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Novolipetsk Steel (NLMK)

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Thursday 22 July, 2021

Novolipetsk Steel

NLMK Group Q2 2021 IFRS Financial Results

RNS Number : 1160G
Novolipetsk Steel
22 July 2021
 

NLMK Group Q2 and 6M 2021 IFRS Financial Results

NLMK Group's EBITDA (LSE, MOEX: NLMK) in Q2 2021 totalled $2.1 bn; EBITDA margin grew by 9 p.p. qoq to 50%. Free cash flow (FCF) reached $ 864 m. NLMK Group Board of Directors recommended approving Q2 2021 dividends in the amount of 13 . 62   RUB/share ( 127 % of the FCF).

Key highlights

k t/$ million

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Sales volumes

4,329

3,908

11%

4,352

-1%

8,237

8,857

-7%

Revenue

4,139

2,867

44%

2,174

90%

7,006

4,631

51%

EBITDA 2

2,052

1,166

76%

582

3.5x

3,218

1,176

2.7x

EBITDA margin

50%

41%

+9 p.p.

27%

+23 p.p.

46%

25%

+21 p.p.

Profit for the period 3

1,359

775

75%

77

17.6x

2,134

366

5.8x

Free cash flow 4

8 64

452

91 %

304

2, 8 x

1, 316

635

2 ,1 x

Net debt 5

1,963

2,087

-6%

1,830

7%

1,963

1,830

7%

Net debt/EBITDA 5

0.42x

0.65x


0.79x


0.42x

0.79x


 Q2 2021 key highlights

· Revenue grew by 44% qoq to $4.1 bn (+90% yoy) with an increase in steel product prices and production and sales volumes.

· EBITDA grew by 76% qoq to $2.1 bn (+3.5х yoy) amid increased sales and wider price spreads. EBITDA margin grew by 9 p.p. qoq to 50%.

· Free cash flow grew by 91 % qoq to $8 64   m (+2. 8 х yoy), driven by stronger financial performance.

· Net profit grew by 75% qoq to $1.4 bn (+18х yoy) .

 

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.

 


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

 

 



 

6M 2021 key highlights

· Revenue grew by 51% yoy to $7.0 bn amid higher average sales prices and an increase in the share of finished products in the sales portfolio.

· EBITDA grew by a factor of 2.7 yoy to $3.2 bn due to the widening of the steel products/raw materials price spreads and the implementation of Strategy 2022 projects. EBITDA margin was 46% (+21 p.p. yoy).

· Free cash flow increased by a factor of 2.1   yoy to $1.3 bn, driven by EBITDA growth. This was partially offset by higher investment and the outflow of funds for working capital replenishment amid growing prices.

· Net profit increased by a factor of 5. 8   yoy to $2.1 bn due to gross profit growth, and last year's low baseline effect amid NBH investment cost impairment.

 

Comment from NLMK Group CFO Shamil Kurmashov:

"In Q2 2021, steel prices continued to grow across all key markets. In the US and the EU, prices hit new highs. Steel product consumption grew due to the realization of deferred demand and government support measures. Steel capacity utilization rates reached pre-crisis levels as facilities that were stopped during the first wave of the pandemic were relaunched. The outstripping growth in steel consumption relative to production led to a decrease in inventories to all-time lows, which brought about a further increase in prices.

"Sales growth and favourable pricing conditions contributed to an increase in NLMK Group's revenue by 44% qoq to $4.1 billion, and an EBITDA growth by 76% qoq to $2.1 billion. EBITDA margin reached 50%. Free cash flow increased by 91 % to $ 864 million.

"Net debt/EBITDA stood at 0.4x; net debt decreased by 6% qoq to $2 billion.

"In line with the Group's Dividend Policy, the management recommended to the NLMK Board of Directors to pay $1.1 b illion in Q2 2021 dividends.

 


TELECONFERENCE

 

NLMK is pleased to invite the investment community to a conference call with the Company management :

Thursday, 22 July 2021

· 10:30 a.m. - New York

· 3:30 p.m. - London

· 5:30 p.m. - Moscow

To join the conference call and webcast, the participants are invited to dial :

US number :
+1 334-777-6978 (
local access ) // 800-367-2403 ( toll free )

UK number :
+44 (0)330 027 1846 (
local access ) // 0800 031 4838 ( toll free )

Russian number :
+7 499 609 1260 (
local access ) // 8 800 100 9471 ( toll free )

Conference code : 3727268

To join the webcast, please follow the link :

https://www.webcast-eqs.com/nlmk20210722  

 

* We recommend participants start dialling 5-10 minutes in advance to avoid waiting .

 



 

MANAGEMENT COMMENTS

Q2 2021 market review

Q2 2021 prices

· Raw material prices: Australian coking coal prices grew by 6% qoq (+12% yoy) amid restocking in India, Japan and South Korea. With the continued ban on coal imports from Australia, coking coal prices in China increased by 17% qoq (+98% yoy) due to increased steel production and limited supplies from Mongolia.

· The increase in prices for iron ore raw materials (+18% qoq; +112% yoy) was triggered by a shortage in the market associated with record volumes of steelmaking in China, increased demand in other regions, and limited supplies from Brazil.

· Market prices** for flat steel increased by 28% qoq (+179% yoy) in the US, and by 44% qoq (+155% yoy) in the EU, due to the implementation of infrastructure projects and supported by consumer demand.

· Dollar-denominated prices for steel products on the Russian market increased by 36% qoq (+114% yoy). Dollar-denominated rebar prices grew by 13% qoq (+78% yoy).

· Slab prices in export destinations (FOB Black Sea) increased by 29% qoq (+153% 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.

Q2 2021 output and sales breakdown

Steel output increased by 5% to 4.6 m t (+19% yoy) with NLMK steelmaking equipment ramp-up after the overhaul. 

Sales reached 4.3 m t (+11% qoq; -1% yoy) due to an increase in the export of slabs to Middle Easter and EU markets.

Sales mix : the share of semi-finished products increased qoq against the backdrop of an increase in the supply of pig iron, billets, and slabs to third parties by 57% qoq. Sales of finished products amounted to 2.7 m t (+1% qoq, +12% yoy).

Sales in the 'home' markets reached 2.8 m t (+1% qoq; +19% yoy). Sales to the Russian market increased by 8% qoq to 1.8 m t (+26% yoy) with the start of the construction season. Sales in the US increased by 17% qoq amid increased shipments of NLMK slabs with a corresponding growth of rolled steel capacity utilization rates. In the EU, sales decreased by 28% qoq (-18% yoy) due to the upgrade of the NLMK La Louvière hot strip mill (a Strategy 2022 project).

Sales in export markets increased by 20% qoq to 1.4 m t (-30% yoy).

6M 2021 output and sales breakdown

Steel output increased by 11% yoy with the completion of the overhauls at NLMK Lipetsk's steelmaking operations.

Sales amounted to 8.2 m t (-7% yoy) following the redistribution of slab supplies to NLMK USA amid a strong consumption trend in the region, which resulted in the need to stockpile slabs in the intragroup supply chain.

Sales mix : sales of semi-finished products to third parties decreased by 23% yoy with the resumption of slab deliveries to NLMK USA. Shipments of NBH slabs totalled 0.93 m t (-23% yoy). Sales of finished rolled products grew by 5% yoy to 5.4 m t

Sales on 'home' markets increased by 3% to 5.5 m t, supported by sales growth in Russia and the United States. Sales in export markets decreased by 23% to 2.6 m t due to the high base in the same period last year (non-traditional export markets).

 



 

NLMK GROUP KEY FINANCIALS

Q2 2021 revenue

· Revenue grew by 44% qoq to $4.1 bn (+90% yoy) due to an increase in sales volumes and average sales prices for steel products.

· Revenue from semi-product sales totalled $1.2 bn (+73% qoq; +61% yoy), due mainly to higher sales volumes of slabs to export markets. The share of semi-finished products in total revenue increased by 5 p.p. qoq and reached 28% (-5 p.p. yoy).

· Revenue from sales of finished products increased by 32% qoq to $2.8 bn (+108% yoy), due to an increase in sales volumes and prices of steel products in key markets. The share of finished products in consolidated revenue totalled 67% (-6 p.p. qoq, +6 p.p. yoy).

· The share of the Russian market in total revenue went down to 43% (-3 p.p. qoq; +6 p.p. yoy) as a result of increased export supplies from the Russian companies. The US share increased to 19% (+4 p.p. qoq; +5 p.p. yoy) amid a strong market due to a shortage of steel in the region, while the EU share remained flat qoq at 17% (+1 p.p. yoy).

6M 2021 revenue

· Revenue increased by 51% yoy to $7.0 bn due to higher sales prices on all key markets, which was partially offset by the decrease in sales as slab supplies were redistributed to NLMK USA amid a strong consumption trend in the region.

· Revenue from semi-finished product sales increased by 27% yoy to $1.8 bn amid an increase in average prices and an improvement in the sales structure with lower pig iron sales. The share of semi-finished products in total revenue decreased by 5 p.p. yoy to 26%.

· Revenue from finished product sales increased by 65% yoy to $4.9 bn. The share of finished products in the revenue totalled 70% (+6 p.p. yoy).

· Russian market share increased to 44% (+5 p.p. yoy) vs. last year's low baseline. The share of revenue from sales to Asian markets restored to traditional levels, amounting to 2% in H1 2021 (-6 p.p. yoy) due to demand recovery on traditional sales markets. The share of the North American region remained flat at 17% (+0p.p. yoy); the EU share decreased to 17%. 

 

 

Q2 2021 EBITDA

· EBITDA* grew by 76% qoq to $2.1 bn (+3.5х yoy) with wider steel/raw material price spreads and higher steel product sales, as well as due to ongoing operational efficiency programmes.

· Commercial costs increased by 16% qoq to $216 m (-5% yoy) following overall sales growth.

· General and administrative expenses increased by 20% qoq to $116 m (+41% yoy) amid accrual of Long-Term Incentive Programme reserves and annual salary indexation at NLMK's Russian companies.

6M 2021 EBITDA

· EBITDA increased by a factor of 2.7 yoy to $3.2 bn, due to wider price spreads and a weaker ruble, as well as due to the implementation of Strategy 2022 projects. 

· Commercial costs decreased by 9% yoy to $402 m due to lower exports.

· General and administrative expenses increased by 27% yoy to $213 m amid accrual of Long-Term Incentive Programme reserves and annual salary indexation at NLMK's Russian companies .

Net profit**

· Net profit in Q2 2021 grew by 75% qoq to $1.4 bn as EBITDA increased.

· Net profit in 6M 2021 increased by a factor of 5.8 yoy to $2.1 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.

Q2 2021 free cash flow

· Free cash flow increased by 91% qoq to $864m (+2.8х yoy) following EBITDA growth, which was partially offset by higher investment and an outflow of funds for working capital replenishment amid growing prices.

· Operational cash flow grew by 80% qoq to $1.2 bn.

· The outflow of funds for working capital replenishment amounted to $430 m due to:

- $290 m: increased accounts receivable due to higher steel product prices

- $395 m: higher prices of inventory stocks, seasonal scrap inventory replenishment, increased inventory at NLMK USA due to output growth in Q2-Q3 2021

+ $252 m: increased accounts payable due to increased purchases of scrap and slabs by NLMK USA, an increase in advance payments received, and an increase in VAT arrears amid higher sales prices in Russia.

6M 2021 free cash flow

· Free cash flow doubled yoy and reached $1.3 bn, due mainly to a higher EBITDA. This was partially offset by the outflow of funds for working capital replenishment.

· The outflow of funds for working capital replenishment totalled $719 m due to:

- $594 m: increased accounts receivable due to higher steel product prices and the effect of the low baseline in late 2020 (faster settlements with buyers amid high demand)

- $510 m: higher inventory prices and growth of inventory stocks at NLMK USA amid production growth

+ $379 m: increased accounts payable due to higher prices and purchase volumes of scrap and slabs by NLMK USA, an increase in advance payments received, and an increase in VAT arrears amid higher sales prices in Russia.

 

 



 

Investment

· The Group's investment in Q2 2021 increased by 55% qoq to $359 m (+64% yoy) as part of the annual plan.

· The Group's investment in 6M 2021 grew by 17% yoy to $591 m following the final stage in NLMK Lipetsk BF and BOF operations upgrade.

Dividends

· In Q2 2021 the Company paid out $592 m in dividends.

· On 22 July 2021 the Board of Directors recommended that shareholders approve the payment of Q2 2021 dividends in the amount of RUB 13.62 per share.

Strategy 2022 execution

· In 6M 2021 structural EBITDA gains from operational efficiency programmes totalled $6 8  m (to the 2020 cost baseline).

· Investment projects during the same period added $44 m to EBITDA.

Debt management

· Total debt in Q2 2021 decreased by 3% qoq to $2.8 bn amid a planned partial repayment of the revolving lines and due to currency rate differences. In June, NLMK Group concluded a transaction to float an issue of 5-year Eurobonds for a total of €500 m with an annual interest rate of 1.45%. The funds received during the issuance were directed to buy back outstanding Eurobonds with repayment dates in 2023 and 2024.

· Net debt went down by 6% qoq to $2.0 bn due to the decrease in overall debt and the growth of free cash flow. Net debt/EBITDA totalled 0.42х vs. 0.65x in Q1 2021.

· The weighted average interest on debt liabilities decreased by 0.4 p.p. qoq to 2.7% (-0.7 p.p. yoy), driven by debt portfolio optimization.

NLMK Russia Flat Products

Q2 2021 highlights

· Sales grew by 18% qoq (+3% yoy) to 3.5 m t amid higher sales, both to the Russian market (+7% qoq, +16% yoy) and to export markets (+24% qoq, -3% yoy).

· Revenue in the Segment grew by 51% qoq to $3.2 bn (+96% yoy) due to increased sales volumes and average sales prices.

· EBITDA stood at $1.4 bn (+80% qoq, +4.6х yoy) due to wider steel product/raw material price spreads, higher sales volumes, and the effects of operational efficiency programmes and investment projects.

6M 2021 highlights 

· Sales went down by 5% yoy to 6.5 m t amid planned repairs in rolling shops and an increase in the average period of slab delivery as supplies to NLMK USA resumed.

· Revenue grew by 56% yoy to $5.3 bn due to an increase in average sales prices, which was partially offset by lower sales and a higher share of semi-finished products. The share of revenue from inter-segmental operations went up to 27% (+8p.p. yoy).

· EBITDA increased by a factor of 3.3 yoy to $2.2 bn, due mainly to wider steel product/raw material price spreads and a weaker ruble.

 

 



 

NLMK Russia Long Products

Q2 2021 highlights

· Sales grew by 11% qoq to 0.8 m t (+38% yoy) due to increased shipments to the Russian market (+10% qoq; +54% yoy) and to export (+11% qoq; +11% yoy) amid higher demand ahead of the construction season.

· Revenue increased by 54% qoq to $803 m (+2.5х yoy) following the growth of sales volumes and prices. Revenue from inter-segmental operations almost tripled, reaching $214 m as a result of the seasonal increase in scrap collection.

· EBITDA totalled $157 m (+74% qoq) due mainly to wider rolled product/scrap price spreads and higher sales.

6M 2021 highlights

· Sales grew by 34% yoy to 1.6 m t against the backdrop of last year's low baseline, when the production programme was limited due to the COVID-19 pandemic.

· Revenue increased by a factor of 2.1 yoy to $1.3 bn following the growth of sales and average sales prices for long products. Revenue from operations with external buyers doubled, reaching $1.0 bn.

· EBITDA went up to $247 m amid demand recovery in the construction segment and a wider rebar/scrap price spread. The operational efficiency programme had an additional positive impact.

 

Mining and Processing of Raw Materials

Q2 2021 highlights

· Sales increased by 8% qoq (+6% yoy) to 5.2 m t due to growth of output driven by investment programme gains and growth of raw material demand from NLMK Lipetsk.

· Revenue grew by 31% qoq to $685 m (+2х yoy) due to higher sales volumes and an increase in ruble-denominated sales prices for concentrate (16% qoq; +144% yoy) and pellets (29% qoq; +173% yoy).

· EBITDA increased by 35% qoq to $585 m (+2.4х yoy) due to higher production and sales volumes and improving market conditions.

6M 2021 highlights

· Sales reached 10 m t (+5% yoy) due to growth of output driven by investment programme gains and the implementation of operational efficiency programmes.

· Revenue grew to $1.2 bn (+86% yoy) due mainly to the increase of global raw material prices and higher sales.

· EBITDA totalled $1.0 bn (+2.1х yoy) amid a positive price trend on raw material markets and investment project implementation.

 

 



 

NLMK USA

Q2 2021 highlights

· Sales grew by 17% qoq to 0.5 m t (+52% yoy) amid increased production capacity utilization rates due to high demand on the US market.

· Revenue went up by 73% qoq to $699 m (+2.9х yoy) following higher sales and amid record high steel product prices.

· EBITDA grew by a factor of 3.3 qoq to $213 m (+71х yoy) following higher sales volumes and improved flat steel/slab price spread, and due to operational efficiency gains.

6M 2021 highlights

· Sales increased by 8% yoy to 0.9 m t, following the recovery of steel product demand.

· Revenue increased by 79% yoy to $1.1 bn, driven by higher sales and higher steel prices.

· EBITDA grew to $278 m amid wider price spreads and higher sales.

 

 

NLMK DanSteel*

Q2 2021 highlights

· Sales of plate went down by 7% qoq to 0.16 m t (+33% yoy) amid an optimization of the order portfolio and the high baseline of Q1 2021, when some of the volumes shipped at the end of last year were recognized.

· Revenue grew by 9% qoq to $157 m due to higher plate sales prices, which was partially offset by lower sales.

· EBITDA decreased to -$13 m, due mainly to shipments under long-term contracts signed before the period of spiking prices for products and slabs.

6M 2021 highlights

· Sales went up by 17% yoy to 0.3 m t against the backdrop of the low baseline of the same period last year during the COVID-19 pandemic.

· Revenue increased by 34% yoy to $301 m following higher sales and favourable market conditions.

· EBITDA was down to -$17 m (see above).

 

* NLMK DanSteel and the plate sales network.



 

JV performance (NBH)

Q2 2021 highlights

· NBH sales decreased by 34% qoq (-30% yoy) to 0.33 m t amid the drop in production due to the planned upgrade of the hot strip mill at NLMK La Louvière (a Strategy 2022 project).

· Revenue was down by 16% qoq to $355 m. The decrease in sales was partially offset by price growth.

· EBITDA totalled -$7 m vs. $8 m in Q1 2021 amid decreased production of strip products at NLMK La Louvière, which was partially offset by improved products/slabs price spreads.

6M 2021 highlights

· NBH sales went down by 23% yoy to 0.82 m t, due mainly to lower HRC production at NLMK La Louvière.

· Revenue increased by 13% yoy to $777 m, following higher steel product prices.

· EBITDA stood at $1 m vs. -$33 m the year before, driven by wider price spreads, which was offset by lower sales.

 


Appendix No. 1: Operating and financial results

  (1) Sales markets

k t

Total

Sales markets


Russia

Е

Russia

Middle
East and Turkey

Russia

Other

NLMK Group (with NBH)

4 , 194

1 , 821

730

627

510

330

178

Division sales to third parties:








NLMK Russia Flat

2 , 388

1 , 249

185

116

435

320

81

NLMK Russia Long

818

567

102

0

71

0

78

International subsidiaries and affiliates, incl.:

988

4

442

511

4

9

19

NLMK USA

502

0

0

502

0

0

0

European rolling facilities (NLMK DanSteel and NBH)

486

4

442

8

4

9

19

 

(2) NLMK Russia Flat

k t/$ million

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Steel product sales, incl.:

3,527

2,997

18%

3,432

3%

6,524

6,902

-5%

external customers

2,387

2,082

15%

2,834

-16%

4,469

5,334

-16%

semis to NBH

451

479

-6%

472

-5%

930

1,206

-23%

intersegmental sales

689

435

58%

126

5,5x

1,124

361

3,1x

Revenue, incl.:

3,189

2,117

51%

1,624

96%

5,306

3,412

56%

external customers

2,275

1,596

43%

1,384

64%

3,871

2,760

40%

intersegmental operations

914

521

75%

240

3,8x

1,435

652

2,2x

EBITDA

1,393

772

80%

303

4,6x

2,165

658

3,3x

EBITDA margin

44%

36%

+8 p.p.

19%

+25 p.p.

41%

19%

+22 p.p.

 

(3) NLMK Russia Long

k t/$ million

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Steel product sales

818

740

11%

594

38%

1,558

1,163

34%

Revenue, incl.:

803

522

54%

326

2,5x

1,325

642

2,1x

external customers

589

449

31%

251

2,3x

1,038

511

2x

intersegmental operations

214

73

2,9x

75

2,9x

287

131

2,2x

EBITDA

157

90

74%

10

15,7x

247

24

10,3x

EBITDA margin

20%

17%

+3 p.p.

3%

+17 p.p.

19%

4%

+15 p.p.

 



 

(4) Mining Segment

k t/$ million

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Iron ore products sales, incl.:

5,159

4,785

8%

4,880

6%

9,944

9,484

5%

sales to Lipetsk plant

4,881

4,763

2%

4,428

10%

9,645

8,957

8%

Revenue, incl.:

685

521

31%

336

2x

1,206

648

86%

external customers

48

4

12x

24

100%

52

34

53%

intersegmental operations

637

517

23%

312

2x

1,154

614

88%

EBITDA

585

432

35%

248

2,4x

1,017

475

2,1x

EBITDA margin

85%

83%

+2 p.p.

74%

+11 p.p.

84%

73%

+11 p.p.

 

 (5) NLMK USA

k t/$ million

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Steel product sales

502

431

17%

330

52%

933

867

8%

Revenue, incl.:

699

403

73%

238

2,9x

1,102

615

79%

external customers

699

403

73%

238

2,9x

1,102

615

79%

intersegmental operations

-

-

0%

-

0%

-

-

0%

EBITDA

213

65

3,3x

3

71x

278

(19 )

14,6x

EBITDA margin

30%

16%

+14 p.p.

1%

+29 p.p.

25%

-3%

+28 p.p.

 

 (6) NLMK DanSteel

k t/$ million

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Steel product sales

162

174

-7%

122

33%

336

286

17%

Revenue, incl.:

157

144

9%

95

65%

301

225

34%

external customers

157

144

9%

95

65%

301

225

34%

intersegmental operations

-

-

0%

-

0%

-

-

0%

EBITDA

(13 )

(4 )

3,3x

(3 )

4,3x

(17 )

3

-5,7x

EBITDA margin

-8%

-3%

-5 p.p.

-3%

-5 p.p.

-6%

1%

-7 p.p.

 

(7) NBH

k t/$ million

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Steel product sales

329

495

-34%

468

-30%

824

1,073

-23%

Revenue, incl.:

355

422

-16%

308

15%

777

690

13%

external customers

344

410

-16%

297

16%

754

667

13%

intersegmental operations

11. 0

12. 0

-8%

11. 0

0%

23

23

0%

EBITDA

(7)

8

-0,9x

(14)

-50%

1

(33)

0x

EBITDA margin

-2%

2%

-4 p.p.

-5%

+3 p.p.

0%

-5%

+5 p.p.



 

 (8) Sales by product  

k t

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Pig iron

133

30

437

389

368

Slabs

1,337

1,082

1,083

1,215

1,445

Thick plates

163

175

145

97

122

Hot-rolled steel

904

957

947

887

904

Cold-rolled steel

406

431

424

480

405

Galvanized steel

334

279

273

315

292

Pre-painted steel

96

81

82

129

96

Transformer steel

77

67

78

64

65

Dynamo steel

62

65

68

66

62

Billet

139

105

96

86

116

Long products

599

572

522

642

426

Metalware

80

63

65

74

53

TOTAL

4,329

3,908

4,220

4,443

4,352

 

 (9) Sales by region

k t

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Russia

1,818

1,677

1,643

1,817

1,447

European Union

890

805

852

482

767

Middle East, including Turkey

507

536

567

580

553

North America

624

468

604

562

472

Central and South America

325

225

184

49

44

CIS

76

91

101

135

76

Asia and Oceania

68

23

190

794

899

Rest of World

21

82

79

25

95

TOTAL

4,329

3,908

4,220

4,443

4,352

 

 (10) Revenue by region

Region

Q2 2021

Q1 2021

Q4 2020

$ million

share

$ million

share

$ million

share

Russia

1,769

43%

1,306

46%

992

42%

European Union

723

17%

501

17%

447

19%

Middle East, including Turkey

407

10%

343

12%

296

12%

North America

781

19%

430

15%

342

14%

Central and South America

255

6%

140

5%

95

4%

CIS

84

2%

74

3%

64

3%

Asia and Oceania

98

2%

33

1%

103

4%

Rest of World

22

1%

40

1%

46

2%

TOTAL

4,139

100%

2,867

100%

2,385

100%



 

 (11) EBITDA*

$ million

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Operating income**

1,899

1,016

758

437

437

minus:






Depreciation and amortization

(153)

(150)

(132)

(142)

(145)

EBITDA

2,052

1,166

890

579

582

* 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

$ million

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Net cash provided operating activities

1,247

691

524

591

549

Interest paid

(25)

(8)

(25)

(9)

(28)

Interest received

1

1

3

1

2

Advance VAT payments on imported equipment

-

-

-

-

-

Capex

(359 )

(232 )

(273 )

(344 )

(219 )

Free Cash Flow

864

452

229

239

304

 

 (13) Net debt

$ million

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Short-term borrowings

831

857

1,054

856

1,219

Long-term borrowings

2,002

2,069

2,432

2,346

2,139

Cash and cash equivalents

(748 )

(489)

(842)

(755)

(1,121)

(122)

(350)

(149)

(501)

(407)

1,963

2,087

2,495

1,946

1,830

 



 

(14) Production of main products

k t

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Crude steel, incl.:

4,523

4,307

3,863

3,824

3,809

Steel Segment

3,557

3,331

2,970

2,864

3,145

Long products Segment, incl.:

777

789

708

786

610

NLMK Kaluga

310

333

349

361

272

Foreign Rolled Products Segment

189

187

185

173

53

Finished products, incl.:

2,756

2,764

2,594

2,614

2,467

Flat steel

2,104

2,096

2,024

1,957

1,978

Long steel

652

669

570

657

489

Coke (6% moisture), incl.:

1,498

1,463

1,486

1,506

1,530

NLMK Lipetsk

644

638

647

647

643

Altai-Koks

853

825

839

858

887

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

k t

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Sales to 3rd parties, incl.:

886

603

502

907

973

Export

667

406

380

797

796

Sales to subsidiaries & associates

1,130

911

728

410

598

Sales to NBH

451

479

582

308

472

TOTAL

2,016

1,514

1,230

1,318

1,571

 

 (16) Export shipments of steel products from Russian assets of the Group to third party consumers

k t

Q2 2021

Q1 2021

QoQ

Q2 2020

YoY

6M 2021

6M 2020

YoY

Semi-finished products

939

541

74%

1,280

-27%

1,480

2,008

-26%

Pig iron

133

30

4,4x

368

-64%

163

659

-75%

Slabs

667

406

64%

796

-16%

1,073

1,203

-11%

Billets

139

105

33%

116

20%

244

146

67%

Flat products

347

486

-29%

591

-41%

833

1,029

-19%

HRC

162

253

-36%

352

-54%

415

500

-17%

CRC

74

125

-41%

135

-45%

199

294

-32%

HDG

5

5

0%

8

-28%

11

24

-55%

Coated

1

1

92%

0

2,2x

1

1

82%

Dynamo

39

44

-12%

42

-6%

83

95

-13%

Transformer

66

57

15%

55

20%

123

115

7%

Long products

112

121

-8%

110

1%

232

245

-5%

Total

1,398

1,148

22%

1,981

-29%

2,545

3,282

-22%

 

 


(17) Segmental information  

Q2 2021

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

2,275

589

48

699

157

344

4,112

-

27

4,139

Intersegment revenue

914

214

637

-

-

11

1,776

(1,765)

(11)

-

Gross profit

1,581

190

583

219

5

22

2,600

(243 )

(107 )

2,250

Operating income/(loss)

1,292

147

556

203

(16 )

(21)

2,161

(198 )

(64 )

1,899

Income / (loss) before minority interest

997

121

410

181

(6 )

(24)

1,679

(155)

(160 )

1,364

Segment assets including goodwill

8,704

1,100

2,990

1,287

508

1,637

16,226

(3,473)

(1,439)

11,314

Balance figures presented as of 30.06.2021

Q1 2021

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

1,596

449

4

403

144

410

3,006

-

(139)

2,867

Intersegment revenue

521

73

517

-

-

12

1,123

(1,111)

(12)

-

Gross profit

927

119

411

70

10

38

1,575

(184 )

(70 )

1,321

Operating income/(loss)

687

79

392

54

(7 )

(6)

1,199

(157 )

(26 )

1,016

Income / (loss) before minority interest

530

63

319

52

(19 )

(7)

938

(102 )

(58 )

778

Segment assets including goodwill

7,315

984

2,195

810

453

1,373

13,130

(2,013)

(1,165)

9,952

Balance figures presented as of 31.03.2021



 


Novolipetsk Steel

Interim condensed consolidated statement of financial position (unaudited)

(millions of US dollars)


Note


As at

30 June 2021


As at
31 December 2020

Assets












Current assets






Cash and cash equivalents

3


748


842

Short-term financial investments

4


235


191

Trade and other accounts receivable

5


1,733


1,148

Inventories

6


1,911


1,373

Other current assets



11


16




4,638


3,570

Non-current assets






Long-term financial investments

4


6


7

Investments in joint ventures

4


15


131

Property, plant and equipment

7


6,008


5,659

Goodwill

8


216


212

Other intangible assets

8


164


159

Deferred income tax assets



261


119

Other non-current assets



6


5




6,676


6,292

Total assets



11,314


9,862







Liabilities and equity












Current liabilities






Trade and other accounts payable

9


1,423


1,065

Dividends payable



648


109

Short-term borrowings

1 0


831


1,054

Current income tax liability



158


51

Other short-term liabilities



-


3




3,060


2,282

Non-current liabilities






Long-term borrowings

10


2,002


2,432

Deferred income tax liability



370


359

Other long-term liabilities



46


48




2,418


2,839

Total liabilities



5,478


5,121







Equity attributable to Novolipetsk Steel shareholders






Common stock



221


221

Additional paid-in capital



8


8

Accumulated other comprehensive loss



(6,967)


(7,140)

Retained earnings



12,555


11,641




5,817


4,730

Non-controlling interests



19


11

Total equity



5,836


4,741

Total liabilities and equity



11,314


9,862

The interim condensed consolidated financial statements as set out on pages 5 to 2 5 were approved by the Group's management and authorised for issue on   22 July 2021.

 

Novolipetsk Steel

Interim condensed consolidated statement of profit or loss (unaudited)

(millions of US dollars, unless otherwise stated)


Note


For the six months ended
30 June 2021


For the six months ended
30 June 2020


For the three

months ended
30 June 2021


For the three

months ended
30 June 2020











Revenue

1 2 , 1 5


7,006


4,631


4,139


2,174

Cost of sales



(3,435)


(3,118)


(1,889)


(1,415)











Gross profit



3,571


1,513


2,250


759











General and administrative expenses



(213)


(168)


(116)


(82)

Selling expenses



(402)


(439)


(216)


(227)

Net impairment losses on financial assets



(1)


(5)


(1)


(2)

Other operating income , net



2


9


3


6

Taxes, other than income tax



(42)


(34)


(21)


(17)











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



2,915


876


1,899


437











Loss on disposals of property, plant and equipment



(4)


(2)


(2)


(2)

Impairment of non-current assets



(3)


(1)


(2)


-

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



(132)


(176)


(98)


(146)

Finance income



3


5


2


2

Finance costs



(78)


(41)


(56)


(20)

Foreign currency exchange loss, net

13, 16


(47)


(67)


(63)


(70)

Hedging result

1 6


(3)


(4)


(2)


(2)

Expenses on operations with financial instruments



-


(31)


-


(31)

Other expenses, net



(19)


(40)


(15)


(16)











Profit before income tax



2,632


519


1,663


152











Income tax expense

14


(490)


(153)


(299)


(75)











Profit for the period



2,142


366


1,364


77











Profit attributable to :










Novolipetsk Steel shareholders



2,134


366


1,359


77

Non-controlling interests



8


-


5


-











Earnings per share - basic and diluted:




















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

1 1


0.3561


0.0611


0.2268


0.0128











 

 



 

Novolipetsk Steel

Interim condensed consolidated statement of cash flows (unaudited)

(millions of US dollars)


Note


For the six months ended
30 June 2021


For the six months ended
30 June 2020

Cash flows from operating activities






Profit for the period



2,142


366

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






Depreciation and amortisation



303


300

Loss on disposals of property, plant and equipment



4


2

Finance income



(3)


(5)

Finance costs



78


41

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



132


176

Income tax expense

14


490


153

Impairment of non-current assets



3


1

Foreign currency exchange loss, net

13 , 16


47


67

Hedging result

16


3


4

Expenses on operations with financial instruments



-


31

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



(3)


4

Changes in operating assets and liabilities






( Increase )/ decrease in trade and other accounts receivable



(594)


65

( Increase )/ decrease in inventories



(510)


149

Decrease in other operating assets



6


3

Increase /( decrease) in trade and other accounts payable



379


(75)

С ash provided by operating activities



2,477


1,282

Income tax paid



(539)


(116)

Net cash provided by operating activities



1,938


1,166

Cash flows from investing activities






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



(591)


(507)

Proceeds from sale of property, plant and equipment



2


1

L oans given



(113)


-

Proceeds from repayment of loans given



41


85

Placement of bank deposits



(219)


(405)

Withdrawal of bank deposits



245


159

Interest received



2


6

Contribution to share capital of joint venture

4


(18)


(131)

Net cash used in investing activities



(651)


(792)

Cash flows from financing activities






Proceeds from borrowings



886


1,307

Repayment of borrowings



(1,476)


(635)

Payments on leases



(10)


(9)

Interest paid



(33)


(30)

Commissions paid



(42)


-

Dividends paid to Novolipetsk Steel shareholders



(692)


(579)

Net cash (used in)/provided by financing activities



(1,367)


54

Net (decrease)/increase in cash and cash equivalents



(80)


428

Effect of exchange rate changes on cash and cash equivalents



(14)


(20)

Cash and cash equivalents at the beginning of the year

3


842


713

Cash and cash equivalents at the end of the period

3


748


1,121







 

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