ALROSA Q2 and 6M 2018 IFRS results

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MDA Q2 / 6M 2018 Release
MDA Q2 / 6M 2018 Presentation
IFRS Consolidated Statements for Q2 / 6M 2018
IFRS Consolidated Statements for Q2 / 6M 2018_excel

Moscow, 24 August 2018 – ALROSA, the world leader in diamond mining, announces an increase in its EBITDA by 10% y-o-y in Q2 2018 and by 22% in 6M 2018.

Key highlights for 6M 2018
• Revenue increased by 8%, to RUB 168 bn, on the back of higher average diamond selling prices and better sales mix, despite the 8% drop in sales in carats, including sales of gem-quality diamonds shrinking by 14%.
• EBITDA grew by 22%, to RUB 89.1 bn, supported by higher top line and lower production costs.
• EBITDA margin exoanded by 6 p.p. to 53%.
• 6M net profit grew by 19% to RUB 58.3 bln on stronger EBITDA.
• Free cash flow (FCF) grew by 23% on profitbaility expansion while investments remained broadly flat (+RUB 0.6 bn). Additional driver for FCF growth was the working capital release of RUB 6.6 bn due to sales from inventory.
• Dividends: Supervisory Board recommended that the shareholders approve the 6M 2018 dividends of at least RUB 5.93 per share. The General Meeting of Shareholders to discuss the matter is tentatively scheduled for 30 September.

Key highlights in Q2 2018
• Revenue decreased by 25% q-o-q, to RUB 72 bn, mainly due to the drop in sales (-32% q-o-q as a result of the high base effect of Q1 2018), while the 2% growth y-o-y was driven by higher average selling prices, with sales down by 11% y-o-y.
• EBITDA in Q2 declined by 13% q-o-q on the back of a 32% drop in sales in carats, which was partially offset, among other factors, by an improved sales mix. A 10% growth y-o-y results from lower costs and better prices.
• EBITDA margin in Q2 grew by 7 p.p. to 57%.
• Net profit in Q2 went down to RUB 25.4 bn (-23% q-o-q) reflecting the lower EBITDA. Net profit remained almost flat compared to Q2 2017 (+1% y-o-y).
• Free cash flow decreased to RUB 20.9 bn (-49% q-o-q) due to the lower revenue and the seasonal growth in investments to RUB 7.2 bn (+48% q-o-q). Working capital buildup was RUB 6 bn as the Company started seasonal stocking up on supplies for the winter period. The increased operating cash flow drove the FCF 33% up y-o-y.
• Net debt fell to RUB 6 bn (-68% q-o-q, -83% y-o-y) as company continued to generate positive FCF.
• Net debt to EBITDA was at 0.04x vs. 0.13x in Q1 2018.
Outlook: our guidance for 2018 sales remains unchanged at 39–40 million carats.

ALROSA’s CEO Sergey Ivanov commented on the results:
“The Company delivered strong financial results, reaffirming its industry leadership both in profitability and market share. In the firs six months of 2018, higher diamond prices and stringent cost control along with softer rouble drove our EBITDA margin up to 53%. Free cash flow expanded by 23% to RUB 62 bn.

ALROSA maintained its strategic focus on core assets. In early 2018, we disposed non-core gas assets at an auction for RUB 30.3 bn, with the proceeds used to bring down the Company’s debt. As at the end of June 2018, our net debt-to-EBITDA ratio was one of the lowest in the industry at 0.04x. In July 2018, S&P, a global credit rating agency, upgraded ALROSA’s credit rating to an investment-grade level.

The Company’s ability to generate free cash flow enables us not only to bring our leverage down, but also to share cash with our shareholders in the form of dividends. In August, the Supervisory Board approved a new dividend policy with allows to pay dividends of up to 100% of free cash flow twice a year depending on the Company’s leverage.”

Financial results

1 EBITDA stands for earnings for the last 12 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.

Contacts for investors:                      ALROSA Press Centre:

E-mail: ir@alrosa.ru                              E-mail: smi@alrosa.ru
Phone: +7 495 745 5872                     T: +7 495 620 9250, ext. 1426
Sergey Takhiev, Corporate Finance
E-mail: st@alrosa.ru
Mobile: +7 985 760 5574

Please find details for conference call on 28 August here.

This page was last updated on 24 August 2018 at 12.35