Page 119 - RusRPTDec19

MMK’s 2020 EBITDA may fall by circa $100mn-140mn (6-8%) under two different scenarios. The company did not guide the scheduled works and did not yet give planned output reduction estimate," BCS GM analysts wrote, while maintaining the Sell call on the name with the target price of $7 per GDR.
● Norilsk Nickel
MMC​ ​Norilsk Nickel​ may cut dividend payments from 2022 as the world’s largest refined nickel and palladium producer plans to divert more money to expanding output​. Nornickel may raise capital expenditure by more than 40% from next year’s target to as much as $4bn in 2022, according to a presentation for an investor day in London. It expects spending to remain at that level through 2025 and then ease to below $2bn a year until the end of the decade. The Russian producer has the highest profit margin among peers that include commodity giants BHP Group and Rio Tinto Group. Nornickel’s dividend ratio is also one of the highest in the industry, partly because of an accord between billionaire chief Vladimir Potanin and the second-largest shareholder, United Co. Rusal. The payment for last year was equal to about 60% of profit. Nornickel is now looking to free up more cash to significantly expand production to tap growing demand for metals, partly from both the electric and traditional auto sectors. If it fully completes the plan, including the three stages of its Arctic Palladium project, then nickel output would jump as much as 30% from 2017’s level by 2030 and platinum-group metals output could almost double. Copper production may climb 40%, the presentation showed.
The total investment in the Arctic Palladium joint venture of metals major Norilsk Nickel​ and ​Russian Platinum​ is estimated at $15bn, ​as the production of platinum group metals (PGM) at the Taymir peninsula set to be launched in 2024. The planned output of the joint venture stands at 7mn tonnes of ore annually, reaching 21mn by 2030. The investment in 2019-2014 is planned at $2.8bn-3.2bn.
Russian metals major ​Norilsk Nickel​ held a capital markets day, and announced capital expenditure will rise to $2.5bn-$2.8bn and $3bn-$3.4bn in 2020 and 2021​, respectively, from $1.3bn-1.5bn in 2019. In the medium term, 2022-2025 capex of NorNickel is expected at $3.5bn-4.0bn, while in 2026-30 investments are expected to fall back to below $2bn. Notably, during the peak of investment activity in 2022-2025, the company will cut the dividends, as the leverage is expected rise to more than 1.8x after 2020, although the new dividend target was not specified.
Norilsk Nickel​ has a structural deficit in nickel and palladium​. The company reiterated its estimates on the global nickel market balance (a deficit in 2019-2020), seeing a structural deficit afterwards; however, it cut its copper market deficit estimates to just 40/20kt in 2019-20F. It also reduced – but more slightly – its Palladium deficit, although to a still sizable 4% of the global market, while the company now expects deficit to remain in place until 2025.
Norilsk Nickel​ Introduces a long-term vision - far beyond the tenor of shareholder agreement. ​For the first time since conclusion of shareholder agreement between major shareholders on 10 December 2012, Norilsk Nickel management gave long-term vision of production and capex until 2030F - long after tenor of shareholder agreement until 10 December 2022. This is dictated primarily by addition of long-term growth projects - South Cluster and Artic
119​ RUSSIA Country Report​ December 2019 ​ ​www.intellinews.com