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OJSC Novolipetsk NLMK NLMK Q3 2012 US GAAP Results

  OJSC Novolipetsk (NLMK) - NLMK Q3 2012 US GAAP Results

RNS Number : 7404Q
OJSC Novolipetsk Steel
09 November 2012




RNS Announcement

09 November

NLMK GROUP CONSOLIDATED US GAAP RESULTS FOR 9M AND Q3 2012



9M 2012 FINANCIAL AND OPERATING RESULTS



· Revenue: $9,354 million (+8% y-o-y)

· EBITDA: $1,511 million (-20%)

· EBITDAmargin: 16.2% (-5.5 p.p.)

· Net profit:$617million (-49%)

· Cash flow from operations: $1,491 million (+0,4%)

· Capex: $1,157 million (-24%)

· Revenue per tonne of steel: $813 (-13%)

· Steel output:11,2 milliontonnes (+28%)

· Steel product sales: 11.5 million tonnes (+24%)



Q3 2012 FINANCIAL AND OPERATING RESULTS 



· Revenue: $3,002 million (-8% q-o-q)

· EBITDA: $483 million (-19%)

· EBITDAmargin:16.1% (-2.2 p.p.)

· Net profit: $167million (-40%)

· Cash flow from operations: $684 million (+125%)

· Capex: $347 million (-23%)

· Revenue per tonne of steel: $787 (-8%)

· Steel output:3.8milliontonnes (-2%)

· Steel product sales: 3.8 million tonnes (0%)



OUTLOOK

We expect Q4 steel output will be 3.7 million tonnes (-2%), and in 2012, steel
production will grow by 25% to approximately 15 million tonnes.

In view of the weak market  conditions and the seasonal consumer slowdown,  in 
Q4 steel prices hit bottom for 2012. Low production costs and a balanced sales
mix allowed the Company to partially offset the adverse impact of the external
factors on its financial performance. Nonetheless, we expect Q4 revenue to  be 
down by  5% largely  due to  lower  selling prices,  and profit  will  further 
decrease.

In the beginning  of Q1 2013,  we anticipate a  minor pick-up in  demand in  a 
number of regions, driven by restocking.



Disclaimer

This announcement may contain a number of forward-looking statements  relating 
to, among others,  the financial condition  and results of  operations of  the 
Company. Such  forward-looking  statements  involve  A  number  of  risks  and 
uncertainties that could cause actual results to differ materially from  those 
suggested by them and are based on assumptions regarding the Company's present
and future business strategies  and the environment in  which the Company  and 
its  subsidiaries  operate  both  now  and  in  the  future.   Forward-looking 
statements speak only as at the date of this announcement and save as required
by applicable  legal  and/or  regulatory requirements  the  Company  expressly 
disclaims any obligation to release publicly  any updates or revisions to  any 
forward-looking statements.







KEY HIGHLIGHTS



'000 tonnes /          Q3    Q2                9M    9M
                     2012^1 2012  Change, %   2012  2011  Change, %
US$ million
Steel products sales  3,816 3,818        0%  11,506 9,288      +24%
Incl. HVA^2           1,351 1,450       -7%   4,206 3,201      +31%
Revenue               3,002 3,257       -8%   9,354 8,675       +8%
Operating profit        262   425      -38%     942 1,423      -34%
EBITDA^3                483   596      -19%   1,511 1,883      -20%
EBITDA margin (%)       16%   18%               16%   22%
Net profit^4            167   278      -40%     617 1,204      -49%
Net debt^5            3,470 3,564       -3%   3,470 2,933      +18%
Net debt/EBITDA^6      1.84  1.90              1.84  1.23



Примечания:

^1 Reporting periods of the Company are 9M and H1 2012. Q3 figures are
derived by computational method. The same assumption applies to the
calculation of segmental financial results.
^2High value added (HVA) products include plates, cold‐rolled, galvanised,
pre‐painted and electrical steel, and metalware.
^3EBITDA calculations are presented in the Appendix. EBITDA is calculated as
operating profit adjusted to loss or gain from impairment losses (including
goodwill) and depreciation and amortisation.
^4Net profit attributable to NLMK shareholders.
^5Net debt is calculated as the sum of LT and ST credits and loans less cash
and cash equivalents, as well as ST financial investments at period end.

^6Net debt / EBITDA is represented by net debt as at the end of the period and
EBITDA is presented as Last 12 months EBITDA.

CONFERENCE CALL DETAILS

NLMK is pleased to invite the investment community to a conference call with
the management of NLMK:

Friday, 09 November, 2012

08:00 (New York)

13:00 (London)

17:00 (Moscow)

To join the conference call, please, register on-line:


https://eventreg1.conferencing.com/webportal3/reg.html?Acc=097741&Conf=185889

or dial

International Call-in Number: +44 (0)20 7162 0025

US Call-in Number: +1 334 323 6201

Conference ID: 925211

*We recommend that participants register on-line to avoid waiting in a queue
or to start dialing in 5-10 minutes prior to ensure a timely start to the
conference call.

The conference call replay will be available through 14 November 2012

International Replay Number: +44 (0) 20 7031 4064

US Replay Number: +1 954 334 0342

Replay Access Code: 925211



About NLMK:

NLMK is an international vertically-integrated steelmaking company with
production facilities located in Russia, Europe and the US. The liquid steel
capacity of its operating units exceeds 15 mtpy. The Company generated $11.7
billion of revenues and a 19.5% EBITDA margin for the full year 2011. The
Company's shares and GDSs are traded on the MICEX-RTS and LSE, respectively.



For more information:

NLMK

Investor Relations:

+7 (495) 915-1575

e-mail: st@nlmk.com









MANAGEMENT COMMENTS



· Production and sales

Q3 utilisation rates  remained high,  bringing steel output  to 3,722  million 
tonnes (-2%). The Group sales stayed at a record 3.8 million tonnes, including
35% of high value added.

In 9M 2012, crude  steel production increased by  28% to 11.2 million  tonnes, 
with 94%  produced  by  the  Group's Russian  assets.  NLMK's  Russian  assets 
accounted for around 20%  of the country's total  steel output, securing  NLMK 
Group's leadership among Russian steel producers.



· Sales markets

In Q3,  the Company  capitalised  on increased  demand from  construction  and 
machine-building in Russia, growing its sales to these sectors to 1.05 million
tonnes (+4%) and  0.12 million tonnes  (+5%), or approximately  84% and 9%  of 
total sales, respectively. 

Weaker sales in Europe, including by NLMK Europe's rolling assets, were offset
by the growth in slab sales from Novolipetsk to South-East Asia and the Middle
East.



· Sales structure

In Q3, NLMK Group increased slightly the share of slab sales in its sales mix:
slab sales to third parties totaled 977,000 tonnes (+14% q-o-q). 

With the high demand and  stable prices in the  domestic market, the share  of 
high value added sales reached 35% (or 1.35 million tonnes).



· Pricing trends

Deterioration in the  pricing environment  started in  the mid-second  quarter 
well continued in the third quarter, putting significant pressure on  ordinary 
grade products  -  pig iron,  slabs  and HRC.  Prices  in the  Russian  market 
remained relatively  stable,  supported  by  high  demand  from  construction. 
Year-on-year, however, prices were an average 5-10% lower.

In Europe, with the seasonal softening in demand, coupled with the  persistent 
economic slowdown,  steel product  consumption  slumped, putting  pressure  on 
prices across the board resulting in a sequential decline of 2-7% and 10% on a
year on year basis. Inventory levels  for trading companies and end  consumers 
are still at the low level.

In the USA, prices were pressured by imports, which added to the weakening  in 
the market conditions. In Q4, however, US producers are attempting to increase
prices for their products in order to restore production profitability.



· Production costs

In Q3, the Group's  production costs decreased by  5% to $2,095 million.  Slab 
cash costs at the  Lipetsk site were down  by 8% to $383/t,  due to lower  raw 
material prices, management  efforts to streamline  operational expenses,  and 
the weakening of the RUB/US FX rate.



· Capex programme

Q3 investments decreased by 23% to $347 million. 9M 2012 investments were down
by 24% to $1,157 million, with maintenance capex accounting for  approximately 
30%.

NLMK continues  to implement  its key  Technical Upgrade  Programme  projects, 
including the

construction of the  NLMK Kaluga mini-mill  (1.5 million tonnes  of steel  and 
long products per year). The first stage is scheduled for launch in 2013.



Stoilensky continues the  expansion of  its open pit  iron ore  mine, and  the 
construction  of  the  4   mt/y  capacity  Beneficiation  Plant.   Preparatory 
activities are  under  way  for  the construction  of  the  6  mt/y  capacity 
Pelletising Plant to produce metallised pellets.



In the second half of October, NLMK DanSteel completed the construction of its
new Plate Mill (including the Plate Mill Stand 4300), enabling the  production 
of a new type of product, 4300 mm wide and 5-200 mm thick plates, widely  used 
in the energy  industry, including the  construction of oil  and gas  drilling 
platforms, and in shipbuilding.



Novolipetsk is in the process  of introducing Pulverised Coal Injection  (PCI) 
technologн for its  blast furnace operations.  PCI commissioning and  start-up 
activities for NLMK's 2.6 million  tonne BF-5 (accounts for approximately  20% 
of the total BF capacity at Novolipetsk) are scheduled for early 2013. We are
planning  to   gradually  develop   these  technologies   in  2013-2014.   PCI 
technologies are used to reduce natural gas and coke consumption for pig  iron 
production by injecting steam coals into the blast furnace.



· Debt management

On September  27, NLMK  closed of  its debut  US$500 million  7-year  Eurobond 
offering with an annual coupon rate of 4.95%, the lowest coupon ever  achieved 
for a benchmark Eurobond issue among Russia's non-state-owned companies.

The proceeds from the issue will be used for the refinancing of NLMK's current
debt.

In October 2012 NLMK repaid a 3-year RUR10 billion bond issue.

At the end  of Q3, the  share of  US$-denominated debt in  the Company's  debt 
portfolio increased by  5 p.p.  The average  maturity increased  to 2.7  years 
(from 2.5 years at the end of Q2).



· Shareholder meeting

On October  25, 2012  NLMK shareholders  at an  Extraordinary General  Meeting 
("EGM") elected Mr. Oleg Bagrin as NLMK President (Chairman of the  Management 
Board).
Mr. Bagrin has been serving as Member of the Board of Directors since 2004.









NLMK's KEY FINANCIALS

· Revenue

NLMK Group's  Q3 2012  revenue  decreased by  8%  to US$3  billion,  adversely 
impacted by weaker prices and changes in the sales mix.



· Production costs (COGS)

Q3 production costs (excluding depreciation and amortisation) decreased by  5% 
to US$2,095  million,  due to  lower  prices  for raw  materials  and  reduced 
consumption of  pellets  purchased from  the  third parties.  Changes  to  the 
product sales  mix in  Q3 served  as an  additional factor  in driving  NLMK's 
production costs down. With approximately 70% of the Group's production  costs 
being RUB-denominated, the further  depreciation of the  RUB/US$ FX rate  also 
had a positive impact of NLMK's costs. 



· Depreciation and amortisation

Amortisation charges  in Q3  amounted to  approximately US$221  million  (+29% 
quarter-on-quarter), due to the growth in property, plant and equipment.



· SG&A

SG&A expenses decreased by 2% to US$99 million due to persistent  optimization 
measures.

Selling expenses  sequentially  decreased by  10%  to US$279  million,  driven 
mainly by the changes in the geography and structure of sales.



· Interest expenses

Part of  the interest  payments  were capitalised  under US  GAAP  standards. 
Interest expensesin the  amount of US$24  million were recognised  in the  P&L 
statement in Q3 due  to the gradual commissioning  of new equipment.  Without 
the capitalisation effect,  Q3 interest payments  totalled US$65 million  (+5% 
quarter-on-quarter).



· Operationalprofit

Operational profit  decreased by  38%  quarter-on-quarter to  US$262  million, 
pressured mostly by the weakening in  prices in NLMK's key markets, and  still 
elevated production costs.



· Net profit

Net profit decreased by 40% quarter-on-quarter to US$167 million, due to lower
profit from main activities,  and an increase in  the recognition of  interest 
expenses. The net profit margin was 5.6%, (-2.9 p.p. quarter-on-quarter).



· Cash flow from operations

Cash flow  from  operations increased  by  125% quarter-on-quarter  to  US$684 
million, driven mainly by the significant working capital improvement:  US$181 
million were released from accounts  receivable, and US$79 were released  from 
inventories.

Improved supplier relations added an extra  US$24 million to the Group's  cash 
flow from operations.



· Cash flow from investment activities

Net outflow decreased by 44%  quarter-on-quarter to US$337 million,  including 
US$347  million  (-23%  quarter-on-quarter)  capex.  This  sequential  decline 
resulted  from   management  efforts   aimed   at  investment   cash   outflow 
optimization, and the annual installment paid under the agreement to  purchase 
the rolling assets of Steel Invest and Finance in Q2 2012.



· Cash flow from financial activities

Net inflow amounted to US$707 million (x6.4 quarter-on-quarter), supported  by 
the RUB bond  (approximately US$320  million) and Euro  bond (US$500  million) 
placements.







Steel segment*



US$ million               Q3    Q2   Change,  9M    9M   Change,
                         2012  2012          2012  2011
                                        %                   %
Crude steel

production, '000         3,076 3,130   -2%   9,157 7,060  +30%

tonnes
Coke production, '000
                         1,805 1,823   -1%   5,424 4,893  +11%
tonnes
Revenue from external
                         1,836 1,816   +1%   5,447 6,157  -12%
customers
Revenue from

intersegmental            295   462   -36%   1,180  654   +80%

operations
Gross profit              439   536   -18%   1,352 1,730  -22%
Operating profit          152   237   -36%    467   918   -49%
Profit after income tax   248   348   -29%    710   953   -26%

In Q3 2012, revenue from external customers increased to US$1,836 million (+1%
quarter-on-quarter).  Revenue  from  intersegmental  operations  decreased  to 
US$295 million (-36% quarter-on-quarter), due to lower slab deliveries to  the 
Group's international rolling assets and their partial shift towards  external 
customers.

Q3 EBITDA was US$286  million (-10% q-o-q); the  EBITDA margin was 13%.  Lower 
profitability was primarily due to lower average selling prices.

9M 2012 revenue was largely in line  with 9M 2011 (-3%). However, there was  a 
shift towards intersegmetal sales, explained by  the fact that last year  slab 
sales to the international  rolling assets prior  to their consolidation  from 
Q3 2011 were reflected as sales  to external customers. The effect from  the 
price weakening  for  steel products  in  2012  was partially  offset  by  the 
significant increase in sales.

9M profit decreased year-on-year as a result of lower average product  prices. 
However, the decrease was capped by higher sales and lower raw material prices
in Q3 2012.

Outlook:

Despite the consumer slowdown, we  expect the segment's operating results  and 
utilisation rates  in Q4  to remain  at high  levels, supported,  among  other 
factors, by  slab  supplies  to  the  Group's  international  rolling  assets. 
Scheduled maintenance and  repair activities are  planned for the  Novolipetsk 
rolling equipment during this period.

*As part of the consolidation of Steel Invest and Finance rolling assets, the
Group's segment reporting breakdown was adjusted (see Note #22 to Consolidated
US GAAP Results for 12M 2011).

- A separate Foreign Rolled Products segment was formed, alongside Steel
Invest and Finance comprising NLMK Indiana and NLMK DanSteel, which used to be
included in the Steel segment (in H1 2011 results).

- Results for Altai-Koks were included in the Steel segment (it previously
formed a separate Coke-chemical segment).
The Steel segment comprises: Novolipetsk (Lipetsk site), VIZ-Stal (a producer
of electrical steel), trading companies Novexco Limited, Cyprus and Novex
Trading S.A., Switzerland, Altai-Koks (Russia's largest non-integrated coke
manufacturer), as well as a number of service companies.





Long products segment*



US$ million               Q3   Q2  Change,  9M    9M   Change,
                         2012 2012         2012  2011
                                      %                   %
Long products and

metalware
                         457  443    +3%   1 320 1 197  +10%
production, '000

tonnes
Revenue from external
                         314  329    -5%    918   895    +3%
customers
Revenue from

intersegmental           122  162   -25%    358   514   -30%

operations
Gross profit              78   84    -7%    217   179   +21%
Operating profit          40   29   +38%    76    10    +659%
Profit after income tax   -7  -31   -78%    -60  -153   -61%

Higher output in Q3 2012 was supported by the stable demand from  construction 
in the  Russian  market.  Higher output  in  9M  2012 was  supported  by  full 
utilisation rates (note: one of the two EAF's had to be idled since July  2011 
due to transformer repairs).

In Q3, revenue from  external customers declined 5%  q-o-q, primarily due  toa 
slight decrease in sales volumes. Intersegmental revenues were down, mostly as
a result of lower  volumes of scrap deliveries  to the Lipetsk site  following 
the partial  replacement  of  scrap  with pig  iron  at  the  Novolipetsk  BOF 
operations.

In 9M 2012, almost all  long product sales were  sold in Russia, supported  by 
increased demand from  the local  construction sector. As  export sales  (done 
through traders that are part of  the Steel segment) contracted, revenue  from 
intersegmental operations fell by 30% to US$358 million.

In Q3 2012, the Segment's EBITDA was  largely flat as compared to Q2 at  US$61 
million,  and  the  EBITDA  margin  was  14%.  9M  EBITDA  increased  by   78% 
year-on-year to US$139 million; the EBITDA margin was 11%, supported by higher
average selling prices and improved operating performance.

Losses after income  tax were  mostly associated with  interest expenses  from 
intercompany loans provided by the main production site in Lipetsk.

Outlook:

Given the seasonal slowdown in demand from the construction sector, we  expect 
the segment's  operating performance  to  level off  in  Q4. We  believe,  the 
segment's performance will also be affected  by a seasonal reduction in  scrap 
sales to third parties and scheduled maintenance and repair works.



* The Long  products segment includes  the financial performance  of the  Long 
Products Division  companies: NSMMZ,  UZPS,  scrap collecting  and  processing 
facilities, and others. The core activities of these companies are ferrous and
non-ferrous scrap collection and processing, steelmaking (EAF-based) and  long 
products and metalware manufacturing.





Mining segment*



US$ million               Q3      Q2   Change,    9M      9M    Change,
                         2012    2012            2012    2011
                                          %                        %
Sales of iron ore

concentrate and          3,777  3,910   -3,4%   11,169  11,068   +0,9%

sinter ore, '000        931 ** 780** +19.4% 2,017 ** 950 ** +112.2%

tonnes
Revenue from external
                          93      86     +9%     214      148     +45%
customers
Revenue from

intersegmental            222    274    -19%     777      931     -17%

operations
Gross profit              216    259    -17%     702      809     -13%
Operating profit          173    230    -25%     606      746     -19%
Profit after income tax   117    238    -51%     482      662     -27%

Q3   iron   ore   concentrate   sales    were   3.8   million   tonnes    (-3% 
quarter-on-quarter). The segment's 9M 2012 operating performance increased  as 
the Group's beneficiation capacities were expanded in mid-2011.

Q3 EBITDA was US$190 million (-23% quarter-on-quarter) driven by lower  iron 
ore prices; the  EBITDA margin was  60%. 9M EBITDA  was US$654 million  (-16% 
year-on-year); the EBITDA  margin was  66% (-6 p.p.).  Weaker average  selling 
prices compared to 9M 2011 lead to the change in the segment's profit.

Outlook:

Ongoing control over production costs  supported by stable sales should  allow 
the segment to maintain high operating results and margins in Q4 2012.

* NLMK's Mining segment comprises  Stoilensky (the Group's key mining  asset), 
Dolomit and Stagdok.  These companies  mainly supply raw  materials to  NLMK's 
production facilities in  Lipetsk and  also sell limited  volumes outside  the 
Group.

**Sales to third parties.



Foreign rolled products segment*



US$ million              Q3   Q2   Change,  9M    9M   Change,
                        2012 2012          2012  2011
                                      %                   %
Steel products sales,
                        913  1,128  -19%   3,171 1,704  +86%
'000 tonnes
Revenue from external
                        759  1,026  -26%   2,774 1,475  +88%
customers
Revenue from

intersegmental           1     -      -      1    0,2   +582%

operations
Gross profit            -52   +23   -328%   -12   -38   -68%
Operating profit        -110  -56   +96%   -229  -175   +31%
Profit after income tax -109  -61   +78%   -233  -171   +36%



In Q3,  deteriorating  conditions in  the  international markets,  notably  in 
Europe, adversely impacted  the Foreign  rolled products  segment sales  which 
went down by 19% to 0.9 million tonnes.

As sales and prices  weakened, Q3 revenue declined  by 26% to US$759  million. 
Cash cost optimisation efforts and lower  prices for purchased slabs were  not 
able to fully offset the  decrease in revenue, leading  to an increase in  the 
segment losses.

The segment's Q3 EBITDA amounted to -US$62 million; the margin was -8%.

The significant year-on-year  change is associated  with the consolidation  of 
the rolling assets of Steel Invest and Finance (JV with Duferco) starting from
July 2011.

Outlook:

The segment companies will  continue to work on  cutting costs and  maximising 
sales, ensuring higher efficiency for the segment in the medium-term.



* The  Foreign  Rolled  Products  segment  comprises  steelmaking  companies 
located outside Russia, including rolling assets in Europe (NLMK Europe) and
the USA (NLMK  USA), including those  that became part  of the Group  starting 
from July 2011.  NLMK Europe  is represented  by thick  plates producers  NLMK 
DanSteel (Denmark, the  company was part  of the Steel  segment until July  1, 
2011), NLMK Clabecq (Belgium), NLMK Verona (Italy) and strip product producers
NLMK La Louvière (Belgium), NLMK Coating (France), NLMK Strasbourg  (France). 
NLMK USA includes NLMK Pennsylvania, Sharon Coating, NLMK Indiana (part of the
Steel segment until July 1, 2011).





Appendix

(1) EBITDA*

    $ million      9M    9M    Q3   Q2
                  2012  2011  2012 2012
Operating profit    942 1,423  262  425
Minus:
Impairment losses                     -
Depreciation and
                   -569  -460 -221 -171
amortisation
EBITDA            1,511 1,883  483  596

Note: * Effective from 2012 the Company is changing the formula for EBITDA
calculation in order to simplify and make the calculation of this indicator
more transparent for external users. From Q1 2012, EBITDA is calculated as
operating profit adjusted to loss or gain from impairment losses (including
goodwill) and depreciation and amortisation.

(2) Sales by region in 2011-2012
(in '000 tonnes)

                           9М    9М                    Q1    Q4    Q3
         Region                       Q3 2012 Q2 2012
                          2012  2011                  2012  2011  2011
Russia                    3,558 3,211   1,255   1,203 1,100 1,056 1,113
EU                        2,227 2,304     639     754   834   561   676
Middle East incl. Turkey    976 1,264     270     327   379   341   473
North America             1,734 1,225     493     611   629   505   561
Asia and Oceania          1,905   507     730     549   627   827   202
Other regions             1,106   776     428     373   304   262   361
TOTAL                    11,506 9,288   3,816   3,818 3,872 3,552 3,386



(3) Sales by products in 2011-2012
(in '000 tonnes)

                          9М    9М                    Q1    Q4    Q3
Product type                         Q3 2012 Q2 2012
                         2012  2011                  2012  2011  2011
Pig iron                   568   514     207     142   220   448   229
Slabs                    2,726 2,432     977     858   892   698   561
Hot‐rolled thick plates    761   454     209     260   292   243   244
Hot‐rolled steel         2,917 2,051     914     975 1,029   817   892
Cold‐rolled steel        1,545 1,220     522     521   501   402   502
Galvanised steel           870   576     263     302   305   341   313
Pre‐painted steel          434   372     153     150   132   147   144
Transformer steel          177   173      60      63    54    66    62
Dynamo steel               201   214      66      76    59    63    60
Billets                      0    84       0       0     0     0    10
Long products            1,087 1,006     366     394   327   281   299
Metalware                  218   193      78      77    63    46    70
TOTAL                   11,506 9,288   3,816   3,818 3,872 3,552 3,386





(4) Revenue by region



Region                     9М 2012           Q3 2012            Q2 2012
                      $ million Share, % $ million Share, % $ million Share, %
Russia                    3,311     35.4     1,167     38.9     1,123     34.5
EU                        1,961     21.0       523     17.4       740     22.7
Middle East incl.           661      7.1       155      5.2       237      7.3
Turkey
North America             1,351     14.4       400     13.3       494     15.2
Asia and Oceania          1,140     12.2       448     14.9       332     10.2
Other regions               930      9.9       310     10.3       331     10.2
TOTAL                     9,354      100     3,002      100     3,257      100



(5) Working capital

$ million                 30.09. 30.06. 31.03. 31.12. 30.09. 30.06. 31.03.

                           2012   2012   2012   2011   2011   2011   2011
Current assets             6,287  5,230  5,714  5,504  5,644  4,811  4,438
Cash and cash equivalents  1,803    769    926    797    830    911    977
Short term investments        11     10     11    227     59    202    265
Accounts receivable        1,559  1,642  1,786  1,573  1,694  1,669  1,295
Inventories                2,819  2,733  2,904  2,828  2,939  1,923  1,784
Other current assets, net     96     76     87     78    122    106    116
Current liabilities        4,155  3,579  3,577  2,940  3,163  2,141  1,831
Accounts payable           1,713  1,582  1,783  1,623  2,098  1,535  1,252
Short‐term debt            2,434  1,971  1,781  1,306  1,031    544    553
Other current liabilities      9     26     12     11     34     62     26
Working capital            2,133  1,651  2,137  2,564  2,481  2,670  2,607





(6) Consolidated production costs for products sold

                                     9М 2012       Q3 2012        Q2 2012
$ million                            $    Share,    $    Share,    $    Share,

                                  million   %    million   %    million   %
Iron ore                              687     11     226     11     248     11
Coke and coal                       1 172     18     358     17     410     19
Scrap                                 981     15     311     15     323     15
Ferroalloys                           229      4      77      4      83      4
Other raw materials                   961     15     315     15     391     18
Energy                                485      7     154      7     156      7
Natural gas                           242      4      81      4      77      4
Other fuel and energy resources        59      1      17      1      18      1
Labour expenses                       761     12     248     12     263     12
Other expenses                        836     13     290     14     276     13
Changes in the balance of
semifinished                           96      1      19      1     -40     -2

products, WIP and finished goods
Production costs                    6 510    100   2 095    100   2,205    100











OJSC NLMK

Interim condensed consolidated balance sheets

as at September30,2012 and December31,2011 (unaudited)

(All amounts in thousands of US dollars, except for share data)



                                                      As at
                                                                         As at
                                        September30,2012  December31,2011
ASSETS
Current assets
Cash and cash equivalents                        1,802,885           797,169
Short-term investments                              10,726           227,279
Accounts receivable and advances given,
net                                              1,558,727         1,572,641
Inventories, net                                 2,819,055         2,828,433
Other current assets                                42,333            59,355
Deferred income tax assets                          53,768            18,887
                                                 6,287,494         5,503,764
Non-current assets
Long-term investments                               13,055             8,420
Property, plant and equipment, net              11,458,385        10,569,828
Intangible assets, net                             146,286           158,611
Goodwill                                           778,068           760,166
Deferred income tax assets                         239,902           237,113
Other non-current assets                            25,358            19,274
                                                12,661,054        11,753,412
Total assets                                    18,948,548        17,257,176
LIABILITIESANDSTOCKHOLDERS'EQUITY
Current liabilities
Accounts payable and other liabilities           1,712,590         1,622,679
Short-term borrowings                            2,433,534         1,306,263
Current income tax liability                         8,628            10,994
                                                 4,154,752         2,939,936
Non-current liabilities
Deferred income tax liability                      752,242           713,666
Long-term borrowings                             2,850,077         3,073,535
Other long-term liabilities                        272,880           424,878
                                                 3,875,199         4,212,079
Total liabilities                                8,029,951         7,152,015
Commitments and contingencies                            -                 -
Stockholders' equity
NLMK stockholders' equity
Common stock, 1 Russian ruble par value
-  5,993,227,240   shares  issued   and 
outstanding at  September30,2012  and 
December31,2011                                  221,173           221,173
Statutory reserve                                   10,267            10,267
Additional paid-in capital                         306,391           306,391
Accumulated other comprehensive loss            (1,177,829)        (1,489,442)
Retained earnings                               11,603,984        11,098,635
                                                10,963,986        10,147,024
Non-controlling interest                           (45,389)           (41,863)
Total stockholders' equity                      10,918,597        10,105,161
Total  liabilities  and   stockholders' 
equity                                          18,948,548        17,257,176





OJSC NLMK

Interim condensed consolidated statements of income

for the nine months ended September30,2012 and 2011 (unaudited)

(All amounts  in  thousands of  US  dollars,  except for  earnings  per  share 
amounts)



                                              For the nine        For the nine

                                              months ended        months ended
                                       September30,2012  September30,2011
Revenue                                         9,353,666          8,675,117
Cost of sales
Production cost                                (6,510,018)         (5,617,718)
Depreciation and amortization                    (569,121)           (459,988)
                                               (7,079,139)         (6,077,706)
Gross profit                                    2,274,527          2,597,411
General and administrative expenses              (335,057)           (365,567)
Selling expenses                                 (870,643)           (690,591)
Taxes other than income tax                      (127,015)           (117,781)
Operating income                                  941,812          1,423,472
Loss on disposals of property,  plant 
 and equipment                      (37,566)            (23,234)
Gains/(losses) on investments, net                 (159)             68,981
Interest income                                    18,468             19,852
Interest expense                                  (37,959)                  -
Foreign       currency        exchange 
gain/(loss),  net               (10,792)             44,834
Other income/(expenses), net                    (34,994)              3,948
Income before income tax                          838,810          1,537,853
Income tax expense                               (223,451)           (400,047)
Income, net of income tax                         615,359          1,137,806
Equity in net earnings of associates                  333             54,048
Net income                                        615,692          1,191,854
Add:  Net  loss  attributable  to  the 
non-controlling interest                            1,729             12,309
Net  income   attributable   to   NLMK 
stockholders                                      617,421          1,204,163
Income per share - basic and diluted:
Net  income   attributable   to   NLMK 
stockholders per share (US dollars)                0.1030             0.2009
Weighted-average  shares  outstanding, 
basic and diluted (inthousands)                5,993,227          5,993,227













OJSC NLMK

Interim condensed consolidated statements of cash flows

for the nine months ended September30,2012 and 2011 (unaudited)

(thousands of US dollars)

                                                                             For the nine        For the nine

                                                                             months ended        months ended
                                                                      September30,2012  September30,2011
CASHFLOWSFROMOPERATINGACTIVITIES
Net income                                                                       615,692          1,191,854
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization                                                    569,121            459,988
Loss on disposals of property, plant and equipment                                37,566             23,234
Losses/(gains) on investments, net                                                 159            (68,981)
Equity in net earnings of associates                                                (333)            (54,048)
Deferred income tax (income)/expense                                            (2,170)             34,284
(Gains)/losses on derivative financial instruments                              (7,184)              4,819
Other                                                                              8,248             91,913
Changes in operating assets and liabilities
Decrease in accounts receivable                                                   74,681             23,118
Decrease/(increase) in inventories                                             128,192           (489,604)
Decrease in other current assets                                                  19,218             11,116
Increase in accounts payable and other liabilities                                50,187            244,176
(Decrease)/increase in current income tax payable                               (2,207)             13,080
Net cash provided by operating activities                                      1,491,170          1,484,949
CASH FLOWSFROM INVESTING ACTIVITIES
Purchasesandconstructionofproperty,plantandequipment                   (1,157,451)         (1,528,985)
Proceeds from sale of property, plant and equipment                               23,861             15,958
Purchases of investments and placement of bank deposits                          (33,552)           (270,589)
Withdrawalofbankdeposits,proceedsfromsaleofotherinvestments
 and loans settled                                                260,743            691,308
Payments for acquisition of interests in new subsidiaries                       (156,510)            (41,751)
Net cash used in investing activities                                         (1,062,909)         (1,134,059)
CASHFLOWSFROMFINANCINGACTIVITIES
Proceeds from borrowings and notespayable                                     1,319,717            829,950
Repayment of borrowings and notes payable                                       (551,416)         (1,171,552)
Capital lease payments                                                           (17,200)            (29,805)
Dividends to shareholders                                                       (115,880)           (247,286)
Proceedsfromdisposalofassetstothecompanyundercommoncontrol                   -            313,246
Net cash provided by / (used in) financing activities                            635,221           (305,447)
Net increase in cash and cash equivalents                                      1,063,482             45,443
Effectofexchangeratechangesoncashandcashequivalents                     (57,766)             36,609
Cash and cash equivalents at the beginning of the year                           797,169            747,979
Cash and cash equivalents at the end of the period                             1,802,885            830,031



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


QRTLIFIDLALAIIF -0- Nov/09/2012 07:42 GMT
 
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