05.09.2012 NCSP Preliminary 1H 2012 EBITDA up 31% to US$ 319 mln
Novorossiysk Commercial Sea Port Group (“NCSP Group” or the “Group”) (LSE: NCSP, MICEX-RTS: NMTP) today reports its preliminary consolidated 1H 2012 IFRS results.
1H 2012 Financial Highlights
· The Group’s revenue increased by 9.5% from US$ 494.1 mln in 1H 2011 to US$ 541.1 mln in 1H 2012;
· EBITDA(1) in the first half of 2012 was US$ 318.6 mln, up 31.1% from US$ 243.1 mln a year earlier;
· EBITDA margin improved from 49% in 1H 2011 to 59% in 1H 2012;
· NCSP Group’s net debt(2) decreased by US$ 249.0 mln to US$ 2,129.7 mln at 30 June 2012 as the Group continued to deleverage;
· Net debt / LTM EBITDA(3) declined to 3.4x at 30 June 2012 from 4.3x at the beginning of the year.
1) EBITDA is calculated as net profit for the period before finance costs, income tax and D&A, interest income and foreign exchange gain/(loss), net.
2) Net debt is calculated as Total debt – Cash & cash equivalents.
3) LTM EBITDA is calculated as EBITDA for the twelve months preceding the end of the reporting period.
Despite significantly stronger performance in terms of revenue, EBITDA and operating cash flow, net profit for 1H 2012 declined y-o-y to US$ 141.0 mln, vs. US$ 222.5 mln in 1H 2011, primarily due to the effect of changes in the RUB/US$ exchange rate on the Group’s assets and liabilities denominated in foreign currency.
1H 2012 operational highlights
In 1H 2012 the Group’s turnover grew faster than the market average: up 6.2% vs. 5.4% total year-on-year (y-o-y) turnover growth for other Russian seaports, according to ASOP. This included a recovery in grain (>100% y-o-y) due to the lifting of Russia’s export ban on 1 July 2011 and growth in crude oil (+2.5%), oil products (+2.3%) and ferrous metals (+26.8%). The Group’s market share (total cargo handled by Russian seaports) increased from 29% at the end of 2011 to 30% for the first half of 2012, according to ASOP.
1H 2012 cargo turnover
(4) Volumes for PTP are included from 1 January 2011
The Group completed construction of several key projects aimed at increasing cargo capacity and improving efficiency in 1H 2012. These projects included a joint-venture fuel oil terminal in the port of Novorossiysk with a capacity of 4 mln tonnes (which involved reconstruction of pier 4) and the successful launch of bunkering operations at LLC Primorsk Trade Port (PTP).
NCSP Group also continued to make progress on its operational improvement programme with a particular focus on cost reduction, improved technologies and yards and storage spaces management, as well as implementation of automation systems.
Commenting on today’s announcement, NCSP Group CEO Rado Antolovic said: “Strong cargo handling volume growth, especially in high margin cargoes like grains and ferrous metals, meant we were able to strengthen our market position and achieve significantly higher revenue and EBITDA in the first six months of 2012 vs. the first six months of 2011, despite the shut-downs due to bad weather in the beginning of this year.
“We also benefited from the Group’s diversified, flexible cargo-handling capacities, with the ability to respond rapidly to changing demand: in the first half of 2012 we quickly switched our facilities from declining mineral fertiliser turnover to increasing ferrous metals turnover.
“A decline in cost of services of 12.7% y-o-y, achieved as a result of effective cost controls initiatives and by improving the profitability of our bunkering operations, provided additional support to NCSP Group’s 1H 2012 results.
“We continue to make progress on our investment programme, completing several projects during the first half of the year and remaining on track to put others into operation by 2014; the investment projects currently underway are expected to increase container-handling capacity by 630 ths. TEU, oil and oil handling capacity of 15 mln tonnes and bulk goods capacity by 1 mln tonnes.
“With the goal of ensuring effective and timely execution of NCSP Group’s investment programme, we recently hired Radostin Popov, who has 17 years of experience in the port business with companies like P&O Ports and DP World, as Vice President for Development. Mr. Popov will have responsibility for overseeing the implementation of our Master Plan Development Strategy until 2020.
“NCSP Group’s 1H 2012 results are clear evidence of some of our key strengths: the scale of our operations and our advantageous location make us the top choice for many of the country’s largest exporters, and enable us to benefit from economies of scale, while offering clients an unrivalled service mix.”
1H 2012 financial results
Revenue growth from US$ 494.1 mln in 1H 2011 to US$ 541.1 mln in 1H 2012 was primarily driven by the return of grain handling volumes after Russia lifted its export ban in July 2011 (up US$ 64.4 mln y-o-y), higher ferrous metals volumes (up US$ 7.9 mln y-o-y) and higher crude oil handling (up US$ 7.8 mln y-o-y), which offset decreases in revenue from other cargoes, primarily bunkering operations (decrease of US$ 32.7 mln y-o-y), as well as iron ore and ore concentrate (decrease of US$ 4.9 mln y-o-y).
1H 2012 revenue overview
The Group’s cost of services declined 12.7% y-o-y to US$ 220.7 mln for 1H 2012, while SG&A was unchanged compared to 1H 2011 at US$ 39.9 mln. The decline in cost of services was primarily driven by a decrease in fuel costs from US$ 116.1 mln to US$ 78.1 mln (down 32.7% y-o-y) due to reduction in volumes of bunkering operations.
1H 2012 cost overview
NCSP Group’s EBITDA increased materially from US$ 243 mln in 1H 2011 to US$ 319 mln in 1H 2012 (up 31%) as a result of higher revenue and lower costs. EBITDA margin increased from 49% for the first half of 2011 to 59% for 1H 2012.
The effect of changes in the RUB/US$ exchange rate (a decrease by 2.3 RUB/US$ for 1H 2011, vs. an increase by 0.6 RUB/US$ for 1H 2012) on the Group’s assets and liabilities denominated in foreign currency resulted in a foreign exchange gain in the amount of US$ 143.4 mln for 1H 2011, and caused foreign exchange loss of US$ 14.0 mln in 1H 2012. Finance costs also rose in 1H 2012 (up 35.3% y-o-y to US$ 93.6 mln), primarily due to a non-cash loss on a cross-currency and interest rate swap of US$ 20.1 mln arising due to the effect of changes in the RUB/US$ exchange rate. These were the main factors that caused net profit for 1H 2012 to decline y-o-y to US$ 141.0 mln, vs. US$ 222.5 mln in 1H 2011, despite significantly stronger performance in terms of revenue, EBITDA and operating cash flow.
The Group’s operating cash flow increased by 112% y-o-y to US$ 238.3 mln for 1H 2012. Capital expenditure (capex) for the period was US$ 21.0 mln, vs. US$ 41.5 mln in 1H 2011. The y-o-y decrease in capex was primarily due to delays in projects due to bad weather at the beginning of the reporting period and to adjustments in project timing related to the implementation of Federal Law #223 FZ starting from 1 April 2012, which lengthened the time required to complete tender procedures in the last three months of the reporting period. NCSP’s cash and cash equivalents at the end of the period reached US$ 150.2 mln, up from US$ 127.5 mln at the end of 2011.
The increase in cash and cash equivalents, combined with debt repayments during the period (including US$ 300.0 mln Eurobond) brought NCSP Group’s net debt down to US$ 2,129.7 mln as of 30 June 2012, a decrease of US$ 249.0 mln from US$ 2,378.7 mln at 31 December 2011. The Group’s net debt/LTM EBITDA ratio reached 3.4x, down from 4.3x at the beginning of 2012.
Conference call and webcast
Today, 5 September 2012, NCSP Group will host a conference call and webcast for investors & analysts at 18:00 Moscow time (15:00 London / 10:00 New York).
The conference call will be hosted by NCSP Group CEO Rado Antolovic and CFO Anton Vishanenko, who will present the results and answer questions from conference call and webcast participants.
The call will be held in English.
Webcast link: http://www.media-server.com/m/p/5nxbc86v
Conference call dial-ins:
+7 499 272 4337 Moscow
+44 (0) 20 3003 2666 London
+1 646 843 4608 New York
8 10 8002 1774011 Russia (Moscow only)
0808 109 0700 UK
1 866 966 5335 USA
Conference call password: Novorossiysk
About NCSP Group
NCSP Group is the largest Russian port operator in terms of cargo turnover. NCSP shares are traded on Russia's MICEX-RTS exchange (ticker: NMTP) and on the London Stock Exchange in the form of GDRs (ticker: NCSP). 50.1% shares of PJSC “NCSP” belong to Novoport Holding Ltd, the beneficial owners of which are OJSC “Transneft” and Summa Group. NCSP Group cargo turnover in 2011 totalled 157 million tonnes. Consolidated revenue according to IFRS in 2011 totalled $1,050 million and EBITDA was $550 million. NCSP Group combines the following stevedoring and other companies: OJSC “Novorossiysk Commercial Sea Port”, CJSC “Primorsk Oil Terminal” (since 2011), PJSC “Novorossiysk Grain Terminal”, OJSC “Novorossiysk Ship Repair Yard”, OJSC “NCSP Fleet”, OJSC “NLE”, OJSC “IPP”, CJSC Baltic Stevedore Company, CJSC “SFP” and LLC NFT (joint venture).
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