Alrosa · RUS:ALRS
Alrosa — Prosperity conference (September 2018)
16 slides from Alrosa's conference presentation, Sep 26, 2018
Slide 1: ALROSA – Meeting with Alexey Philippovskiy, CFO
ALROSA Meeting with Alexey Philippovskiy, CFO 26 September 2018
Slide 2: Disclaimer
DISCLAIMER The information contained herein has been prepared for the use in this Presentation (the “Presentation”) and has not been independently verified. Such information is confidential and is being provided to you solely for your information and may not be reproduced, retransmitted, further dis
Slide 3: About ALROSA
ABOUT ALROSA ~26% global share We are the world’s leading producer of rough diamonds with assets Republic of Sakha (Yakutia) located in Russia Arkhangelsk Region ❶ Leader in diamond production ❷ Largest reserves ❸ Diversified sales geography Angola ❹ Profitability leader 53% Open-pit ❺ Investment gr
Slide 4: Demand growth in end-market
DEMAND GROWTH IN END-MARKET Diamond jewelry market, $ bn Key growing regions in Q2 2018, % yoy 81 76 83 17% 62 Diamond jewelry sales 5% 5% 4% 3% 2010 2011 2012 2013 2014 2015 2016 2017 World Asia Pacific USA Europe Japan +4% annual growth since 2010 4
Slide 5: Prices recovered to 5Y average
PRICES RECOVERED TO 5Y AVERAGE ALROSA’s average realized price, $/ct Chinese policies effect Monetary reform in India 197 170 164 136 123 Gem-quality diamonds 2010 2011 2012 2013 2014 2015 2016 2017 Q1 Q2 2018 2018 $160 per carat – 5Y average realized price of gem-quality rough diamonds 5
Slide 6: Market consolidation improves supply discipline
MARKET CONSOLIDATION IMPROVES SUPPLY DISCIPLINE Market share in 2017 Others TOP-3 producers 38% 75% 68% 86% 86% 62% 25% 32% 14% 14% Silver Gold Cooper Nickel Diamonds Diamond production is one of the most consolidated in extractive industries 6
Slide 7: Supply: incremental growth is limited
SUPPLY: INCREMENTAL GROWTH IS LIMITED Supply drop from 2020 World diamond production forecast, m ct due to lack of new deposits and existing mines depletion 151 150 125 136 126 2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F Sources: Industry reports, officially reported informat
Slide 8: ALROSA: global leader in output and reserves
ALROSA: GLOBAL LEADER IN OUTPUT AND RESERVES Rough diamond production, m ct Diamond reserves according to JORC, m ct ALROSA share 151 377 inferred 128 123 128 130 125 127 126 resources 653 434 28% 28% 29% 32% 31% 28% 29% 26% 48 95 132 2010 2011 2012 2013 2014 2015 2016 2017 Peer 1 Peer 2 Peer 3 Peer
Slide 9: ALROSA: leader in returns and cash generation
ALROSA: LEADER IN RETURNS AND CASH GENERATION Major diamond producers EBITDA margin Free Cash Flow, bn RUB 5Y average 2017 111 46% 47% ALROSA 71 33% 38% Peers’ max 41 23% 17 Peers’ min 0% 25% 50% 2013 2014 2015 2016 2017 2018Е ALROSA sustainably demonstrates highest EBITDA …translating into strong F
Slide 10: Clear capital allocation strategy
CLEAR CAPITAL ALLOCATION STRATEGY Net Debt / EBITDA CAPEX, RUB bn Dividends, RUB/share 1.9 1,9 1.7 38 8.93 36 34 32 5,93 0.7 30 29 5.24 0.5 1.47 1.47 0.04 2.09 2013 2014 2015 2016 2017 H1 2013 2014 2015 2016 2017 2018Е 2013 2014 2015 2016 2017 H1 2018 2018 Investment grade criteria CAPEX plateaus at
Slide 11: New dividend policy
NEW DIVIDEND POLICY Dividend payout ratios New dividend policy: Free cash flow based 70% 70% 2x a year 59% Minimum level – 50% of IFRS net income 50% 52% 60% 50% 50% 50% Payout “mechanics”: 35% 37% 26% ❶ ND/EBITDA < 0.0 – over 100% FCF ❷ ND/EBITDA: 0.0–1.0 – 70–100% FCF 2013 2014 2015 2016 201
Slide 12: Asset portfolio strategy – focus on the core
ASSET PORTFOLIO STRATEGY – FOCUS ON THE CORE Number of ALROSA’s subsidiaries • Program to divest non-core assets started in 2013 – -40% of non-core entities to date Sale of gas assets for RUB30.3 bn 47 • C. 80% of total proceeds came from the sale of gas assets in Q1 2018 to Novatek 29 2013 2014 201
Slide 13: Operational excellence program
OPERATIONAL EXCELLENCE PROGRAM Number of projects in each stream • Key steps: 53% Energy use o Identification of gaps and improvement areas Mining & production 26% development 187 Organizational structure o Formalized organizational structure projects 13% & administrative costs and study best practi
Slide 14: Governance & shareholders structure
GOVERNANCE & SHAREHOLDERS STRUCTURE Supervisory board composition, number of members Shareholders structure 33% 34% 15 members 10 Other 33% Russian Federation 33% 4 Independent directors 33% Republic of Sakha (Yakutia) 1 Executive director 34% Free float 14
Slide 15: Q&A
Q&A Head of Corporate Finance M: +7 985 760 55 74 Sergey Takhiev E: [email protected] Please consider your environmental responsibility: Before printing this presentation, ask yourself whether you need a hard copy.
Slide 16: FX exposure
FX EXPOSURE RUB USD 6% 3% 29% 87% 87% 94% 97% 71% 13% 13% Revenue Cost of sales Capex Cash and Total debt cash equivalents 16