NLMK Group Announces Q1 2013 RAS Financial Results
OREANDA-NEWS. Note: Russian accounting standards (RAS) results differ materially from US GAAP results and are not comparable to financial statements prepared in accordance with US GAAP. Reference should be made only to consolidated financial statements prepared in accordance with US GAAP for information with respect to NLMK Group’s financial condition and results of operations to be published in May 2013.
Q1 revenue declined 2.6% due to a marginal decrease in steel product sales. An additional factor contributing to the decline were lower average steel prices negatively impacted by a softer USD/RUB FX rate for export sales nominated in US currency.
Gross profit went down by 19% as top line remained under pressure while costs remained stable impacted by seasonal repair and maintenance works and the growth in iron ore prices. The bulk of iron ore supplies (over 80%) were delivered by NLMK’s subsidiary, Stoilensky.
Net loss resulted from the contraction in operating profit. A significant decline in net profit was mainly due to an effect of high base as in Q4 2012 Novolipetsk received dividend payments from its subsidiaries.
In Q2, we expect an improvement in operating results largely driven by the seasonal improvement in steel demand in the domestic market.
A 5% growth in revenue was attributable to higher sales volumes as Q4 2012 export sales were recognized with a delay.
As market conditions continued to remain challenging, the decrease in transformer steel prices outpaced that of HRC costs, a key substrate for transformer steel manufacturing, leading to a growth in operating loss in Q1 2013.
A sequential decline in revenue of 4% was caused by lower sales of iron ore concentrate and sinter ore.
Operating profit went up by 4% driven by a decrease in production costs due to lower expenses related to scheduled maintenance.
Operational results as well as FX rate differences had a positive effect on the net profit.
Q1 revenue went up by almost 10% qoq, mainly due to increased sales to Novolipetsk.
Gross profit and operating profit grew by 13% and 33%, respectively, due to a lower level of provisions in Q1 compared to Q4. On a year-on-year basis, operating results decreased as the selling price/input cost spread narrowed.
Q1 2013 revenue remained almost flat qoq (-0.4%), as the seasonal decline in long steel prices was offset by the increase in steel product sales.
Gross profit and operating profit were down by 30% and 63%, respectively, impacted by the seasonal margin squeeze between selling prices and input costs (ferrous scrap).
The company’s net loss is still attributable to its high debt level. Bad debt provision served as an additional factor negatively impacting financial results*. Net profit in the previous period was mainly attributable to the recovery of bad debt allowance.
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