On December 7, the Russian steelmaker Novolipetsk Steel (NLMK) released its financial results for the first nine months of 2009 under US GAAP (Generally Accepted Accounting Principles).
Accordingly, during the period in question, NLMK incurred a net loss amounting to $79 million. However, significant growth in Q3 operating profit allowed the company to improve its performance on a bottom line level, resulting in a net profit of $164 million for the quarter in question. In the first nine months of 2009, NLMK's sales revenue reached $4.325 billion, down 55 percent year on year due to the weak market environment starting from the end of 2008. On the other hand, a recovery in production and sales volumes through Q3 2009 to pre-crisis levels helped to improve the overall performance in the nine months.
Q3 2009, ($ million) | Q2 2009, ($ million) | Change (%) | Jan-Sept 2009, ($ million) | Jan-Sept 2008, ($ million) | Change (%) | |
Sales revenue | 1.739 | 1.293 | 35 | 4.325 | 9.640 | -55 |
Gross profit | 610 | 371 | 64 | 1.304 | 4.752 | -73 |
Operating profit | 340 | 105 | 222 | 545 | 3.780 | -86 |
EBITDA | 486 | 234 | 107 | 917 | 4.020 | -77 |
EBITDA margin (%) | 28 | 18 | 21 | 42 | ||
Net loss/profit | 164 | -49 | - | -79 | 2.759 | - |
Operating cash flow | 324 | 545 | -41 | 1.251 | 1.888 | -34 |
Net debt | 761 | 737 | 3 | 761 | 587 | 29 |
"The demand for steel in the third quarter was at an historically high level for NLMK," reads the company's statement, adding that the Q3 sales volume grew 20 percent year on year and 40 percent quarter on quarter, while the January-September sales volume totaled 8.3 million mt - down seven percent year on year.
During the first nine months of the year, NLMK's production costs (excluding depreciation and amortization) amounted to $2.673 billion - down 41 percent year on year, mainly due to the lower raw material prices from third parties. In Q3 2009, NLMK saw its production cost of one metric ton of steel decrease slightly to $199 from $203 in Q2 2009.
Meanwhile, NLMK's total investments in January-September this year, including maintenance capex reached $708 million - down 51 percent year on year. The company said it is continuing with its main investment projects including the construction of a new blast furnace No. 7, modernization and expansion of its steelmaking operations (construction of vacuum degasser, ladle furnace, etc.), construction of pre-painting line No. 3 and projects to ensure increased energy self-sufficiency at its main production site in Lipetsk. In addition, NLMK is also continuing with the construction of its new EAF mini-mill in the Kaluga region. NLMK's investment capex (excluding maintenance) is expected to be above $1 billion, but still 50 percent lower year on year.
NLMK said that in Q4 2009 it expects a four percent decline in its steel production to 2.8 million mt, while its EBITDA margin is expected to decline to 25 percent driven by higher prices for raw materials.
"We confirm our forecast for NLMK's steel production in 2009 to reach 10.5 million mt. We expect that strong sales and improved financial performance in H2 2009 will result in an EBITDA margin for 2009 of 22-25 percent," reads the company's statement.