| MMC Norilsk Nickel (MNOD) PRESS RELEASE Public Joint Stock Company «Mining and Metallurgical Company «NORILSK NICKEL» (PJSC «MMC «NORILSK NICKEL», «Nornickel», the «Company», the «Group») NORNICKEL REPORTS FULL YEAR 2021 AUDITED CONSOLIDATED IFRS FINANCIAL RESULTS
Moscow, February 10, 2022 - PJSC MMC Norilsk Nickel the world's largest palladium and high-grade nickel and a major producer of platinum and copper, reports audited consolidated IFRS financial results for the full year ended December 31, 2021.
FY2021 HIGHLIGHTS
KEY CORPORATE HIGHLIGHTS
1) A non-IFRS measure, for the calculation see the notes below. 2) A non-IFRS measure, for the calculation see an analytical review document ("Data book") available in conjunction with Consolidated IFRS Financial Results on the Company's web site. 3) Paid during the current period 4) Normalized on interim dividends (at the rate of the Board of Directors meeting date) and bank deposits with maturity of more than 90 days 5) Normalized on receivables from the registrar on transfer of dividends to shareholders
MANAGEMENT DISCUSSION AND ANALYSIS The President of Nornickel, Vladimir Potanin, commented on the results, "In 2021, we had to deal with a number of new challenges. The two underground mines and Norilsk concentrator have been successfully restored to their full capacity after industrial incidents. Owing to the global economic recovery after 2020's COVID-driven recession, the demand for our products increased. In addition, the consumption of metals needed for the transition to green economy was exceptionally strong. Our company is one of the global leaders in these metals not just enjoying the world's lowest cash operating costs, but also the industry's lowest carbon footprint. In 2021, Nornickel delivered strong financial performance. Revenue was up 15% y-o-y to USD 17.9 billion driven by higher metal prices and sales of palladium from earlier accumulated stocks. EBITDA increased almost 40% to USD 10.5 billion. Free cash flow, though, was down 34% to USD 4.4 billion due mostly to the reimbursement of environmental damages in the first half of the year and substantial increase of capital investments. CAPEX increased 60% year-on-year to a record USD 2.8 billion, which was fully in line with the management guidance. We materially increased investments in modernization of equipment and other fixed assets including energy infrastructure with a focus on industrial health and safety and energy efficiency. Nornickel also continued executing on its SO2 reduction programme in Norilsk. Last year investments in this project increased 4-fold year-on-year to over USD 500 million. Our environmental strategy has started to deliver some tangible results. After the shutdown of smelting and metallurgical shops at Kola Peninsula SO2 emissions in the area decreased 78% from 2020 and by over 90% as compared to 2015, even more than what we initially planned. In Norilsk, SO2 emissions were down 14% year-on-year. After the completion of Phase 1 of the Sulfur programme that is scheduled by the end of this year, we expect that SO2 emissions in Norilsk will decrease 45% next year versus 2015.
At the same time, we are deeply concerned about the high level of fatal incidents at our operations, which we find as totally unacceptable. Regrettably, we lost 11 our employees last year. The management team has developed a new holistic programme that should help to completely eradicate fatalities and we hope will start bearing fruits soon. In 2021, the Company dramatically increased its social investments to over USD 1 billion owing mostly to provisions related to the long-term renovation of housing and social infrastructure in Norilsk until 2035".
HEALTH AND SAFETY In 2021, number of lost time injuries increased almost two times y-o-y (from 22 to 42). Regretfully, in the reported period, the number of fatal accidents increased to 11 from 9 in 2020, partly due to the group accident at Norilsk Concentrator in February that resulted in 3 casualties. All accidents have been thoroughly investigated and reported to the Board, action plans to tackle causes of each incident prepared. The management reiterates its major strategic focus of transforming Norilsk Nickel into a zero-fatality mining company adhering to the world's best safety standards. A wide range of programmes and various initiatives to prevent occupational injuries and fatalities are being rolled out and implemented. A comprehensive review of industrial safety requirements and standards is scheduled for 2022, in order to focus on the most common causes leading to fatal and serious injuries.
METAL MARKETS Nickel in 2021: series of supply curtailments in Class-1 nickel production as well as ramp-up of Indonesian NPI falling short of expectations together with exceptionally robust post-quarantine demand recovery in stainless and battery sectors and massive restocking throughout the value chain exacerbated by logistical constraints dramatically tightened the nickel market. As a result, the market recorded a material 166 kt deficit. Combined exchange stocks of LME and SHFE were down 60% to 107 kt, while the average annual price rallied 34% y-o-y to USD 18,488 per tonne reflecting an apparent deficit. At the end of February, the nickel price reached its highest level since 2014 of USD 20,000 per tonne amid optimism towards the prospects of the global economic recovery fueled by ongoing massive stimulus packages dispatched across all major economies and a shift in global spending away from services to goods. However, the Tsingshan's announcement to supply NPI-based nickel matte to Chinese battery material makers for further nickel sulphate production brought an end to the 11 months-long rally sending the LME price down to USD 16,000 per tonne. The price renewed a seven-year high of USD 20,400 per tonne in mid-September as strong market fundamentals and falling LME stocks fuelled the speculative demand. However, the Evergrande's debt crisis and widespread power curtailments in China eventually sent the price to below USD 18,000 per tonne in the end of September. The LME Week in October revealed the optimism of the market participants and triggered another price rally, which was supported by strong fundamentals, especially in the EV sector, bullish sentiments among the traders and new concerns over supply, stemming from Vale's reduced production guidance, temporary suspension of Onça Puma's FeNi operations as well as unfavourable weather conditions in the Philippines hitting the mine output in Q4. As a result, the LME nickel price closed near $21,000/t Ni in the end of December. In 2021, one of the highest-ever annual growth rates in global nickel consumption of 17% y-o-y to 2.87 million tonnes was recorded. Lower stainless steel production in China (-1% y-o-y) caused by the power shortages was more than well offset by the significant growth of Indonesian stainless output (+90% y-o-y) and recovery in other stainless-producing countries and regions, where Americas and Japan were up 17% y-o-y, EMEA, India and South Korea +14% y-o-y, and Taiwan +13% y-o-y. Rampant nickel demand in the battery sector (+73% y-o-y) benefited from exceptionally strong global BEV sales (+113% y-o-y) primarily driven by China (+158% y-o-y) followed by the USA (+95% y-o-y) and Europe (+64% y-o-y) on the back of government incentives, wider range of available EV models and overall improvement in consumer's sentiment. Other non-stainless sectors (specialty steels, standard alloys, superalloys and plating) increased their nickel consumption by 7% y-o-y driven by the end-use demand recovery and restocking across the value chain. Global nickel production increased by 7% y-o-y to 2.7 million tonnes and fell materially short of our expectations, as the commissioning of Indonesian NPI capacities was behind the schedule owing to COVID-related constraints at Tsingshan's Morowali and Delong projects. Nevertheless, Indonesian NPI production still surged 46% y-o-y adding 270 kt of new supply, which offset positively the decline in Chinese NPI output (-17% y-o-y) and lower Class 1 nickel production (-6% y-o-y) resulting from the strike at the Vale's Sudbury division and temporary suspension of some operations of Norilsk Nickel. Overall, in 2021, the nickel market went into a deficit of 166 kt (as opposed to the 2020 surplus of 82 kt), which was mainly registered in Class 1 nickel products. Moreover, 2H2021 was marked by increasing physical tightness, when significant outflows of nickel from exchange inventories were recorded, market premiums across all shapes were expanding, geographic arbitrage and steep backwardation emerged. Combined nickel inventories at LME and SHFE plunged by 60% to 107 kt by the end of 2021 from 265 kt at the end of 2020, with the notable acceleration of drawdown taking place also in 2H2021. Nickel outlook: in 2022, we expect the market to swing to a mild 42 kt surplus, mostly in low-grade nickel, while the high-grade nickel market to be balanced or even develop a small deficit. This deficit may be caused by EV uptake outperforming current expectations and stronger stainless steel output, carrying 2021's momentum well into this year. At the same time, the ramp-up of the Indonesian NPI capacities may fall short of high expectations again as the pandemic-related and operational constraints continues to take their toll. The primary nickel consumption is forecasted to increase 16% y-o-y to 3.3 million tonnes in 2022 on the back of growing global stainless output (+9% y-o-y), where strong growth is expected in Indonesia (+24% y-o-y) and China (+16% y-o-y), robust nickel demand in batteries (+30% y-o-y) and growth of other non-stainless applications (+7% y-o-y). Increase in supply is anticipated to outpace consumption growth, the Indonesian NPI supply is expected to surge again (+45% y-o-y to 1.2 million tonnes), alongside the production of nickel compounds for the EV market (+99% y-o-y to 400 kt) upon the launch of the NPI-to-matte conversion facilities and HPAL projects, while the recovery of Class 1 nickel production is expected to be quite modest (+5% y-o-y).
In the long run, nickel demand will benefit from the developing EV sector driven by government incentives all over the world. In our base-case scenario, we estimate the nickel consumption in batteries to grow to nearly 1 Mt by 2030 to a 30% of total nickel demand. We see upside risks to our base case, as carbon neutrality goals are getting more ambitious, while subsidies-driven electrification and cost optimization of the battery cell production might outperform current expectations. The battery value chain will require low carbon nickel units, which are likely to be in shortage considering the projected aggressive pace of electrification. Additionally, nickel's role as a critical metal for a low carbon economy is further enhanced by its ever-increasing usage in renewable energy. Copper in 2021: the market was fairly balanced as the copper demand was recovering on the back of the global economic rebound, while the US and China announced multi-trillion infrastructure plans. Despite some issues in copper mining, the production of refined metal increased sufficiently enough to meet the higher demand. On the back of the rising importance of the ESG agenda, governments and investors worldwide began to pay closer attention to copper intensive technologies, such as renewable energy, transport electrification and the reduction of GHG emissions, driving higher speculative demand, which resulted in a decrease in exchange stocks and price spikes. The average LME copper price in 2021 increased 51% y-o-y to USD 9,317 per tonne. Having started the year at USD 7,900 per tonne, the copper price continued its upward movement through 2021, mainly due to faster than expected global economic recovery, backed by improving market sentiment, a successful global rollout of vaccination, and new government stimulus packages. Labour unions' protests in Chile and Peru and the new scrap policy in China limited supply recovery and contributed to the upward price trend through the year. The price increased to an all-time high of USD 10,724 per tonne in May due to the US Infrastructure and Rescue plan news, declining LME stocks and increased speculative interest. In the middle of the year, China's inventory selling, strengthening US dollar, new COVID-19 Delta variant concerns pushed the price back to a USD 9,000 per tonne level. However, worries over inflation, production stoppages in Latin America, energy-related disruptions in China and declining global exchange stocks pushed the price to the second-highest mark in October 2021, followed by price stabilisation at just below USD 10,000 per tonne further towards the year-end. In 2021, copper demand grew 4% to 24.4 Mt. Europe demand increased 9% to 3.9 Mt, North America added 11% to 2.6 Mt, China - 1% up to 12.6 Mt. Global mine production increased by 2.5% to 21.5 Mt. All major producers were able to adjust to the measures against the spread of COVID-19, as well as new mines were developed in Chile and DRC. However, there were moderate mine disruptions in Chile and Peru, the main copper-producing countries. Antamina (Glencore and BHP), Las Bambas (MMG), Antapakkay (Glencore), Escondida (BHP) and many others were hit by union strikes, negatively impacting mine output. At the same time, major refined copper producers increased output by 3% to 24.6 Mt in 2021. China increased production by 7% to 10 Mt, DRC increased production by 10% to 1.5 Mt, while the US by 12% to 1 Mt. In Chile production fell by 4% to 2.2 Mt, in Japan it decreased by 3% to 1.5 Mt and in Russia by 9% to 934 kt. In 2021, the copper market was close to a balance. At the end of 2021, the surplus amounted to 128kt, or less than 1% of annual consumption, compared with a surplus of 443 kt in 2020. In 2021, exchange stocks on the LME decreased by 19 kt to 89 kt by the year-end, SHFE decreased by 48kt to 38kt, COMEX stocks decreased by 9 kt to 69 kt. Total exchange copper stocks decreased by 76 kt to 189 kt (or -28% y-o-y ) to a multi-year low level. Copper outlook: neutral in the short-term. The market is expected to be in a mild deficit of 82kt in 2022 as the global consumption will be growing on the back of further post-COVID global economic recovery and increasing investments in renewable energy and transport electrification. Although we forecast that mine production will grow in 2022, the increase of refined metal output will not be sufficient to match the demand, in our view. In spite of favourable market fundamentals, there are downside risks for copper market related to macro factors such as reduction of liquidity injection and increase of interest rates globally in 2022. In our opinion, the copper market will remain generally balanced in the near term, running a deficit of less than 1% of the global consumption (or 82 kt). In 2022, the global copper consumption is expected to grow 3% to 25.1 Mt as the major economies continue their recovery after the global pandemic and ongoing roll-out of copper-intensive clean energy technologies and decarbonization plans. In spite of elevated copper price level, the substitution with aluminum is to be very limited as aluminum price is trading also at multi-year high levels. In 2022, global mine production is expected to increase by 4% to 22.3 Mt owing to the ramp-up of new mines in DRC and Peru and also due to the expansion of existing projects. Refined copper production will grow by 2% to 25 Mt, in our assessment. In the longer run, copper demand will greatly benefit from the race for carbon-neutrality that will require massive upgrade of the backbone energy infrastructure. Currently, the number of probable copper mining projects is too small to meet the upcoming demand that might shift the market into a sizeable deficit, if no new projects are started in the next 2-3 years. Palladium in 2021: price reached its new historical high of nearly USD 3,000 per troy ounce on the back of anticipated automotive market recovery and supply concerns caused by the temporary mines and a concentrator suspension at Norilsk Nickel in the first half of the year. Chip shortage and additional supply from South Africa eased the market tightness and caused price correction closer to the end of the year. Palladium substitution with platinum in automotive catalysts was limited and did not impact the demand significantly. Early in the year, palladium was trading within the range of USD 2,300-2,500 per troy ounce, then started to rally in the middle of March, reaching its new record high of USD 2,994 per troy ounce in early May. Such a strong performance was mainly driven by the accelerating recovery of global car production after a major recession of 2020 and supply shocks. Production losses at Norilsk amplified the positive momentum as market participants worried about the potential physical tightness of the supply. However, as the expectations for the resolution of the semiconductor supply crisis were pushed back towards 2H 2022-1H 2023, automakers reduced purchases of palladium. The minimum price of the metal in 2021 was reached in December and amounted to USD 1,576 per troy ounce. The average palladium price in 2021 increased 9% y-o-y to USD 2,398 per troy ounce. In 2021, the global palladium demand grew by 4% y-o-y to 10 moz mainly on the back of the recovery of automotive consumption. Although the initial expectations for this recovery in 2021 were significantly higher, the global automotive production still increased 2% y-o-y to 76 million, which was 9% lower than the pre-COVID 2019 level. Full recovery of the auto industry is now expected in 2H2022 - 2023. Palladium supply in 2021 increased by 3% to 9.8 moz. The temporary suspension of operations in Norilsk caused a significant decrease in the Russian output. Nonetheless, the shortfall was completely positively offset by South African miners, which recovered from the COVID-related disruptions and started releasing their work-in-progress material accumulated in 2020. At the same time, recycling was subdued, as the low availability of new vehicles impacted negatively the number of old cars hitting the scrapyards. As a result, the market was in a small deficit of 0.2 moz in 2021. Palladium outlook: positive; the market is expected to run a 0.3 moz deficit in 2022; chip shortage easing, which is expected in 2H2022, should boost palladium demand by 7% y-o-y; supply to grow by 5% y-o-y mostly on the back of Nornickel returning to normal production and additional secondary supply. In 2022, we expect industrial palladium consumption to increase 6% y-o-y to 10.6 moz. The automotive industry will be the main driver of this growth as the chip shortage is expected to ease in 2H 2022. Taking into account the industry production lead time, OEMs will have to start restocking PGMs already in 1Q 2022. Offtake in other industries, such as electronics and chemical industry, will remain unchanged, in our view. Global palladium output is anticipated to increase 5% to 10.3 moz in 2022. Primary supply from South Africa and Nornickel is expected to return to normal as the work-in-progress material stocks are depleting in the former, whereas operations of the latter have already returned to full capacity. We forecast that recycling will resume its growth as new car availability to improve in 2H 2022. As a result, we expect a mild (relative to the recent history) deficit of 0.3 moz in 2022. Platinum in 2021: market remained oversupplied as refined metal production went up ahead of the demand; after reaching a 6-year high of USD 1,300 per troy ounce, the price consolidated between USD 900 and 1,100 per troy ounce as investors' interest faded. Having started to rally at the beginning of the year, platinum price reached a 6-year record high of above USD 1,300 per troy ounce in mid-February on the back of expectations of automotive market recovery and aggressive outlook for the growth of the hydrogen economy. After that, the price corrected downwards towards a range of USD 900-1,100 per troy ounce. The minimum price for 2021 of USD 911 per troy ounce was recorded in December, somewhat rebounding towards the end of the year on growing inflation fears. In 2021, the average LPPM platinum price increased 23% y-o-y to USD 1,090 per troy ounce. In 2021, the global platinum demand grew by 11% to 7.1 moz. The recovery was supported by demand revival in industrial applications (chemical, glass, petroleum) and the introduction of China VI emission legislation, driving up platinum consumption in heavy-duty vehicles. Jewellery demand increased by 8%. At the same time, platinum consumption in Europe was impacted negatively by falling diesel share. In 2021, the global platinum supply increased by 22% to 8.1 moz, predominantly due to the release of work-in-progress materials and strong primary production growth in South Africa. As a result, the platinum market was in surplus of 0.9 moz. Platinum outlook: neutral; the recovery in automotive, jewellery and other industries will lag behind the supply expansion, moving the market to a 1 moz surplus in 2022. In 2022, we forecast that platinum demand (excl. investments) will be flat at 7.5 moz, as automotive industry recovery due to semiconductor supply chains disruption easing will be offset negatively by a decrease of diesel vehicles market share. Demand in other industrial applications is expected to contract in 2022, due to the high base of the previous year. Jewellery and investment demand is not expected to grow significantly, although it can be supported by inflation expectations. Global platinum output is anticipated to increase by 1% to 8.2 moz in 2022. Most of the previously accumulated stocks in South Africa were already processed in 2021. However, additional ounces will come from Russia and secondary sources. According to our assessment, palladium substitution with platinum, albeit being actively communicated to the public by some industry participants, has not been widely implemented yet. We consider this as a long-term opportunity for platinum.
KEY SEGMENTAL HIGHLIGHTS1
1) Segments are defined in the consolidated financial statements
In August 2020, in order to improve management efficiency it was decided to establish Norilsk, Kola and Trans-Baikal divisions. Norilsk division includes GMK Group, South Cluster and a number of companies from "Other non-metallurgical segment". Kola division includes KGMK Group and NN Harjavalta, as well as a number of companies from "Other non-metallurgical segment". Trans-Baikal division includes the GRK Bystrinskoye segment, as well as a number of companies from "Other mining" and "Other non-metallurgical" segments. In 2021, revenue of GMK Group segment decreased 7% to USD 11,836 million primarily due to the decrease of revenue from selling matte to Kola MMC as well as lower copper sales volumes due to the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator, that was partly offset positively by higher realized metal prices. Revenue of South cluster segment increased 11% to USD 767 million primarily driven by higher realized prices of semi-products delivered to GMK Group that was partly negatively offset by lower sales volumes due to the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. Revenue of KGMK Group segment increased 11% to USD 9,893 million primarily owing to higher realized metal prices, that was partly negatively offset by lower sales volumes due to the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. Revenue of NN Harjavalta increased 14% to USD 1,493 million driven by higher realized metal prices, that was partly offset negatively by lower sales volumes due to the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. Revenue of GRK Bystrinskoye segment increased 34% to USD 1,346 million primarily driven by higher copper and iron prices. Revenue of Other mining segment decreased 80% to USD 28 million owing to lower sales volumes of semi-products following the termination of Nkomati's operations in 1H2021. Revenue of Other non-metallurgical segment increased 11% to USD 1,533 million primarily due to increase in revenue from other sales, that was partly offset negatively by lower sales volumes of semi-products following the termination of Nkomati's operations in 1H2021. In 2021, EBITDA of GMK Group segment decreased 12% to USD 5,456 million primarily owing to lower revenue, as well as higher social expenses and higher cash operating costs due to higher mineral extraction tax and temporarily re-introduced export duties, which were partly positively offset by the lower expenses on environmental provisions. EBITDA of South cluster segment decreased 2% to USD 397 million due to the increase in mineral extraction tax in 2021, which was partly positively offset by higher revenue. EBITDA of KGMK Group segment increased 2 times to USD 3,758 million primarily owing to higher revenue and higher margin on matte processing, following the revision of a purchase price formula, that was partly negatively offset by temporary re-introduced export duties. EBITDA of NN Harjavalta decreased 16% to USD 59 million owing to lower sales volumes due to the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. EBITDA of GRK Bystrinskoye segment increased 50% to USD 1,076 million primarily due to higher revenue. EBITDA of Other mining segment decreased by USD 2 million to a negative USD 16 million. EBITDA of Other non-metallurgical segment decreased by USD 20 million and amounted to USD 11 million. EBITDA of Unallocated segment decreased by USD 13 million and amounted to a negative USD 945 million.
1) All information is reported on the 100% basis, excluding sales of refined metals purchased from third parties and semi-products purchased from Nkomati. 2) Metal volumes represent metals contained in semi-products. 3) Includes metals and semi-products purchased from third parties and Nkomati.
Nickel Nickel sales accounted for 21% of the Group's total metal revenue in 2021. In 2021, nickel revenue increased 15% (or +USD 483 million) to USD 3,627 million. The increase was primarily driven by higher realized nickel price (+USD 958 million), which was partially offset negatively by lower sales volume (-USD 478 million). The average realized price of refined nickel increased 33% from USD 13,916 per tonne in 2020 to USD 18,528 per tonne in 2021. Sales volume of refined nickel produced from the Company's own Russian feed, decreased 12% (or -24 thousand tonnes) to 174 thousand tonnes owing the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. Sales volume of refined nickel produced from third-party feed remained unchanged at 3 thousand tonnes. In 2021, sales of nickel in semi-products increased 1% to USD 345 million primarily due to an increase in the sales volume of semi-products following the shut down of a smelter at Kola MMC, which was almost fully negatively offset by lower sales volume of semi-products produced by Nkomati. In 2021, revenue from the resale of nickel purchased from third parties amounted to USD 3 million. Copper In 2021, copper sales accounted for 22% of the Group's total metal sales, increasing 1 p.p y-o-y. Copper revenue increased 23% (or +USD 711 million) to USD 3,789 million. The increase was primarily driven by higher realized copper price (+USD 1,528 million), which was partly offset negatively by lower sales volume (-USD 1,122 million). The average realized price of refined copper increased 50% from USD 6,221 per tonne in 2020 to USD 9,322 per tonne in 2021. Physical volume of refined copper sales from the Company's own Russian feed decreased 28% (or -119 thousand tonnes) to 308 thousand tonnes primarily driven by the temporary suspension of operations at Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. Revenue from copper in semi-products in 2021 increased 43% to USD 607 million driven by higher copper price. In 2021, revenue from the resale of copper purchased from third parties amounted to USD 305 million. Palladium In 2021, palladium accounted for 39% of the Group's total metal revenue, down by 3 p.p. y-o-y. Palladium revenue increased 5% (or +USD 300 million) to USD 6,665 million due to higher realized price (+USD 544 million) and increase in sales volume (+USD 56 million). The average realized price of refined palladium increased 10% from USD 2,176 per troy ounce in 2020 to USD 2,388 per troy ounce in 2021. Physical volume of refined palladium sales from the Company's own Russian feed increased 2% (or +52 thousand troy ounces) to 2,656 thousand troy ounces in 2021. The increase in sales volume was driven by the sale of metal from the stock accumulated in 2020, that more than offset by the negative impact from the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. Revenue of palladium in semi-products decreased 53% to USD 69 million in 2021 primarily due to lower sales volume of semi-products produced by Nkomati. In 2021, revenue from the resale of palladium purchased from third parties amounted to USD 253 million (vs USD 553 million in 2020). Platinum In 2021, platinum sales increased 10% (or +USD 63 million) to USD 685 million. Platinum remained unchanged at 4% of the Group's total metal revenue. The increase in realized platinum price (+USD 141 million) was partly negatively offset by the decline in sales volume (-USD 78 million). Physical volume of refined platinum sales from the Company's own Russian feed decreased 9% (or -63 thousand troy ounces) to 621 thousand troy ounces in 2021 due to the negative impact from the temporary suspension of Oktyabrsky and Taimyrsky mines and Norilsk Concentrator. Revenue of platinum in semi-products in 2021 decreased 47% to USD 10 million primarily due to lower sales volume of semi-products produced by Nkomati. Rhodium In 2021, revenue from rhodium increased 55% (or +USD 374 million) due to the higher realized price. Revenue from the resale of rhodium purchased from third parties amounted to USD 14 million in 2021. Gold In 2021, revenue from gold declined 3% (or -USD 22 million) primarily due to lower realized volume of semi-products produced by Bystrinsky project. Other metals In 2021, revenue from other metals increased 53% (or +USD 217 million) to USD 627 million primarily driven by higher revenue from iron ore concentrate on the back of higher realized price.
OTHER SALES In 2021, other sales increased 32% (or +USD 181 million) to USD 749 million primarily due to an increase of air transportation services following the lift of travel restrictions related to the COVID-19 pandemic and higher oil products sales.
COST OF SALES Cost of metal sales In 2021, the cost of metal sales increased 12% (or +USD 557 million) to USD 5,057 million, driven by the following factors:
Cash operating costs In 2021, total cash operating costs increased 25% (or +USD 988 million) to USD 4,874 million mainly due to the introduction of temporary Nickel and Copper export custom duties in 2H2021 Inflationary growth of cash operating costs (+USD 159 million) was partly positively offset by Russian rouble depreciation against USD (-USD 40 million).
Labour In 2021, labour costs increased 8% (or USD +99 million) to USD 1,406 million amounting to 29% of the Group's total cash operating costs driven by the following factors:
Materials and supplies In 2021, expenses for materials and supplies decreased 2% (or USD 16 million) to USD 715 million driven by the following factors:
Mineral extraction tax and other levies In 2021, mineral extraction tax and other levies increased 3 times (or USD 379 million) to USD 627 million driven by the following factors:
Purchases of refined metals for resale In 2021, purchases of refined metals for resale increased 21% (or USD 99 million) to USD 581 million owing to the purchases of copper in order to cover production losses caused by the temporary suspension of two mines and the Norilsk Concentrator, which was partly offset negatively by lower purchases of palladium. Export custom duties In 2021, export custom duties amounted to USD 442 million due to introduction of temporary Nickel and Copper export custom duties by the Government of the Russian Federation, which were effective from August until December 2021. Third-party services In 2021, cost of third-party services increased 49% (or USD 134 million) to USD 410 million mainly driven by:
Transportation expenses In 2021, transportation expenses increased 44% (or USD 40 million) to
Fuel In 2021, fuel expenses increased 12% (or USD 13 million) to USD 122 million driven by the following factors:
Electricity and heat energy In 2021, electricity and heat energy expenses decreased 22% (or USD 33 million) to USD 118 million driven by the following:
Purchases of raw materials and semi-products In 2021, purchases of raw materials and semi-products decreased 68% (or USD 203 million) to USD 95 million due to cessation of third-party copper concentrate consumption and termination of Nkomati's operations.
Sundry costs In 2021, sundry costs increased 18% (or +USD 34 million) to USD 228 million mostly due to increase in clean-up expenses in Norilsk industrial region and also due to price inflation and growth of security and industrial safety expenses. Depreciation and amortisation In 2021, depreciation and amortisation expenses were unchanged compared to 2020 and amounted to USD 843 million. Increase in metal inventories Сomparative effect of change in metal inventory amounted to -USD 429 million resulting in a respective decrease of cost of metal sales primarily due to increase in the cost of work in progress and finished goods following the changes in legislation in 2021 (increase in MET and introduction of temporary export custom duties).
COST OF OTHER SALES In 2021, cost of other sales increased by USD 189 million to USD 753 million primarily due to increase of air transportation services following the lift of restrictions related to the COVID-19 pandemic and higher oil products sales.
SELLING AND DISTRIBUTION EXPENSES
In 2021, selling and distribution expenses increased 10% (or +USD 17 million) to USD 184 million primarily due to increase in transportation expenses (+USD 9 million).
GENERAL AND ADMINISTRATIVE EXPENSES
In 2021, general and administrative expenses increased 14% (or USD 120 million) to USD 989 million. Positive effect of the Russian rouble depreciation amounted to -USD 16 million. Changes of the general and administrative expenses in real terms were primarily driven by the following factors:
OTHER OPERATING EXPENSES, net
In 2021, other operating expenses, net decreased by USD 1,452 million to USD 1,285 million driven by the following factors:
FINANCE COSTS, NET
In 2021, finance costs, net declined 68% y-o-y to USD 279 million primarily driven by the following factors:
INCOME TAX EXPENSE In 2021, income tax expense increased by USD 1 366 million driven mostly by the increase of profit before tax. The effective income tax rate in 2021 of 24.9% was above the Russian statutory tax rate of 20%, which was primarily driven by the income tax provision related to the compensation of environmental damages as well as recognition of non-deductible social expenses. The breakdown of the income tax expense:
EBITDA
In 2021, EBITDА increased 37% (or +USD 2,861 million) to a USD 10,512 million primarily due to higher revenue.
STATEMENT OF CASH FLOWS
In 2021, free cash flow decreased 34% to USD 4.4 billion following the decrease of cash generated from operating activities and increase in cash used in investing activities. In 2021, net cash generated from operating activities decreased 15% to USD 7.0 billion. Settlement of environmental obligations and increase in income tax payments were partly positively offset by higher metal revenue. In 2021, net cash used in investing activities increased 60% to USD 2.6 billion primarily driven by a 57% capital expenditures increase to USD 2.8 billion. Reconciliation of the net working capital changes between the balance sheet and cash flow statement is presented below.
Capital investments breakdown by project is presented below:
In 2021, CAPEX increased 57% (or USD 1,004 million) to a record USD 2,764 million driven by growth of investments in key strategic projects. Sulfur Programme that entered its active phase recorded over USD 500 million of CAPEX, while investments in South Cluster and Talnakh Concentrator expansion increased 3- and 4-fold, respectively. Expenditures on capital repairs, improvement of industrial safety and modernization of core assets were up more than 40% exceeding USD 800 million.
DEBT AND LIQUIDITY MANAGEMENT
As of December 31, 2021, the Company's total debt increased 6% compared to December 31, 2020 and amounted to USD 10,461 million. The increase was primary driven by the new US$500mm five-year Eurobond successfully priced in October 2021 with the purpose to increase the available liquidity cushion for the scheduled 2022 debt repayments. Current loans and borrowings as of December 31, 2021 increased by USD 1,598 million as compared to December 31, 2020, primarily due to the two Eurobonds totaling USD 1,500 million maturing in April and October 2022 becoming a short-term liability as of December 31, 2021. Current loans and borrowings are fully covered by the balance sheet liquidity and available limits under committed credit lines. The Company's Net debt as of December 31, 2021 increased 4% compared to December 31, 2020 due to the increase in total debt. Despite the Net debt increase, Net debt / 12M EBITDA as at the end of 2021 decreased by 0.1x compared to December 31, 2020 and amounted to 0.5x. As of December 31, 2021, the Company was assigned investment grade credit ratings from all three international rating agencies Fitch, Moody's and S&P Global, and Russian rating agency "Expert RA". Attachment A CONSOLIDATED INCOME STATEMENT FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019 US Dollars million
Attachment B consolidated STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2021, 2020 AND 2019 US Dollars million
Attachment C CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019 US Dollars million
Attachment C CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2021, 2020 AND 2019 (CONTINUED) US Dollars million
Attachment D NET WORKING CAPITAL
1 Normalized on receivables from the registrar on transfer of dividends to shareholders This announcement contains inside information in accordance with Article 7 of EU Regulation 596/2014 of 16 April 2014. Full name and position of person making the announcement - Vladimir Zhukov, Vice - president, Investor Relations
ABOUT THE COMPANY PJSC «MMC NORILSK NICKEL» is a diversified mining and metallurgical company, the world's largest producer of refined nickel and palladium and a leading producer of platinum, cobalt, copper and rhodium. The company also produces gold, silver, iridium, selenium, ruthenium and tellurium. The production units of «NORILSK NICKEL» Group are located at the Norilsk Industrial District, on the Kola Peninsula and Bystrinsky region in Russia as well as in Finland PJSC «MMC «NORILSK NICKEL» shares are listed on the Moscow and on the Saint-Petersburg Stock Exchanges. PJSC «MMC «NORILSK NICKEL» ADRs trade over the counter in the US and on the London and Berlin Stock Exchanges.
Media Relations: Investor Relations: Phone: +7 (495) 785 58 00 Phone: +7 (495) 786 83 20 Email: pr@nornik.ru Email: ir@nornik.ru
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| ISIN: | US55315J1025 |
| Category Code: | MSCH |
| TIDM: | MNOD |
| LEI Code: | 253400JPTEEW143W3E47 |
| Sequence No.: | 142328 |
| EQS News ID: | 1279221 |
| End of Announcement | EQS News Service |
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