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01 april 2024

On February 9, Norilsk Nickel presented the company’s financial statements for the second half of 2023 in accordance with International Financial Reporting Standards (IFRS). The main financial indicators were close to market expectations. Taking into account a strong decline in prices for base metals, an important result was that the profitability remained almost unchanged. The company managed to reverse the trend of the working capital growth that appeared in 2022 due to longer transport and logistic chains and the accumulation of end products. Amid the reorientation of sales due to geopolitical factors and the changes in the centers of demand for nickel, Norilsk Nickel was able to sell the entire volume of metals produced in 2023 and part of the inventories built up earlier. Norilsk Nickel used the generated cash flow to reduce the company’s debt. Analysts do not expect final dividends for last year, since the free cash flow (FCF) limit available for paying the dividends has been already exceeded because of the payments of the interim dividends.

Financial performance indicators:

- Revenue for the second half of 2023 increased by 1% compared to the first half of 2023 but dropped by 8% YoY, to $7.2 bn (2% below consensus forecast), which was caused by a decrease in stock exchange prices for metals. Annual revenue decreased by 15% due to lower sales prices for nickel (down 16% YoY), palladium (down 37% YoY) and rhodium. Not only the prices declined but also the outputs of all metals except platinum. This decline was expected and explained by a reduced ore production due to the transition to new mining equipment.  

- At the same time, the company sold all the metal produced in 2023, as well as part of the stock balance of metals accumulated in the previous year. Sales of inventories partially compensated for the decline in prices and sales. As a result, working capital at the end of 2023 decreased by 23% compared to the end of 2022, to $3.1 bn. Another factor in the reduced working capital was the weakening of the ruble.

- Although there is no direct ban on imports of the Norilsk Nickel’s products into the EU countries and the USA, the company faces logistics and financial restrictions, as well as ‘self-imposed sanctions’ (consumers’ voluntary refusals to buy the Russian goods that are not subject to sanctions). Therefore, sales flows are redistributed towards the Asian markets, which resulted in the increased share of this region in sales that exceeded 50% for the first time. For comparison, back in 2021, 27% of metals were sold to the Asian countries, 53% to Europe, and 15% to the USA.

- EBITDA for the half year decreased by 9.9% YoY, to $3.514 bn amid the decrease in revenue. As of the end of 2023, EBITDA decreased by 20.8%, to $6.9 bn. Despite the strong decline in metal prices, profitability remains at a high level of 48.5% versus 49.4% a year earlier.

- Cash operating costs decreased by 19%, to $5.3 bn, primarily due to the weakening of the ruble, the ceased purchases of the metals for resale, and the implementation of an operational efficiency program. This program minimized the inflationary pressure on the costs despite the introduction of export duties in October 2023 (last year’s export duty costs were $117 mn and are expected to be about $450 mn in 2024).

- The free cash flow of Norilsk Nickel remained unchanged compared to the first half of the year and amounted to $1.3 bn. The generated cash flow was used to reduce the company’s debt, which made it possible to reduce net debt from $9.1 bn to $8.1 bn (down 11%). The net debt/EBITDA ratio at the end of 2023 was at an acceptable level of 1.2x.

Norilsk Nickel’s key financial figures in 2023 are given below, $ mn:




Change, %









EBITDA margin




Net profit




Capital expenditure




Net working capital




Free Cash Flow




Net debt




Net debt/EBITDA ratio





Debt repayment

The short-term debt increased to $4.3 bn; this amount includes Eurobonds with their repayment due this year ($0.75 bn), according to Renaissance Capital. “It can be assumed that in 2024, the company will continue refinancing its liabilities on the local debt market, apparently preferring to borrow in yuan,” the bank lending survey states.

Norilsk Nickel complies with all the payment obligations, servicing all debt is carried out as usual, despite the increase in the average cost of servicing in the current market situation, assured Sergey Malyshev, senior vice president and financial director of Norilsk Nickel. He specified that in total, Norilsk Nickel’s interest expenses this year would amount to about $1 bn. To refinance, the company can enter the public debt market in addition to using the funds obtained from operating activities and the free limits available at the Russian banks. “Borrowing in Chinese yuan is the priority due to the export nature of sales, the trend of reorienting the trading operations to the Eastern countries, as well as due to low volatility of the USD/CNY currency pair and promising opportunities for hedging currency risk,” explained the senior vice president.

Analysts’ estimates

A positive development was the capex forecast updating for the current year from $3.6 bn to $3-$3.2 bn, which was mainly caused by the weakening of the ruble, Sinara notes. The Norilsk Nickel’s investment program was further reduced against the backdrop of changes in the implementation schedules of a number of projects and their reorganization due to problems with the imported equipment and spare parts caused by the geopolitical situation. Last year, capital expenditures were down about 30% compared to 2022 and amounted to $3.04 bn, although initially, they were estimated at $4.7 bn.

“This year, we will continue to implement the strategy of moderate growth and sustainable development, which includes key investment projects for increased mining and processing, for upgrading and replacing the equipment, which is aimed at improving the industrial safety and labor protection, as well as at improving the energy and fuel infrastructure facilities and reducing the environmental hazard,” said Malyshev, answering the question about the capital investments.

Sinara says that the company previously published its production plan that suggested a decrease in metal output. The nickel production target in 2024 (184-194 thousand tons) are down 9% compared to the metal output in 2023, for palladium - down 12% (2.296 mn to 2.451 mn ounces). The decrease is explained by the delayed scheduled repairing of the flash smelting furnace at the Nadezhda Metallurgical Plant, which the company postponed during two years due to problems with the equipment supply. The reduced production forecast coupled with declined nickel and palladium prices could lead to lower profits this year, Sinara warns.


As for dividends, Veles Capital’s expectations are that there is a possibility of refusal of final payments based on the results of 2023 due to the depletion of the FCF limit for these purposes and the company’s reluctance to increase its debt burden. According to Malyshev, the interest expenses ($791 mn) and the dividends paid to the minority shareholders of the Bystrinsky Mining and Processing Plant ($503 mn) should be subtracted from the standard free cash flow ($2.69 bn). As a result, the adjusted FCF at the end of 2023 is about $1.39 bn. At the same time, the interim dividends for 9 months of 2023 (140 bn rubles or $1.5 bn) have already exceeded this amount. Malyshev emphasized that the company’s management team wants to consider free cash flow as the basis for paying the dividends.

Based on Malyshev’s comments, BCS also believes that it’s quite possible that no dividends for the full year 2023 will be paid. “It’s up to the shareholders to decide on the dividends, but given the weak release of current assets (in money terms), it’s highly unlikely that dividends will be paid for the full year 2023,” BCS said in its review.

Sinara expects the final dividends for 2023 to be 300 rubles per share, which will give a 2% dividend yield.

Sergey Bondarenko for Rough&Polished