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Moscow, 17 May 2019 – ALROSA, the world’s leader in diamond mining, announces its IFRS financial results for Q1 2019.

  • Revenue increased by 15% q-o-q to RUB 70 bn, mainly driven by strong sales volumes (up 18% q-o-q). The sales exceeded production by 35% due to increased sales of smaller-size diamond from inventories as polishers’ restocked early in 2019. Y-o-y revenue declined by 27% owing to a higher share of small-size rough gem diamonds in sales and lower sales in carats (down 21% y‑o‑y).
  • EBITDA grew by 16% q-o-q to RUB 31 bn, supported by top line growth. On a y‑o‑y basis, EBITDA decreased by 34% as revenue declined.
  • EBITDA margin remained flat q-o-q at 44% (down 5 pp y-o-y).
  • Free cash flow went up by 81% q-o-q to RUB 26 bn due to a 40% higher operating cash flow q-o-q and a reduction in capex (down 45% q-o-q). On a y‑o‑y basis, free cash flow declined by 37%, mainly due to a 35% y-o-y decrease in operating cash flow, despite capex going down by 20% y-o-y due to launch of Verkhne-Munskoye deposit.
  • Net profit grew 3x q-o-q to RUB 24 bn because of, among other things, the low base of the Q4 2018 net profit (due to one-off factors, including impairment) and the growth in EBITDA. A 27% y-o-y decline was attributable to lower revenue.

RUB bn

Q1

2019

Q4

2018

q-o-q

Q1

2018

y-o-y

Diamond sales, million carats, incl.

10.6

9.0

18%

13.4

(21%)

gem-quality

7.9

5.3

50%

10.1

(22%)

industrial

2.7

3.7

(27%)

3.2

(16%)

Revenue

70.5

61.4

15%

96.0

(27%)

EBITDA[1]

31.4

26.9

16%

47.7

(34%)

EBITDA margin

44%

44%

50%

-6 pp

Net profit

24.1

7.9

3.0х

32.9

(27%)

Free cash flow[2]

25.9

14.3

81%

41.1

(37%)

Net debt[3]

33.8

67.4

(50%)

18.6

82%

Net debt / EBITDA

0.2x

0.4x

0.1x

Alexey Philippovskiy, ALROSA’s Deputy CEO, commented on the results:

“Following a sizable destocking of small-size rough diamonds at cutters and polishers in 2H 2018, we saw an improved demand for this product early in 2019. This translated in a 18% q-o-q sales growth in Q1, which came at 10.6 m carats; Q1 revenue increased by 15% q‑o‑q to RUB 70.5 bn. Better operating performance coupled with continuous cost control helped us maintain EBITDA margin at 44%. In absolute terms, EBITDA grew by RUB 4.5 bn to RUB 31.4 bn.

Our free cash flow grew to an impressive RUB 25.9 bn (up 81% q-o-q) on the back of capex reduction by 45% q-o-q (-20% y-o-y) to RUB 3.9 bn and RUB 3.6 bn of working capital release, mainly due to a seasonal decline in rough diamond inventories. As a result, the Company’s leverage slimmed down, with the net debt / EBITDA ratio now standing at 0.2x.

We continued to actively manage our debt portfolio. In early April, Alrosa placed 5-year $500 m Eurobonds with a coupon rate of 4.65% per annum and partially redeemed its Eurobonds due in November 2020 for a total of $400 m.

Fitch, a global credit rating agency, upgraded ALROSA’s credit rating to an investment grade in March highlighting the Company’s leadership in the global diamond market, stronger financial position and higher transparency. Currently, the Company has investment grade credit ratings from three global credit rating agencies.

Based on the Company’s performance in 2018, the Board recommended ALROSA shareholders to approve 2H 2018 dividends of RUB 4.11 per share, or RUB 30.3 bn in total, which is equal to 100% of the free cash flow.”

 

[1] EBITDA stands for earnings for the last twelve 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 calculated in accordance with the IFRS net of capital expenditures (posted as Purchase of Property, Plant and Equipment on the consolidated IFRS statement of cash flows).

[3] Net debt is the amount of debt less cash and cash equivalents and bank deposits at each reporting date in accordance with the IFRS.

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