MDA Q1 2020 Release
MDA Q1 2020 Presentation
IFRS Q1 2020 Consolidated statement
IFRS Q1 2020 Consolidated statement_EXCEL 

Moscow, 5 June 2020 – ALROSA, a global leader in diamond production, announces its IFRS results for Q1 2020.

• Revenue in Q1 was RUB 63 bn (-3% q-o-q) amid a 14% decline in the average realised price, and decrease in other revenue and income from grants.

On a y-o-y basis, revenue decreased by 11% as a result of lower sales volumes (down 11% y-o-y) caused by COVID-19 and price index reduction.

• EBITDA¹ increased to RUB 30 bn (up 2% q-o-q) mainly due to seasonal reduction in social and SG&A expenses. A 4% y-o-y reduction resulted primarily from lower sales volumes (down 11%).
• EBITDA margin expanded to 48% (up 2 pp q-o-q and up 4 pp y-o-y) on the backdrop of lower costs.
• Free cash flow (FCF) in Q1 went up by 30% q-o-q to RUB 22 bn amid a stronger operating cash flow (up RUB 0.7 bn) and a seasonal reduction in CAPEX (down RUB 4.3 bn).

A 16% y-o-y decline was mostly driven by a RUB 5.2 bn decrease in the operating cash flow partially offset by a RUB 1.2 bn reduction in CAPEX.

• Net profit amounted to RUB 3 bn, having dropped by RUB 9 bn q-o-q (down 87% y-o-y) due to non-cash factors (foreign exchange loss of RUB 21 bn resulting from the revaluation of foreign currency debt).
• Net debt / LTM EBITDA stood at 0.7x as at the end of Q1 2020 (flat q-o-q).
• 2020 guidance:
• Production – 28–31 m ct (vs the previous guidance of 34 m ct);
• CAPEX – RUB 20 bn (vs the previous guidance of RUB 22 bn).

Alexey Philippovskiy, ALROSA’s CFO, commented:

“Steps taken in 2019 to restore the balance of supply and demand in the diamond pipeline gave the industry a healthy start into 2020: the retail and midstream stocks normalised, the leverage of Indian polishers returned to historical averages, and the key sales markets saw a recovery in consumer activity.

In January, cutters demonstrated steady demand on the back of robust retail sales during Christmas holidays, but after mid-February the demand and customer activity declined amid the uncertainty surrounding the COVID-19 pandemic. In March, the situation escalated, with sales dropping considerably as the restrictions were being introduced around the world. In April, the Company began to provide its long-term customers with unprecedentedly flexible terms, allowing them to completely suspend purchases and transferring the contractual volumes to subsequent months. Today, we see diamond jewellery sales bouncing back in China and other Asian markets, which is expected to drive diamond demand up as soon as in July –August.

In terms of our production operations, in an effort to cut operational expenses, we decided to reduce the production target from 34.2 m to 28–31 m carats, and cut CAPEX from RUB 22 bn to RUB 20 bn.

In Q1 2020, diamond sales and total revenue amounted to 9.4 m carats and $904 m (including $23 m from the sale of polished diamonds) (down 1% q-o-q and 10% y-o-y), respectively. FCF stood at RUB 21.8 bn. Net debt / EBITDA as at the end of Q1 2020 remained at 0.7x.

In early May, ALROSA’s Supervisory Board recommended to distribute RUB 19.4 bn as dividends for H2 2019, i.e. 100% of FCF for the period, the maximum amount allowed by the dividend policy.

On 22 May, the Company issued 5-year exchange-traded bonds in the amount of RUB 25 bn. The coupon rate of 5.75% per annum demonstrates investor confidence in ALROSA's financial stability and the diamond market outlook in general.”

¹ EBITDA stands for the Group’s earnings or loss for the period adjusted for income tax expenses, financial income and expenses, share of net profit of associates and joint ventures, depreciation and amortisation, impairment and disposals of property, plant and equipment, gain or loss on disposal of joint ventures, revaluation of investments, and one-off items.

² FCF (free cash flow) is the operating cash flow calculated in accordance with the International Financial Reporting Standards (IFRS), net of capital expenditure (posted as Purchase of Property, Plant and Equipment on the consolidated IFRS statement of cash flows).

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