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ALROSA Announces IFRS Results for 2018

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Moscow, 15 March 2019 – ALROSA, the world’s leader in diamond mining, announces its IFRS financial results for 2018.

Key highlights for 12M 2018

  • Revenue increased by 9% to RUB 300 bn driven by higher price index and a better sales mix, despite an 8% lower sales in carats.
  • EBITDA grew by 23% to RUB 156 bn supported by top line growth and cost control.
  • EBITDA margin expanded by 6 p.p. to 52%.
  • Net profit grew to RUB 90 bn (up 15%) on stronger profitability.
  • Free cash flow went up by 26% to RUB 92 bn following profitability expansion despite moderate capex growth.
  • Net debt to EBITDA was at 0.4x compared to 0.7x in the previous year.

Key highlights for Q4 2018

  • Revenue decreased by 12% q-o-q to RUB 61 bn, mainly due to sales mix change with increased sales of industrial diamonds. A 1% y-o-y growth was due to increase in average selling price offsetting lower sales in carats.
  • EBITDA in Q4 declined by 33% q-o-q to RUB 27 bn as revenue declined. On a y-o-y basis, EBITDA remained unchanged.
  • EBITDA margin in Q4 remained flat at 44%.
  • Free cash flow (FCF) decreased to RUB 14.3 bn (down 11% q-o-q) as operating cash flow was 14% down q-o-q, while capex was down 20% q-o-q. On a y-o-y basis, FCF grew by 22% due to a 18% drop in capex, and 6% growth in operating cash flow.
  • Net profit in Q4 declined to RUB 8 bn (down 67% q-o-q) due to a weaker EBITDA. A 53% reduction y-o-y was attributable to the recognition of income from the SOGAZ insurance reimbursement as other operating income for 2017, with the said reimbursement paid in full in 2018.
RUB bn Q4 2018 Q3 2018 q-o-q Q4 2017 y-o-y 2018 2017 y-o-y
Diamond sales, million carats, incl. 9.0 6.7 34% 9.4 (5%) 38.1 41.2 (8%)
gem-quality 5.3 4.7 12% 6.2 (15%) 26.4 30.1 (12%)
industrial 3.7 2.0 87% 3.3 12% 11.7 11.1 5%
Revenue 61.4 70.1 (12%) 61.0 1% 299.7 275.4 9%
EBITDA[1] 26.9 40.0 (33%) 27.0 156.2 126.9 23%
EBITDA margin 44% 57% 44% 52% 46%
Net profit 7.9 24.3 (67%) 16.8 (52%) 90.4 78.6 15%
Free cash flow[2] 14.3 16.0 (11%) 11.7 22% 92.3 73.5 26%
Net debt[3] 67.4 36.6 84% 86.0 (22%) 67.4 86.0 22%
Net debt / EBITDA 0.4x 0.2х 0.7x 0.4x 0.7x

Alexey Philippovskiy, ALROSA’s Deputy CEO, commented on the results:

“In 2018, the Company continued to consistently improve its financial position: revenue grew by 9% to RUB 300 bn, while margins expanded by 6 p.p. to 52%, almost 2x higher than the industry average. EBITDA grew by 23% to RUB 156 bn in 2018.

The key financial drivers included improved market environment (recovery in prices and stronger demand for diamond jewellery in major markets) and management efforts to boost efficiency.

The rise in operating cash flow and moderate capex allowed us to increase our free cash flow by 26% to RUB 92 bn.

In 2018, ALROSA took an active approach to the debt portfolio management bringing down its total debt by 5% and interest expenses by 39%. As a result, the Company’s leverage slimmed down to an all-time low, with the net debt / EBITDA ratio now standing at 0.4x compared to 0.7x in the previous year.

International rating agencies have acknowledged strong credit quality and unique assets of the Company, with its credit rating upgraded to investment grade by S&P and Moody’s over the recent 12 months.

Significant free cash flow, low leverage and conservative investment strategy enable the Company to grow dividend payments. The 6M 2018 dividends amounted to ca. RUB 43.7 bn, while the total dividend payments for 2018 stood at RUB 80.7 bn, up 23% compared to 2017.”

[1]EBITDA stands for earnings for the last twelve months before interest, income tax, depreciation and amortisation calculated for the past twelve months in accordance with the International Financial Reporting Standards (IFRS).

[2]FCF (free cash flow) is the operating cash flow net of investments (capital expenditure) in the core business in accordance with the IFRS.

[3]Net debt is the amount of debt less cash and cash equivalents at each reporting date in accordance with the IFRS.

Courtesy: Press Release

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