In Q3 NLMK revenue increased by 19% QoQ to $2.2 billion, driven by a 7% QoQ growth in sales to 4.2 million tons.
EBITDA increased by 46% QoQ to $673 million; EBITDA margin reached 30% (+5% QoQ), including 18% for NLMK’s international companies. Net income doubled QoQ to $385 million. Net debt / EBITDA decreased to 0.4х.
Sales increased by 7% QoQ to 4.2 million tons (+2% YoY); with the share of finished products of 66% of total sales (+1% QoQ and –2% YoY).
Revenue grew to $2,225 million (+19% QoQ and +10% YoY), driven by the increase in sales and prices for steel products.
EBITDA increased by 46% QoQ to $673 million (+32% YoY). EBITDA margin expanded to 30% (+5% QoQ and +5% YoY). Net income doubled QoQ to $385 million (-6% YoY). Capex decreased to $104 million (-35% QoQ and -29% YoY). Free cash flow increased to $474 million (a threefold increase QoQ and +28% YoY).
In January-September the group sales increased by 2% YoY to 12.3 million tons. Revenue totaled $5,671 million (-11% YoY) due to the drop in average prices for steel products. EBITDA was $1,423 million (-13% YoY). EBITDA margin was 25% (-1% YoY). Capex decreased to $384 million (-14% YoY). Free cash flow was $906 million (+2% YoY). Operational efficiency gains – $48 million. Net debt fell to $0.7 billion (-37% vs. end of 2015).
Q4 results will soften sequentially into a low season but profitability is expected to improve on YoY basis.
NLMK Group CFO Grigory Fedorishin: “In Q3 NLMK revenue grew by 19% QoQ to $2.2 billion, driven by the increase in deliveries and the increase in average sales prices; and improvements to the structure of sales. The group’s local markets, Russia, the EU, and the US, accounted for approximately 66% of steel product sales. The increase in the revenue, coupled with operational efficiency gains, supported a 46% QoQ increase in EBITDA to $673 million. Group’s EBITDA margin gained 5% QoQ to 30%, hitting its highest since Q2 2010. NLMK Group’s international companies in the US and Europe posted a Q3 EBITDA margin of 18% on the back of improved market conditions, hitting a peak since 2008. Gains from operational efficiency programs (projects not requiring capex), rolled out across all group sites, totaling $48 million for 9M 2016 vs. 2015. In November Stoilensky is planning to receive the first output of pellets at its new pelletizing plant, the latter covering 100% of the group’s iron ore pellet needs. This will enable the company to achieve a reduction in steel production costs, consolidating its position as one of the most cost-efficient manufacturers in the world. The increase in operating cash flow (+76% QoQ) supported a threefold increase in free cash flow QoQ to $474 million; and a 37% decrease in net debt vs. the beginning of 2016 to $0.7 billion. Net debt to EBITDA was 0.4х. Q3 dividends will be recommended at a meeting of NLMK’s Board of Directors on November 17”. (NLMK/Ukrainian metal)