Norilsk Nickel increased its net profit by half in the first half of the year

For the first 6 months of 2018, Norilsk Nickel earned 1.65 billion dollars in net profit.
MMC Norilsk Nickel has published good financial results for the first half of the year, showing almost a twofold increase in net profit, an EBITDA growth of 77% and a marked reduction in the ratio of net debt to EBITDA to 1.1. The reason was the favorable conjuncture of world markets, where prices for virtually all metals of Norilsk Nickel grew by 20-40%. However, it is not yet clear how the financial prosperity of the company will be affected by the initiative of Presidential Assistant Andrei Belousov to increase taxes for metallurgists and chemists.

Norilsk Nickel (the main shareholders - Vladimir Potanin's Interros and Oleg Deripaska's RusAl) positively reported under IFRS for the first half of the year. Revenue increased by 37%, to $ 5.8 billion, EBITDA - by 77%, to $ 3.1 billion, with the growth of EBITDA margins to 53%. Net profit increased 1.8 times to $ 1.65 billion. Net debt decreased by 29%, to $ 5.8 billion, and the debt / EBITDA ratio to 1.1, from 2.1 in 2017, and the company expects , that at the end of the year this indicator will be in the corridor 1-1,3.

One of the main factors in the growth of financial indicators was the jump in prices for basic metals compared to the first half of 2017: nickel by 40% (to $ 14.14 thousand per ton), copper - by 21% (to $ 6.99 thousand per tonne) and palladium by 30% (to $ 1 thousand per ounce). The exception was platinum, the price of which fell by 3%, to $ 930 per ounce. But MMC said it was changing the outlook on platinum from neutral to positive and expects that, despite a small surplus in the market, the current price of platinum is too low and will grow in the medium term.

The main contribution to the revenue (36%) was palladium - the revenue from its sale increased by 62%, to $ 1.95 billion, including by selling 350,000 out of 550,000 ounces of the palladium fund. According to Sergei Malyshev, the senior vice-president and financial director of Norilsk Nickel, the company does not exclude "further small reduction" in the fund's reserves. The bulk of the sales of Nornikel metals is still in Europe (57%), the share of the New World markets has fallen from 15% to 12%, and Asia - on the contrary, has increased from 23% to 26%.

The company expects further growth of the deficit in the world nickel market against the backdrop of growing demand from stainless steel producers in China and Indonesia and manufacturers of lithium-ion batteries for electric vehicles. According to Norilsk Nickel's forecasts, demand from the latter sector may reach 365,000 tonnes by 2025 against today's 34,000 tonnes. The company changed the forecast for nickel deficiency in the market at the end of the year from 15,000 tonnes to 124,000 tonnes, in 2019 According to the estimates of MMC, it will decrease to 87 thousand tons. Palladium deficiency will continue to grow against the background of demand from manufacturers of autocatalysts and stagnation of primary metal production.

With optimistic market forecasts, the company is still cautiously assessing the impact on its performance of the loud initiative of presidential aide Andrei Belousov on the removal of super-profits of metallurgists and chemists related to the world market situation (see the material on this page). Hypothetical seizures specifically with the MMC Mr. Belousov estimated at 114.2 billion rubles. the company's performance in 2017. According to Sergei Malyshev, the company believes the risk of a retrospective increase in the tax burden resulting from the adoption of this proposal is extremely low. In his opinion, if such an initiative is adopted, it will differ in content from what was presented in the letter. Aton analysts Andrei Lobazov and Angelina Glazova in their report on Norilsk Nickel agree that the new tax risks are overvalued, and the company's securities will be quoted above the market.


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