NLMK Group Q3 2021 IFRS Financial Results

NLMK Group’s EBITDA in Q3 2021 increased by 11% qoq to $2.3 bn; EBITDA margin was 50%. Free cash flow (FCF) reached $1.1 bn. The Board of Directors recommended approving Q3 2021 dividends in the amount of 13.33 RUB/share (100% of the FCF).
Q3 2021 key highlights

Revenue grew by 10% qoq to $4.6 bn (+2х yoy) with an increase in steel product prices.
EBITDA grew by 11% qoq to $2.3 bn (+3.9x yoy) due to a wider steel products/raw materials spread. EBITDA margin remained flat qoq at 50% (+24 p.p. yoy).

Free cash flow grew by 29% qoq to $1.1 bn (+4.7x yoy) driven by stronger financial performance.

Net profit grew by 19% qoq to $1.6 bn (+5.2х yoy).

9M 2021 key highlights

Revenue grew by 69% yoy to $11.6 bn amid higher average sales prices and an increase in the share of finished products in the sales portfolio.
EBITDA grew by a factor of 3.1 yoy to $5.5 bn due to wider steel products/raw materials price spreads and the implementation of Strategy 2022 projects. EBITDA margin was 48% (+22 p.p. yoy).
Free cash flow increased by a factor of 2.8 yoy to $2.4 bn driven by EBITDA growth. This was partially offset by the outflow of funds for working capital replenishment amid growing steel and raw material prices.
Net profit increased by a factor of 5.5 yoy up to $3.8 bn driven by gross profit growth.

Comment from NLMK Group CFO Shamil Kurmashov:

“In Q3 2021, average steel prices grew across all key sales markets. In the US, prices hit new highs. Starting from the middle of the quarter, demand growth in export markets slowed down, coupled with the ongoing recovery of local production and imports. The decrease in steel production and declining exports in China supported global steel prices, leading to an adjustment of iron ore prices at the same time. Australia coal export prices continued to climb amid restocking activities in India, Europe, and Japan.

“In August 2021, NLMK Lipetsk performed equipment repairs following an incident in the steelmaking production oxygen supply infrastructure. Capacity utilization rates recovered after the repairs, reaching 98% in September. In this context, the Company’s sales totalled 4.1 m t (-4% qoq). Favourable pricing conditions contributed to an increase in NLMK Group’s revenue by 10% qoq to $4.6 bn, and EBITDA growth by 11% qoq to $2.3 bn. EBITDA margin remained flat vs. the Q2 level of 50%. Free cash flow increased by 29% qoq to $1.1 bn.

“Net debt grew by 40% qoq to $2.7 bn due to working capital increase and dividend payments outflow in Q3 2021. Net debt/EBITDA remained practically flat at 0.43х.

“In line with the Group’s Dividend Policy, the management recommended the NLMK Board of Directors to pay $1.1 bn in Q3 2021 dividends.”