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TRANSCRIPT
ALROSA
MOSCOW, 5 JUNE 2020
Q1 2020 IFRS RESULTS
DISCLAIMER
For notes: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 by such forward-looking statements. Past performance should not be
taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future
performance. The information and opinions contained in this document are provided 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 s tatements.
This Presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solici tation of an
offer to buy or acquire any securities in any jurisdiction or an inducement to enter into any investment activity. The contents hereof
should not be construed as investment, legal, tax, accounting or other advice, and investors and prospective investors in securities of
any issuer mentioned herein are required to make their own independent investigation and appraisal of the business and financ ial
condition of such issuer and the nature of the securities and consult their own advisers as to legal, financial, tax and other related
matters.
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, directors, officers or employees, affiliates, advisors, representatives nor any other person accepts any liability
whatsoever for any loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection
therewith. No reliance may be placed for any purpose whatsoever on the information contained in this Presentation or on its
completeness, accuracy or fairness.
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 locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to
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Presentation and/or such information may come are required to inform themselves thereof and to observe such restrictions.
Some 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
ALROSA: COVID response
Team
Preventive measures taken for
at-site workers: daily control of
the temperature at entrance,
provision of masks, etc.
Shift approach for unique
specialists to reduce risk of
possible contamination
WFH mode for most of the
administrative staff ahead of
official quarantine been
introduced
Operations
Crisis management committee
was set up
Output reduction for 2020,
scenarios for 2021-22 assessed
Capex revised downwards
Cost cutting measures
(e.g. G&A)
Customers
Added flexibility to customers
April-June: 100% of purchase
volumes can be deferred
Launch of a digital platform for
large-stone tenders for remote
purchase
Communities
~RUB 400 m allocated to safety
measures and medical
equipment, incl. face masks,
testing systems and ventilators
(both for company and local
hospitals)
Development of telemedicine
networks for the remote areas
DIAMOND MARKET OVERVIEW
4
Diamond jewelry demand in Q1’20
After strong start in January
COVID-19 pandemic led to stores
closure in February-March and
stock-piling at retail
Polishers structurally reduced stocks
Better offtake in H2’19 allowing to
bring supply and demand into
balance by the year-end
Mid-stream decreases almost to
zero rough purchases on lock-
downs/travel restrictions
Miners1 adjusted diamonds supply
$ bn
Major diamond producers adjusted
supply to stock-building at mid-
stream and price decreases
~30% of diamond capacity was
closed in March-April
7.3%
10.9%
7.1%
4.4%
(0.6%)(1.3%)
3.0% 2.6%
(6.1%)
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20
3.2
5.7
2.3
3.3
Net imports
(rough diamonds)
Net exports
(polished diamonds)
Q1 2019 Q1 2020
-29% YoY
-41% YoY
4.0
3.3
2.5
Q1 2019 Q4 2019 Q1 2020
-36%
Source: Company data and analysis, GJEPC, Bureau of Economic Analysis. 1. Data based on results of ALROSA and other diamond producers with a market share totaling c. 75% in 12M 2019.
$ bnyoy change, U.S. PCE on jewelry
2020 output cut down
38.5 34.228-31
2019 2020
(initial)
2020
(revised)
m ct
Output cuts at the assets with higher
variable costs, and with lower vs average
profitability
…thus helping reduce cash outlays and
speed up w/c release once demand
recovers
- 3-6 m ct
29 2620 22 ~20
2019 2020
Initial Revised New
MANAGING THROUGH THE DOWNTURN
Source: Company data and analysis.
5
Responsibility over customers
Mining majors helped industry destock by
the end of 2019 and continued to support
in 2020
E.g. ALROSA decreased minimum allowed
contract allocation level to 50% from
March 2020
… in April - June‘20 up to 100% of
volumes could be deferred
RUB bn
Capex downscaled
A number of small projects were
rescheduled or put on hold
No impact on operational performance
2020 capex outlook was revised
downward from RUB 22 bn by
RUB 1-2 bn
80% 80%
70%
70%
55%
55%
50%
50%
Jan'18 Sep'18 Jul'19 Mar'20 Jun'20
In April-June ‘20 up
to 100% of min
allowed volumes
could be deferred
Min. allowed contract allocation level
10.1 6.3 4.7 5.3
7.96.0 4.3 5.9 7.1
3.2
2.7 2.0
3.7 2.7
2.32.1
2.2 2.4
13.4
9.0
6.7
9.0 10.6
8.36.4
8.2 9.4
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
Gem-quality diamonds Industrial quality diamonds
ALROSA ROUGH DIAMOND SALES
6
1,556
1,034 933 802 969780
585877 868
26
2316
22
18
16
16
11 13
1,582
1,057949
824988
796601
888 881
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
Gem-quality diamonds Industrial quality diamonds
Source: Company data and analysis.
Q1 diamond sales went up by 15% qoq (-11% yoy)
Q1 diamond sales by value were down by 1% qoq (-11% yoy)
$ mn
m ct Q1 ’20:
o sales up by 15% qoq to 9.4 m ct amid demand
recovery in the first half of the quarter.
o sales declined by 11% yoy due to sharp drop in
consumer activity since the end of February on the
back of COVID-19 pandemic
o sales in USD amounted to $881 m (down 1% qoq)
with a 15% qoq sales growth in carats due to
changes in the sales mix (growth in share of small-
size diamonds)
o An 11% yoy reduction in sales in USD came as a result of
lower sales in carats (down 11% yoy)
-11%
-11%
Share
25%
75%
Share
2%
98%
+15%
-1%
12.3 11.715.5 17.0 14.3 15.9
21.7 22.6 21.1
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
INVENTORIES
7
70% 80% 82%
17%13% 12%
13% 6% 6%
14.3 22.6 21.1
Q1 '19 Q4 '19 Q1 '20
Other
Work in progress
Finished goods
Source: Company data and analysis.
1. Diamond inventories at mining and processing divisions.
Q1 ALROSA's diamond inventories were down by 6% qoq
ALROSA's diamond inventories structure
m ct, end of the period
m ct, end of the period Q1 ‘20 diamond inventories were down by 1.5 m ct
(-6% qoq) to 21.1 m ct as strong sales exceeding
seasonally lower production
48% yoy growth in inventories (+6.8 m ct) due to
both decreased sales and increased output
-6%
+48%
-6%
1
PRICE DYNAMICS
8
1% 2% 2%
(2%) (3%) (2%) (3%) (2%) (1%)
11%6%
22%
(23%)(19%)
5% 4%9%
(17%)
154 164
199
153
123 130 135148
123
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
LFL price index change ARP change
Source: Company data and analysis.1. Average realized prices (sales revenue divided by sales volumes in carat terms) are also impacted by changes in the product mix throughout the reported period.2. Average index change of like-for-like diamonds prices (excl. +10.8 carats).
Average price1 for gem-diamonds were flat yoy
$/ct Q1 ’20 like-for-like price index (LFL PI) was
-1% qoq
Q1 ’20 average realized prices (ARP) for gem-
quality diamonds declined by 17% qoq (flat
yoy) to $123/ct due to the high base effect of
Q4 ’19, which saw increased demand for large-
size diamonds
3% 3%
(6%)(9%)
21%
(19%)
136
164
133
2017 2018 2019
Average price2
70 65 6331 30 30
44% 46%48%
Q1 '19 Q4 '19 Q1 '20
Revenue EBITDA EBITDA margin
FINANCIAL HIGHLIGHTS
9
Q1 EBITDA margin amounted to 48%
Strong cash flow generation capability
RUB bn
RUB bn
Q1 ‘20:
o Revenue: RUB 63 bn, -3% qoq due to decrease
of average realized prices by 14%, decline of
other revenue and income from grants
o EBITDA: RUB 30 bn, +2% qoq on lower costs, -
4% yoy
o Profitability up by 2 pp qoq (+4 pp yoy) to 48%
o FCF grew to RUB 22 bn (+RUB 5 bn qoq) on
limited capex and lower working capital build up
o Net debt / LTM EBITDA was at 0.7x (flat qoq)
26
1722
Q1 '19 Q4 '19 Q1 '20
Source: Company data and analysis.
56 56
11 0.03(11) (0.1)
Q4 '19
Revenue
Sales
volume
Sales mix Pricing
like-for-like
FX Q1 '20
Revenue
GEM-QUALITY DIAMONDS REVENUE DRIVERS
10
6456
5(7) (4)(2)
Q1 '19
Revenue
Sales
volume
Sales mix Pricing
like-for-like
FX Q1 '20
Revenue
Source: Company data and analysis.
Q1 gem-quality rough diamond revenue bridge (qoq)
Q1 gem-quality rough diamond revenue bridge (yoy)
RUB bn
RUB bn Q1 ‘20 gem-diamond revenue was flat qoq to RUB
56 bn due to :
o (+) 19% increase in sales volumes (in carats)
o (-) weaker product mix
o (-) LFL index change and FX impact were immaterial
12% decrease yoy driven by:
o (-) 10% reduction in sales volumes (in carats)
o (+) normalized product mix
o (-) softer like-for-like prices (av. index change -8% yoy)
o (-) FX rate impact on stronger RUB
14 1215
1914 15 14
1715
34
1915 16
25
17
10
18 18
48
31
30
34
39
3225
35 33
13.4
9.0
6.7
9.0
10.6
8.3
6.4
8.2
9.4
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
Non-production sales costs Production related sales costs Sales, m ct
COSTS DYNAMICS
11
Source: Company data and analysis.
Q1 total cost of sales were down by 7% qoq
RUB bn Q1 ‘20 total costs were down by 7% qoq to RUB
32.8 bn due to:
o Production-related costs were up by 2% qoq (+RUB 0.3
bn) on +15% sales volumes growth partially offset by
fuel & energy and material expenses decrease
(see p. 23)
o Non-production costs were down by 15% (-RUB 2.6 bn)
mostly driven by decrease of social expenses, SG&A
cost cuttings and lower MET (see p. 24)
16% yoy decrease driven by:
o Production-related cost of sales down -26% (-RUB 6.5
bn) mostly due to decrease of sales in carats (see p. 23)
o Non-production costs up by 1% (+RUB 0.1 bn) driven by
increase of SG&A, exploration and other operating
expenses with lower MET expenses (see p. 24)
- Total cost of sales
30 30
6
5(10)
(1) (0.1)
Q4 '19
EBITDA
Sales
volume
Sales mix Pricing
like-for-like
FX Other Q1 '20
EBITDA
PROFITABILITY DRIVERS
12
31 30
52(2)
(5) (2)
Q1 '19
EBITDA
Sales
volume
Sales mix Pricing
like-for-like
FX Other Q1 '20
EBITDA
Source: Company data and analysis.
1. Mainly due to decrease of SG&A, extraction tax and fuel and energy expenses (+RUB 4.2 bn).
2. Mainly due to decrease of extraction tax expenses (+RUB 1.3 bn) and change in ore and sands movement (+RUB 1.5 bn)
Q1 EBITDA bridge (qoq)
Q1 EBITDA bridge (yoy)
RUB bn
RUB bn Q1 ‘20 EBITDA was up by 2% qoq driven by:
o (+) 15% on volumes growth: net impact +RUB 6 bn (revenue
+RUB 11 bn, COGS down: -RUB 5 bn)
o (-) sales mix: -RUB 10 bn
o (-) like-for-like prices: -RUB 1 bn
o (-) FX rate: -RUB 0.1 bn
o (+) other factors (inlc. lower SG&A): net impact -RUB 5 bn
Q1 ‘20 EBITDA was down by 4% yoy driven by:
o (-) 11% reduction in sales volumes (in carats): net impact
-RUB 2 bn (revenue decline: -RUB 7 bn, COGS reduction:
+RUB 5 bn)
o (+) sales mix: +RUB 5 bn
o (-) like-for-like prices: -RUB 5 bn
o (-) FX rate: -RUB 2 bn
o (+) other factors: net impact +RUB 2 bn
1
2
3.34.8
5.9
3.2 2.4 2.81.6 1.7 1.6
1.0
1.6
2.1
3.6
1.21.5
2.53.4
0.8
0.6
0.7
0.8
0.2
0.40.3 0.6
1.9
0.3
4.8
7.2
8.8
7.0
3.94.5 4.6
6.9
2.6
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
Infrastructure
Equipment
maintenance
Mining capacity
CAPEX
13
Source: Company data and analysis.
Q1 capex was down by 62% qoq
Annual capex dynamics
RUB bn
RUB bn Q1 ’20 capex seasonally decreased by 62% qoq to
RUB 2.6 bn mostly due to lower capex in
equipment maintenance (-76% qoq) and
infrastructure (-85% qoq)
32% yoy decrease mainly driven by lower capex in
mining capacity (-34%, -RUB 0.8 bn):
o V.Munskoye deposit (-RUB 0.4 bn)
o Zarya pipe (-RUB 0.4 bn)
2020-2024E capex outlook was revised downward
-62%
2229 26
22 2120 2319 18 17
2020E 2021E 2022E 2023E 2024E
Initial capex outlook
Updated capex outlook
38 36 34 3227 28
20
2013 2014 2015 2016 2017 2018 2019
2.7 2.9
2.1
1.4
2.1 1.9
2015 2016 2017 2018 2019 Q1 '20
DEBT POSITION
14
3,0622,347
1,622 1,5351,895 2,100
2,781
1,374 1,494971 1,286 995
1.7x
0.5x 0.7x0.4x
0.7x 0.7x
2015 2016 2017 2018 2019 Q1 '20
Total Debt Net Debt Net Debt / EBITDA, x
Source: Company data and analysis.1. Including lease obligation (RUB 6.6 bn)2. Based on EBITDA and Net Debt denominated in rubles3. Excluding lease obligation (RUB 6.6 bn) and amortization of discount.4. For RUB-denominated debt based on FX rate as of 1 June 2020.
Sound financial profile
$ mn Total debt in Q1 ’20 increased by $0.2 bn to $2.1 bn
Q1 ‘20 liquidity up by 82% yoy to $1.1 bn
Net debt down by $0.3 bn to $1.0 bn (-23% yoy)
Net debt/EBITDA was flat qoq - 0.7x
Recent transactions:
March’20 - 2Y bank loan of $200 m at fixed rate
April-May ’20 - two 2Y bank loans
May’20 - placed local bonds of RUB 25 bn @ 5.75% pa
Weighted average debt maturity
years
21
Liquidity position Debt3 repayment schedule
$ mn $ mn
Cash and
Equivalents
(incl. deposits)
Credit Lines
494 500758
213
533
758
374
9
503358
2020E 2021E 2022E 2023E 2024E 2025E
Eurobonds Bank loans New debt (Apr-May'20)
1,105
3,221
4,326
31.03.2020
4
117.3163.2
25.627.1
0.9(7.7)
Q4 '19
Total Debt
Loan received Loan repaid FX Change of lease
liabilities
Q1 '20
Total Debt
79.6 77.4
0.1 21.1(21.8) (1.6)
(0.1)
Q4 '19
Net Debt
FCF Dividends
received
Net interest FX Other Q1 '20
Net Debt
DEBT ANALYSIS
15
Source: Company data and analysis.
Q1 Net Debt bridge
Q1 Total Debt bridge
RUB bn
RUB bn Q1 ‘19 net debt decreased by 2% qoq to RUB 77.4
bn mostly driven by:
o (-) increased +ve FCF (-RUB 21.8 bn)
o (-) dividends received (-RUB1.6 bn)
o (+) FX rate impact on weaker RUB (+RUB 21.1 bn)
Q1 ‘20 total debt increased by 39% to RUB 163.2 bn
due to:
o (+) 2Y $200 m bank loan received and bank overdraft
of RUB 9.6 bn provided
o (-) bank overdraft of RUB 7.7 bn repaid
o (+) FX rate (+RUB 27.1 bn)
o (+) change of lease liabilities (+RUB 0.9 bn)
0.7x 0.7xNet Debt/
LTM EBITDA
FREE CASH FLOW
16
29.5
30.0
24.5
21.8
0.5
1.4
(0.9)
(6.0)
(2.6)
Q4 '19 EBITDA
Changes in profitability
Q1 '20 EBITDA
Changes in NWC
Income tax
Other
Operating cash flow
Capex
Q1 '20 Free cash flow
Source: Company data and analysis.
Q1 ’20: EBITDA to Free cash flow bridge
RUB bn Q1 ‘20 FCF grew 30% qoq RUB 21.8 bn (RUB 16.8 bn in Q4
‘19) due to:
● (+) Profitability increase by 2% qoq to RUB 30.0 bn
● (-) Working capital build up by RUB 0.9 bn mainly due to:
o -RUB 2.0 bn – seasonal decrease in diamond inventories
o +RUB 4.3 bn – seasonal growth of sands at alluvials
o -RUB 2.0 bn – seasonal decline in materials
o +RUB 1.9 bn – increase in receivables due to FX impact on
weaker RUB and growth in receivables from a number of
suppliers
o -RUB 1.5 bn – increase in payables due to growth in advances
from customers
o +RUB 0.2 bn – other factors
● (-) Income tax payment (-RUB 6.0 bn)
● (+) Other (+RUB 1.4 bn) incl. FX rate impact on weaker RUB
(+RUB 1.1 bn)
● (-) Capex (-RUB 2.6 bn)
50%
50% 50%
76%
95%76% 78%
26%
37%
59% 52%
70%
100% 100% 100%
2014 2015 2016 2017 H1 '18 H2 '18 H1 '19 H2 '19
Payment ratio based on IFRS net income Payment ratio based on FCF
10.8 10.8 15.4
65.738.0
(12M’17)29.8
(H2’18)
42.7
(H1’18) 27.7
H1’19
2014 2015 2016 2017 2018 2019
DIVIDENDS
17
10.8 15.4
65.8
38.643.7
(H1'18) 28.3
(H1'19)
30.3
(H2'18)19.4
(H2'19)
2014 2015 2016 2017 2018 2019
Source: Company data and analysis.1. Dividends paid less than dividends accrued due to exclusion of dividends for treasury shares.2. H2 ‘19 dividends to be approved by AGM (scheduled on 24 June 2020)
Dividend accruals
Dividend payments1
RUB bn
RUB bn Dividend policy adopted in 2018: FCF-linked with the
payout ratios depending on the level of Net debt/LTM
EBITDA ratio
Board recommended H2 ’19 dividends RUB 19.4 bn (RUB
2.63/sh), or 100% H2’19 FCF.
AGM scheduled for 24 June
Dividend payout ratios
74.0
80.7
57.5
47.7
2
2
OUTLOOK
Market outlook
Long-term fundamentals of the industry remain strong – diamond jewelry remains the product of choice for “special moments in
life”, and being culturally accepted in new geographies
Gradual diamond demand recovery on the market after lifting of lockdowns around the world (based on China’s track record)
Supply of the rough diamonds continues to decrease as deposits deplete and a number of mines are under lockdowns
Company performance
2020 production is expected to decrease to 28-31 m ct (see p. 19)
2020 sales volumes will depend on real market demand. Sales strategy remains intact – “price over volume”
2020 capex outlook was revised downward to RUB 20 bn (down RUB 1-2 bn) with no effect on operational performance
Active cost cutting program being rolled out:
o Suspension of Aikhal underground mine – May 15 to Sept 30, 2020; Zarya pipe – May 15 to Dec 31, 2020; V. Munskoye – June 1 to Oct 1, 2020;
Zarnitsa pipe – May 1 to Dec 31, 2020, reduced production at Severalmaz from Q2’20
o SG&A savings for payroll – cut by 20% from April
o Ongoing savings from operational efficiency programs to support profitability
Source: Company data and analysis.
18
2020 PRODUCTION OUTLOOK
19
0.27
2.0 1.9
4.2
0.26
1.61.1
2.53.0
Zaria Aikhal V.Munskoe Severalmaz Total reduction
Initial outlook Updated outlook
Source: Company data and analysis.1. Other includes marginal production at Komsomolskaya and Zaria pipes of Aikhal Division, Zarnitsa pipe and alluvials of Udachny Division.
2020 output reduction by deposits
m ct
Management response to the downturn:
• 2020 “COVID crisis”:
o ‘20 output was revised from 34.2 m ct to 28-31 m ct,
which is expected to:
- Costs down by RUB 6 bn to translate into FCF
increase
- Unit cost (RUB/ct) up by ~5%
o Scenarios for ‘21-22 output cuts are being studied
Production outlook
m ct
Almazy Anabara
V.MunskoyeUdachny
Severalmaz
Nyurbinskaya
Jubilee
Aikhal
Mirny Division
Other1
Botuobinskaya
Aikhal Division
Udachny Division
Nyurba Division
International
Alluvials
Arkhangelskaya
Karpinskogo-1
Alluvials5.4 5.2
3.6 4.2
1.5
5.5 6.2
4.7 2.5
3.1 0.2
1.5
4.2
3.0 2.4
2.6 28-31
9.1
7.2
1.5
1.4 36.7
38.5
34.2
Potential to
produce up to
37-38 m ct
2018 2019 2020E 2021-30E
APPENDIX
17.9 20.116.1 17.0
19.7 21.618.0 18.5
16.2
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
ALROSA PRODUCTION (1/2)
21
5.7 10.1
17.2 7.5 6.4
10.517.2
7.2 5.9
1.30 0.84 0.61
1.38 1.23 0.93 0.711.22 1.36
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
Grade, ct/t
Source: Company data and analysis.1. ROM – run of mine
Q1 run-of-mine ore was down by 12% qoq
Ore and sands processing went down 18% qoq
m t
m m3 Q1 ‘20 ROM1 ore down by 12% qoq (-18% yoy) to
16.2 m m3, largely due to decision to suspend project of pit
deepening at the Arkhangelskaya pipe (Severalmaz) in
2020
Q1 ‘20 processed feedstock seasonally down by 18% qoq
(-7% yoy)
Q1 ‘20 average diamond grade saw an increase of 11% qoq
to 1.36 cpt due to seasonal suspension of production at the
Mirny Division's lower-grade alluvial deposits. A 10% yoy
growth was mostly driven by an increased share of high-
grade ore processing at the underground mines of Aikhal
and International, along with a rise in the average diamond
grade at the Jubilee pipe
-12%
-18%
5.34.1 3.8
6.5 6.1 5.6 5.2 6.0 5.9
2.02.1
1.0
3.3
1.5 2.21.6
2.6 2.00.2 2.3 5.8
0.5
0.21.9
5.40.3
0.17.4
8.5
10.5 10.3
7.8
9.7
12.1
8.8 8.0
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
Open pit Underground Alluvials
ALROSA PRODUCTION (2/2)
22
Source: Company data and analysis.
Diamond production was down by 9% qoq
m ct Q1 ’20 diamond output decreased by 9% qoq to
8.0 m ct, mainly following lower production at the
Aikhal underground mine (-0.6 m ct) and the
Botuobinskaya pipe (-0.5 m ct)
…a 2% growth yoy was due to increased production
at the Aikhal and Udachnaya underground mines
(+0.3 m ct)
Share
2%
25%
74%
-9%
+2%
(1.5) (3.2) (4.3)
6.4
(2.7)
1.1
12.2 12.4 12.3
4.05.9 4.2
2.6
4.02.6
2.0
1.1
1.10.2
0.40.3
24.717.9
18.2
Other production costs
Services and transportation
Materials costs
Fuel and energy
Labor costs
Movement of diamonds
Movement of ore and sands
PRODUCTION COSTS DYNAMICS AND BREAKDOWN
23
21.518.2
1.1
(4.3)
Q1 '20
Production costs
Movement in inventory
of ore and sands
Movement in inventory
of diamonds
Q1 '20
Production costs of sales
Direct production related costs of sales up
Production cost adjusted for inventory movements
RUB bn
RUB bn Q1 ‘20 production related costs of sales were up by 2% qoq to
RUB 18.2 bn driven by:
o (+) movement in inventory on decrease in diamonds stock due to
sales exceeding output (+RUB 3.7 bn)
o (-) movement in inventory on increase in ores & sands stock as its
output exceeded processing volumes (-RUB 1.1 bn)
o (-) fuel & energy -28% on volumes decrease (-RUB 1.7 bn)
o (-) materials -36% due to seasonality and unscheduled repairs
work in Q4 ’20 (-RUB 1.4 bn)
o (+) services & transport costs +91% (+RUB 1.0 bn)
Q1 ‘20 production related costs of sales were down by 26% yoy
driven by:
o (-) decrease of negative movement in diamonds stock driven by
less excess of sales over production on the back of 11% sales
decline with 2% production increase (-RUB 5.3 bn)
o (-) increase of positive movement in ores & sands stock (-RUB 1.5
bn)
Q1 ‘19 Q4 ‘19 Q1 ‘20
XX - total direct production costs of sales
NON-PRODUCTION COSTS DYNAMICS AND BREAKDOWN
24
1.0(0.8)
1.8
6.1
6.0
4.8
3.1 4.7 3.4
2.12.2
2.5
0.8
3.8
0.81.2
1.3
1.2
14.4
17.1
14.5
Q1 '19 Q4 '19 Q1 '20
Other taxes and payments
Social expenses
Exploration expenses
SG&A
Extraction tax and royalty
Other non-production costs
Source: Company data and analysis.
1. Mainly includes cost of diamonds for resale and other non-production costs
Non-production costs were down by 15% qoq
RUB bn Q1 ‘20 non-production costs were down by 15% qoq to RUB 14.5 bn
mostly due to:o (-) social expenses down by 4.9x on lower charity expenses &
maintenance of local infrastructure (-RUB 3.0 bn) due to high base effect
in Q4 ’20: one-off expenses on disposal of farming unit & contribution to
“Yakutia’s Fund of Future Generations”.
o (-) SG&A expenses -27% (-RUB 1.3 bn) due to decrease of consulting
and IT services
o (-) MET down by 20% (-RUB 1.2 bn) mostly driven by lower extracted
volumes
o (+) other non-production costs up by RUB 2.6 bn due to decrease of
other operating income and increase of other operating expense
Q1 ‘20 non-production costs were up by 1% yoy mostly due to:o (+) other non-production costs up by RUB 0.8 bn due to higher of other
operating expenses
o (+) SG&A expenses up by 11% (+RUB 0.3 bn)
o (+) exploration expenses up by 18% (+RUB 0.4 bn) due to start of
exploration and appraisal activities on new projects (Mir, Udachnaya,
Zarya pipes and others)
o (-) MET down by 22% (-RUB 1.3 bn) on lower volumes and change of
price list
1
Udachny
UG mine
VM1
deposit
Maiskaya
pipe
VG2
deposit
Type of mining Underground Open-pit Open-pit Alluvials
Production start 2014 2018 2025 2024
Ramp-up 2021 2019 2027 2025
Target ore output pa, m t 4.0 3.0 0.3 1.1
Target production pa, m ct 5.6 1.8 1.2 0.4
Total CAPEX, RUB bn 63.9 20.0 5.6 2.3
Invested share 87% 92% 6% 0%
Resource base3, m ct 207.6 40.4 12.7 4.7
KEY INVESTMENTS PROJECTS
Source: Company data1. Verkhne-Munskoye deposit2. Vodorazdelnye Galechniki deposit3. Diamond mineral resources in accordance with the JORC Code as at 1 July 2018 25
1 2 3 4
YakutskMirny
Udachny
Nyurba
1
2
3
4
Yakutia
DIAMOND PRODUCTION BY ASSETS
26
1.3 1.2
0.8 0.7
1.11.0
3.23.0
2.4
2.1
8.8
8.0
Q4 2019 Q1 2020
Nyurba Division
Aikhal Division
Severalmaz
Mirny Division
Udachny Division
Source: Company data and analysis.
Diamond output
m ct Q1 ‘20 diamond production decreased by 9% qoq
mainly due to lower production at the Aikhal
underground mine and the Botuobinskaya pipe
Key drivers:
o Nyurba Division – down by 13% due to lower
production at the Botuobinskaya pipe partially offset by
increased production at the Nyurbinskaya pipe
o Aikhal Division – down by 5% due to production
decline at the Aikhal underground mine partially offset
by higher production at the Jubilee pipe
(5%)
(18%)
(7%)
-9%
(7%)
(13%)
FX RATE
27
93%
15%26%
75%
96%
7%
85%74%
25%
4%
Revenue Cost of sales Capex Cash and cash
equivalents
(incl. bank deposits)
Total
debt
RUB
USD
Source: Company data and analysis.1. Excluding lease obligation (RUB 6.6 bn)
Financial metrics breakdown by currency
% of metric's total, Q1 ‘2020 ALROSA is an exporter with more than 90% of
revenue denominated in USD
Major portion of costs and capex is denominated in
RUB, 96% of the Company’s debt portfolio1 is
denominated in USD to create a natural hedge
against FX risks
ALROSA's financial sensitivity analysis shows that a
change in the USD exchange rate by +/- 1 RUB/USD
leads to the following change in metrics:
o revenue – +/-1.39%
o cost of sales – +/-0.23%
o EBITDA – +/-2.69%
o capex – +/-0.38%
1
OPERATING CASH FLOW AND CAPEX
46 41
28
21 25
16 21
14
30 26
7 2
73
24
17 17
24 22 22
(5)
(7)
(9)(7)
(4)
(5) (5)
(7)(3)
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20
OCF CAPEX FCF21
Operating cash flow and capex dynamics
RUB bn
Source: Company data and analysis.
1. OCF – operating cash flow
2. FCF – free cash flow is defined as OCF net of capex in the core business
28
THANK YOU!
SERGEY TAKHIEVHEAD OF CORPORATE FINANCEM: +7 985 760 55 74E: [email protected]
RUSSIA, 115184MOSCOW24 OZERKOVSKAYA EMB.
DMITRY BYALOSHITSKIYCORPORATE FINANCEM: +7 915 113 32 04E: [email protected]