MINING AND METALLURGICAL COMPANY NORILSK NICKEL 
In 2020, other operating expenses increased by USD 2,434 million to USD 2,737 million driven by the following factors: ? +USD 2,241 million - primarily the environmental provision related to the liquidation of diesel fuel leak at the
industrial site of the Heat and Power Plant ? 3 of Norilsk and compensation for environmental damage; ? +USD 192 million - cease of recognition of net income earned during the pre-commissioning stage generated by GRK
"Bystrinskoye" owing to the full commissioning of Bystrinsky project in September 2019; ? +USD 276 million - increase in social expenses including coronavirus relief packages provided to the regions of the
Company's operations; ? -USD 200 million - change in provision on production facilities shut down at the Kola GMK.
FINANCE COSTS, NET
USD million 2020 2019 Change,% Interest expense, net of amounts capitalised 364 340 7% Changes in fair value of other long-term and other current liabilities 262 64 4x Fair value (gain)/loss on the cross-currency interest rate swap 182 (199) n.a. Unwinding of discount on provisions and payables 61 84 (27%) Interest expense on lease liabilities 12 12 0% Other, net (2) 5 n.a. Total 879 306 3x
In 2020, finance costs, net increased three times and amounted to USD 879 million primarily due to a change in the fair value of cross-currency interest rate swaps y-o-y, caused by a comparative effect of depreciation of the Russian ruble against the US dollar in 2020 and its appreciation in 2019, and also due to a change in the fair value of other long-term and other current liabilities y-o-y, representing an obligation to exercise a put option in relation to transactions with the owners of non-controlling interests of Bystrinsky GOK.
The average value of total debt increased in 2020, while the effective interest rate of the Company's debt portfolio as of the end of 2020 (2.9% in USD1) decreased, as compared to this as of the end of 2019 (4.3% in USD1) because of the following factors: ? Loose monetary policies of the Federal Reserve System of the USA and the Bank of Russia, which positively impacted
the Company's debt obligations bearing floating interest rates and on the back of which a share of the Company's
total debt tied to floating indicators, main of which were 1 Month Libor and Key rate of the Bank of Russia,
increased from 38% to 54% for the period from December 31, 2019 to December 31, 2020; ? Refinancing of a syndicated loan facility, originally signed in December 2017, with a group of international banks
in February 2020, which resulted in the reduction of the loan's interest rate to Libor+1.40% per annum and the
increase of the loan's funding limit from USD 2,500 million to USD 4,150 million; ? Issuance of five-year USD 500 million Eurobonds at a coupon of 2.55% per annum in September 2020; and ? Redemption of USD 1 billion Eurobonds bearing a coupon of 5.55% per annum in October 2020 and early repayment of
RUB 60 billion loan at an interest rate of 8.3% per annum in November 2020.
1 According to management accounts of the Company
INCOME TAX EXPENSE
In 2020, income tax expense decreased 39% y-o-y to USD 945 million driven mostly by the decrease of profit before tax.
The effective income tax rate in 2020 of 20.6% was above the Russian statutory tax rate of 20%, which was primarily driven by recognition of non-deductible social expenses.
The breakdown of the income tax expense:
USD million 2020 2019 Change,% Current income tax expense 1,685 1,924 (12%) Deferred tax (benefit)/expense (740) (366) 2x Total 945 1,558 (39%) The breakdown of the current income tax expense by tax jurisdictions: USD million 2020 2019 Change,% Russian Federation 1,648 1,883 (12%) Finland 11 16 (31%) Rest of the world 26 25 4% Total 1,685 1,924 (12%)
EBITDA
USD million 2020 2019 Change,% Operating profit 6,400 7,036 (9%) Depreciation and amortisation 943 911 4% Impairment of non-financial assets 308 (24) n.a. EBITDA 7,651 7,923 (3%) EBITDA margin 49% 58% (9 p.p.)
In 2020, EBITD? decreased 3% (or -USD 272 million) to USD 7,651 million primarily owing to environmental provisions and additional expenses related to the containment of COVID-19 pandemic, which was partly offset by higher metal revenue.
STATEMENT OF CASH FLOWS
USD million 2020 2019 Change,% Cash generated from operations before changes in working capital and income tax 10,254 8,226 25% Movements in working capital (662) (307) 2x Income tax paid (1,304) (1,910) (32%) Net cash generated from operating activities 8,288 6,009 38% Capital expenditure (1,760) (1,324) 33% Other investing activities 112 204 (45%) Net cash used in investing activities (1,648) (1,120) 47% Free cash flow 6,640 4,889 36% Interest paid (472) (460) 3% Other financing activities (3,860) (3,163) 22% Net cash used in financing activities (4,332) (3,623) 20% Effects of foreign exchange differences on balances of cash and cash equivalents 99 130 (24%) Net increase in cash and cash equivalents 2,407 1,396 72%
In 2020, free cash flow increased 36% to USD 6.6 billion. Higher cash generated from operating activities was partly offset negatively by more cash used in investing activities.
In 2020, net cash generated from operating activities increased 38% to USD 8.3 billion primarily driven by higher metal revenue as well as the decrease in income tax payments due to lower taxable profit.
In 2020, net cash used in investing activities increased 47% (or USD 528 million) primarily driven by a 33% capital expenditures increase (or USD 436 million). In real terms, capital expenditures increased 51% as flagship investment projects entered active construction stage.
Reconciliation of the net working capital changes between the balance sheet and cash flow statement is presented below.
USD million 2020 2019 Change of the net working capital in the balance sheet 273 (118) Foreign exchange differences (290) 112 Change in income tax payable (359) (26) Change of long term components of working capital included in CFS (95) (158) Other changes including reserves (191) (117) Change of working capital per cash flow (662) (307)
Capital investments breakdown by project is presented below:
USD million 2020 2019 Change,% Polar Division, including: 665 478 39% Skalisty mine 109 58 88% Taymirsky mine 97 67 45% Komsomolsky mine 51 54 (6%) Oktyabrsky mine 16 27 (41%) Talnakh Concentrator 38 14 3x Other Polar Division projects 354 258 37% Kola MMC 155 221 (30%) Sulfur project 154 24 6x South cluster 114 76 50% Chita (Bystrinsky) project 98 103 (5%) Other operating projects 563 413 36% Other non-operating projects 11 9 22% Total 1,760 1,324 33%
In 2020, CAPEX increased 33% (or USD 436 million) to USD 1.8 billion following higher investments in main industrial sites of the Group - Polar Division and South cluster, including higher investments in mining projects and launch of the active phase of sulfur project. This was exacerbated by sustaining capital expenditures including capitalized repairs and purchase of equipment.
DEBT AND LIQUIDITY MANAGEMENT
Change,
USD million As of 31 December 2020 As of 31 December 2019 Change,%
USD million
Non-current loans and borrowings 9,622 8,533 1,089 13%
Current loans and borrowings 12 1,087 (1,075) (99%)
Lease liabilities 262 224 38 17%
Total debt 9,896 9,844 52 1%
Cash and cash equivalents 5,191 2,784 2,407 86%
Net debt 4,705 7,060 (2,355) (33%)
Net debt /12M EBITDA 0.6x 0.9x (0.3x) (MORE TO FOLLOW) Dow Jones Newswires
February 16, 2021 06:31 ET (11:31 GMT)
