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24 June 2014
Investor Presentation – Q1 2014 Results
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Disclaimer
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The below applies to the presentation (the “Presentation”) following this important notice, and you are therefore advised to read this important
notice carefully before reading, accessing or making any other use of this Presentation.
This Presentation contains statements about future events and expectations that are forward-looking statements. Any statement herein (including,
without limitation, a statement regarding our financial position, strategy, management plans and future objectives) that is not a statement of
historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause ALROSA’s
actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied
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as at the date hereof (unless indicated otherwise) and are subject to change without notice. ALROSA assumes no obligation to update,
supplement or revise the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors
affecting these statements.
This Presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or
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This Presentation has not been independently verified. No representation or warranty or undertaking, express or implied, is made as to the
accuracy, completeness or fairness of the information or opinions contained in this Presentation. None of ALROSA nor any of its shareholders,
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This Presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any
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Some numerical figures included in this Presentation have been subject to rounding adjustments.
By reviewing and/or attending this Presentation you acknowledge and agree to be bound by the foregoing.
3
Q1 2014 Key Financial Highlights
Diamond sales Diamond sales reached record 12.7 mln carats, +23% higher y-o-y
Revenue Revenue increased by +43% compared to Q1 2013, amounting to RUB56.3 bn as a result
of increased gem-quality rough diamond sales volume and the ruble weakening
EBITDA EBITDA increased 1.6 times compared to Q1 2013 and reached RUB26.1 bn mainly due to
an increase in gross profit from diamond sales; EBITDA margin increased to 46%
Net profit Net profit decreased by -3% y-o-y and amounted to RUB6.1 bn as a result of the increased
FX loss
Free cash flow Free cash flow increased 2.5 times compared to Q1 2013, reaching RUB20.1 bn as a result
of increased cash flow from the rough diamond sales and inventory sell-down
Net debt / EBITDA Net debt reduced by -7%, net debt to EBITDA ratio is at the level of 1.5x
4
Financial Results
RUB mln Q1 2014 Q4 2013 Q1 2013 Q1 2014
vs.
Q4 2013
Q1 2014
vs.
Q1 2013
Operational Figures
Production, mln cts 7.9 9.9 7.5 (20%) 5%
Sales, mln cts 12.7 10.8 10.3 18% 23%
IFRS Income Statement
Revenue 56,291 47,127 39,459 19% 43%
Cost of sales (27,881) (22,072) (19,935) 27% 40%
EBITDA(1) 26,098 17,831 15,825 46% 1.6х
EBITDA margin 46% 38% 40% - -
Net profit 6,059 8,802 6,258 (31%) (3%)
Net profit margin 11% 19% 16% - -
EPS, RUB 0.77 1.18 0.79 (35%) (3%)
IFRS Balance Sheet
Cash and cash equivalents 16,143 9,270 12,387 1.7х 30%
Total debt 136,931 138,591 132,298 (1%) 4%
Net debt 120,788 129,321 119,911 (7%) 1%
Net debt / EBITDA 1.5x 1.9x 1.9х - -
Equity attributable to owners of OJSC ALROSA 167,606 159,800 137 486 5% 22%
IFRS Cash Flow Statement
Cash inflow from operating activities before changes in working capital 25,783 17,952 15,022 44% 1.7x
Income tax paid (3,456) (2,030) (2,903) 1.7х 19%
Changes in working capital 6,098 9,839 2,427 (38%) 2.5х
Net cash inflow from operating activities 28,425 25,761 14,546 10% 2.0х
Purchase of property, plant and equipment (8,338) (14,414) (6,579) (42%) 27%
Free cash flow(2) 20,087 11,347 7,967 1.8х 2.5х
(1) As used in this presentation, EBITDA is defined as operating profit adjusted for depreciation, loss on disposal of property, plant and equipment
(2) As used in this presentation, Free cash flow is defined as net cash inflow from operating activities less purchase of property plant and equipment Note:
5
Q1 2014 revenue increase was mainly driven by increased diamond sales
Revenue in Q1 2013 Increase in revenue from
diamond sales
Increase in revenue from
sales of gas Increase in other revenue (1) Revenue in Q1 2014
39,459
15,271 1,123 438
56,291
+43%
Revenue dynamics RUB mln
+42% 2,7х +17%
Revenue in Q4 2013 Increase in revenue from
diamond sales
Decrease in revenue from
sales of gas Decrease in other revenue (1) Revenue in Q1 2014
47,127
9,357
(30) (163)
56,291 +19%
+22% (5%) (2%)
Note: (1) Other revenue includes: transportation, social infrastructure, trading, construction activity, other activities
6
Higher diamond sales volume and ruble depreciation caused an increase in gem-quality rough diamond revenue in Q1 2014 compared to the same period of the previous year
Gem-quality
rough diamond sales
in Q1 2013
Sales volume
growth
Gem-quality average diamond
price decrease Ruble depreciation
Gem-quality
rough diamond sales
in Q1 2014
34,136
8,868
(1,051)
6,743
48,696
+43%
Gem-quality rough diamond revenue dynamics RUB mln
Gem-quality rough diamond average price dynamics $/carat
Average price of sold gem-quality
rough diamonds
in Q1 2013
Average price decrease due to
change in product mix
Average price growth due to
increased demand
Average price of sold gem-quality
rough diamonds
in Q1 2014
158
(3)
0.3
155 (2%)
(2%) 0%
7
Higher diamond sales volume and ruble depreciation caused an increase in gem-quality rough diamond revenue in Q1 2014 compared to Q4 2013. Average price decrease was driven by changes in sales product mix
Gem-quality
rough diamond sales
in Q4 2013
Sales volume
growth
Gem-quality average diamond
price decrease Ruble depreciation
Gem-quality
rough diamond sales
in Q1 2014
39,905
16,350
(11,026)
3,467
48,696
+22%
Gem-quality rough diamond revenue dynamics RUB mln
$/carat
Average price of sold gem-quality
rough diamonds
in Q4 2013
Average price decrease due to
change in product mix
Average price growth due to
increased demand
Average price of sold gem-quality
rough diamonds
in Q1 2014
192
(43)
6
155 (19%)
Gem-quality rough diamond average price dynamics
(22%) +3%
8
Cost of production growth was mainly influenced by extraction tax, transportation costs and depreciation
Q1
2014
Q4
2014
Q1
2013
Q1 2014
vs.
Q4 2013
Q1 2014
vs.
Q1 2013
Wages, salaries and other staff
costs 7,876 8,475 7,642 (7%) 3%
Depreciation 3,806 3,322 3,211 15% 19%
Extraction tax 3,411 2,823 2,431 21% 40%
Fuel and energy 2,879 2,153 3,175 34% (9%)
Transport 1,368 979 460 40% 3,0х
Materials 1,157 2,019 1,035 (43%) 12%
Services 686 1,223 650 (44%) 6%
Other 178 33 109 5,4х 63%
Cost of production 21,361 21,027 18,713 2% 14%
Movement in inventory of
diamonds, ores and concentrates 6,163 909 955 6,8х 6,5х
Cost of diamonds for resale 357 136 267 2,6х 34%
Cost of sales 27,881 22,072 19,935 26% 40%
Q1 2014 cost of sales growth of +26% and +40% compared to Q4 2013 and Q1 2013 was driven by increased diamond sales
volume by +18% and +23% respectively, as well as increased sales volumes in other operations, including sales of gas
Extraction tax costs increase in Q1 2014 was due to increased volume of diamonds evaluated for MET calculation, as well as
its value growth as a result of ruble weakening. Extraction tax costs increase was also influenced by increased sales volumes
in other operations, including gas assets
Q1 2014 transportation costs increased by +40% compared to Q4 2013 and 3 times compared to Q1 2013 as a result of
additional expenses of goods transportation by trucks in winter due to reduced period of navigation on the Lena River in 2013
Depreciation growth in Q1 2014 occurred mainly due to increased gas production volumes, acquiring of Nizhne-Lenskoye,
new equipment commissioning at Severalmaz and increased charges at other diamond mining facilities
Production costs in Q1 2014 Cost of sales RUB mln
16% Extraction tax
37% Wages, salaries and other
staff costs
13% Fuel and energy
18% Depreciation
3% Services
6% Transport
5% Materials
less than 1 % Other
Other operating expenses decreased in Q1 2014 due to reduced exploration costs and social costs
Other operating expense
in Q1 2013 Decrease in exploration costs
Increase in
social costs
Increase in
other operating expenses(1) Other operating expense
in Q1 2014
RUB mln
Analysis of other operating expenses
(1) Other operating expenses include taxes other than income tax, extraction tax and payments to social funds, loss on disposal of property, plant and equipment, other operating expenses Note:
(14%)
9
Other operating expense results
in Q1 2013
Other operating expense
in Q4 2013 Decrease in exploration costs
Decrease in
social costs
Increase in
other operating expenses(1) Other operating expense
in Q1 2014
6,706
(1,102)
(1,414)
104
4,294 (36%)
4,977
(527)
11
(167)
4,294
EBITDA in Q1 2014 increased due to a growth in gross profit from diamond sales
EBITDA
in Q1 2013
Increase in
gross profit (1)
Decrease in exploration
costs Other income Increase in SG&A
Increase in
social costs
EBITDA
in Q1 2014
15,825
9,558 527 263
(64) (11)
26,098
1,6х
46%
40%
EBITDA margin
EBITDA factor analysis
10
EBITDA
in Q4 2013
Increase in
gross profit (1) Decrease in SG&A
Reduction of
social costs
Decrease
in exploration costs Other income
EBITDA
in Q1 2014
17,831
3,748
1,936 1,414 1,102 67
26,098
46%
38%
+46%
RUB mln
Note: (1) Gross profit excluding depreciation
Net profit decreased in Q1 2014 vs Q1 2013 due to increased exchange loss
Net profit
in Q1 2013 EBITDA growth Other (1) Increase
in exchange loss
Increase in income tax
expense
Increase
in depreciation
Net profit
in Q1 2014
6,258
10,273 272
(8,862)
(1,210) (672)
6,059
(3%)
Net profit factor analysis
11 (1) Other include decrease in loss on disposal of property, plant and equipment, higher income from associates, increase in interest expenses
RUB mln
Note:
Total Capex grew y-o-y mainly due to increase in maintenance expenses
Capex
in Q1 2013 Maintenance Expansion Gas assets
Non-mining
operations Social infrastructure
Capex
in Q1 2014
Q1 2014 4,732 2,744 190 588 84 8,338
Q1 2013 2,960 2,596 403 535 85 6,579
6,579
1,772 148
(213)
53
(1)
8,338
+27%
Capital expenditure dynamics
+6% +60% (53%) (1%) +10%
Capital expenditure
12
RUB mln
Expansion Capex grew mainly due to continued construction of the Udachny underground mine
Expansion Capex
in Q1 2013
Udachny underground mine 1,299 806
Aikhal underground mine 405 350
Mir underground mine 261 321
Open-pit mines at
Severalmaz 634 951
Botuobinskaya open pit 145 168
Expansion Capex
in Q1 2014
+6%
2,596
493
55
(60)
(317)
(23)
2,744
Expansion Capex dynamics
Q1
2014
Q1
2013
Capital expenditure
2,744 2,596
13
RUB mln
Cash inflow from changes
in working capital
In Q1 2013
Decrease in
inventories
Decrease in trade and
other receivables
Decrease in changes in trade
and other payables
Decrease in changes in
taxes payable
Cash inflow from changes in
working capital
In Q1 2014
14
Cash inflow from changes in working capital was driven by decrease in inventories
2,427
4,125
925
(969)
(410)
6,098
Changes in working capital
2,5х
RUB mln
15
Free cash flow increased due to a growth in operating profit and reduction in investments in working capital
Free cash flow
in Q1 2013
Increase in
operating profit
Reduction of investments in
working capital Increase in Capex
Increase in
income tax expense Free cash flow
in Q1 2014
7,967
10,761
3,671
(1,759) (553)
20,087
Free cash flow
2,5х
RUB mln
3,871
4,130
3,767
4,210
31.12.2012 31.12.2013 31.03.2014 today
16
The share of long-term debt is 88%, debt increased to create a liquidity source for upcoming in 2014 Eurobond repayment
Dynamics of bank loans and public debt instruments
585
600
500
1,185
435
1,090 1,000
Q4 2014 2015 2016 2017 2020
Bank loans Rouble bonds Eurobonds
Structure of bank loans and public debt instruments As of 24 June 2014
50% public debt instruments
50% Bank loans 36% Eurobonds
14% Rouble bonds
14% Ruble-denominated debt 86% US dollar-denominated debt
88% long-term debt 12% short-term debt
Debt maturity profile of bank loans and public debt instruments
$ mln
As of 24 June 2014, $ mln
24.06.2014
Обновить 23 июня
по курсу на 24 июня
17
Appendix
18
Diamond sales overview
2012 2013 Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013 Q2
2013
Q3
2013
Q4
2013
Q1
2014
Revenue from the diamond segment,
RUB bn,
incl.:
136.4 149.3 34.5 36.0 23.3 42.6 36.3 37.7 33.1 42.2 51.5
diamond revenue 130.4 144.2 33.0 34.1 21.9 41.5 35.0 36.3 31.7 41.0 50.1
gem-quality rough diamonds 127.2 140.5 32.2 33.3 21.0 40.7 34.3 35.9 30.3 39.9 48.7
industrial rough diamonds 3.2 3.7 0.8 0.8 0.9 0.8 0.7 0.4 1.4 1.1 1.4
polished diamonds 4.6 4.5 1.2 1.3 0.8 1.3 0.9 1.2 1.2 1.2 1.1
resale of diamonds 1.4 0.6 0.3 0.6 0.5 - 0.3 0.1 0.2 - 0.4
Rough diamond sales volume, mln cts,
incl.: 33.2 38.0 9.5 7.7 5.1 10.8 10.3 8.8 8.0 10.8 12.7
gem-quality rough diamonds 22.4 26.7 6.1 5.5 3.4 7.4 7.6 6.9 5.4 6.7 9.5
industrial rough diamonds 10.8 11.3 3.4 2.2 1.7 3.4 2.7 1.9 2.6 4.1 3.2
Average selling price, $/ct,
incl.: 134.3 126.1 121.6 152.4 142.8 128.4 117.9 138.0 129.1 121.7 118.5
gem-quality rough diamonds 193.9 175.9 183.9 207.8 212.4 183.3 157.7 173.0 185.0 191.7 154.6
industrial rough diamonds 10.1 9.0 8.8 12.0 8.8 11.0 9.1 8.0 12.8 7.0 12.0
Thank you!
Foreign Affairs and Analytics
Investor Relations
1-st Kazachy Per., 10-12 Moscow 119017 Russia
+7 495 745 58 72 [email protected]
