Q4 and 12m 2018 NLMK Group consolidated financial results under IFRS

NLMK Group (MICEX and LSE: NLMK) is pleased to announce an EBITDA growth of 35% yoy to $3.6 bn in 2018. EBITDA margin hit a decade high at 30%. Free cash flow grew by 60% to $2.0 bn.

12M 2018 key highlights

Group revenue in 12M 2018 totalled $12.0 bn (+20% yoy), driven by the growth of average sales prices and higher sales volumes.

EBITDA grew to $3.6 bn (+35% yoy), driven by higher revenue and operational efficiency gains in 2018.

Free cash flow increased by 60% yoy to $2.0 bn, due to the increase in profitability and a positive working capital trend vs. 2017.

Net income grew by 54% yoy to $2.2 bn.

Net debt/EBITDA decreased to 0.25х (0.35х at the end of 2017), driven by the increase in the Company’s profitability and the decrease in net debt by 3% yoy.

Q4 2018 key highlights

Group revenue decreased by 4% qoq to $3.0 bn (+7% yoy), due to the drop in prices for steel products in the Company’s key markets and the growth in the share of semi-finished products in its sales portfolio.

EBITDA totalled $847 m (-17% qoq), due to the narrowing of steel product/main raw material price spreads. EBITDA grew by +8% compared to Q4 2017.

Free cash flow decreased by 21% qoq to $502 m (+150% yoy), due to the decrease in revenue and EBITDA, and the growth of capex, driven by active settlements with equipment suppliers at the end of the financial year.

Net income dropped by 21% qoq to $509 m (+19% yoy) against the backdrop of lower operating profit.

Comment from NLMK Group CFO Shamil Kurmashov:

“In 2018, demand for steel continued to recover, coupled with a rise in protectionism in key markets.

“In this context, NLMK Group’s flexible business model that helped it secure its presence in key sales markets, enabled the Company to grow its sales by 7% yoy (by 1.1 m t) to 17.6 m t, hitting an all-time high for the Company. NLMK Group retained its leadership on the Russian market in terms of steel output, and consolidated its positions on global markets. Revenue grew by 20% yoy to $12.0 bn; NLMK’s EBITDA increased by 35% to $3.6 bn, while its EBITDA margin grew to 30% (+4 p.p. yoy).

“In 2018, NLMK Group persisted with its consistent operational efficiency efforts. EBITDA gains from the operational efficiency programme totalled $189 m to the 2017 cost base. The impact of capex projects executed as part of Strategy 2017 totalled an additional $121 m. Total gains from Strategy 2017 in 2014-2018 were $1,348 m, which is significantly in excess of the $1 bn target.

“EBITDA growth and the decrease in cash outflow to finance working capital supported a 60% increase in the Group’s free cash flow yoy to $2.0 bn. Total debt decreased by 9% yoy, while the cost of financing reduced from 3.8% to 3.4%. The Company’s debt is at an all-time low: Net debt/EBITDA decreased to 0.25x by the end of 2018. Growth of free cash flow and low debt enabled the Company to keep dividends high despite the growth in capex.”