IR-release: MDA Q3 / 9M 2018
Presentation: MDA Q3 / 9M 2018
IFRS Consolidated Statements for Q3 / 9M 2018
IFRS Consolidated Statements for Q3 / 9M 2018_excel

Moscow, 08 November 2018 – ALROSA, the world's leader in diamond mining, announces its IFRS financial results for Q3 and 9M 2018.

Key highlights for 9M 2018

• Revenue increased by 11% to RUB 238 bn, on the back of higher price index and average diamond selling prices and a better sales mix, despite a 9% drop in sales in carats.
• EBITDA grew by 29% to RUB 129 bn, supported by higher top line and slightly lower production costs.
• EBITDA marginexpanded by 7 p.p. to 54%.
• 9M net profit grew by 33% y-o-y to RUB 82.5 bn, on stronger EBITDA.
• Free cash flow (FCF) grew by 38% on profitability expansion while investments increased by RUB 2.4 bn. An additional driver for the FCF growth was a working capital release due to increased sales from inventory.

Key highlights for Q3 2018

• Revenue decreased by 3% q-o-q to RUB 70.1 bn, on the back of weaker sales in carats (down 26% q-o-q) amid rising average prices, while a 19% y-o-y growth was driven by a higher price index and a better sales mix.
• EBITDAin Q3 declined by 3% q-o-q to RUB 40 bn, due to a 26% drop in sales in carats, which was partially offset by higher average selling prices supported by cost control measures. A 47% y-o-y growth resulted from lower costs and better prices.
• EBITDA margin in Q3 remained flat at 57%.
• Net profit in Q3 decreased to RUB 24.2 bn (down 5% q-o-q). An 87% y-o-y growth was driven by the improved market environment.
• Free cash flowincreased to RUB 23.6 bn (up 13% q-o-q and two-fold y-o-y) due to a stronger operating cash flow (up 15% q-o-q and 75% y-o-y).
• Net debt increased from RUB 6 bn to RUB 36.6 bn, mainly due to a decrease in cash following a 2017 dividends payment (RUB 38.6 bn).
• Net debt to EBITDA was at 0.2x, below the target range of 0.5–1.0x.
• Dividends:on 30 September 2018, the General Meeting of Shareholders approved the 6M 2018 dividends of RUB 5.93 per share (70% of FCF).

Outlook: our guidance for 2018 sales has been revised to 37–38 million carats due to weaker demand for small-size rough diamonds in 2H 2018.

ALROSA’s CEO Sergey Ivanov commented on the results:

“Our strong financial performance was driven by the recovery in demand for end products and higher prices, coupled with our efforts to improve margins through a more aggressive sales policy and implementation of the operational excellence programme. The Company increased its EBITDA margin by 7 p.p. to 54%, reaffirming its industry leadership both in market share and profitability. Stronger operating cash flow and a more balanced capex profile helped boost our free cash flow by 38% to RUB 86 bn and, ultimately, improve the Company's financial stability, with net debt to EBITDA ratio down to 0.2 vs 0.7 in the previous year.

In October 2018, the Company started commercial mining operations at the Verkhne-Munskoye deposit, which will produce 1.8 million carats of diamonds per year. With the deposit put on stream and an increased output at the existing assets, ALROSA will be able to partially make up for the volumes lost due to the shutdown of the Mir underground mine, and increase diamond production to 38 million carats in 2019.

On recommendation of the Supervisory Board, ALROSA's shareholders approved 6M 2018 dividends of RUB 5.93 per share based on a stable 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 net of investments (capital expenditure) in the core business in accordance with the IFRS.

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