2.3. Financial Results

USD mln or % unless otherwise stated 2012 2011 Change (%)
Revenue 1,033.7 1,049.5 (1.5%)
Cost of services 435.7 495.4 (12.1%)
SG&A 87.5 78.2 12.0%
EBITDA* 591.5 550.3** 7.4%
EBITDA margin 57.2% 52.5% 4.8pp
Profit 316.0 130.3 142.5%
Investments (CAPEX)*** 89.3 115.6 (22.8%)
Group debt 2,262 2,506 (9.7%)
Net debt** 2,019.0 2,378.7 (15.1%)
Net debt/EBITDA 3.4x 4.3x

* EBITDA is calculated as profit for the period before finance costs, income tax and D&A, impairment of goodwill, PP&E write-offs, interest income and foreign exchange gain/(loss), net

** Net debt is calculated as Total debt less Cash & cash equivalents

*** According to management reporting data, including VAT

NMTP Group’s revenue in 2012 was US$ 1,033.7 mln. Cost of services and SG&A expenses totalled US$ 435.7 mln and US$ 87.5 mln, respectively. Group EBITDA increased by 7.4% to US$ 591.5 mln, and the EBIDTA margin was 57.2%. The Group’s debt fell by 10% during the accounting period to US$ 2,262 mln. The net debt/EBITDA ratio at the end of 2012 stood at 3.4x.

Revenue

The Group’s revenue from stevedoring services totaled $827.9 million in 2012, compared to $857.5 million in the previous year. Revenue from additional port services grew by $6.4 million to $89.9 million. Revenue from port fleet services increased by $8 million to $100.9 million.

The growth of transshipment volumes for a number of types of cargo increased stevedoring revenue by $60.3 million*, including:

  • Grain shipments increased by 2 mln tons, and revenue in the segment jumped by US$ 30.9 mln.*;
  • Shipments of oil products grew by 2.9 mln tons, driven among other factors by the introduction of new capacity, and generated an additional US$ 7.4 mln.* in revenue;
  • A 1.8 mln ton increase in shipments of ferrous metals created US$ 14.7 mln.* of additional revenue.
  • Growth of container transshipments by 26,000 TEU, which increased revenue on such cargo by another $7.3 mln.*

On the other hand revenue from stevedoring services in 2012 was affected by the following negative factors:

  • Foreign exchange loss in the amount of $26.8 mln.* resulting from the effect of translation of ruble revenues into presentation currency and from exchange rate differences between 2012 and 2011;
  • A drop of $6.7 mln.* in crude oil revenues resulting from 2.6 mln. tonnes reduction of volumes;
  • Bulk fertilizers revenues were down $9.7 mln.* following 1.2 mln. tonnes decrease in volumes;
  • Iron ore revenues reduced by $6.9 mln.* on the back of 1.2 mln. tonnes drop in volumes;
  • Aggregated reduction in volumes of other cargoes resulted in reduction of stevedoring revenue by $39.8 mln.*

* Not IFRS indicator, cited according to management reporting data.

Cost of services

In 2012 the Group‘s cost of services fell by $ 59,7 mln., or 12.1% year-on-year, to $ 435.7 mln. The biggest reduction of $ 71.6 mln. was in expense on fuel for resale and own consumption as a result of reduced procurement of bunkering fuel.

Depreciation and amortization increased by $4.4 million due to the launch of new facilities, including a bunkering complex at LLC PTP.

Personnel costs grew by $5.6 million with the increase in salaries for operational staff at a number of Group companies at the end of 2011 and beginning of 2012 as part of a new social policy.

Group’s expense on repairs and maintenance of plant and equipment rose by $3.9 million, including due to unscheduled repairs in the wake of the flooding in Krasnodar region on July 6-7, 2012.

Combined changes in other cost items reduced the Group’s cost of sales by $2.06 million.

The Group’s selling, general and administrative expenses increased by $9.4 million or 12.0% in 2012 to $87.5 million. This was primarily due to an $8.6 million increase in staff expenses following the introduction of a new pay and incentive system. Other items of SG&A rose by a total of $1.3 million.

EBITDA

Group EBITDA in the reporting period rose to $ 591.5 mln. from $550.3 mln. in 2011. The EBITDA margin was 57.2%, against 52.5% in 2011, driven by growth in volumes of higher-margin products and the introduction of new capacities.

The main driver of EBITDA growth was 1.9 mln. tonnes increase in cargo volumes and changes to cargo mix, accounting for US$ 44.8 mln.* EBITDA from bunkering operations grew by $ 4.4 mln.* Higher volumes of additional services produced a $ 13.7 mln.* increase in EBITDA, while new capacities brought online contributed $ 11.9 mln.* Net change to cost of services (excluding expense on bunkering fuel and variable costs of grain handling) produced a negative impact on EBITDA of $ 33.5 mln.*

Net profit

The Group’s net profit for 2012 was $316 million. Impairment of goodwill on the acquisition of LLC PTP in the amount of $89.5 million had a major impact on the net profit. Net profit adjusted for this factor amounted to $388 million. The impact of the Russian ruble’s appreciation against the U.S. dollar on the Group’s assets and liabilities denominated in foreign currency in 2012 resulted in an exchange rate gain of $130 million compared to an exchange rate loss of $168 million in 2011.

Investment program

NCSP Group’s spending on its investment program totaled $89.3 million* in 2012 (according to management reporting data, including VAT), including $55.6 million* on development projects and $33.7 million* on equipment upgrades in the course of current operations.

* Not IFRS indicator. Cited according to management reporting data, includes VAT.

Debt

The Group’s debt as of 31 December 2012 totalled $ 2,262 mln., a 9.7% reduction from the end of 2011. Net debt as of the end of 2012 comprised $ 2,019 mln., against US$ 2,379 at the end of 2011.

The Net debt/EBITDA ratio was 3.4 at the end of the reporting period, well below the maximum of 3.75 for 2012 stipulated by the covenants of Group loans. As at 31 December 2012, the average effective borrowing rate relating to the Group’s debt was 5.79% per annum compared to 5.73% per annum as at 31 December 2011.

On 4 March 2012 the Board of Directors of PJSC NCSP approved a programme of rouble bonds to be issued in five series. Series BO-01, BO-02, BO-03, BO-04 and BO-05 are nominated in the amount of RUB 5 bln., RUB 4 bln., RUB 4 bln., RUB 3 bln., and RUB 2 bln. respectively. On 3 April 2012 the Group completed registration of the programme, and the bonds were included in the list of securities admitted to trading on the Moscow Exchange.

The Group placed rouble bonds Series BO-02 for the amount of 4 billion rubles ($136 million) and maturing April 29, 2015, in a public offering on May 2, 2012. The bonds have a 9% annual coupon rate payable every 182 days, with the first payment on October 31, 2012.

At the time of roble bonds placement PJSC NCSP has also entered into a currency swap agreement to hedge its currency risk, by balancing the currency structure of its liabilities and revenues. The currency swap agreement allowed PJSC NCSP an effective borrowing rate on the bonds of less than 4.0% per annum.

On 15 May 2012, NMTP Group repaid in full its five-year Eurobond issue in the amount of $300 mln. The Eurobond, in the form of loan participation notes (LPN), was placed on 17 May 2012 through the Luxembourg-registered SPV Novorossiysk Port Capital S.A. The notes had an annual coupon of 7% with semi-annual payments.

Redemption of the Eurobond was financed in part from own funds and partly through the placement of rouble bonds Series BO-02 for RUB 4 bln.

NCSP Group seeks to optimize its debt portfolio in terms of cost and duration of borrowings in order to maintain optimum liquidity for the Group. Therefore the Group is considering a changing of the terms of or refinancing a loan of $1.950 mln. received from Sberbank of Russia in 2011 to finance the acquisition of LLC PTP, to improve on fixed interest rate of 7.48% per annum which will be applied to this loan as of January 2014.

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