News about Russia´s nickel market development under Sanctions:
Norilsk Nickel's EBITDA for the first half of 2022 was $4.8 billion, which is 16% lower than a year ago.
The decrease in the indicator was due to the increase in the cost price, which is due to the increase in personnel costs and the increase in the mineral extraction tax. EBITDA margin was 53% compared to 64% a year earlier.
The impact of higher non-ferrous metal prices and the increase in production volume caused by the removal of the consequences of the accidents at the Oktjabrsky and Taimyrsky mines and the Norilsk processing plant will be offset by the fall in the price of palladium and the fall in sales volumes due to disruptions in logistics chains in 2022 and the sale of scrap metals in 2021, the company explained.
The amount of capital investments in the first half of the year increased by 83% to 1.8 billion dollars due to the planned increase in investments in key environmental and mining and metallurgical projects and capitalized repairs.
"The introduction of voluntary restrictions on several foreign suppliers of spare parts, materials, equipment and technologies has created new challenges for Norilsk Nickel to implement the strategic investment program. We are doing everything to mitigate the impact of such restrictions on the implementation of our long-term plans, while we see the risk that some of these plans will not be implemented in advance," commented the company's CEO, Vladimir Potanin.
"Our main focus has shifted to developing new logistics routes and finding new suppliers of spare parts and equipment to maintain stable operations and minimize negative impacts on our staff and key stakeholders," he added.
"The restrictive economic measures introduced by several countries against Russia pose risks to the company's production, sales and investment activities. To minimize them, Norilsk Nickel has developed appropriate measures and organized work to replace the import of necessary goods and services with alternative suppliers," the company emphasized.
Free cash flow in the first half of the year fell 25% year-over-year to $1.1 billion, primarily due to lower EBITDA, increased working capital and increased capital expenditures.
Net working capital increased to $3.8 billion, which was mainly due to a significant strengthening of the ruble, an increase in inventories of steel products, materials and spare parts, as well as write-offs of customer prepayments and a decrease in factoring services, the company stated.
Norilsk Nickel's net debt increased 2x to $10.2 billion due to a reduction in free cash flow and 2021 dividend payments totaling approximately $6.2 billion.
At the same time, the ratio of net debt to EBITDA on June 30, 2022 was 1.1x. The company continues to meet its debt obligations in full, assured Norilsk Nickel.
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