Novolipetsk Steel sees $379 mln in Q3 EBITDA to US GAAP
MOSCOW. Nov 8 (Interfax) - The NLMK group, whose main asset is OJSC Novolipetsk Steel (NLMK) , posted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $379 million to US GAAP last quarter, 5% down quarter-on-quarter, the company said.
An Interfax consensus forecast anticipated $386 million.
The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for the quarter was 13.9% versus 14.1% for the previous quarter.
NLMK sales revenues were down 4% at $2.72 billion. "Top line was impacted mainly by lower average selling prices on the back of an insignificant decrease in steel product sales (-1%), which was partially offset by an improved sales structure, with the share of HVA products growing to 38% (+1 p.p. quarter-on-quarter)," the company said.
Q3 net profits were up 4.1-fold quarter-on-quarter at $138 million. "This significant increase was factored by positive FX [forex] rate differences in the amount of $52 million (in Q2 there was a $5 million loss)," NLMK said.
The consensus forecast for sales revenues was $2.75 billion and for net profits $87 million.
"In Q3, conditions in the steel product markets remained challenging, pressured by the weak demand, coupled with a structural steelmaking overcapacity in the world, and high pricing volatility for key raw materials," the statement quotes company CFO Grigory Fedorishin as saying. "An improved sales structure, operational efficiency programs, and a reduction in SG&A expenses supported the EBITDA margin at c.14%," he said.
"Proactive debt management and the sale of NBH shares brought our financial debt down by $652 million. At the end of Q3, Net debt/EBITDA stood at x1.87," Fedorishin said. "Q3 capex was $281 million (+27% quarter-on-quarter). As the capital intensity of our investment program decreases, NLMK investments in 2013, including maintenance, will total approximately $850 million, 40-45% lower year-on-year," he said.
Key US GAAP financial indicators for NLMK ($ mln):
| Q3 2013 | Q2 2013 | % | 9M 2013 | 9M 2012 | % | |
| Revenue | 2 720 | 2 829 | -4% | 8 405 | 9 354 | -10% |
| Operating profit | 149 | 180 | -17% | 440 | 942 | -53% |
| EBITDA | 379 | 400 | -5% | 1 096 | 1 511 | -27% |
| EBITDA margin, % | 13.9% | 14.1% | -0.2 p.p. | 13.0% | 16.2% | -3.2 p.p. |
| Net profit (loss) | 138 | 34 | 310 | 209 | 617 | -66% |
| Net debt | 2 772 | 3 424 | -19% | 2 772 | 3 470 | -20% |
| Net debt/ EBITDA | 1.87 | 2.15 | 1.87 | 1.84 |
"Q3 average global steel product prices hit their yearly low in July and August, pressured by steel oversupply and the seasonal slowdown in demand. Prices saw a mild recovery at the end of Q3, supported by restocking at customers and trading companies and growing raw material prices, while inQ4 the prices leveled off," the press release says.
"Sales prices from our Russian assets to the domestic and export markets decreased following the decline in global average prices. As the ruble weakened against the US$, prices in dollar terms in the domestic market fell by $10 - $15 qoq," it says.
"In Europe, average prices fell due to the seasonal weakening in buyer activity; at the end of the quarter this trend reversed. Increased demand for flat steel in the U.S., and higher scrap prices lead to an increase in Q3 prices in the region," NLMK said.
"As at the end of Q3'13, net debt was down by $0.65 billion (19% qoq ) to $2.8 billion driven mainly by a positive free cash flow over the period of $274 million (including proceeds from the sale of a stake in NBH of $123 million) and the deconsolidation of NBH financial liabilities from the Group's financial liabilities for a total of $757 million , as well as other factors. The bulk of this NBH debt was raised to finance the working capital of its operating and sales assets, secured by corresponding inventories and receivables. In Q3, $252 million of liabilities for the acquisition of SIF were reclassified as financial debt since they were reassigned to a bank. Previously, this amount was part of other liabilities. $150 million of the amount is a part of short-term liabilities.
"Throughout the quarter, net repayment of debt (net of borrowings ) was $199 million. Net debt-to-12M EBITDA ratio was 1.87."
"Q3 operating profit decreased by 17% qoq to $149 million, pressured mostly by the narrowing of steel product/raw materials spreads. Production costs sequentially decreased by 3% to $1,993 million. This decrease was related to the savings achieved under cost optimization programs across the Group's production sites. The weakening of the ruble against the dollar had an additional positive impact on costs."
"Q3 general and administrative expenses were down by 4% to $108 million. Commercial expenses were down by 7 % to $212 million, as the share of export sales from NLMK's Russian sites in total sales decreased."
The NLMK group brought the state-run Belgian company Societe Wallonne de Gestion et de Participations S.A. (SOGEPA) on board as an investor in NLMK Europe, selling it 20.5% of the stock in NLMK Belgium Holdings S.A. (NBH), which comprises NLMK Europe's operating and trading companies, excluding NLMK Dansteel, for 91.1 million euro. The group's investment in NBH will henceforth be reflected in consolidated reporting using the equity method.
The NLMK group includes Novolipetsk Steel, NLMK USA, NLMK Europe, OJSC Stoilensky GOK , OJSC Altai-Koks, LLC VIZ-Stal and NSMMZ. Vladimir Lisin controls 85.54% of shares via Fletcher Group Holdings and LKB-Invest. Management owns 3.2% of shares.