RNS Number : 7955P
Novolipetsk Steel
21 October 2021
 

 

Investor relations contact:

Dmitriy Kolomytsyn, CFA

+7 (495) 504 0504

ir@nlmk.com

Media relations contact:

Maria Simonova

+7 (915) 322 62 25

simonova_mn@nlmk.com

NLMK Group Q3 and 9M 2021 IFRS Financial Results

NLMK Group's EBITDA1 (LSE, MOEX: NLMK) in Q3 2021 increased by 11% qoq to $2.3 bn; EBITDA margin was 50%. Free cash flow (FCF) reached $1.1 bn. The Board of Directors recommended approving Q3 2021 dividends in the amount of 13.33 RUB/share (100% of the FCF).

Key highlights

k t/$ million

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Sales volumes

4,146

4,329

-4%

4,443

-7%

12,383

13,300

-7%

Revenue

4,560

4,139

10%

2,229

2x

11,566

6,860

69%

EBITDA 2

2,287

2,052

11%

579

3.9x

5,505

1,755

3.1x

EBITDA margin

50%

50%

+ 0 p.p.

26%

+24 p.p.

48%

26%

+22 p.p.

Profit for the period 3

1,622

1,359

19%

312

5.2x

3,756

678

5.5x

Free cash flow 4

1,114

864

29%

239

4.7x

2,430

874

2.8x

Net debt 5

2,739

1,963

40%

1,946

41%

2,739

1,946

41%

Net debt/EBITDA 5

0.43x

0.42x

 

0.87x

 

0.43x

0.87x

 

 

 Q3 2021 key highlights

·    Revenue grew by 10% qoq to $4.6 bn (+2х yoy) with an increase in steel product prices.

·    EBITDA grew by 11% qoq to $2.3 bn (+3.9x yoy) due to a wider steel products/raw materials spread. EBITDA margin remained flat qoq, at 50% (+24 p.p. yoy).

·    Free cash flow grew by 29% qoq to $1.1 bn (+4.7x yoy) driven by stronger financial performance.

·    Net profit grew by 19% qoq to $1.6 bn (+5.2х 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.

 

 

9M 2021 key highlights

·    Revenue grew by 69% yoy to $11.6 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 3.1 yoy to $5.5 bn due to wider steel products/raw materials price spreads and the implementation of Strategy 2022 projects. EBITDA margin was 48% (+22 p.p. yoy).

·    Free cash flow increased by a factor of 2.8 yoy to $2.4 bn driven by EBITDA growth. This was partially offset by the outflow of funds for working capital replenishment amid growing steel and raw material prices.

·    Net profit increased by a factor of 5.5 yoy up to $3.8 bn driven by gross profit growth.

 

Comment from NLMK Group CFO Shamil Kurmashov:

"In Q3 2021, average steel prices grew across all key sales markets. In the US, prices hit new highs. Starting from the middle of the quarter, demand growth in export markets slowed down, coupled with the ongoing recovery of local production and imports. The decrease in steel production and declining exports in China supported global steel prices, leading to an adjustment of iron ore prices at the same time. Australia coal export prices continued to climb amid restocking activities in India, Europe, and Japan.

In August 2021, NLMK Lipetsk performed equipment repairs following an incident in the steelmaking production oxygen supply infrastructure. Capacity utilization rates recovered after the repairs, reaching 98% in September. In this context, the Company's sales totalled 4.1 m t (-4% qoq). Favourable pricing conditions contributed to an increase in NLMK Group's revenue by 10% qoq to $4.6 bn, and EBITDA growth by 11% qoq to $2.3 bn. EBITDA margin remained flat vs. the Q2 level of 50%. Free cash flow increased by 29% qoq to $1.1 bn.

Net debt grew by 40% qoq to $2.7 bn due to working capital increase and dividend payments outflow in Q3 2021. Net debt/EBITDA remained practically flat at 0.43х.

In line with the Group's Dividend Policy, the management recommended the NLMK Board of Directors to pay $1.1 bn in Q3 2021 dividends."

TELECONFERENCE

 

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

Thursday, 21 October 2021

• 10:30 a.m. - New York

• 15:30 p.m. - London

• 17:30 p.m. - Moscow

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

US number:

+1 929 477 0324 (local access) // 800 479 1004 (toll free) 

UK number:

+44 (0) 330 336 9127 (local access) // 0800 358 6377 (toll free) 

Russian number:

+7 495 213 1767 (local access) // 8 800 500 9283 (toll free)

 

Conference code: 8105625

To join the webcast, please follow the link:

https://www.webcast-eqs.com/nlmk20211021

 

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

 

 

MANAGEMENT COMMENTS

Q3 2021 market review

·     Global steel demand growth rates slowed down in Q3 2021, driven by a decrease in the effect of deferred consumption and by weaker industrial output growth. Other limiting factors included supply chain disruptions amid a shortage of ships and a shortage of electronic components.

·     Steel consumption in the EU decreased by 5% qoq (+35% yoy) due to the seasonal decline in economic activity in August and a negative demand trend in the automotive segment amid a shortage of semiconductors. Demand for steel products in the United States increased by 6% qoq (+34% yoy) driven by industrial production growth and an extra liquidity inflow contributing to an uptick in business activity.

·     Demand for steel products in China went down by 15% qoq (-13% yoy) amid stricter government regulation. Reduced state support measures and a tightening credit policy caused a drop in housing construction in Q3 2021. Pursuing the goal to reduce controlled emissions, China introduced more restrictions on energy resource consumption, causing a decline in output in energy-intensive industries.

·     In Russia consumption of steel products decreased by 12% qoq (-12% yoy) amid slower growth rates in the construction and industrial production sectors.

 

Q3 2021 prices

·     Coal prices: Australian coking coal prices grew by 88% qoq (+121% yoy) amid high steel output outside of China. Coking coal prices in China increased by 53% qoq (+212% yoy) due to decreased internal output and reduced supplies from Mongolia.

·     Iron ore raw material prices decreased by 14% qoq (+44% yoy) amid declining steel output in China and growth of supply from Brazil and Australia in September 2021.

·     Market prices** for flat steel in the USA increased by 23% qoq (+247% yoy) against the backdrop of stable demand in industrial sectors of the economy and repairs of several large blast furnaces in September. In the EU, prices grew by 7% qoq (+ 136% yoy). However, in August and September prices in the European market declined amid a seasonal slowdown in demand, an increase in import supply and growth of stocks.

·     Dollar-denominated prices for steel products on the Russian market grew by 2% qoq (+125% yoy). Dollar-denominated rebar prices grew by 10% qoq (+94% yoy).

·     Slab prices in export destinations (FOB Black Sea) decreased by 9% qoq (+89 % 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 2021 output and sales breakdown

·    Steel output went down by 15% qoq (+1% yoy) to 3.9 m t due to the incident in the steelmaking production oxygen supply infrastructure at the Lipetsk site in August and the subsequent repairs.

·    Sales decreased to 4.1 m t (-4% qoq; -7% yoy) with the reduction of slab supply to NBH and export markets caused by the decline in steel output.

·    Sales mix: the share of semi-finished products was 34% (-3 p.p. qoq; -4 p.p. yoy) as slab and billet supplies to third parties declined. Exports of square billet went down driven by a decrease in the product margin caused by the export duties on steel introduced in Russia for the period from August to December 2021. Sales of finished products amounted to 2.7 m t (+1% qoq, flat yoy).

·    Sales in the "home" markets reached 2.8 m t (flat qoq and yoy). US sales grew by +17% qoq (+60% yoy) amid strong end demand. In the EU, sales increased by 7% qoq (-12% yoy). In Russia sales dropped by 7% qoq (-9% yoy) due to the slowdown in end demand and purchasing activity of traders in anticipation of further price reduction. Export sales increased by 2% qoq to 1.4 m t. The 21% yoy decrease was due to the high base of Q3 2020, when supplies were being made to non-traditional export destinations.

9M 2021 output and sales breakdown

·    Steel output increased to 12.9 m t (+8% yoy) as upgrades were completed at NLMK BF and BOF operations and following output growth at NLMK Russia Long Products and NLMK USA.

·    Sales totalled 12.4 m t (-7% yoy) with the resumption of intra-group slab deliveries to NLMK USA (+0.9 m t yoy) amid a strong demand trend in the region (last year, NLMK USA was rolling slabs from external markets) and a decrease in pig iron production taking into account repairs at NLMK's BF operations in Q1-Q3 2021.

·    Sales mix: sales of semi-finished products to third parties decreased by 21% yoy driven by the growth of slab deliveries to NLMK USA and NLMK DanSteel. Slab shipments to NBH totalled 1.2 m t (-23% yoy) amid the La Louvière Hot Strip Mill upgrade in H1 2021. Sales of finished products increased by 3% yoy to 8.2 m t.

·    Sales on "home" markets increased by 2% yoy to 8.3 m t driven by the steel consumption increase in Russia and in the USA. Sales in export markets decreased by 23% yoy to 4.0 m t due to the high base of 9M 2020, when sales were reallocated to export.

 

* 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 2021 revenue

·     Revenue grew by 10% qoq to $4.6 bn (+2х yoy) due to an increase in steel product prices.

·     Revenue from semi-finished product sales went down by 4% qoq to $1.1 bn (+77% yoy) driven by a decrease in slab supplies to NBH and the Russian market against the backdrop of a decrease in steel output, as well as due to a decrease in the export of billets. The share of semi-finished products in total revenue was down by 3 p.p. qoq to 24% (-3 p.p. yoy).

·     Revenue from sales of finished products increased by 16% qoq to $3.2 bn (+2.2x yoy) due to the growth of rolled steel sales and prices in the key markets. The share of finished rolled steel in the consolidated revenue totalled 69% (+3 p.p. qoq; +4 p.p. yoy).

·     The share of the Russian market in total revenue went down to 37% (-6 p.p. qoq; -9 p.p. yoy) due to the slowdown in end demand and purchasing activity of the traders expecting a further steel price downturn. The US share increased to 25% (+6 p.p. qoq; + 12 p.p. yoy) due to high demand and record-high prices in the region. The ЕU share was 18% (+1 p.p. qoq; +7 p.p. yoy).

9M 2021 revenue

·     Revenue increased by 69% yoy to $11.6 bn due to higher sales prices on all key markets, which was partially offset by the decrease in sales to external customers as slab supplies were redistributed to NLMK USA (see above).

·     Revenue from semi-finished product sales increased by 43% yoy to $2.9 bn amid an increase in average prices, which was partially offset by the increase of intragroup slab supplies. The share of semi-finished products in total revenue decreased by 4 p.p. yoy to 25%.

·     Revenue from finished product sales increased by 84% yoy to $7.9 bn. The share of finished products in the revenue totalled 69% (+6 p.p. yoy).  

·     The share of the Russian market remained flat year-on-year at 41%. The share of revenue from sales to Asian markets restored to traditional levels, amounting to 2% (-8 p.p. yoy) due to the recovery of demand on the traditional sales markets. The share of the North American region increased to 20% (+4 p.p. yoy), and the share of the EU region grew to 18% (+2 p.p. yoy).

Q3 2021 EBITDA

·    EBITDA* grew by 11% qoq to $2.3 bn (+3.9x yoy), due mainly to wider steel/raw material price spreads.

·    Commercial costs increased by 7% qoq to $231 m (+11% yoy) due to increased transportation costs and reduced intra-group deliveries.

·    General and administrative expenses decreased by 5% qoq to $110 m due to the high base of the previous quarter, when an additional reserve for bonus payments was accrued.

 

9M 2021 EBITDA

·    EBITDA grew by a factor of 3.1 yoy to $5.5 bn due to wider price spreads and a weaker ruble, and to the implementation of Strategy 2022 projects.

·    Commercial costs decreased by 2% yoy to $633 m driven by intragroup supply growth, to NLMK USA facilities in particular. 

·    General and administrative expenses increased by 28% yoy to $323 m amid accrual of the Long-Term Incentive Programme reserves and annual salary indexation at NLMK's Russian companies.

Net profit**

·    Net profit in Q3 2021 increased by 19% qoq to $1.6 bn amid EBITDA growth.

·    Net profit in 9M 2021 increased by a factor of 5.5 yoy to $3.8 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.

Q3 2021 free cash flow

·     Free cash flow increased by 29% qoq to $1.1 bn (+4.7х yoy) following EBITDA growth and investment reduction, which was partially offset by working capital growth. 

·     Operational cash flow increased by 11% qoq to $1.4 bn.

·     The outflow of funds for working capital replenishment totalled $451 m due to:

-$223 m: an increase in advance payments for export duties in the Russian Federation, as well as an increase in VAT recoverable receivables against the backdrop of a decrease in prices for steel products with an increase in prices for raw materials.

-$262 m: an increase in the cost of raw materials and finished products in stocks, a seasonal increase in scrap stocks.

+$50 m: increased accounts payable amid coal price growth.

9M 2021 free cash flow

·     Free cash flow increased by a factor of 2.8 yoy to $2.4 bn, driven mainly by EBITDA growth. This was partially offset by the outflow of funds for working capital replenishment.

·     The outflow of funds for working capital replenishment totalled $1.2 m due to:

-$817 m: an increase in accounts receivable amid higher prices for steel products, an increase in VAT recoverable receivables due to the increase in prices for raw materials and advances on export duties.

-$772 m: growth of inventory prices, an increase in inventories at NLMK USA amid increased production, a seasonal increase in scrap stocks.

+$429 m: an increase in accounts payable due to higher coal prices, an increase in advance payments from the customers against the backdrop of a strong market, an increase in VAT payable amid growing sales prices in the Russian market.

Investment

·     The Group's investment in Q3 2021 decreased by 24% qoq to $272 m (-21% yoy) considering the high base of Q2 2021, when pellet cars were purchased. In addition, the Q3 investment load was partially shifted to NBH, where projects for hot strip mills and plate mills are being implemented as part of Strategy 2022.

·     The Group's 9M 2021 investment totalled $863 m (+1% yoy).

Dividends

·     In Q3 2021 the Company paid out $1.7 bn in dividends.

·     On 21 October 2021 the Board of Directors recommended that shareholders approve the payment of Q3 2021 dividends in the amount of RUB 13.33 per share.

Strategy 2022 execution

·     In Q3 2021 operational efficiency programmes added $49 m to our EBITDA (hereinafter vs. the 2020 cost base); investment project gains totalled $90 m.

·     In 9M 2021 structural EBITDA gains from operational efficiency programmes totalled $119 m; investment projects added $129 m.

Debt management

·     Total debt in Q3 2021 grew by 20% qoq to $3.4 bn amid the Group's drawdown on working capital funding lines.

·     Net debt increased by 40% qoq to $2.7 bn amid cash outflow to pay out dividends for Q1-Q2 2021 and working capital growth on a strong market. Net debt/EBITDA remained practically flat, at 0.43х (0.42x as of 30.06.2021).

·     The weighted average interest on debt liabilities decreased by 0.3 p.p. qoq to a record low of 2.4%  (-0.6 p.p. yoy) driven by debt portfolio optimization.

 

NLMK Russia Flat Products

Q3 2021 highlights

·    Sales decreased by 15% qoq to 3.0 m t (-9% yoy) amid lower slab output due to the incident in the steelmaking production oxygen supply infrastructure at the Lipetsk site.

·    Revenue in the Segment decreased by 6% qoq to $3.0 bn (+87% yoy) following lower sales, which was partially offset by increased steel product prices.

·    EBITDA totalled $1.2 bn (-17% qoq; +3.8х yoy) as sales went down and export tariffs were accrued, which was partially offset by investment project gains as part of Strategy 2022.

9M 2021 highlights

·    Sales in the Segment went down by 7% yoy to 9.5 m t as a result of reduced pig iron and finished steel shipments due to planned repairs at the BF operations in Q1-Q3 2021 and hot and cold rolling mills in Q2 2021, as well as an increase in the average slab supply lead time as shipments to NLMK USA were resumed.

·    Revenue grew by 66% yoy to $8.3 bn due to higher average sales prices and an increased share of finished products in sales, which was partially offset by lower shipments. The share of revenue from inter-segmental operations went up to 24% (+7 p.p. yoy).

·    EBITDA increased by a factor of 3.4 yoy to $3.3 bn, due mainly to wider steel product/raw materials spreads and implementation of Strategy 2022 projects.

 

NLMK Russia Long Products

Q3 2021 highlights

·     Sales decreased by 9% qoq to 0.75 m t (-7% yoy) amid lower export shipments of billets following the introduction of export tariffs for steel products in Russia on 1 August 2021.

·     Revenue went down by 3% qoq to $776 m (+72% yoy) following the decrease in sales. Revenue from inter-segmental operations decreased by 18% qoq to $175 m amid a temporary decrease of demand for scrap from the Lipetsk site.

·     EBITDA stood at $158 m, 1% higher qoq, due to wider long product/scrap price spreads, which was offset by lower sales.

9M 2021 highlights

·     Sales grew by 17% yoy to 2.3 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 92% yoy to $2.1 bn following the increase in sales and average sales prices for finished products. Revenue from operations with external buyers increased by 93% yoy to $1.6 bn.

·     EBITDA grew to $405 m (+6.6х yoy) as demand recovered in the construction segment and the rebar/scrap spread widened. The operational efficiency programme and Strategy 2022 investment projects had an additional positive effect.

 

Mining and Processing of Raw Materials

Q3 2021 highlights

·    Sales decreased by 6% qoq to 4.8 m t (+18% yoy) as demand went down due to the incident in the steelmaking production oxygen supply infrastructure at the Lipetsk site. The segment's concentrate output grew by 1% qoq to 5.1 m t. The corresponding growth of stocks in the division will be offset in subsequent quarters via shipments to Lipetsk to support steel output growth.

·    Revenue was up by 14% qoq to $783 m (+2.4х yoy) due to higher dollar-denominated prices of concentrate and pellets: 19% qoq (+115% yoy) and 29% qoq (+104% yoy), respectively.

·    EBITDA grew by 17% qoq to $686 m (+2.7х yoy) as revenue increased.

9M 2021 highlights

·    Sales reached 14.8 m t (+9% yoy) as a result of investment into expanding concentrate production capacities and against the low baseline of Q3 2020.

·    Revenue increased to $2.0 bn (+2х yoy), due mainly to higher global prices for raw materials and sales growth.

·    EBITDA totalled $1.7 bn (+2.3х yoy) against the backdrop of increased prices on raw materials markets and investment project gains.

 

NLMK USA

Q3 2021:

·    Sales increased by 17% qoq to 0.6 m t (+60% yoy) due to high demand for steel and additional measures aimed at supporting infrastructure construction in the US.

·    Revenue grew by 49% qoq to $1.0 bn (+4.7х yoy) amid increased sales and record-high steel product prices.

·    EBITDA increased by 66% qoq to $354 m (+$366 m yoy) as sales went up and the flat steel/slab spread improved.

9M 2021 highlights

·    Sales increased by 23% yoy to 1.5 m t as demand for steel in the US recovered and capacity utilization grew.

·    Revenue grew by a factor of 2.6 yoy to $2.1 bn due to higher sales and increased steel prices.

·    EBITDA increased to $632 m (+$663 m yoy) amid wider price spreads and higher sales.

 

NLMK DanSteel*

Q3 2021 highlights

·    Sales of plate went down by 20% qoq to 0.13 m t (+34% yoy) amid planned equipment repairs and seasonally low demand.

·    Revenue grew by 8% qoq to $169 m (+2.1х yoy) due to higher sales prices for plate, which was partially offset by lower sales volumes.

·    EBITDA increased by $26 m qoq to $13 m (+$16 m yoy) as the plate/slab spread widened.

9M 2021 highlights

·    Sales were up by 22% yoy to 0.47 m t against the low Q3 2020 baseline during the COVID-19 pandemic.

·    Revenue increased by 54% yoy to $470 m amid higher sales and favourable pricing conditions.

·    EBITDA stood at -$4 m due to shipments in Q1-Q2 2021 based on long-term contracts, signed before steel product prices went up.

* NLMK Dansteel and the plate distribution network

 

JV performance (NBH)

Q3 2021 highlights

·    NBH Sales grew by 16% qoq to 0.4 m t following the completion of the first stage of the Hot Strip Mill upgrade at NLMK La Louvière (a Strategy 2022 project). The mill's step-by-step ramp-up impacted the year-on-year sales trend (-17%).

·    Revenue increased by 26% qoq to $447 m (+49% yoy) amid growing sales and higher European market prices.

·    EBITDA grew to $15 m vs. -$7 m in Q2 2021 (+$47 m yoy) as sales increased and flat steel/slab price spreads improved.

9M 2021 highlights

·    NBH sales went down by 21% yoy to 1.2 m t amid rolling capacity upgrades in H1 2021.

·    Revenue increased by 24% yoy to $1.2 bn as a result of higher steel product prices.

·    EBITDA totalled $16 m vs. -$65 m the year before due to wider price spreads, which was partially offset by lower sales volumes.

 

 

 

Appendix No. 1: Operating and financial results

 (1) Sales markets

k t

Total

Sales markets

Russia

EU

North America

Middle East and Turkey

Central and South America

Other

NLMK Group (with NBH)

 4,203

 1,698

 912

 713

 417

 239

 223

Division sales to third parties:

 

 

 

 

 

 

 

NLMK Russia Flat

 2,365

 1,140

 312

 122

 377

 230

 184

NLMK Russia Long

 747

 554

 123

 -  

 36

 5

 29

International subsidiaries and affiliates, incl.:

 1,091

 5

 477

 590

 4

 4

 11

NLMK USA

 586

 -  

 -  

 586

 -  

 -  

 -  

European rolling facilities (NLMK DanSteel and NBH)

 505

 5

 477

 4

 4

 4

 11

 

(2) NLMK Russia Flat

k t/$ million

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Steel product sales, incl.:

2,983

3,527

-15%

3,281

-9%

9,507

10,182

-7%

external customers

2,364

2,387

-1%

2,870

-18%

6,834

8,204

-17%

semis to NBH

239

451

-47%

308

-23%

1,169

1,514

-23%

intersegmental sales

380

689

-45%

102

3.7x

1,504

464

3.2x

Revenue, incl.:

2,991

3,189

-6%

1,600

87%

8,297

5,012

66%

external customers

2,422

2,275

6%

1,425

70%

6,293

4,185

50%

intersegmental operations

569

914

-38%

175

3.3x

2,004

827

2.4x

EBITDA

1,154

1,393

-17%

306

3.8x

3,319

964

3.4x

EBITDA margin

39%

44%

-5 p.p.

19%

+20 p.p.

40%

19%

+21 p.p.

 

(3) NLMK Russia Long

k t/$ million

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Steel product sales

747

818

-9%

802

-7%

2,305

1,965

17%

Revenue, incl.:

776

803

-3%

452

72%

2,101

1,094

92%

external customers

601

589

2%

337

78%

1,639

848

93%

intersegmental operations

175

214

-18%

115

52%

462

246

88%

EBITDA

158

157

1%

37

4.3x

405

61

6.6x

EBITDA margin

20%

20%

0 p.p.

8%

+12 p.p.

19%

6%

+13 p.p.

  

(4) Mining Segment

k t/$ million

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Iron ore products sales, incl.:

4,845

5,159

-6%

4,112

18%

14,789

13,596

9%

sales to Lipetsk plant

4,587

4,881

-6%

3,954

16%

14,231

12,912

10%

Revenue, incl.:

783

685

14%

330

2.4x

1,989

978

2x

external customers

38

48

-21%

38

0%

90

72

25%

intersegmental operations

745

637

17%

292

2.6x

1,899

906

2.1x

EBITDA

686

585

17%

250

2.7x

1,703

725

2.3x

EBITDA margin

88%

85%

+3 p.p.

76%

+12 p.p.

86%

74%

+12 p.p.

 

 (5) NLMK USA

k t/$ million

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Steel product sales

586

502

17%

366

60%

1,519

1,234

23%

Revenue, incl.:

1,039

699

49%

223

4.7x

2,141

838

2.6x

external customers

1,039

699

49%

223

4.7x

2,141

838

2.6x

intersegmental operations

-

-

0%

-

0%

-

-

0%

EBITDA

354

213

66%

(12)

29.5x

632

(31)

20.4x

EBITDA margin

34%

30%

+4 p.p.

-5%

+39 p.p.

30%

-4%

+34 p.p.

 

 (6) NLMK DanSteel

k t/$ million

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Steel product sales

130

162

-20%

97

34%

465

383

22%

Revenue, incl.:

169

157

8%

80

2.1x

470

305

54%

external customers

169

157

8%

79

2.1x

470

304

55%

intersegmental operations

-

-

0%

1.0

-100%

-

1

-100%

EBITDA

13

(13)

1x

(3)

4,3x

(4)

-

0%

EBITDA margin

8%

-8%

+16 p.p.

-4%

+12 p.p.

-1%

0%

-1 p.p.

 

(7) NBH

k t/$ million

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Steel product sales

384

329

17%

461

-17%

1,208

1,534

-21%

Revenue, incl.:

447

355

26%

299

49%

1,224

989

24%

external customers

434

344

26%

286

52%

1,188

953

25%

intersegmental operations

13.0

11.0

18%

13.0

0%

36

36

0%

EBITDA

15

(7)

2.1x

(32)

0.5x

16

(65)

0.2x

EBITDA margin

3%

-2%

+5 p.p.

-11%

+14 p.p.

1%

-7%

+8 p.p.

 

 (8) Sales by product 

k t

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Pig iron

245

133

30

437

389

Slabs

1,068

1,337

1,082

1,083

1,215

Thick plates

131

163

175

145

97

Hot-rolled steel

1,023

904

957

947

887

Cold-rolled steel

390

406

431

424

480

Galvanized steel

320

334

279

273

315

Pre-painted steel

69

96

81

82

129

Transformer steel

69

77

67

78

64

Dynamo steel

55

62

65

68

66

Billet

90

139

105

96

86

Long products

600

599

572

522

642

Metalware

57

80

63

65

74

Other metal products*

29

-

-

-

-

ИТОГО

4,146

4,329

3,908

4,220

4,443

 

 (9) Sales by region

k t

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Russia

1,695

1,818

1,677

1,643

1,817

European Union

869

890

805

852

482

Middle East, including Turkey

413

507

536

567

580

North America

713

624

468

604

562

Central and South America

238

325

225

184

49

CIS

86

76

91

101

135

Asia and Oceania

114

68

23

190

794

Rest of World

18

21

82

79

25

TOTAL

4,146

4,329

3,908

4,220

4,443

 

 (10) Revenue by region

Region

Q3 2021

Q2 2021

Q1 2021

$ million

share

$ million

$ million

share

$ million

Russia

1,697

37%

1,769

43%

1,306

46%

European Union

834

18%

723

17%

501

17%

Middle East, including Turkey

398

9%

407

10%

343

12%

North America

1,133

25%

781

19%

430

15%

Central and South America

218

5%

255

6%

140

5%

CIS

125

3%

84

2%

74

3%

Asia and Oceania

105

2%

98

2%

33

1%

Rest of World

50

1%

22

1%

40

1%

TOTAL

4,560

100%

4,139

100%

2,867

100%

 

(11) EBITDA*

$ million

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Operating income**

2,132

1,899

1,016

758

437

minus:

 

 

 

 

 

Depreciation and amortization

(155)

(153)

(150)

(132)

(142)

EBITDA

2,287

2,052

1,166

890

579

* 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

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Net cash provided operating activities

1,388

1,247

691

524

591

Interest paid

(4)

(25)

(8)

(25)

(9)

Interest received

2

1

1

3

1

Advance VAT payments on imported equipment

-

-

-

-

-

Capex

(272)

(359)

(232)

(273)

(344)

Free Cash Flow

1,114

864

452

229

239

 

 (13) Net debt

$ million

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Short-term borrowings

1,423

831

857

1,054

856

Long-term borrowings

1,985

2,002

2,069

2,432

2,346

Cash and cash equivalents

(542)

(748)

(489)

(842)

(755)

Short-term deposits

(127)

(122)

(350)

(149)

(501)

Net debt

2,739

1,963

2,087

2,495

1,946

 

(14) Production of main products

k t

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Crude steel, incl.:

3,867

4,523

4,307

3,863

3,824

Steel Segment

2,877

3,557

3,331

2,970

2,864

Long products Segment, incl.:

811

777

789

708

786

NLMK Kaluga

307

310

333

349

361

Foreign Rolled Products Segment

179

189

187

185

173

Finished products, incl.:

2,886

2,756

2,764

2,594

2,614

Flat steel

2,211

2,104

2,096

2,024

1,957

Long steel

675

652

669

570

657

Coke (6% moisture), incl.:

1,405

1,498

1,463

1,486

1,506

NLMK Lipetsk

643

644

638

647

647

Altai-Koks

762

853

825

839

858

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

k t

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Sales to 3rd parties, incl.:

830

886

603

502

907

Export

667

667

406

380

797

Sales to subsidiaries & associates

534

1,130

911

728

410

Sales to NBH

239

451

479

582

308

TOTAL

1,364

2,016

1,514

1,230

1,318

 

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

k t

Q3 2021

Q2 2021

QoQ

Q3 2020

YoY

9M 2021

9M 2020

YoY

Semi-finished products

1,002

939

7%

1,271

-21%

2,483

3,279

-24%

Pig iron

245

133

84%

389

-37%

409

1,048

-61%

Slabs

667

667

0%

797

-16%

1,740

2,000

-13%

Billets

90

139

-35%

85

6%

334

231

45%

Flat products

393

347

13%

416

-5%

1,225

1,445

-15%

HRC

218

162

35%

160

36%

632

660

-4%

CRC

78

74

6%

148

-47%

277

442

-37%

HDG

5

5

-11%

8

-40%

16

32

-51%

Coated

1

1

6%

1

-16%

3

2

22%

Dynamo

34

39

-13%

47

-28%

117

142

-18%

Transformer

57

66

-14%

52

11%

181

167

8%

Long products

103

112

-8%

169

-39%

335

415

-19%

Total

1,498

1,398

7%

1,856

-19%

4,044

5,139

-21%

 

(17) Segmental information 

Q3 2021

Russian Flat Steel

Russian Long Products

Mining

NLMK USA

NLMK DanSteel and Plate Distribution Network

Investments in NBH

Totals

Intersegmental operations and balances

NBH
deconsoli-
dation

Consolidated

$ million

Revenue from external customers

2,422

601

38

1,039

169

434

4,703

-

(143)

4,560

Intersegment revenue

569

175

745

-

-

13

1,502

(1,489)

(13)

-

Gross profit

1,373

202

683

367

25

44

2,694

(94)

(48)

2,552

Operating income/(loss)

1,050

147

656

347

10

1

2,211

(74)

(5)

2,132

Income / (loss) before minority interest

833

121

517

272

2

(2)

1,743

(107)

(8)

1,628

Segment assets including goodwill

8,427

1,119

3,092

1,391

507

1,696

16,232

(2,883)

(1,505)

11,844

 Balance figures presented as of 30.09.2021

Q2 2021

Russian Flat Steel

Russian Long Products

Mining

NLMK USA

NLMK DanSteel and Plate 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

 

 

 

Novolipetsk Steel

Interim condensed consolidated statement of financial position (unaudited)

(millions of US dollars)

 

 

 

 

Note

 

As at 30 September 2021

 

As at 31 December 2020

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

3

 

542

 

842

 

Short-term financial investments

4

 

237

 

191

 

Trade and other accounts receivable

5

 

1,947

 

1,148

 

Inventories

6

 

2,166

 

1,373

 

Other current assets

 

 

22

 

16

 

 

 

 

4,914

 

3,570

 

Non-current assets

 

 

 

 

 

 

Long-term financial investments

4

 

168

 

7

 

Investments in joint ventures

4

 

10

 

131

 

Property, plant and equipment

7

 

6,104

 

5,659

 

Goodwill

8

 

215

 

212

 

Other intangible assets

8

 

134

 

159

 

Deferred income tax assets

 

 

290

 

119

 

Other non-current assets

 

 

9

 

5

 

 

 

 

6,930

 

6,292

 

Total assets

 

 

11,844

 

9,862

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other accounts payable

9

 

1,492

 

1,065

 

Dividends payable

 

 

11

 

109

 

Short-term borrowings

10

 

1,423

 

1,054

 

Current income tax liability

 

 

159

 

51

 

Other short-term liabilities

 

 

-

 

3

 

 

 

 

3,085

 

2,282

 

Non-current liabilities

 

 

 

 

 

 

Long-term borrowings

10

 

1,985

 

2,432

 

Deferred income tax liability

 

 

380

 

359

 

Other long-term liabilities

 

 

42

 

48

 

 

 

 

2,407

 

2,839

 

Total liabilities

 

 

5,492

 

5,121

 

 

 

 

 

 

 

 

Equity attributable to Novolipetsk Steel shareholders

 

 

 

 

 

 

Common stock

 

 

221

 

221

 

Additional paid-in capital

 

 

8

 

8

 

Accumulated other comprehensive loss

 

 

(6,976)

 

(7,140)

 

Retained earnings

 

 

13,074

 

11,641

 

 

 

 

6,327

 

4,730

 

Non-controlling interests

 

 

25

 

11

 

Total equity

 

 

6,352

 

4,741

 

Total liabilities and equity

 

 

11,844

 

9,862

                 

 

 

 

 

Novolipetsk Steel

Interim condensed consolidated statement of profit or loss (unaudited)

(millions of US dollars, unless otherwise stated)

 

 

 

 

Note

 

For the nine months ended
30 September 2021

 

For the nine months ended
30 September 2020

 

For the three months ended
30 September 2021

 

For the three months ended
30 September 2020

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

12, 15

 

11,566

 

6,860

 

4,560

 

2,229

 

Cost of sales

 

 

(5,443)

 

(4,595)

 

(2,008)

 

(1,477)

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

6,123

 

2,265

 

2,552

 

752

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

(323)

 

(252)

 

(110)

 

(84)

 

Selling expenses

 

 

(633)

 

(647)

 

(231)

 

(208)

 

Net impairment  gains/(losses) on financial assets

 

 

3

 

(8)

 

4

 

(3)

 

Other operating (expenses)/income, net

 

 

(3)

 

3

 

(5)

 

(6)

 

Taxes, other than income tax, and contributions

18

 

(120)

 

(48)

 

(78)

 

(14)

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

5,047

 

1,313

 

2,132

 

437

 

 

 

 

 

 

 

 

 

 

 

 

Loss on disposals of property, plant and equipment

 

 

(7)

 

(4)

 

(3)

 

(2)

 

Impairment of non-current assets

8

 

(35)

 

(3)

 

(32)

 

(2)

 

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

 

 

(136)

 

(186)

 

(4)

 

(10)

 

Finance income

 

 

5

 

7

 

2

 

2

 

Finance costs

 

 

(96)

 

(70)

 

(18)

 

(29)

 

Foreign currency exchange (loss)/gain, net

13, 16

 

(68)

 

(29)

 

(21)

 

38

 

Hedging result

16

 

(4)

 

(11)

 

(1)

 

(7)

 

Expenses on operations with financial instruments

 

 

-

 

(31)

 

-

 

-

 

Other expenses, net

 

 

(29)

 

(53)

 

(10)

 

(13)

 

 

 

 

 

 

 

 

 

 

 

 

Profit before income tax

 

 

4,677

 

933

 

2,045

 

414

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

14

 

(907)

 

(255)

 

(417)

 

(102)

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

 

3,770

 

678

 

1,628

 

312

 

 

 

 

 

 

 

 

 

 

 

 

Profit attributable to:

 

 

 

 

 

 

 

 

 

 

Novolipetsk Steel shareholders

 

 

3,756

 

678

 

1,622

 

312

 

Non-controlling interests

 

 

14

 

-

 

6

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

11

 

0.6267

 

0.1131

 

0.2706

 

0.0521

 

 

 

 

 

 

 

 

 

 

 

                         

 

 

 

 

Novolipetsk Steel

Interim condensed consolidated statement of cash flows (unaudited)

(millions of US dollars)

 

 

 

Note

 

For the nine months ended
30 September 2021

 

For the nine months ended
30 September 2020

 

Cash flows from operating activities

 

 

 

 

 

 

Profit for the period

 

 

3,770

 

678

 

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

 

 

 

 

 

 

Depreciation and amortisation

 

 

458

 

442

 

Loss on disposals of property, plant and equipment

 

 

7

 

4

 

Finance income

 

 

(5)

 

(7)

 

Finance costs

 

 

96

 

70

 

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

 

 

136

 

186

 

Income tax expense

14

 

907

 

255

 

Impairment of non-current assets

 

 

35

 

3

 

Foreign currency exchange loss, net

13, 16

 

68

 

29

 

Hedging result

16

 

4

 

11

 

Expenses on operations with financial instruments

 

 

-

 

31

 

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

 

 

(6)

 

3

 

Changes in operating assets and liabilities

 

 

 

 

 

 

(Increase)/decrease in trade and other accounts receivable

 

 

(817)

 

28

 

(Increase)/decrease in inventories

 

 

(772)

 

198

 

Increase in other operating assets

 

 

(10)

 

(4)

 

Increase in trade and other accounts payable

 

 

429

 

18

 

Сash provided by operating activities

 

 

4,300

 

1,945

 

Income tax paid

 

 

(974)

 

(188)

 

Net cash provided by operating activities

 

 

3,326

 

1,757

 

Cash flows from investing activities

 

 

 

 

 

 

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

 

 

(863)

 

(851)

 

Proceeds from sale of property, plant and equipment

 

 

2

 

5

 

Loans given

 

 

(276)

 

(51)

 

Proceeds from repayment of loans given

 

 

41

 

85

 

Placement of bank deposits

 

 

(297)

 

(686)

 

Withdrawal of bank deposits

 

 

318

 

347

 

Interest received

 

 

4

 

7

 

Contribution to share capital of joint venture

4

 

(18)

 

(131)

 

Net cash used in investing activities

 

 

(1,089)

 

(1,275)

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from borrowings

 

 

1,732

 

1,599

 

Repayment of borrowings

 

 

(1,721)

 

(1,118)

 

Payments on leases

 

 

(15)

 

(15)

 

Interest paid

 

 

(37)

 

(39)

 

Payments from settlement of derivative financial instruments

 

 

-

 

(8)

 

Commissions paid

 

 

(43)

 

-

 

Dividends paid to Novolipetsk Steel shareholders

 

 

(2,438)

 

(845)

 

Dividends paid to non-controlling interests

 

 

-

 

(4)

 

Net cash used in financing activities

 

 

(2,522)

 

(430)

 

Net (decrease)/increase in cash and cash equivalents

 

 

(285)

 

52

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(15)

 

(10)

 

Cash and cash equivalents at the beginning of the year

3

 

842

 

713

 

Cash and cash equivalents at the end of the period

3

 

542

 

755

 

 

 

 

 

 

 

               

 

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