ALROSA Group’s Q2 and 6M 2020 IFRS results

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MDA Q2&6M 2020 Release
MDA Q2&6M 2020 Presentation
IFRS Q2&6M 2020 Consolidated statement
IFRS Q2&6M 2020 Consolidated statement_EXCEL

Moscow, 14 August 2020 – ALROSA, a global leader in diamond mining, announces its IFRS results for Q2 and 6M 2020

RUB bn

Q2
2020

Q1
2020

q-o-q

Q2
2019

y-o-y

2020

2019

y-o-y

Diamond sales, m ct, incl.

0.6

9.4

(93%)

8.3

(92%)

10.1

18.9

(47%)

gem-quality

0.4

7.1

(95%)

6.0

(94%)

7.4

13.9

(47%)

industrial

0.3

2.4

(88%)

2.3

(88%)

2.6

5.0

(47%)

Revenue

10.4

62.7

(83%)

57.4

(82%)

73.1

127.9

(43%)

EBITDA

0.1

30.0

(100%)

25.1

(100%)

30.1

56.5

(47%)

EBITDA margin

1%

48%

(47 pp)

44%

(43 pp)

41%

44%

(3 pp)

Net profit

0.3

3.1

(85%)

13.4

(98%)

3.3

37.5

(91%)

Free cash flow2

(30.2)

21.8

2.4

(8.3)

28.3

Net debt3

100.6

77.4

30%

35.4

2.8х

100.6

35.4

2.8х

Net debt / LTM EBITDA

1.2х

0.7x

                   –

0.3x

                   –

1.2х

0.3x

                 –

Alexey Philippovskiy, ALROSA’s CFO:

“In Q2 2020, consumption of jewelry in the key markets significantly declined as a result of the steps taken by a number of countries to contain the spread of the COVID-19. Both retailers and diamond cutters and polishers had sufficient stocks accumulated previously to meet the decreased demand.  Taking that into account, the key mining companies, including ALROSA, decided to support their customers by allowing them not to purchase volumes under effective contracts so that they can work down their previously accumulated stocks.  This decision helped to avoid market overstocking that would have only aggravated the situation and delayed the industry’s recovery. Due to that, our performance in Q2 was low as expected – proceeds from diamonds’ sales in this period amounted to $87 m.

The retail sector is already showing signs of recovery – in June, demand for jewelry in the US rose 1.9% y-o-y, and the consumer activity in China increased too. We are also seeing the first signs of growth in diamond imports to India as exports of polished diamonds recover. For now, this growth has been met by existing diamonds’ stocks at the mid-stream cutters, but we believe that the cutters’ purchasing activity will start to recover in September ahead of the seasonal growth in demand for polished diamonds in November–January. Obviously, if this scenario materialises, the demand will still be “cautious” anyway. Besides, we cannot rule out the possibility of the “second wave” of the virus, which can tame the nascent recovery.

The Company continues to take all necessary measures aimed at combating the pandemic and its consequences.  To ensure employee safety, enhanced sanitary safety measures have been implemented at all of the Company's facilities, our administrative personnel continue to work remotely, and employees are being tested for COVID-19. We continue to support healthcare facilities located in the regions of Yakutia where the Company operates. By now, we have spent over RUB 0.5 bn on COVID-19 response and prevention measures.

In terms of operating activities, we take a number of anti-crisis steps, including decrease of production, cost optimisation, as well as revision of the Company's capex programme.  These measures helped us contain the free cash flow losses in 6M 2020 at minus RUB 8 bn, despite almost zero sales in Q2. At the same time, we were active at the debt capital markets in Q2, and created a $1.7 bn liquidity cushion by the end of June, providing the Company with a stable basis for operations as well as the capabilities to meet debt and other liabilities.  As a result, we managed to keep the leverage below the critical levels at 1.2x Net debt / EBITDA.

Let me remind you that on 25 June, ALROSA's shareholders decided to distribute RUB 19.4 bn as dividends for H2 2019, i.e. 100% of free cash flow for the period, which is the maximum level allowed by the dividend policy. As regards dividends for H1 2020, taking into account the negative free cash flow for the first half of the year at RUB 8.3 bn, there are no conditions for interim dividend payment, according to the dividend policy”.

 


1 EBITDA stands for the Group’s earnings or loss for the period adjusted for income tax expenses, financial income and expenses, share of net profit of associates and joint ventures, depreciation and amortisation, impairment and disposals of property, plant and equipment, gain or loss on disposal of joint ventures, revaluation of investments, and one-off items.

2FCF (free cash flow) is the operating cash flow calculated in accordance with the International Financial Reporting Standards (IFRS), net of capital expenditure (posted as Purchase of Property, Plant and Equipment on the consolidated IFRS statement of cash flows).

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

This page was last updated on 14 August 2020 at 11.03