NLMK GROUP 12M AND Q4 2019 IFRS FINANCIAL RESULTS
NLMK GROUP 12M AND Q4 2019 IFRS FINANCIAL RESULTS
NLMK Group (LSE, MOEX: NLMK) today announced its Q4 and 12M 2019 financial results1. Q4 revenue amounted to $2,312 m, with an EBITDA margin of 21%. Free cash flow (FCF) in Q4 grew to $338 m (+36% qoq). NLMK Board of Directors recommended approving Q4 dividends in the amount of RUB 5.16/share (148% of FCF) in line with NLMK's Dividend Policy.
Key highlights
k t/$ million | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Sales volumes | 4,172 | 4,015 | 4% | 4,643 | -10% | 17,069 | 17,591 | -3% |
Revenue | 2,312 | 2,576 | -10% | 3,013 | -23% | 10,554 | 12,046 | -12% |
EBITDA 2 | 480 | 654 | -27% | 847 | -43% | 2,564 | 3,589 | -29% |
EBITDA margin | 21% | 25% | -4 p.p. | 28% | -7 p.p. | 24% | 30% | -6 p.p. |
Profit for the period 3 | 200 | 343 | -42% | 509 | -61% | 1,339 | 2,238 | -40% |
Free cash flow 4 | 338 | 249 | 36% | 502 | -33% | 1,523 | 2,027 | -25% |
Net debt 5 | 1,786 | 1,736 | 3% | 891 | 2x | 1,786 | 891 | 2x |
Net debt/EBITDA 5 | 0.70x | 0.59x | Â | 0.25x | Â | 0.70x | 0.25x | Â |
12M 2019 key highlights
·   Revenue decreased by 12% yoy to $10.6 bn amid falling steel product prices and lower sales due to major repairs at NLMK Lipetsk BF and BOF operations.
·   EBITDA totalled $2.6 bn (-29% yoy) amid a decrease in revenue and narrower steel/raw material spreads. EBITDA margin was down to 24% (-6 p.p. yoy).
·   Free cash flow totalled $1.5 bn. The 25% decrease yoy is associated with the decrease in EBITDA and growth of capex as part of Strategy 2022 implementation.
Q4 2019 highlights
·   Revenue decreased by 10% qoq to $2.3 bn amid a decrease in average sales prices and an increase in the share of semi-finished products in the sales portfolio.
·   EBITDA decreased to $480 m (-27% qoq) due to an outstripping decrease in steel prices relative to raw materials. EBITDA margin decreased to 21% (-4 p.p. qoq).
·  Free cash flow grew to $338 m (+36% qoq) amid a decrease in stock prices and a set of working capital management measures.
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 | 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 |
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NLMK GROUP Q4 2019 IFRS CONSOLIDATED FINANCIAL RESULTS
Key highlights
Comment from NLMK Group CFO Shamil Kurmashov:
"The situation on steel product markets in 2019 was rather challenging. H2 2019 saw prices fall below the cycle average. The dive was so deep, we estimate that 80% of global HRC production was loss-making. The margins in the sector were further pressured by increasing prices for raw materials.
"Amid the low phase of the market NLMK carried out major overhauls at its blast furnace and BOF operations, resulting in a 3% yoy reduction in steel sales in 2019.
"NLMK Group revenue in 2019 decreased by 12% year-on-year. EBITDA was $2.6 billion, which is 29% lower than the previous year. The major factor to drive down our financial performance was the decline in prices for steel products. EBITDA margin decreased by 6 p.p. yoy to 24%.
"In 2019, we saw the first gains from Strategy 2022. The total structural effect on EBITDA from operational efficiency programmes and investment programme projects exceeded $200 m per annum (relative to the 2018 cost base).
"Net debt/EBITDA ratio reached 0.7Ñ…. The growth was associated with the active implementation phase of our investment programme as part of Strategy 2022, and a higher dividend payout in line with NLMK's new Dividend Policy adopted in March 2019.
"Free cash flow totalled $1.5 bn. A positive free cash flow and maintaining the net debt/EBITDA ratio below 1.0x enabled NLMK management to recommend the Company's Board of Directors to pay out Q4 dividends in the amount of $500 m."
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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.
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TELECONFERENCE
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NLMK is pleased to invite the investment community to a conference call with the Company management:
Wednesday, 12 February 2020
·   10:00 a.m. - New York
·   3:00 p.m. - London
·   5:00 p.m. - Moscow
To join the conference call and web-cast, the participants are invited to dial:
U.S. number:
+1 334-777-6978 (local access)Â // 800-367-2403 (toll free)Â
UK number:
+44 (0)208 089 2860 (local access)Â // 0800 756 33 33 (toll free)Â
Russian number:
+7 (499) 609 12 60 (local access)Â // 8Â 800Â 100 36 87 (toll free)
Conference code: 4293086
To join the webcast, please follow the link: https://webcasts.eqs.com/nlmk20200212Â
We recommend participants start dialling 5-10 minutes in advance to avoid waiting.
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MANAGEMENT COMMENTS
2019 market review*
·    Global steel output grew by 3.5% yoy up to 1.85 bn t.
·    Chinese steel exports declined by 7% yoy, down to 60 m t, net exports decreased by 8% yoy, down to 47 m t due to growth in domestic consumption (+8% yoy) outstripping production output growth (+7% yoy).
·    U.S. consumption decreased by 1% yoy* amid a weakening in demand in the pipe and tube, machine building, automotive and energy sectors.
·    European demand declined by 4% yoy due to weak consumption in the automotive sector, machine building and white goods manufacturing.
·   Russian consumption increased by 8% yoy, up to 45 m t, breaking the 2014 record, due to demand in the construction and energy sectors.
2019 prices ·    Raw material prices: average global coal prices decreased by 11% yoy due to weak demand in India and import restrictions in China; iron ore prices increased by 34% yoy amid disruptions of supply from Brazil and Australia. ·    Market prices** for flat products: decreased by 23-27% yoy in the U.S, bottoming out in early Q4 2019, followed by a gradual recovery. Prices in Europe decreased by an average 15-20% yoy, but starting from mid-Q4 the region also saw a recovery in prices. ·    Russian prices for steel products, as denominated in dollars, decreased by 3-6% yoy, following global prices. The more gradual decline in prices is associated with strong consumption growth rates on the Russian steel market. ·    Slab export prices (FOB Black Sea) decreased by 18% yoy, following global prices for finished products.  |
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*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.Â
12M 2019 output and sales breakdown ·   Steel output* decreased by 10% yoy to 15.7 m t amid capital repairs at NLMK Lipetsk BF and BOF operations, and low demand for billets on export markets. ·   Sales decreased by 3% yoy, down to 17.1 m t, following the decline in production output, which was partially offset by selling off stocks accumulated by the end of 2018 at the beginning of the year. ·   Finished steel sales increased by 3% yoy, up to 11.1 m t. HVA sales increased by 2% yoy up to 5.1 m t. The share of HVA in the sales portfolio grew by 1 p.p. to 30%. ·   Sales of semis to 3rd parties decreased by 12% yoy, down to 3.9 m t amid lower sales of pig iron and billets. Slab sales to NBH went down by 12% yoy to 2.1 m t, due to NLMK Clabecq restructuring and optimization of slab stocks at the European sites in H2 2019. ·   Sales on "home" markets (w/ NBH) increased to a record high of 11.4 m t (+7% yoy) due to the increase in Russian sales to 6.6 m t (+15% yoy). U.S. sales decreased by 3% yoy due to lower demand for uncoated flats. Sales of NLMK's European companies remained flat yoy. Q4 2019 output and sales breakdown ·   Steel output* increased by 1% qoq, up to 3.8 m t, following the completion of major repairs at NLMK Lipetsk BF and BOF operations. ·   Sales increased by 4% qoq to 4.2 m t due an increase in pig iron sales following the completion of repairs at NLMK Lipetsk. ·   Sales of finished products grew by 1% qoq to 2.7 m t amid an increase in HRC sales following the completion of the HSM upgrade at NLMK Lipetsk and an increase in deliveries of finished long 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 U.S. |
NLMK GROUP KEY FINANCIALS 12M 2019 revenue ·    Revenue totalled $10.55 bn (-12% yoy). The increase in the share of finished and HVA products in the sales mix partially offset the 10% yoy reduction in average sales prices and the decrease in steel product sales volumes. ·    The share of finished steel in the revenue grew to 68% (+3 p.p. yoy). The share of HVA products totalled 38% (+2 p.p. yoy) amid lower sales of semis. ·    The share of the Russian market in the revenue grew by 7 p.p. yoy to 41%, driven by a 15% increase in steel product sales in the Russian market yoy. The shares of the US (18%) and the EU (18%) were down by 3 p.p. and 1 p.p. yoy, respectively. ·    The share of the Group's revenue from sales on its home markets (Russia, the US and the EU), including NBH JV sales, grew by 5 p.p. yoy to 71%. Q4 2019 revenue ·    Revenue totalled $2.31 bn (-10% qoq) due to a drop in steel product prices and a higher share of pig iron in the sales mix, which was partially offset by an increase in total sales by 4% qoq. ·    Revenue in the Russian market totalled $1.07 bn, or 8% less than in the previous quarter. The decline was due to price adjustments. The share of the Russian market in the Group's consolidated revenue grew by 1 p.p. qoq to 46%. Revenue from sales in the EU remained flat qoq at $0.38 bn with the market share in total revenue growing by 1 p.p. qoq to 16%. Revenue in the US declined to $0.41 bn (-4% qoq). ·    The share of the Group's revenue from sales on its home markets, including NBH JV sales, grew by 2 p.p. qoq to 74%. |
12M 2019 EBITDA ·   EBITDA went down by 29% yoy to $2.56 bn due to the narrowing of steel/raw material price spreads, which was partially offset by an improvement in the product portfolio structure and operational efficiency gains. ·   Commercial expenses decreased by 5% yoy to $843 m, due to lower export volumes. ·   G&A expenses decreased by 6% yoy to $352 m, driven by cost optimization. Q4 2019 EBITDA ·   EBITDA* reduced by 27% qoq to $480 m, due to the narrowing of steel/raw material price spreads. ·   Commercial expenses increased to $213 m (+5% qoq), due to higher sales and transportation costs driven by an increase in exports. ·   G&A expenses remained flat qoq. Net profit** ·   12M 2019 net profit decreased by 40% yoy due to the decrease in EBITDA and higher effective income tax rate (NLMK USA loss). ·   Q4 net profit decreased by 42% qoq to $200 m, following the decline in EBITDA. |
* 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. |
2019 free cash flow ·     Free cash flow decreased by 25% yoy to $1.5 bn with a reduction in cash flow from operating activities and higher capex as part of Strategy 2022. ·   Operating cash flow decreased by 4% yoy to $2.6 bn, driven by the reduction in EBITDA, which was partially offset by the release of cash from working capital. ·    Cash inflow from working capital totalled $465 m (vs. an outflow of $261 m during 2018) due to: o +$314 m: a decrease in receivables driven by lower steel product sales volumes and prices; o +$284 m: inventory reduction due to lower prices, lower exports of slabs and long products, as well as inventory optimization across the supply chain; o -$132 m: decrease in payables. |
Q4 2019 free cash flow ·    Free cash flow increased by 36% qoq to $338 m, driven by working capital release. ·    Operating cash flow grew by 25% qoq to $710 m. ·    Cash released from working capital totalled $334 m due to: o +$238 m: a decrease in receivables driven by lower steel product prices and faster settlements with buyers; o +$91 m: a seasonal decrease in stocks of scrap, finished flat and long products, as well as declining prices for steel products. |
Investment
·   NLMK Group's 12M 2019 investment increased by 59% yoy to $1.1 bn in line with the guidance. The growth in investment was associated with the overhauls of the BF and BOF operations at NLMK Lipetsk and the active phase of the investment programme as part of Strategy 2022.
·    NLMK Group's Q4 2019 investment increased by 14% qoq to $359 m.
Dividends
·    In Q4 2019, NLMK paid out $347 m in dividends.
·    On 12 February 2020, the Board of Directors recommended that shareholders approve the payment of
Q4 2019 dividends in the amount of 5.16Â rubles per share, which is equivalent to 148% of the free cash flow.
Strategy 2022 execution
·    Structural EBITDA gains from operational efficiency improvements totalled $173 m (relative to the 2018 cost base), including the effect of NLMK Clabecq restructuring. The main part of the gains came from NLMK Russia Flat and the Mining Segments.
·    EBITDA gains from the investment programme as part of Strategy 2022 totalled $41 m, due mainly to projects aimed at increasing Stoilensky's output.
Debt management
·    Total debt in 2019 increased by 28% yoy to $2.66 bn, which was associated with the placement of $500 m 7-year Eurobonds. Quarter-on-quarter, the Company's total debt decreased by 1% due to the scheduled repayment of Eurobonds.
·    Net debt in 2019 reached $1.79 bn, driven by the implementation of the investment programme as part of Strategy 2022, coupled with a cash outflow towards dividend payments. Net debt/EBITDA stood at 0.7х. Quarter-on-quarter, net debt increased by 3%.
Q1 2020 outlook
·    We expect steel output at NLMK Lipetsk to increase to the level of the same period last year following the completion of overhauls at the plant's blast furnace and BOF operations in Q4 2019.
NLMK Russia Flat |
12M 2019 highlights: ·   Sales decreased by 8% yoy, down to 12.46 m t amid major repairs at NLMK Lipetsk BF and BOF operations. ·   Revenue decreased by 16% yoy, amid lower prices for steel products throughout the year and lower sales. The revenue shortfall was partially offset by an improved portfolio structure: the share of revenue generated by finished product sales grew by 1 p.p. yoy to 64% ·   EBITDA decreased by 36% yoy amid narrower steel/raw material spreads. Q4 2019 highlights: ·   Sales increased by 16% qoq against the backdrop of higher semis sales following the completion of repairs at NLMK Lipetsk blast furnace and BOF operations. ·   Revenues of the Segment decreased by 3% qoq to $1.7 bn, driven by an increased share of semis in the sales portfolio and a decrease in average sales prices. ·    EBITDA decreased to $248 m amid narrower price spreads, which was partially offset by operational efficiency gains.  |
NLMK Russia Long |
12M 2019 highlights: ·    Sales decreased by 10% yoy to 2.85 m t due to a decrease in billet exports. ·    Revenue decreased by 18% yoy due to lower sales and prices for long products. ·   EBITDA decreased by 60% yoy, following a narrowing of price spreads, which was partially offset by operational efficiency gains and a weaker ruble. Q4 2019 highlights: ·    Sales decreased by 3% qoq, down to 0.67 m t, as billet exports were discontinued due to low margins. ·    Revenue in Q4 2019 totalled $389 m (-20% qoq), due to weak prices for long products and lower sales of billets and scrap. ·   EBITDA of the Segment was -$2 m. The decrease from $46 m last quarter was due to a narrower scrap/rebar spread and lower sales.  |
Mining Segment |
12M 2019 highlights: ·   Sales remained flat yoy at 18.45 m t due to shipments of iron ore being redirected to 3rd parties amid a temporary decrease in demand from NLMK Lipetsk. ·   Revenue increased by 9% yoy, supported by higher iron ore sales and prices. ·   EBITDA increased by 10% yoy following the increase in revenue. EBITDA margin grew to 74%. Q4 2019 highlights: ·   Sales of iron ore decreased by 5% qoq to 4.56 m t due to planned maintenance. ·   Revenue decreased by 21% qoq to $321 m, due to lower sales and a 5% qoq price adjustment for concentrate and a 19% price adjustment for pellets. ·   EBITDA decreased by 23% qoq to $241 m, following the decrease in revenue, which was partially offset by operational efficiency gains. EBITDA margin stood at 75% (-2 p.p. qoq).  |
NLMK USA |
12M 2019 highlights: ·   Sales decreased by 3% yoy to 2.2 m t as demand for HRC from the pipe and tube, machine building, automotive and energy sectors declined. ·   Revenue decreased by 20% yoy, due to a steel price adjustment in the U.S. ·   EBITDA was -$37 m against last year's earnings of $253 m. The indicator took a steep dive due to a narrowing of slab/rolled steel spreads related to rolled product price adjustments, and the use of Lipetsk slabs purchased in early 2019, with a 25% import tariff priced into slabs. NLMK USA stopped purchasing Lipetsk slabs in Q2 2019. Excluding import tariffs from the stock, 2019 EBITDA would be +$27 m. Q4 2019 highlights: ·   Sales decreased by 14% qoq to 0.47 m t, amid a seasonal weakening of steel purchases. ·   Revenue decreased by 18% qoq to $322 m (-36% yoy), due to a decrease of sales prices on the U.S. market and lower sales. ·   EBITDA was -$37 m (vs -$33 m the previous quarter) amid narrower price spreads.  |
NLMK Dansteel* |
12M 2019 highlights: ·  Sales increased by 2% yoy to 0.5 m t, supported by an uptick in demand from the wind power industry. ·   Revenue decreased by 4% yoy, pressured by a price adjustment for steel products. ·   EBITDA was $8 m (vs. a $17 m loss the previous year), supported by a wider plate/slab price spread and product mix expansion following investment programme implementation. Q4 2019 highlights: ·   Sales of plate grew by 9% qoq to 0.13 m t, due to the completion of planned maintenance and an uptick in demand in November and December. ·   Revenue declined by 1% qoq to $110 m due to lower plate prices. ·   EBITDA remained flat qoq at $1 m. |
*NLMK Dansteel and plate distribution network. Â |
JV performance (NBH) |
12M 2019 highlights: ·   NBH sales decreased by 2% down to 2.19 m t due to lower plate sales related to NLMK Clabecq restructuring. ·   Revenue decreased by 15% yoy to $1.56 bn, mainly due to lower steel product sales prices. ·   EBITDA was -$134 m (-$111 m, excluding non-operating provisions for NLMK Clabecq accrued in Q2) vs. -$87 m the previous year, amid narrower rolled product/slab price spreads and lower plate sales. Q4 2019 highlights: ·   NBH sales decreased by 3% qoq to 0.52 m t, due to lower HRC sales related to weaker demand in the automotive and machine building sectors, and due to high stocks on the consumer side. ·   Revenue decreased by 5% qoq, down to $0.35 bn, due to lower sales and average sales prices. ·   EBITDA was -$27 m vs. -$43 m in Q3 2019. |
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Appendix. Operating and financial results
(1) Sales markets
'000 t | Total | Sales markets | |||||
Russia | EU | North America | Middle East and Turkey | C. and S. America | Other markets | ||
NLMK Group | 4,167 | 1,805 | 750 | 729 | 557 | 74 | 251 |
Division sales to third parties: | Â | Â | Â | Â | Â | Â | Â |
NLMK Russia Flat   | 2,375 | 1,270 | 50 | 254 | 552 | 69 | 180 |
NLMK Russia Long | 674 | 535 | 100 | 0 | 0 | 0 | 39 |
International subsidiaries and affiliates, incl.: | 1,118 | 0 | 601 | 476 | 5 | 5 | 32 |
NLMK USA | 472 | 0 | 0 | 472 | 0 | 0 | 0 |
European rolling facilities                  (NLMK Dansteel and NBH) | 646 | 0 | 601 | 3 | 5 | 5 | 32 |
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(2) NLMK Russia Flat
k t/$ million | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Steel product sales, incl.: | 3,226 | 2,776 | 16% | 3,557 | -9% | 12,460 | 13,516 | -8% |
external cutmores | 2,375 | 2,226 | 7% | 2,588 | -8% | 9,381 | 9,203 | 2% |
semis to NBH | 523 | 430 | 22% | 577 | -9% | 2,104 | 2,379 | -12% |
intersegmental sales | 328 | 119 | 2,7x | 392 | -16% | 975 | 1,934 | -50% |
Revenue, incl.: | 1,687 | 1,741 | -3% | 2,152 | -22% | 7,327 | 8,743 | -16% |
external customers | 1,347 | 1,482 | -9% | 1,642 | -18% | 5,897 | 6,327 | -7% |
intersegmental operations | 340 | 259 | 31% | 510 | -33% | 1,430 | 2,416 | -41% |
EBITDA | 248 | 363 | -32% | 568 | -56% | 1,490 | 2,339 | -36% |
EBITDA margin | 15% | 21% | -6 p.p. | 26% | -11 p.p. | 20% | 27% | -7 p.p. |
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(3) NLMK Russia Long
k t/$ million | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Steel product sales | 674 | 693 | -3% | 841 | -20% | 2,850 | 3,185 | -10% |
Revenue, incl.: | 389 | 485 | -20% | 568 | -32% | 1,757 | 2,152 | -18% |
external customers | 316 | 359 | -12% | 441 | -28% | 1,428 | 1,720 | -17% |
intersegmental operations | 73 | 126 | -42% | 127 | -43% | 329 | 432 | -24% |
EBITDA | (2) | 46 | -0.04x | 38 | -0,1x | 89 | 221 | -60% |
EBITDA margin | -1% | 9% | -10 p.p. | 7% | -8 p.p. | 5% | 10% | -5 p.p. |
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(4) Mining Segment
k t/$ million | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Iron ore products sales, incl.: | 4,560 | 4,784 | -5% | 4,751 | -4% | 18,446 | 18,377 | 0% |
sales to Lipetsk plant | 4,440 | 4,420 | 0% | 4,751 | -7% | 17,850 | 18,377 | -3% |
Revenue, incl.: | 321 | 406 | -21% | 259 | 24% | 1,315 | 1,211 | 9% |
external customers | 15 | 42 | -64% | 5 | 3x | 77 | 22 | 3,5x |
intersegmental operations | 306 | 364 | -16% | 254 | 20% | 1,238 | 1,189 | 4% |
EBITDA | 241 | 314 | -23% | 180 | 34% | 977 | 888 | 10% |
EBITDA margin | 75% | 77% | -2 p.p. | 69% | +6 p.p. | 74% | 73% | +1 p.p. |
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(5) NLMK USA
k t/$ million | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Steel product sales | 472 | 549 | -14% | 504 | -6% | 2,205 | 2,285 | -3% |
Revenue, incl.: | 322 | 391 | -18% | 504 | -36% | 1,715 | 2,134 | -20% |
external customers | 322 | 391 | -18% | 504 | -36% | 1,715 | 2,134 | -20% |
intersegmental operations | - | - | 0% | - | 0% | - | - | 0% |
EBITDA | (37) | (33) | 12% | 49 | -0,8x | (37) | 253 | -0,1x |
EBITDA margin | -11% | -8% | -3 p.p. | 10% | -21 p.p. | -2% | 12% | -14 p.p. |
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(6) NLMK DanSteel
k t/$ million | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Steel product sales | 128 | 118 | 9% | 120 | 7% | 529 | 520 | 2% |
Revenue, incl.: | 110 | 111 | -1% | 119 | -8% | 491 | 514 | -4% |
external customers | 110 | 111 | -1% | 119 | -8% | 490 | 513 | -4% |
intersegmental operations | - | - | 0% | - | 0% | 1 | 1 | 0% |
EBITDA | 1 | 1 | 0% | (8) | -0,1x | 8 | (17) | -0,5x |
EBITDA margin | 1% | 1% | 0 p.p. | -7% | +8 p.p. | 2% | -3% | +5 p.p. |
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(7) NBH
k t/$ million | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Steel product sales | 518 | 537 | -3% | 540 | -4% | 2,185 | 2,229 | -2% |
Revenue, incl.: | 349 | 369 | -5% | 436 | -20% | 1,562 | 1,837 | -15% |
external customers | 332 | 348 | -5% | 426 | -22% | 1,502 | 1,772 | -15% |
intersegmental operations | 17.0 | 21.0 | -19% | 10.0 | 70% | 60 | 65 | -8% |
EBITDA | (27) | (43) | -37% | (32) | -16% | (134) | (87) | 54% |
EBITDA margin | -8% | -12% | +4 p.p. | -7% | -1 p.p. | -9% | -5% | -4 p.p. |
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(8) Sales by product
k t | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 |
Pig iron | 253 | 54 | 156 | 47 | 295 |
Slabs | 1,172 | 1,173 | 1,288 | 1,559 | 1,527 |
Thick plates | 128 | 118 | 137 | 146 | 120 |
Hot-rolled steel | 912 | 852 | 901 | 1,016 | 827 |
Cold-rolled steel | 473 | 533 | 498 | 509 | 476 |
Galvanized steel | 331 | 338 | 331 | 348 | 325 |
Pre-painted steel | 113 | 117 | 100 | 89 | 111 |
Transformer steel | 66 | 63 | 74 | 71 | 70 |
Dynamo steel | 50 | 75 | 68 | 61 | 53 |
Billet | 1 | 60 | 78 | 173 | 201 |
Long products | 596 | 568 | 570 | 526 | 578 |
Metalware | 77 | 65 | 68 | 69 | 62 |
TOTAL | 4,172 | 4,015 | 4,268 | 4,614 | 4,643 |
(9) Sales by region
k t | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 |
Russia | 1,805 | 1,682 | 1,704 | 1,451 | 1,407 |
European Union | 787 | 674 | 1,130 | 987 | 886 |
Middle East, including Turkey | 556 | 633 | 409 | 709 | 521 |
North America | 727 | 606 | 748 | 654 | 806 |
Central and South America | 73 | 164 | 24 | 246 | 124 |
CIS | 91 | 114 | 106 | 122 | 135 |
Asia and Oceania | 69 | 21 | 61 | 180 | 639 |
Rest of World | 64 | 122 | 85 | 264 | 126 |
TOTAL | 4,172 | 4,015 | 4,268 | 4,614 | 4,643 |
 (10) Revenue by region
Region | Q4 2019 | Q3 2019 | Q2 2019 | |||
$ million | share | $ million | share | $ million | share | |
Russia | 1,073 | 46% | 1,170 | 45% | 1,158 | 41% |
European Union | 377 | 16% | 376 | 15% | 625 | 22% |
Middle East, including Turkey | 246 | 11% | 321 | 12% | 230 | 8% |
North America | 408 | 18% | 427 | 17% | 551 | 20% |
Central and South America | 40 | 2% | 94 | 4% | 25 | 1% |
CIS | 88 | 4% | 100 | 4% | 110 | 4% |
Asia and Oceania | 54 | 2% | 29 | 1% | 55 | 2% |
Rest of World | 26 | 1% | 58 | 2% | 43 | 2% |
TOTAL | 2,312 | 100% | 2,576 | 100% | 2,797 | 100% |
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(11) EBITDA*
$ million | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 |
Operating income** | 338 | 512 | 593 | 559 | 713 |
minus: | Â | Â | Â | Â | Â |
Depreciation and amortization | (142) | (142) | (142) | (136) | (134) |
EBITDA | 480 | 654 | 735 | 695 | 847 |
* 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
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(12) Free cash flow
$ million | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 |
Net cash provided operating activities | 710 | 568 | 494 | 851 | 761 |
Interest paid | (22) | (4) | (12) | (11) | (12) |
Interest received | 9 | 1 | 3 | 16 | 3 |
Advance VAT payments on imported equipment | - | - | - | - | - |
Capex | (359) | (316) | (227) | (178) | (250) |
Free Cash Flow | 338 | 249 | 258 | 678 | 502 |
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(13) Net debt
$ million | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 |
Short-term borrowings | 468 | 389 | 544 | 224 | 398 |
Long-term borrowings | 2,188 | 2,288 | 2,257 | 1,872 | 1,677 |
Cash and cash equivalents | (713) | (421) | (1,142) | (736) | (1,179) |
Short-term deposites | (157) | (520) | (368) | (445) | (5) |
Net debt | 1,786 | 1,736 | 1,291 | 915 | 891 |
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(14) Production of main products
k t | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 |
Crude steel, incl.: | 3,749 | 3,714 | 3,940 | 4,128 | 4,314 |
Steel Segment | 2,977 | 2,818 | 2,952 | 3,264 | 3,350 |
Long products Segment, incl.: | 603 | 719 | 802 | 693 | 823 |
NLMK-Kaluga | 215 | 256 | 349 | 276 | 363 |
Foreign Rolled Products Segment | 169 | 176 | 185 | 171 | 141 |
Finished products, incl.: | 2,642 | 2,725 | 2,784 | 2,717 | 2,624 |
Flat steel | 2,058 | 2,071 | 2,129 | 2,129 | 2,023 |
Long steel | 584 | 653 | 655 | 588 | 601 |
Coke (6% moisture), incl.: | 1,487 | 1,418 | 1,417 | 1,531 | 1,622 |
Novolipetsk | 652 | 655 | 644 | 634 | 650 |
Altai-Koks | 834 | 762 | 774 | 897 | 972 |
(15) Slab sales, including intra-group sales to NLMK Group companies
k t | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 |
Sales to 3rd parties, incl.: | 648 | 743 | 579 | 1,118 | 949 |
Export | 473 | 532 | 314 | 950 | 896 |
Sales to subsidiaries & associates | 851 | 550 | 933 | 735 | 954 |
Sales to NBH | 523 | 430 | 709 | 441 | 577 |
TOTAL | 1,499 | 1,292 | 1,512 | 1,853 | 1,903 |
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(16) Export shipments of steel products from Russian assets of the Group to third party consumers
k t | Q4 2019 | Q3 2019 | QoQ | Q4 2018 | YoY | 2019 | 2018 | YoY |
Semi-finished products | 726 | 641 | 13% | 1,387 | -48% | 3,073 | 3,916 | -22% |
Pig iron | 253 | 54 | 4,7x | 295 | -14% | 510 | 890 | -43% |
Slabs | 473 | 532 | -11% | 896 | -47% | 2,270 | 2,281 | 0% |
Billets | - | 55 | -100% | 196 | -100% | 293 | 745 | -61% |
Flat products | 381 | 452 | -16% | 474 | -20% | 1,959 | 2,019 | -3% |
HRC | 151 | 183 | -17% | 192 | -21% | 854 | 869 | -2% |
CRC | 130 | 158 | -17% | 165 | -21% | 633 | 601 | 5% |
HDG | 12 | 5 | 2,3x | 21 | -42% | 53 | 84 | -36% |
Coated | 1 | 1 | -40% | 2 | -68% | 4 | 7 | -40% |
Dynamo | 33 | 54 | -38% | 37 | -10% | 182 | 220 | -17% |
Transformer | 54 | 51 | 5% | 57 | -6% | 231 | 237 | -2% |
Long products | 138 | 144 | -4% | 174 | -21% | 560 | 701 | -20% |
Total | 1,245 | 1,237 | 1% | 2,035 | -39% | 5,591 | 6,636 | -16% |
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(17) Segmental information
Q4 2019 | Russian Flat Steel | Russian Long Products | Mining | NLMK USA | NLMK DanSteel and Plates Distribution Network | Investments in NBH | Totals | Intersegmental operations and balances | NBH | Consolidated |
$ million | Â | |||||||||
Revenue from external customers | 1,347 | 316 | 15 | 322 | 110 | 332 | 2,442 | - | (130) | 2,312 |
Intersegment revenue | 340 | 73 | 306 | - | - | 17 | 736 | (719) | (17) | - |
Gross profit | 395 | 24 | 230 | (33) | 13 | (7) | 622 | 7 | 20 | 649 |
Operating income/(loss) | 165 | (15) | 212 | (51) | (2) | (47) | 262 | 15 | 61 | 338 |
Income / (loss) before minority interest | 462 | (16) | 172 | (82) | (3) | (53) | 480 | (304) | 24 | 200 |
Segment assets including goodwill | 7,483 | 1,160 | 2,120 | 840 | 371 | 1,318 | 13,292 | (1,752) | (1,056) | 10,484 |
Balance figures presented as of 31.12.2019
Q3 2019 | Russian Flat Steel | Russian Long Products | Mining | NLMK USA | NLMK DanSteel and Plates Distribution Network | Investments in NBH | Totals | Intersegmental operations and balances | NBH | Consolidated |
$ million | Â | |||||||||
Revenue from external customers | 1,482 | 359 | 42 | 391 | 111 | 348 | 2,733 | - | (157) | 2,576 |
Intersegment revenue | 259 | 126 | 364 | - | - | 21 | 770 | (749) | (21) | - |
Gross profit | 504 | 72 | 309 | (26) | 11 | (13) | 857 | (73) | 38 | 822 |
Operating income/(loss) | 280 | 34 | 285 | (48) | (2) | (53) | 496 | (62) | 78 | 512 |
Income / (loss) before minority interest | 660 | 26 | 232 | (50) | (3) | (52) | 813 | (545) | 76 | 344 |
Segment assets including goodwill | 7,499 | 1,201 | 2,360 | 921 | 361 | 1,330 | 13,672 | (2,126) | (1,168) | 10,378 |
Balance figures presented as of 30.09.2019
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Novolipetsk Steel Consolidated statement of financial position (millions of US dollars) | Â |
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 |  | As at 31 December 2019 |  | As at 31 December 2018 |  | As at 31 December 2017 |
Assets | Â | Â | Â | Â | Â | Â |
 |  |  |  |  |  |  |
Current assets | Â | Â | Â | Â | Â | Â |
Cash and cash equivalents | Â | 713 | Â | 1,179 | Â | 301 |
Short-term financial investments | Â | 287 | Â | 19 | Â | 1,284 |
Trade and other accounts receivable | Â | 1,047 | Â | 1,326 | Â | 1,228 |
Inventories | Â | 1,634 | Â | 1,816 | Â | 1,879 |
Other current assets | Â | 14 | Â | 10 | Â | 19 |
 |  | 3,695 |  | 4,350 |  | 4,711 |
Non-current assets | Â | Â | Â | Â | Â | Â |
Long-term financial investments | Â | 5 | Â | 85 | Â | 2 |
Investments in joint ventures | Â | 223 | Â | 159 | Â | 205 |
Property, plant and equipment | Â | 6,039 | Â | 4,798 | Â | 5,549 |
Goodwill | Â | 248 | Â | 224 | Â | 265 |
Other intangible assets | Â | 162 | Â | 165 | Â | 164 |
Deferred income tax assets | Â | 101 | Â | 152 | Â | 84 |
Other non-current assets | Â | 11 | Â | 11 | Â | 16 |
 |  | 6,789 |  | 5,594 |  | 6,285 |
Total assets | Â | 10,484 | Â | 9,944 | Â | 10,996 |
 |  |  |  |  |  |  |
Liabilities and equity | Â | Â | Â | Â | Â | Â |
 |  |  |  |  |  |  |
Current liabilities | Â | Â | Â | Â | Â | Â |
Trade and other accounts payable | Â | 1,124 | Â | 1,122 | Â | 1,029 |
Dividends payable | Â | 318 | Â | 525 | Â | 537 |
Short-term borrowings | Â | 468 | Â | 398 | Â | 380 |
Current income tax liability | Â | 32 | Â | 28 | Â | 53 |
 |  | 1,942 |  | 2,073 |  | 1,999 |
Non-current liabilities | Â | Â | Â | Â | Â | Â |
Long-term borrowings | Â | 2,188 | Â | 1,677 | Â | 1,901 |
Deferred income tax liability | Â | 405 | Â | 346 | Â | 417 |
Other long-term liabilities | Â | 2 | Â | 14 | Â | 33 |
 |  | 2,595 |  | 2,037 |  | 2,351 |
Total liabilities | Â | 4,537 | Â | 4,110 | Â | 4,350 |
 |  |  |  |  |  |  |
Equity attributable to Novolipetsk Steel shareholders | Â | Â | Â | Â | Â | Â |
Common stock | Â | 221 | Â | 221 | Â | 221 |
Additional paid-in capital | Â | 9 | Â | 10 | Â | 10 |
Accumulated other comprehensive loss | Â | (6,140) | Â | (6,782) | Â | (5,631) |
Retained earnings | Â | 11,840 | Â | 12,370 | Â | 12,029 |
 |  | 5,930 |  | 5,819 |  | 6,629 |
Non-controlling interests | Â | 17 | Â | 15 | Â | 17 |
Total equity | Â | 5,947 | Â | 5,834 | Â | 6,646 |
Total liabilities and equity | Â | 10,484 | Â | 9,944 | Â | 10,996 |
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Novolipetsk Steel Consolidated statement of profit or loss (millions of US dollars, unless otherwise stated) | Â |
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 |  | For the year ended 31 December 2019 |  | For the year ended 31 December 2018 |  | For the year ended 31 December 2017 |
 |  |  |  |  |  |  |
Revenue | Â | 10,554 | Â | 12,046 | Â | 10,065 |
Cost of sales | Â | (7,303) | Â | (7,680) | Â | (6,798) |
 |  |  |  |  |  |  |
Gross profit | Â | 3,251 | Â | 4,366 | Â | 3,267 |
 |  |  |  |  |  |  |
General and administrative expenses | Â | (352) | Â | (375) | Â | (364) |
Selling expenses | Â | (843) | Â | (886) | Â | (788) |
Net impairment losses on financial assets | Â | (1) | Â | (1) | Â | (7) |
Other operating income/(expenses), net | Â | 13 | Â | (4) | Â | 3 |
Taxes other than income tax | Â | (66) | Â | (88) | Â | (80) |
 |  |  |  |  |  |  |
Operating profit before share of results of joint ventures, impairment of non-current assets and loss on disposals of property, plant and equipment | Â | 2,002 | Â | 3,012 | Â | 2,031 |
 |  |  |  |  |  |  |
Loss on disposals of property, plant and equipment | Â | (4) | Â | (7) | Â | (1) |
Impairment of non-current assets | Â | (30) | Â | (4) | Â | (17) |
Share of results of joint ventures | Â | (88) | Â | (243) | Â | (90) |
Losses on investments, net | Â | - | Â | (2) | Â | (5) |
Finance income | Â | 18 | Â | 21 | Â | 29 |
Finance costs | Â | (68) | Â | (70) | Â | (87) |
Foreign currency exchange (loss)/gain, net | Â | (6) | Â | 33 | Â | 17 |
Other expenses, net | Â | (30) | Â | (11) | Â | (54) |
 |  |  |  |  |  |  |
Profit before income tax | Â | 1,794 | Â | 2,729 | Â | 1,823 |
 |  |  |  |  |  |  |
Income tax expense | Â | (453) | Â | (486) | Â | (371) |
 |  |  |  |  |  |  |
Profit for the year | Â | 1,341 | Â | 2,243 | Â | 1,452 |
 |  |  |  |  |  |  |
Profit is attributable to: | Â | Â | Â | Â | Â | Â |
Novolipetsk Steel shareholders | Â | 1,339 | Â | 2,238 | Â | 1,450 |
Non-controlling interests | Â | 2 | Â | 5 | Â | 2 |
 |  |  |  |  |  |  |
Earnings per share: | Â | Â | Â | Â | Â | Â |
 |  |  |  |  |  |  |
Earnings per share attributable to | Â | 0.2234 | Â | 0.3734 | Â | 0.2419 |
 |  |  |  |  |  |  |
Weighted-average number of shares outstanding: basic and diluted (in thousands) |  | 5,993,227 |  | 5,993,227 |  | 5,993,227 |
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Novolipetsk Steel Consolidated statement of cash flows (millions of US dollars) | Â |
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 |  | For the year ended 31 December 2019 |  | For the year ended 31 December 2018 |  | For the year ended 31 December 2017 |
Cash flows from operating activities | Â | Â | Â | Â | Â | Â |
Profit for the year | Â | 1,341 | Â | 2,243 | Â | 1,452 |
Adjustments to reconcile profit for the year to net cash provided by operating activities: | Â | Â | Â | Â | Â | Â |
Depreciation and amortisation | Â | 562 | Â | 577 | Â | 624 |
Loss on disposals of property, plant and equipment | Â | 4 | Â | 7 | Â | 1 |
Losses on investments | Â | - | Â | 2 | Â | 5 |
Finance income | Â | (18) | Â | (21) | Â | (29) |
Finance costs | Â | 68 | Â | 70 | Â | 87 |
Share of results of joint ventures | Â | 88 | Â | 243 | Â | 90 |
Income tax expense | Â | 453 | Â | 486 | Â | 371 |
Impairment of non-current assets | Â | 30 | Â | 4 | Â | 17 |
Foreign currency exchange loss/(gain), net | Â | 6 | Â | (33) | Â | (17) |
Change in impairment allowance for inventories and credit loss allowance of accounts receivable | Â | 5 | Â | 1 | Â | 13 |
Changes in operating assets and liabilities | Â | Â | Â | Â | Â | Â |
Decrease/(increase) in trade and other accounts receivable | Â | 314 | Â | (258) | Â | (223) |
Decrease/(increase) in inventories | Â | 284 | Â | (187) | Â | (262) |
(Increase)/decrease in other operating assets | Â | (1) | Â | 7 | Â | - |
(Decrease)/increase in trade and other accounts payable | Â | (132) | Â | 177 | Â | 105 |
Сash provided by operations |  | 3,004 |  | 3,318 |  | 2,234 |
Income tax paid | Â | (381) | Â | (577) | Â | (335) |
Net cash provided by operating activities | Â | 2,623 | Â | 2,741 | Â | 1,899 |
Cash flows from investing activities | Â | Â | Â | Â | Â | Â |
Purchases and construction of property, plant and equipment and intangible assets | Â | (1,080) | Â | (680) | Â | (592) |
Proceeds from sale of property, plant and equipment | Â | 1 | Â | 3 | Â | 10 |
Purchases of investments and loans given | Â | (164) | Â | (91) | Â | (44) |
Proceeds from repayment of loans given | Â | 115 | Â | - | Â | - |
Placement of bank deposits | Â | (933) | Â | (305) | Â | (1,264) |
Withdrawal of bank deposits | Â | 777 | Â | 1,349 | Â | 1,105 |
Interest received | Â | 29 | Â | 22 | Â | 28 |
Contribution to share capital of joint venture | Â | (155) | Â | - | Â | - |
Acquisition of subsidiary, net of cash and cash equivalents acquired | Â | - | Â | (4) | Â | - |
Acquisition of non-controlling interest | Â | (1) | Â | (4) | Â | (1) |
Net cash (used in)/provided by investing activities | Â | (1,411) | Â | 290 | Â | (758) |
Cash flows from financing activities | Â | Â | Â | Â | Â | Â |
Proceeds from borrowings | Â | 1,015 | Â | 470 | Â | 988 |
Repayment of borrowings | Â | (500) | Â | (643) | Â | (1,093) |
Payments on leases | Â | (14) | Â | - | Â | - |
Interest paid | Â | (49) | Â | (56) | Â | (69) |
Dividends paid to Novolipetsk Steel shareholders | Â | (2,120) | Â | (1,888) | Â | (1,283) |
Dividends paid to non-controlling interests | Â | - | Â | (2) | Â | (2) |
Net cash used in financing activities | Â | (1,668) | Â | (2,119) | Â | (1,459) |
Net (decrease)/increase in cash and cash equivalents | Â | (456) | Â | 912 | Â | (318) |
Effect of exchange rate changes on cash and cash equivalents | Â | (10) | Â | (34) | Â | 9 |
Cash and cash equivalents at the beginning of the year | Â | 1,179 | Â | 301 | Â | 610 |
Cash and cash equivalents at the end of the year | Â | 713 | Â | 1,179 | Â | 301 |
 |  |  |  |  |  |  |
Supplemental disclosures of cash flow information: | Â | Â | Â | Â | Â | Â |
 |  |  |  |  |  |  |
Non-cash investing activities: | Â | Â | Â | Â | Â | Â |
Conversion of debt to equity | Â | - | Â | 210 | Â | 84 |
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