Public Joint Stock Company Mining and Metallurgical Company Norilsk Nickel (GMKN) H1 2024 earnings summary

Executive summary

• Revenue for 1H 2024 was $5.6bn, a 22% decrease year-over-year, mainly due to lower realized prices for palladium, nickel, and rhodium, and logistics disruptions, particularly in the Red Sea.

• EBITDA fell 30% to $2.3bn, with the margin dropping to 42% (down 5 p.p. year-over-year), impacted by lower revenue, ruble depreciation, and new export duties.

• Free cash flow adjusted was negative at $(0.2)bn, compared to $0.4bn in 1H 2023, due to lower EBITDA, higher net working capital, and increased interest paid.

• Net debt increased 24% year-to-date to $10.1bn, with a net debt/EBITDA ratio of 1.7x.

• Net profit decreased 23% year-over-year to $829 million.

Financial highlights

• Net working capital rose 20% to $3.7bn, driven by metal stock accumulation and increased accounts receivable from cross-border payment difficulties.

• Cash operating costs decreased 9% to $2.4bn, with adjusted cost growth below Russian inflation and rouble depreciation.

• Capex was $1.0bn, down 34% year-over-year, reflecting project execution efficiency, rouble depreciation, and payment optimization.

• Finance costs increased 28% year-over-year to $381 million, driven by higher interest rates and RUB-denominated debt.

• Income tax expense rose by $115 million, with an effective tax rate of 27.2%.

Outlook and guidance

• 2024 production guidance expects a slight reduction in finished product output due to scheduled repairs at the Nadezhda Metallurgical Plant.

• Nickel market expected to remain in surplus near-term but rebalance as high-cost producers cut output; long-term outlook positive.

• Copper market seen as cautiously positive mid-term, with global demand projected to grow 4% in 2024 and 3% in 2025.

• Palladium market expected to remain in deficit in 2024, with demand falling slightly and supply stagnating.

• Platinum market forecast to be balanced in 2024, with stable demand and marginal supply decline.