NLMK: overview, reporting and dividends.

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He promised to make a small overview of the company, but here the data for the III quarter arrived, and the news on dividends in December.

Novolipetsk Metallurgical Plant (NLMK) is an international steel producer with a vertically integrated business model.

The date of foundation is considered to be privatization, which took place on September 24, 1993.

Production facilities of the company

NLMK Group’s share in Russian production:

The share of the global slab market is 21%.

The shares are traded on the Moscow Stock Exchange, as well as in the form of GDRs (Global Depositary Receipts) on the London Stock Exchange (1 GDR = 10 shares).

Total authorized capital: 5,993,227,240 ordinary shares.

Shares are traded in a lot: 1 lot = 10 shares.

I would like to point out right away that NLMK is considered a dividend story on the Russian stock market.

In the period 2016-2018, the company paid dividends 3 times a year (before that — 2 times a year), in 2019 — 4 times, and by the end of 2020 (taking into account the upcoming divas in December) — as much as 5 times.

In 2019, the company announced the start of the implementation of Strategy 2022, which provides for investment projects and costs for internal development.

And according to the updated investment policy, the company plans to pay out 100% of free cash flow to shareholders if the Net debt / EBITDA ratio is less than or equal to 1.0x, and 50% of free cash flow if the Net debt / EBITDA ratio is higher than 1.0x … At the same time, to calculate free cash flow for the purpose of paying dividends, the Group will use a normalized investment ratio of $ 700 million per year if the actual investment is higher than this level.

Thanks to Strategy 2022, the company plans to achieve + $ 1.25 billion to EBITDA in annual terms (by 2023), of which $ 0.5 billion per year will be obtained through programs to improve operating efficiency without investment.

I will not reprint the entire program. If you want, you can read

Consider this a New Year’s gift.

Revenue:

This is due to a decrease in prices for metal products and an increase in the share of semi-finished products in sales by 4 pp. up to 40%.

EBITDA:

The reason is the decline in revenue.

EBITDA margin:

Free cash flow:

It is connected with a decrease in EBITDA and an increase in investments within the framework of the Strategy 2022.

Net profit:

Without the impact of this non-cash transaction, the net income would have been $ 798 million.

I specifically added this comment to the reporting of NLMK Group Vice President Shamil Kurmashov in order to better convey the essence of what is happening: the coronavirus, pandemic and quarantine affected the company, but the indicators began to recover as the situation improved.

On the whole, the company has not shown itself badly and continues to adhere to the strategy. She didn’t even donate dividends.

NLMK cannot be called a company that benefits (or is not affected by the situation) from the processes taking place in the world related to the coronavirus.

Although, in general, the shares of this issuer feel quite confident and after the March collapse they practically renewed their historical maximum (September 2018).

The same factor can be counted among the negative ones, since in case of unfavorable news, a correction may occur — the cost already includes reporting and generous New Year dividends (which, in addition, are the 5th for the year).

On the other hand, there are good long-term prospects based on the 2022 Investment Strategy. And, as I said, NLMK is a history of value, that is, it pays dividends on a regular basis.

It is also noteworthy that NLMK shares began to grow faster after the release of reports from Severstal and MMK — direct competitors in the field of metallurgy.

Of this trinity, I have always liked NLMK better (although MMK, for example, is fundamentally cheaper and more undervalued). So I already included them in my portfolio and then averaged them once.

The hand itself is trying to buy more, but for now I will refrain — I will wait for a correction and a better price (at the moment the company is already highly valued).

I plan to be with this company for a long time, so there is no hurry.

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