Nornickel sees surge in working capital, reconfigures logistics chains with focus on China, Turkey, Moroccov - Potanin
MOSCOW. Jan 23 (Interfax) - Nornickel has seen a surge in working capital due to changes in supply chains and settlement systems caused by sanctions, the Russian mining giant's president, Vladimir Potanin said in an interview on RBC TV.
"In terms of production, logistics chains have changed, settlement systems have broken down, with all the ensuing consequences. ...For example, working capital has increased significantly at Nornickel due to the slowdown of all these processes and their complication," Potanin said.
Nornickel's net working capital is usually below $1 billion and at the end of 2021 it was $1.27 billion, but in the first half of 2022 it surged to $3.8 billion due to the growth of inventories of metal products, materials and spare parts, as well as the significant appreciation of the ruble.
The company has to push back many projects because it needs to redesign and find new equipment due to western companies' refusal to supply it, Potanin said. As a result, the company's strategy is becoming more focused on development within, attracting partners from friendly jurisdictions and finding opportunities in these countries.
"For example, we had plans for expansion to other markets for some businesses. And, vice versa, we participated in various startups in other countries in the hopes of bringing them to Russia in order to strengthen our existing businesses here. Such possibilities have now almost completely disappeared. We are reconfiguring our investment policy for an even greater emphasis on Russia and are looking for new opportunities in friendly jurisdictions," Potanin said.
"The whole paradigm of our business, which was more centered around involvement in the international chain of creating products and technologies, is now being reoriented inward with an attempt to involve some friendly countries and partners in this. This is working out in some areas, not yet in others. In general, this is a serious change in the system of planning and system of expectations," Potanin said.
Nornickel is reconfiguring logistics chains to more friendly countries, foremost China, Turkey, Morocco and other Arab countries, he said. As of the beginning of 2022, Nornickel shipped 50% of its metal exports to Europe and 20% to North America.
"This is not directly affecting the company's vital functions, its ability to survive, but of course it restricts its possibilities, including financial and in terms of developing the markets where it traditionally had a presence. It is more difficult to hold onto them and it's expensive to win new ones," Potanin said.
"We, as an individual company and as a country, must [remain] in good shape and simply survive this period, and get to the shore where we will build new rules for relations with all other countries and among ourselves," Potanin said.