

(285)

 

(381)

 

(577)

Net cash provided by operating activities

 

2,281

 

2,623

 

2,741

Cash flows from investing activities

 

 

 

 

 

 

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

 

(1,124)

 

(1,080)

 

(680)

Proceeds from sale of property, plant and equipment

 

15

 

1

 

3

Purchases of investments and loans given

 

(51)

 

(164)

 

(91)

Proceeds from repayment of loans given

 

142

 

115

 

-

Placement of bank deposits

 

(836)

 

(933)

 

(305)

Withdrawal of bank deposits

 

847

 

777

 

1,349

Interest received

 

10

 

29

 

22

Contribution to share capital of joint venture

 

(131)

 

(155)

 

-

Acquisition of subsidiary, net of cash and cash equivalents acquired

 

(4)

 

-

 

(4)

Acquisition of non-controlling interest

 

-

 

(1)

 

(4)

Net cash (used in)/provided by investing activities

 

(1,132)

 

(1,411)

 

290

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from borrowings

 

2,002

 

1,015

 

470

Repayment of borrowings

 

(1,284)

 

(500)

 

(643)

Payments on leases

 

(20)

 

(14)

 

-

Interest paid

 

(64)

 

(49)

 

(56)

Payments from settlement of derivative financial instruments

 

(16)

 

-

 

-

Dividends paid to Novolipetsk Steel shareholders

 

(1,637)

 

(2,120)

 

(1,888)

Dividends paid to non-controlling interests

 

(1)

 

-

 

(2)

Net cash used in financing activities

 

(1,020)

 

(1,668)

 

(2,119)

Net increase/(decrease) in cash and cash equivalents

 

129

 

(456)

 

912

Effect of exchange rate changes on cash and cash equivalents

 

-

 

(10)

 

(34)

Cash and cash equivalents at the beginning of the year

 

713

 

1,179

 

301

Cash and cash equivalents at the end of the year

 

842

 

713

 

1,179

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash investing activities:

 

 

 

 

 

 

Conversion of debt to equity

 

-

 

-

 

210

 

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