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2013-04-12 16:30 CEST
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MMC NORILSK NICKEL REPORTS FULL YEAR 2012 CONSOLIDATED IFRS FINANCIAL RESULTS

 Moscow, April 12, 2013 - OJSC MMC Norilsk Nickel ("MMC Norilsk Nickel", the "Company" or the "Group"), the largest nickel and palladium producer in the world, today reports audited financial results for the year ended 31 December 2012. Today the Board of Directors approved the Company's consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"). The resolution of conflict between shareholders helped the Group to finalize the statements and to receive unqualified audit opinion in the shortest time possible.

Full Year 2012 Highlights

  • Sales revenue amounted to USD 12.1 billion decreasing 15% y-o-y due to unfavourable pricing trends on metals produced by the Company
  • EBITDA was USD 4.9 billion with a strong EBITDA margin of 41%
  • Net profit decreased 41% y-o-y to USD 2.1 billion impacted by USD 976 million non-cash write-offs
  • Net cash from operating activities amounted to USD 3.4 billion (down 27% y-o-y)
  • CAPEX reached USD 2.7 billion (up 22% y-o-y)

Recent Developments

  • On February 28, 2013 the Group placed three-year bonds in the amount of RUR 35 billion with an interest rate of 7.9%
  • On April 2, 2013 the Company reduced its share capital by 9.69% through cancellation of 18,470,925 treasury shares 

Consolidated Financial Results

USD million FY2012 FY2011 Change y-o-y
Revenue 12,065 14,122 (15%)
Gross profit 5,920 8,329 (29%)
EBITDA 4,928 7,239 (32%)
EBITDA Margin 41% 51% (10 p.p.)
Net profit 2,143 3,626 (41%)
Net profit adjusted for impairment of financial and non-financial assets 3,118 4,021 (22%)
Net cash from operating activities 3,434 4,702 (27%)
Capital expenditures 2,713 2,232 22%

Commenting on the results, Chief Financial Officer of the Company Sergey Malyshev said, "Taking into account unfavourable macroeconomic environment in 2012, we consider the financial results of the Company to be decent. Norilsk Nickel continued to generate stable cash flow from its operations which provides for stable level of investments in its core businesses. The management's efforts to control costs resulted in a modest increase in operating expenses and supported EBIDTA margin at par with leading global mining companies. At the same time we see additional opportunities for cost optimization.

As the capital markets currently offer attractive terms we consider the rebalancing of the capital structure of the Company. The current debt level of Norilsk Nickel is comfortable enough for additional borrowings to be further invested in projects with high potential returns. The Company confirms its commitment to sustainability of operations and stable metals output".

1. REVENUE

USD million FY2012 FY2011 Change y-o-y
Total revenue 12,065 14,122 (15%)
Revenue from metal sales 11,061 13,297 (17%)
Nickel 5,223 6,715 (22%)
Copper 2,871 3,258 (12%)
Palladium 1,722 1,985 (13%)
Platinum 1,028 1,145 (10%)
Gold 217 194 12%
Revenue from other sales 1,004 825 22%

Metal sales revenue in 2012 decreased almost 17% year-on-year to USD 11.1 billion driven by weak prices for base and precious metal produced by the Company, while the physical volumes of metals sold were almost unchanged.

Metal sales, physical volumes, by place of production 1,2)

Total Group,
excluding South Africa 3)
FY2012 FY2011 Change y-o-y
Nickel(thousand tonnes) 293 291 1%
Copper (thousand tonnes) 358 369 (3%)
Palladium (thousand ounces) 2,658 2,696 (1%)
Platinum (thousand ounces) 657 661 (1%)

Finished products

Russian entities and Finland FY2012 FY2011 Change y-o-y
Nickel(thousand tonnes) 280 284 (1%)
Russia 234 234 0%
Finland 46 50 (8%)
Copper (thousand tonnes) 352 358 (2%)
Palladium (thousand ounces) 2,629 2,665 (1%)
Platinum (thousand ounces) 652 655 (1%)

  
Semi-finished products

Metal FY2012 FY2011 Change y-o-y
Australia
Nickel(thousand tonnes) 6 - n/a
Botswana
Nickel (thousand tonnes) 7 7 0%
Copper (thousand tonnes) 5 6 (17%)
Palladium (thousand ounces) 27 31 (13%)
Platinum (thousand ounces) 5 6 (17%)
Finland
Copper (thousand tonnes) 4) 1 5 (80%)

Average selling price of metals of Russian entities, own production

Metal FY2012 FY2011 Change y-o-y
Nickel (in USD per tonne) 17,719 23,060 (23%)
Copper (in USD per tonne) 8,015 8,871 (10%)
Palladium (in USD per troy ounce) 643 735 (13%)
Platinum (in USD per troy ounce) 1,549 1,724 (10%)
Gold (in USD per troy ounce) 1,675 1,565 7%

1) All information is presented on the basis of 100% ownership of subsidiaries
2) Sales of metals purchased from third parties are excluded
3) The operating results of Nkomati Nickel Mine (South Africa) are shown in the financial statements based on the Group's 50% ownership and are presented as operating results of associates
4) Copper cake is a semi-product with average copper content of 38-40%

Nickel

In 2012, nickel sales accounted for 47% of revenue from metal sales of the Group being the largest contributor. While the sales volumes of nickel in 2012 increased 1% y-o-y and amounted to 293 thousand tonnes, the average selling price plummeted by 23% y-o-y to USD 17,719 per tonne. As a result of such a negative price dynamics the total revenue from nickel sales went down by 22% and reached USD 5.2 billion.
Sales volume of nickel produced by the Russian entities remained unchanged and amounted to 234 thousand tonnes.
The physical volume of sales produced at Harjavalta decreased by 8% as a result of lower volumes of raw materials delivered to the nickel refining plant by third parties.
Volume of sales of nickel semi-products produced by Norilsk Nickel International (excluding Norilsk Nickel Harjavalta and Nkomati Nickel Mine) increased by 6 thousand tonnes due to the re-launch of operations at Lake Johnston in Australia.

Copper

Revenue from copper sales in 2012 accounted for 26% of total metal sales and declined by 12% to USD 2.9 billion as compared to USD 3.3 billion in 2011. The key reason for the sales decrease was decline in average selling price by 10% from USD 8,871 per tonne in 2011 to USD 8,015 per tonne in 2012.
The physical volume of sales of copper produced by the Company decreased by 3% to 358 thousand tonnes mostly in line with a slight decrease of copper production at Kola and Polar divisions which was caused by decrease of metal content in mined ore. 

Palladium

Revenue from palladium sales made up 16% of revenue from metal sales of the Group in 2012 and amounted to USD 1.7 billion (down by 13% y-o-y).
Physical volume of sales of palladium produced by the Company was flat as compared to 2011 at the level of 2.7 thousand ounces. Decrease in revenue was a result of a soft sales price which declined by 13% from USD 735 per troy ounce in 2011 to USD 643 per troy ounce in 2012.

Platinum

In 2012, revenue from platinum sales accounted for 9% of revenue from metal sales of the Group. Platinum sales revenue decreased by 10%, from USD 1.1 billion in 2011 to USD 1.0 billion in 2012.
The key reason of the decline was weak selling price which dropped by 10% y-o-y, while the physical volume of sales reduced only by 1%.

Gold

Revenue from gold sales accounted for 2% of metal sales of the Group in 2012. The revenue increased from USD 194 million in 2011 to USD 217 million in 2012 mostly due to the growth of the gold selling price by 7% y-o-y. 

Other sales

USD million FY2012 FY2011 Change y-o-y
Total  1,004 825 22%
Energy and utilities  159 157 1%
Transport 540 377 43%
Other 305 292 5%

In 2012, other sales increased by USD 179 million (or by 22%) and amounted to USD 1 billion.
The growth in revenues from other sales in 2012 was driven by the increase in volumes of transportation services provided by 'Taimyr airlines" and acquired company "Nordavia".

2. cOST OF SALES

2.1. Cost of metal sales

USD million FY2012 FY2011 Change y-o-y
Total cost of metal sales 5,162 4,967 4%
Cash operating costs 4,717 4,621 2%
Labour 1,488 1,464 2%
Consumables and spare parts 1,309 1,157 13%
Expenses on acquisition of raw materials and other semi-products 918 1,195 (23%)
Outsourced third party services 651 558 17%
Utilities 216 236 (8%)
Tax directly attributable to cost of goods sold 193 172 12%
Transportation 156 149 5%
Sundry costs 109 115 (5%)
Less: sale of by-product metals (323) (425) (24%)
Amortisation and depreciation 712 698 2%
(Increase)/decrease in metal inventories (267) (352) (24%)

Measures implemented by the management on the back of harsh metal markets conditions, as well as growth in average exchange rate of Russian Rouble to US Dollar (effect of translation to presentation currency) resulted in a growth rates below Russian CPI. 
Cost of metals sold increased by 4% y-o-y, from USD 5.0 billion in 2011 to USD 5.2 billion in 2012.

Cash operating costs

Cash operating costs of the Group increased by 2% and amounted to USD 4.7 billion in 2012 as compared to USD 4.6 billion in 2011.
The composition of cash operating costs in 2012 has changed as compared to 2011. These changes primarily related to the growth in costs incurred on acquisition of consumables and spare parts and outsourced third party services, and decrease in expenses for acquisition of raw materials and semi-products.

The share of cash operating costs among key production units in 2012 was as follows:

  • Russian divisions and Finland     - 94%,
    • Norilsk Nickel International        - 6%.

Labour costs

Labour costs are a significant component in total cash operating costs with a fairly stable share of 30% of total operating costs.
In 2012, labour costs amounted to USD 1.5 billion increasing by 2% y-o-y. Indexation of rouble-denominated salaries and wages in line with inflation was partly compensated by the effect of translation to the presentation currency.

Consumables and spares

Expenditures on consumables and spare parts increased by 13% y-o-y amounting to USD 1.3 billion in 2011. The increase was driven by the following factors:

  • increased number of consumables and spares purchased due to the higher repairs and maintenance volumes in Russia and Finland (up USD 94 million);
  • inflationary growth in prices on consumables, spares and fuel (up USD 95 million);
  • impact of the full year of operations at Lake Johnston (up USD 27 million).

Forex impact of USD 64 million partially offset the growth of the costs.

Expenses on acquisition of raw materials and semi-products

Expenses related to acquisition of semi-products from 3rd parties in 2012 decreased by USD 277 million (or 23%) y-o-y and amounted to USD 918 million.
The decrease of these costs was mostly driven by re-launch of concentrates production in Lake Johnston in Australia, decline of NN Harjavalta production and lower purchasing prices.

Third party services

In 2012, expenditures on services from third parties increased by USD 93 million (or by 17%) and amounted to USD 651 million. Main reason for increase of these costs was higher volumes of repair and maintenance activities in Russia and Finland.

Utilities

Utility costs in 2012 decreased by USD 20 million (or by 8%) y-o-y to USD 216 million. The key reasons for the decrease were lower tariff on electricity purchased by Kola MMC on open wholesale market and Forex gains.   

Transportation costs

In 2012, transportation costs increased by 5% y-o-y and amounted to USD 156 million driven by a 13% y-o-y increase in shipping volumes of cathode copper and higher volumes of external transportation services used by Polar division.

2.2. Cost of other sales

USD million FY2012 FY2011 Change y-o-y
Total  983 826 19%
Energy and utilities  149 138 8%
Transport 471 328 44%
Other 362 360 1%

Other cost of sales increased by USD 157 million in 2012 (or by 19%) and amounted to USD 983 million as a result of higher volumes of air transport services provided by 'Taimyr airlines' and acquired company "Nordavia".

3. SELLING AND DISTRIBUTION EXPENSES

USD million FY2012 FY2011 Change y-o-y
Total  542 828 (35%)
Export customs duties 479 779 (39%)
Transportation expenses 33 25 32%
Labour 17 17 0%
Other 13 7 86%

Selling and distribution expenses declined 35% y-o-y and amounted USD 542 million driven mostly by a  significant decline in export customs duties following the reduction of nickel export duties by the Russian Government.

4. General and administrative expenSES

USD million FY2012 FY2011 Change y-o-y
Total  1,000 848 18%
Labour 584 467 25%
Third party services 146 135 8%
Taxes other than those directly attributable to cost of goods sold and income taxes 108 88 23%
Amortization and depreciation 33 29 14%
Transportation expenses 18 19 (5%)
Other 111 110 1%

General and administrative expenses of the Company increased by USD 152 million (or by 18%) to USD 1 billion. The major contributor to this growth was a 25% increase in labour as a result of substantial retirement benefits to the top management and increased average salary of the Company's employees.

5. impairment of tangible and intangible assets

In 2012, loss from impairment of property, plant and equipment and intangible assets amounted to USD 278 million. The main source of the loss was impairment of Norilsk Nickel International assets in Botswana and Australia. Additionally, an impairment loss related to the Company's investment in its 50% joint venture, Nkomati, has been recognized in the amount of USD 97 million.

6. finance costS

USD million FY2012 FY2011 Change y-o-y
Total  294 151 95%
Interest expense on borrowings 236 96 146%
Unwinding of discount on environmental obligations 52 46 13%
Interest expense on employee benefits obligations 5 7 (29%)
Interest on obligations under financial lease 1 2 (50%)

Finance costs of the Company in 2012 reached USD 294 million as compared to USD 151 million a year ago. The growth of finance costs was mainly driven by new external fundraising on prevailing market terms

7. (LOSS)/PROFIT FROM INVESTMENTS

Loss from investments in 2012 amounted to USD 552 million being one of the major factors that negatively affected the Company's net profit for the year.
The main reasons for the loss from investments was a significant and prolonged decline in share prices for securities traded on the Russian stock exchanges (primarily ordinary shares of Inter RAO UES), which resulted in reclassification of losses previously accumulated within a separate reserve in equity, into the income statement based on IFRS requirements.

8. INCOME TAX

In 2012, current income tax expense decreased by USD 407 million (or by 28%) to USD 1,039 million as compared to USD 1,446 million in 2011 as a result of a lower taxable base for the year. Total income tax expense including deferred taxes decreased by USD 460 million (or by 32%) to USD 1,000 million.
Effective tax rate increased to 32% in 2012 from 26% in 2011, as a result of recognition of certain non-deductible expenses such as impairment of Inter RAO UES shares.

9. EBITDA

USD million FY2012 FY2011 Change y-o-y
Operating profit 3,864 6,235 (38%)
Depreciation and amortisation 786 761 3 %
Impairment of non-financial assets 278 243 14 %
EBITDA 4,928 7,239 (32%)

In 2012, EBITDA amounted to USD 4.9 billion with EBITDA margin of 41%.

10. EXTRACTS FROM THE CONSOLIDATED STATEMENT OF CASH FLOWS

USD million FY2012 FY2011 Change y-o-y
Net cash generated from operating activities 3,434 4,702 (27%)
Net cash used in investing activities (2,914) (1,876) 55%
Net cash used in financing activities (1,164) (6,644) (82%)
Net decrease in cash and cash equivalents (644) (3,818) (83%)
Cash and cash equivalents at beginning of the year 1,627 5,405 (70%)
Cash and cash equivalents of disposal group at beginning of the year - 106 n/a
Effect of foreign exchange differences on balances of cash and cash equivalents and translation to presentation currency 54 (66) n/a
Cash and cash equivalents at end of the year 1,037 1,627 (36%)

Net operating cash flow decreased in 2012 by USD 1.3 billion and amounted to USD 3.4 billion as compared to USD 4.7 billion in 2011 as a result of a substantial decrease in sales revenue compensated by decrease in taxes paid.

Net cash outflow from investing activities in 2012 reached USD 2.9 billion driven mostly by capital investments in construction and acquisition of property, plant and equipment and intangible assets in the amount USD 2.7 billion;

Net cash expenditure on financing activities amounted to USD 1.2 billion, primarily driven by the following:

  • inflow from borrowings in the amount of USD 2.5 billion;
  • repayments of short term loans and borrowings in the amount of USD 2.7 billion;
  • payment of dividends by Group and its subsidiaries for 2011 in the amount of USD 976 million

Cash and cash equivalents decreased by 36% y-o-y amounting to USD 1,037 as of December 31, 2012.

*      *     *

The full version of the consolidated financial statements of the Group for 2012 prepared in accordance with IFRS is available at the website of the Group (www.nornik.ru/en) in the Investors/Financial Statements section.

Conference call and webcast

On Monday April 15, 2012, MMC Norilsk Nickel will host a conference call and webcast for investors & analysts at 18:00 Moscow time (15:00 London / 10:00 New York).

The conference call will be hosted by the Company's management who will present the results and answer questions from conference call and webcast participants.

The call will be held in English.

Webcast link: http://www.media-server.com/m/p/hbv2a9ke
Conference call dial-ins:

Moscow          7 (499) 272-43-37
International   44 (0) 20-30-03-26-66

Toll Free:

Russia                         8 10 800-24-90-20-44
UK                  08 08 109-07-00
USA                1 866 966-53-35

Conference Call Password: Norilsk Nickel.

For further information, please, contact:

Media Relations: Investor Relations:
Phone: +7 (495) 797 82 94 Phone: +7 (495) 786 83 20
Email: pr@nornik.ru Email: ir@nornik.ru

ABOUT MMC NORILSK NICKEL

MMC Norilsk Nickel, a company incorporated under the laws of the Russian Federation, is the largest diversified mining and metals company in Russia, the world's largest producer of nickel and palladium and one of the world's largest producers of platinum, rhodium, copper and cobalt. In addition to this, MMC Norilsk Nickel produces a large number of other by-products, including gold, silver, tellurium, selenium, iridium and ruthenium.
The key production units of the Company's group in Russia are at the Polar and Kola Peninsulas. MMC Norilsk Nickel international assets include operations in Finland, Australia, Botswana and South Africa.
MMC Norilsk Nickel's shares are traded on the Moscow Exchange. ADR's on the Company's shares are traded on the over the counter market in the US and on the London and Berlin stock exchanges.

HUG#1692806