NLMK posts FY 2009 net profit of $215 million

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Russian steel giant, Novolipetsk Steel or NLMK, has posted a FY 2009 net profit of $215 million under US GAAP.

The bottom line is down 91% year-on-year from a FY 2008 net profit of $2.279, with FY 2009 EBITDA falling 68% year on year to $1.444 billion, as FY 2009 Revenues fell 48% to $6.140 billion.

The year, however, ended strongly with 4Q 2009, net profit rising 80% quarter on quarter to $294 million, 4Q EBITDA rising 9% quarter on quarter to $528 million, on the back of a 4% increase in 4Q sales to $1.815 billion.

Galina Aglyamova, NLMK CFO, said the company was able to come out of 2009 in a strong position on the market due to low production costs and further cost cutting measures, despite a 5%net debt increased to $796 million.

“Our sustainable low production cost base coupled with cost reduction initiatives and timely increase of capacity utilization allowed the Group to maintain its strong market position and even increase production volumes in the challenging market environment. In Q4 2009 we improved our EBITDA margin to 29%. For FY 2009 the margin was 24%. NLMK is still one of the most profitable steelmakers in the world. Last year our efforts were constantly directed towards cutting costs, maintaining the market position and increasing sales. At the same time, we managed to maintain a significant level of investments. Therefore, we haven’t interrupted our organic development which has proved its efficiency. We took advantage of favorable financial market conditions in the second half of 2009 to optimize our debt structure and halve the share of expensive short term debt. The average interest rate was also reduced. The Group maintains a low level of debt with comfortable maturity schedule and strong liquidity position. Debt ratios are in line with covenants, providing us a sustainable safety margin. Our solid liquidity position allows us to continue the development of the Company.”

Aglyamova had a postivie outlook for 2010 due to an increase in demand in developing markets as well as other factors.

“In 2010 apparent world steel consumption is expected to grow 10% year‐on‐year to around 1.2 billion tonnes. This increase is associated with continued growth in developing markets and the beginning of restocking in OECD countries. Growing prices for raw material will also drive steel price increases. According to our preliminary estimates, NLMK Group’s steel production will grow by around 10% in 2010 to 11.6 million tonnes. We believe that the stabilization of the domestic market will allow increasing our local sales. We expect higher returns from high value added product sales, supported by increasing coated steel capacities and stabilization of demand in the transformer steel market. We believe the steel prices may increase by 15‐25% year‐on‐year. In 2010 our investments are expected to go up by 50% year‐on‐year. Our plans for Q1 2010 production volumes remain unchanged at around 2.8 million tonnes of steel. Q1 2010 EBITDA margin is expected to be around 20‐25%.”