In the recent press release issued by ALROSA and received by Rough&Polished, the Russian diamond mining company published preliminary data on its performance in the first quarter of 2010, which prove that it is overcoming the difficulties faced during the global economic downturn.
Positive financial results
According to ALROSA’s preliminary results, the company gained 1.8 billion roubles of net profit in the first quarter of 2010.
Sustainable production
According to the preliminary data, in the first quarter of 2010 diamond output in the ALROSA Group reached 8.6 million carats, which is virtually similar to the output registered in the first quarter of 2009 and ALROSA’s production plans in the current year (for information: in the first quarter of 2009 ALROSA recovered 9.2 million carats).
Diamond output in ALROSA Group
The 2009 results have put ALROSA in the world’s leading position as far as diamond output in terms of carats is concerned. ALROSA produced 34.8 million carats expanding its share in the diamond mining market from 22% to 30% (for information: the De Beers Group produced 24.6 million carats in 2009 decreasing its output share from 30% to 23%).
According to the preliminary results, the ALROSA Group will sell $925 million worth of diamonds in the first quarter of 2010 which is virtually 10 times as much as in the first quarter of 2009 and 1.5 times more than in the first quarter of 2007 and 2008. The deliveries to Gokhran stipulated by the plan were actually not made and all the production was sold on the domestic and international markets exceeding the plan by 20%. Domestic sales were 2.5 times higher than planned, while overseas sales went 1.5 times above the schedule.
Procurement In the first quarter of 2010, ALROSA tied up contracts for 4.3 billion roubles to deliver light oil to its major production facilities, the average price index being 0.99 whereas total purchases increased by 7.2% against 2009. Thus, the company managed to limit expenses for light oil in 2010 due to a rigid price policy towards suppliers (for information: the share of expenses for light oil makes 31% in the total amount of material resources and equipment bought by ALROSA in 2010; in 2009 ALROSA spent 4.1 billion roubles for purchasing light oil) Debt servicing In the first quarter of 2010, the average interest rate for the company’s liabilities was lowered by 4.54%. The lower interest rate permitted the company to save 860 million roubles in the first quarter.
In February, ALROSA received updated ratings released by the world’s three largest rating agencies – S&P, Fitch and Moody's. Restoring relation with rating agencies is a part of ALROSA’s borrowing policy for 2010 which aims at placing eurobonds in the 4th quarter of 2010.
In March 2010, ALROSA started to gear up for placing the first tranche of corporate bonds. Totally, in the first six months of 2010 the company intends to place 26 billion roubles worth of rouble bonds for the period of 5 years. In November 2010, the company plans to attract cash funds in the market of eurobonds for the amount of $1 billion for 10 years. The purpose of attracting public funds is to refinance the ALROSA Group’s current short-term debts.
Rough&Polished
Growing sales of basic production
Stable cooperation with customers
Cost management
Restoration of credit ratings
ALROSA’s borrowing policy in 2010
By the end of 2010, the share of long-term credits and loans will make more than 70% from the company’s total debt.
In 2010 it is planned to decrease ALROSA’s credits and loans from $3,790 million to $3,450 million.
