6 Apr 2010 13:00

NLMK's US GAAP net profit plummets 91% to $215 mln in 2009

MOSCOW. April 6 (Interfax) - Novolipetsk Steel (NLMK) saw net profit to US GAAP plummet 91% last year to $219 million, the London-listed Russian steel major, which is controlled by billionaire Vladimir Lisin, said in a statement.

Q4 2009 net profit rose 80% from Q3 to $294 million and was 34% above analyst forecasts.

Sales revenue in FY2009 fell 48% to $6.14 billion and was $1.815 billion, or above forecast, in Q4 2009.

EBITDA in FY2009 was $1.44 billion, or 68% less than in 2008. Q4 EBITDA was above forecast at $528 million.

Analysts told Interfax in a consensus forecast that they thought NLMK could have boosted net profit to US GAAP 33% in Q4 compared with Q3 2009 to $219 million. They said sales revenue was expected to have risen 1% q-o-q to $1.76 billion but fallen 14.7% y-o-y. EBITDA might have risen 2.4% q-o-q to $497 million but fallen 4% y-o-y.

NLMK said in the earnings report that net debt decreased by 5% during 2009 to $796 million.

NLMK financial highlights in Q4 2010 ($ mln):

Q4 Q3 Change %
Sales revenue 1 815 1 739 4%
Gross profit 686 610 12%
Operating profit 347 340 2%
EBITDA 528 486 9%
EBITDA margin (%) 29% 28%
Net profit 294 164 80%

As of December 31, 2009, the overall debt of the Group totaled $2.495 billion while net debt amounted to $796 million. "During the year Company successfully reduced weighted average interest rates for its RUR, USD and EURO debt obligations by 24%, 29% and 47% respectively," NLMK said.

At the end of 2009, the Group signed a EUR524 million financing facility agreement guaranteed by Export Credit Agencies with a maturity of 7-10 years and interest rate of EURIBOR+1.57%. This facility will be allocated to finance the Company's Technical Upgrade Program.

Short term loans at the end of 2009 amounted to $557 million, a decline of 48% from 2008. In 2009, NLMK actively restructured its short term loans. As a result of the restructuring the company succeeded in replacing the bulk of its short term debt by proceeds from the 3-year Russian exchange traded bond issues that took place from Q4 2009 to Q1 2010. The range of coupon rates of the respective bonds was 10.75 - 7.75%. The replacement of short term debt resulted in lower interest payments that were reduced by 21% to $171 million in 2009. NLMK estimates net interest expense of about $130 million in 2010.

Losses for realized forward contracts totaled $95 million. The company is currently undertaking a review of its FX-hedging policy. No forward contracts were concluded for 2010.

The Group's cash position as at December 31, 2009 totaled $1.247 billion and an aggregate of the cash and cash equivalents and short-term investments stood at $1.7 billion which coupled with low debt levels emphasizes the stable financial position of the Company.

NLMK said it expected an EBITDA margin of 20%-25% in Q1 2010.

It expects global steel consumption to rise 10% this year to 1.2 billion tonnes.

NLMK itself plans to raise output 10% in 2010, to 11.6 million tonnes. The Q1 2010 target is 2.8 million tonnes.

NLMK targets capex to soar 50% in 2010 to $1.7 billion.

"We believe that the stabilization of the domestic market will allow increasing our local sales. We expect higher returns from high value added product sales, supported by increasing coated steel capacities and stabilization of demand in the transformer steel market. We believe the steel prices may increase by 15-25% year-on-year," said Galina Aglyamova, NLMK's vice president, finance.

Construction of Blast Furnace #7, with a total projected annual capacity of 3.4 million tonnes, remains the Group's largest and the most capital-intensive project. Currently over 60% of the project is complete and a major part of the equipment will be installed in 2010. The launch of the furnace is expected in the middle of 2011.

The Group continues the construction of converter #1 which, along with launching BF#7, will allow an increase in annual steelmaking capacity to 12.4 million tonnes. The launch of the converter is expected in 2011.

In 2010 the Group will continue expanding the Stoilensky mine in order to increase mining capacity by 25% to secure 100% self-sufficiency in iron ore at the Lipetsk production site after the launch of the Blast Furnace #7.

The NLMK group includes the core production facility Novolipetsk Steel, Denmark's DanSteel A/S, iron ore producer Stoilensky Mining and Processing , coke producer Altai-Koks, transformer steel producer VIZ-Stal and steel mini-mill developer Maxi Group.

Vladimir Lisin's Fletcher Group Holdings controls 84.6% of London-listed NLMK.