NLMK Group (LSE: NLMK, MOEX: NLMK) reports that Q3. 2020 revenue increased by 3% qoq to $ 2.2 billion, EBITDA amounted to $ 579 million (-1% qoq). The Board of Directors recommended approving dividends for Q3. 2020 in the amount of 6.43 rubles /share.

Key results for Q3 2020

• Revenue increased to $ 2.2 bn (+ 3% qoq) with metal product sales increased by 2% qoq to 4.4 mn tons. 13% YoY was driven by falling prices for metal products and an increase in the share of semi-finished products in the sales structure.
• EBITDA amounted to $ 579 mn (-1% qoq). An increase in sales and an improvement in the structure of the product portfolio, as well as the devaluation of the ruble neutralized the negative effect of production losses during the recovery of the conveyor gallery at SGOK in September 2020. EBITDA margin was 26% (-1 pp qoq; +1 pp qoq; +1 pp y /y).
• Free cash flow amounted to $ 239 mn (-21% qoq) with investment growth amid the implementation of the second stage of major overhauls of NLMK's blast furnace and converter facilities and other projects of Strategy 2022.
• Net income quadrupled qoq to $ 312 mn on the back of a low base in the previous quarter, when NBH (non-cash) investments were impaired.

Key results 9 month 2020

• Revenue decreased by 17% YoY to $ 6.9 billion due to lower prices for metal products and an increase in the share of semi-finished products in sales by 4 pp. up to 40%.
• EBITDA decreased by 16% yoy to $ 1.8 bn with a decline in revenue. EBITDA margin amounted to 26% (+1 p.p. YoY).
• Free cash flow decreased by 26% YoY to $ 874 mn, with EBITDA decrease and investment growth under Strategy 2022.
• Net income declined 40% YoY to $ 678 mn on the back of lower revenues and the recognition of a $ 120 mn impairment of investment in NBH in Q2. 2020 Without the impact of this non-cash transaction, the net profit would have been $ 798 million.

Comment of Shamil Kurmashov, Vice President for Finance of NLMK Group:

“In the third quarter of 2020, business activity in the world began to gradually recover, which led to a revival of demand for steel in our traditional sales markets and an increase in prices for metal products. However, an increase in the number of new cases of COVID-19 infection in a number of regions and uncertainty over future countermeasures to the pandemic may slow down the global economic recovery.

NLMK Group demonstrated robust operating and financial results in the past quarter. Revenue increased by 3% qoq to $ 2.2 bn on the back of increased sales of metal products and an increase in the share of finished products in the sales portfolio. The EBITDA margin was 26%. Free cash flow amounted to $ 239 million, including due to effective management of working capital.

Structural effect from the projects of Strategy 2022 for 9 months. 2020 was $ 170 million to the 2019 cost base. The effect of operating efficiency programs on EBITDA amounted to $ 124 million, the effect from investment projects - $ 46 million.

Net debt /EBITDA was 0.87x, total debt decreased by 5% QoQ, and the share of short-term debt decreased due to the restructuring and prolongation of part of the credit lines.

Strong results and the current market conditions allowed the management to recommend to the Board of Directors of NLMK by the results of the third quarter of 2020 to pay $ 500 million in dividends. This amount includes a one-off dividend of $ 250 above the dividend policy to offset the Q4 dividend decline. 2019 by the decision of the Meeting of Shareholders April 24, 2020 » pdf1.34 MBNLMK_Financial_Release - Q3 2020_RUS.pdf pdf818.81 KBNLMK_Financial_statements_IFRS_9m 2020_USD_RUS.pdf xlsx522.85 KBNLMK_Financial_and_operating_data_Q3 2020.xlsx pdf2.2 MBNLMK_Presentation_IFRS_Q3_2020.pdf

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