NorNickel GMK · RUS:GMKN
NorNickel GMK — Norilsk Nickel — H1 2014 Earnings Presentation
29 slides from NorNickel GMK's earnings presentation, Aug 28, 2014
Slide 1: 1H 2014 IFRS Financial Results
1H 2014 IFRS FINANCIAL RESULTS August 28, 2014 Moscow
Slide 2: Disclaimer
Disclaimer The information contained herein has been prepared using information available to OJSC MMC Norilsk Nickel (“Norilsk Nickel” or “NN”) at the time of preparation of the presentation. External or other factors may have impacted on the business of Norilsk Nickel and the content of this presen
Slide 3: 1H 2014 Highlights: Three-Fold Increase in FCF
1H 2014 Highlights: Three-Fold Increase in FCF Robust performance driven by the new strategy focused on capital discipline, cost control and prudent cash management with ROIC expanding to 20% from 17%. Revenue of USD5.7 billion unchanged y-o-y amidst mixed metal markets with strong palladium pri
Slide 4: Health and Safety
Health and Safety Lost Time Injury Frequency Rate (LTIFR) Life protection is the critical priority – target zero fatalities. 0.81 0.77 0.76 Zero tolerance to any unsafe acts. lost time injuries per 1,000,000 hours Lost Time Injury Frequency Rate (LTIFR) in 0.47 1H 2014 was down 38.2% y-o-y to
Slide 5: Accelerated Shutdown of Nickel Plant at Polar Division
Accelerated Shutdown of Nickel Plant at Polar Division Norilsk Nickel Plant Nickel Plant – the oldest asset in the Company’s portfolio with high level of technological and physical obsolescence. Subject to completion of a joint initiative with the Government, Nickel Plant will be shut down by No
Slide 6: Markets Overview
y Nw NORILSK NICKEL Markets Overview
Slide 7: Preferred Metals Basket
Preferred Metals Basket Best performing metal basket, YTD Preferred metal basket for the medium term Commodity price outlook 35% 60% 50% 77% of NN 23% metal basket 40% 17% 30% 6% 20% 4% -4% -5% 10% Ni Pd Pt Cu Al Gold Crude Oil Iron Ore 0% 2013 2014E 2015Е 2016Е 2017Е -10% -20% -30% -33% -40% Nickel
Slide 8: Nickel Market: Surpluses are Being Removed
Nickel Market: Surpluses are Being Removed Major market trends LME nickel price and stocks weeks of global consumption Price, USD/t Nickel ore ban in Indonesia is having a major impact on the global market. 10 60,000 Nickel oversupply to reduce along with Chinese NPI volumes. 50,000 8 New proj
Slide 9: Growing Nickel Consumption
Growing Nickel Consumptions China stainless steel production up strongly in 1H 2014, kt Other world exc. China stainless steel production recovering, kt +13% +5% 6,000 +8% 6,000 +15% 4,000 4,000 2,000 2,000 0 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2
Slide 10: Nickel Ore Stocks in China are Depleting, Price Increasing
Nickel Ore Stocks in China are Depleting, Price Increasing China nickel ore import from Indonesia dried out, NPI production costs are expected to increase wet kt 10,000 25,000 +27% +29% +34% 8,000 20,000 Spot Ni price 18,800 USD/t 6,000 15,000 4,000 10,000 2,000 5,000 0 0 Jan-12 Jun-12 Nov-12 Apr-13
Slide 11: New Projects Unable to Satisfy Demand Growth
New Projects Unable to Satisfy Demand Growth New projects can hardly compensate NPI losses Nickel consumption is growing kt kt 100 250 200 50 2016 150 0 2015 100 -50 50 2014 -100 0 2014 2014 2014 2015 2015 2015 2016 2016 2016 2014 2015 2016 2014 2015 2016 New projects growth Change at existing opera
Slide 12: Palladium Demand Outstrips Supply
Palladium Demand Outstrips Supply Rising usage of palladium in auto catalysts Russian stockpiles have dried out Pd demand in emissions control catalysts, Moz Deliveries from Ministry of Finance stockpiles, koz +3% p.a. 6.1 6.3 6.5 5.2 5.5 0 2010 2011 2012 2013 2014E 2006 2007 2008 2009 2010 2011 201
Slide 13: Supply Side Issues in South Africa
Supply Side Issues in South Africa Africa controls 80%+ of Pt mine supply… …Operating costs in Africa are growing 2014 Pt mine supply Total cash cost (excluding by-product credits), $/oz 4E 1,400 (784 koz) 1,200 15% 1,000 (3,625 koz) 70% 800 (406koz) 600 8% 400 (377 koz) 200 7% 0 2005 2006 2007 2008
Slide 14: PGM Demand On The Rise
PGM Demand On The Rise Increasing demand for PGM: global car production up 5% y-o-y in 1H 2014 Argentina 15% ASEAN Canada Turkey Russia Brazil India Growth in 1H 2014 → 10% 5% Weighted average 0% S. Korea USA EU Mexico Japan China -5% -10% -15% -20% Share in the world automobile production→ -25% 0 0
Slide 15: Global Above-Ground PGM Stocks: Not as Much as it May Seem
Global Above-Ground PGM Stocks: Not as Much as it May Seem Above-ground stocks: only half of Pd and a third of Pt is The market is overestimating the size of available available for immediate consumption – at a right price PGMs stocks Moz Months of consumption 40.0 12.0 10.0 30.0 8.0 not available f
Slide 16: Copper Market Remains Balanced, Inventories low
Copper Market Remains Balanced, Inventories low Major market trends LME copper price and stocks kt Price, USD / t The global market remains fairly balanced - 1,000 12,000 expected surplus in 2014 less than 1% of annual 800 10,000 consumption. 8,000 600 6,000 Lower LME stocks as metal moves to no
Slide 17: 1H 2014 Financial Results
y Nw NORILSK NICKEL 1H 2014 Financial Results
Slide 18: Sales & Distribution Results: Strong Pd Performance
Sales & Distribution Results: Strong Pd Performance Base metals sales volumes: Ni down 4% y-o-y, kt PGM sales volumes: positive dynamics y-o-y, koz 176 165 1,324 1,369 134 128 321 328 Nickel Copper Palladium Platinum 1H 2013 1H 2014 1H 2013 1H 2014 Realized metals prices: Pd price was up strongly Me
Slide 19: Metals Revenue Practically Unchanged
Metals Revenue Practically Unchanged Revenue dynamics, USD mln Revenue unchanged y-o-y at USD5.7 bn in 558 537 545 506 1H 2014 due to a combination of factors: • Recovery on nickel market and strong palladium 5,879 5,149 5,258 5,202 market performance; • Higher sales volumes of copper and PGMs; 2H
Slide 20: Growth in EBITDA and Improved EBITDA Margin
Growth in EBITDA and Improved EBITDA Margin EBITDA increased by 9% y-o-y to USD2.5 bn driven by operating cost savings in Russia and RUB depreciation against USD. Total cash operating costs decreased by 8% y-o-y to USD2.2 bn. SG&A was almost flat y-o-y: 11% decrease in export customs duties an
Slide 21: Improving Management Control of Cash Costs
Improving Management Control of Cash Costs Total cash costs down 8% y-o-y, USD mln Y-o-Y Cash operating costs were down 8% y-o-y: USD mln 1H 2014 1H 2013 Change Cash operating costs • labour costs down 10% y-o-y due to effect of RUB Labour 729 810 (10%) depreciation against USD; Expenses on acquis
Slide 22: Operating Cash Cost Breakdown: Flat Y-o-Y in RUB Terms
Operating Cash Cost Breakdown: Flat Y-o-Y in RUB Terms USD208 mln effect from the depreciation of RUB against USD (effect of translation to presentation currency). USD102 mln cost savings across most cash cost items driven by the cost optimization initiatives. USD102 mln – seasonal increase in
Slide 23: Working Capital Release of USD2 billion in LTM
Working Capital Release of USD2 billion in LTM Working capital reduced by approximately USD0.9 bn since the start of the year and by USD1.9 bn in the last twelve months: • Increase in trade and other payables by USD505 mln mainly due to increase in advances from customers; • Reduction of tax recei
Slide 24: Management Focus on FCF Generation
Management Focus on FCF Generation Free Cash Flow (before financing) almost tripled y-o-y to USD2.4 bn owing to: • Reduction of working capital by USD487 mln in 1H 2014 vs. working capital increase of USD189 mln in 1H 2013; • Increase in EBITDA by USD197 mln; • Lower CAPEX on the back of more stri
Slide 25: Capital Expenditures Discipline Driven by New Strategy
Capital Expenditures Discipline Driven by New Strategy USD mln 1,989 163 117 USD300 mln 182 - FX Effect 1,697 211 - Reduced mandatory Capex 156 - Investment discipline 164 335 192 187 147 981 884 851 491 1H 2013 2013 1H 2014 2014E Mandatory CAPEX Skalisty mine Polar mines Talnakh Enrichment Plant Ko
Slide 26: Maintaining Conservative Balance Sheet
Maintaining Conservative Balance Sheet Leverage reduced to 0.8x Net Debt/LTM EBITDA Strong Liquidity Position as of 1H 2014 USD bn USD2.6 bn of cash and cash equivalents. 5 4.5 4.58 1.20 Available credit lines of USD2.3 bn. 3.99 4 1.1 1.00 3.51 3.46 Overall liquidity comfortably covers refinan
Slide 27: 2014 Outlook
2014 Outlook We reiterate our bullish view on nickel market. We expect it to be balanced in 2014 and develop a sizeable deficit in 2015-2016 as the Indonesian export ban remains in place and unaltered. We expect copper market to remain balanced with low level of exchange inventories making the m
Slide 28: Production Targets
Production Targets 2014 (plan) 2016 (plan) 2018 (plan) Nickel, kt 220–225 225–235 225–235 (225–230)1 Copper, kt 340–345 360–375 420–445(2) (345–355)1 595–620 Platinum, koz 615–640 665–690 (635–650)1 2,500–2,580 Palladium, koz 2,530–2,630 2,730–2,840 (2,585–2,665)1 New basis for production guidance
Slide 29: Q&A Session
Q&A Session NORILSK NICKEL