Financial performance (MD&A)

FY2023 HIGHLIGHTS

  • Consolidated revenue decreased 15% y‑o‑y amounting to USD 14.4 billion following the decline of prices for nickel, copper, palladium and rhodium. The Company sold all metal volumes produced in 2023 as well as a part of stock accumulated in 2022;
  • EBITDA decreased 21% y‑o‑y to USD 6.9 billion owing to lower revenue while EBITDA margin remained at healthy 48%;
  • Cash operating costs decreased 19% y‑o‑y to USD 5.3 billion mostly driven by the weakening of Russian rouble, the termination of metal purchases from third parties as well as the execution on operating efficiencies that allowed to mitigate inflationary pressure on expenditures in spite of introduction of export duties in October 2023;
  • CAPEX decreased 29% y‑o‑y to USD 3 billion driven by softening of rouble exchange rate, optimization of payments to contractors as well as rescheduling of investment projects owing to voluntary self‑sanctions imposed by foreign suppliers of equipment and technologies;
  • Net working capital decreased 23% year‑to‑date to USD 3.1 billion driven mostly by devaluation of rouble, partial sale of metal stock accumulated in 2022 and application of different payment terms in certain major procurement and construction contracts;
  • Net debt decreased 18% y‑o‑y to USD 8.1 billion with net debt/EBITDA ratio as of December 31, 2023 remained at 1.2x;
  • The Company continued the optimization of its debt portfolio to adapt to changing debt market reality while servicing all its outstanding debt portfolio and maintaining comfortable liquidity level on its balance sheet and reserve credit lines;
  • On December 7, General Shareholders Meeting approved the split of ordinary shares with a ratio of 100 to 1 to improve their attractiveness to retail investors.
Key corporate highlights, USD million, unless stated otherwise
Indicators 2022 2023 Change
Revenue 16,876 14,409 –15%
EBITDAA non‑IFRS measure, for the calculation see the notes below. 8,697 6,884 –21%
EBITDA margin, % 52% 48% –4 p.p.
Net profit 5,854 2,870 –51%
Capital expenditures 4,298 3,038 –29%
Net working capitalA non‑IFRS measure, for the calculation see an analytical review document ("Data book") available in conjunction with Consolidated IFRS Financial Results on the Company’s web site. 4,003 3,092 –23%
Net debtA non‑IFRS measure, for the calculation see an analytical review document ("Data book") available in conjunction with Consolidated IFRS Financial Results on the Company’s web site. 9,835 8,093 –18%
Net debt/12M EBITDA 1.1x 1.2x 0.1x
Dividends paid per share (USD )Paid during the perio. 40.5 – –100%
Free cash flowA non‑IFRS measure, for the calculation see an analytical review document ("Data book") available in conjunction with Consolidated IFRS Financial Results on the Company’s web site. 437 2,686 6x
Проценты уплаченныеRegular outflows, financed from free cash flow. 599 791 32%
Dividends paid to non‑controlling interestRegular outflows, financed from free cash flow. 73 503 7x

Recent developments

  • In January 2024, the Company paid dividend for 9 months of 2023 in the amount of RUR 915.33 per one ordinary share.
Key segmental highlightsSegments are defined in the consolidated financial statements., USD million
Indicators 2022 2023 Change
Revenue 16,876 14,409 –15%
GMK Group 12,242 10,488 –14%
South cluster 972 1,066 10%
Kola division 10,889 8,396 –23%
GRK Bystrinskoye 1,325 1,340 1%
Other mining 1 – –100%
Other non‑metallurgical 1,556 1,064 –32%
Eliminations –10,109 –7,945 –21%
EBITDA 8,697 6,884 –21%
GMK Group 4,316 3,641 –16%
South cluster 450 484 8%
Kola division 4,071 2,254 –45%
GRK Bystrinskoye 934 963 3%
Other mining –11 –12 9%
Other non‑metallurgical 8 –13 n.a
Eliminations –7 343 n.a
Unallocated –1,064 –776 –27%
EBITDA margin 52% 48% –4 p.p.
GMK Group 35% 35% 0 p.p.
South cluster 46% 45% –1 p.p.
Kola division 37% 27% –10 p.p.
GRK Bystrinskoye 70% 72% 2 p.p.
Other mining n.a. n.a. n.a.
Other non‑metallurgical 1% n.a. n.a.

In 2023, revenue of GMK Group segment decreased 14% to USD 10,488 million primarily due to lower metal prices and decrease in matte sales delivered to Kola Division partly offset by increase in sales volume of refined metals.

Revenue of South cluster segment increased 10% to USD 1,066 million primarily driven by higher volume of semi‑products realized to GMK Group partly offset by decrease in semi‑products realized prices.

Revenue of Kola division segment decreased 23% to USD 8,396 million primarily owing to lower metal prices partly offset by increase in sales volume of refined metals.

Revenue of GRK Bystrinskoye segment increased 1% to USD 1,340 million.

Revenue of Other non‑metallurgical segment decreased 32% to USD 1,064 million primarily due to cease of metals resale.

In 2023, EBITDA of GMK Group segment decreased 16% to USD 3,641 million owing to lower revenue, partly positively offset by decrease in cash operating costs, primarily due to lower mineral extraction tax and other levies, lower labour and repair and maintenance costs, and comparative impact of environmental provisions accrual.

EBITDA of South cluster segment increased 8% to USD 484 million primarily owing to higher revenue that was partly negatively offset by increase in cash operating costs primarily due to higher mineral extraction tax and ore mining services.

EBITDA of Kola division segment decreased 45% to USD 2,254 million primarily owing to lower revenue.

EBITDA of GRK Bystrinskoye segment increased 3% to USD 963 million primarily due to decrease in cash operating costs driven by Russian rouble depreciation against US Dollar.

EBITDA of Other mining segment decreased by USD 1 million and amounted to negative USD 12 million.

EBITDA of Other non‑metallurgical segment decreased by USD 21 million and amounted to negative USD 13 million.

EBITDA unallocated to segments increased by USD 288 million and amounted to a negative USD 776 million mainly due to lower social expenses and effect of the Russian rouble depreciation against US Dollar.

Metal sales

In 2023, revenue from metal sales was down 15% (or –USD 2,371 million) y‑o‑y to USD 13,702 million primarily driven by lower selling prices (‑USD 3,378 million) mainly for palladium, nickel, rhodium and copper, as well decrease in the resale of metals purchased from third parties (‑USD 385 million). The increase in the volume of metal sales (+USD 1,392 million) primarily due to the partial sale of metal stock accumulated in 2022 was partly offset by decrease in production volume in 2023.

Other sales

In 2023, other sales decreased 12% (or ‑USD 96 million) to USD 707 million primarily due to Russian rouble depreciation, which was partially offset by the increase of revenue from resale of icebreaking and sea transportation services.

Cost of sales

Cost of metal sales

In 2022, the cost of metal sales increased 21% (or +USD 1,051 million) to USD 6,108 million, In 2023, the cost of metal sales increased 4% (or +USD 232 million) to USD 6,322 million, driven by the following factors:

  • decrease in cash operating costs by 19% (or ‑USD1,234million);
  • decrease in depreciation and amortization by 7% (or ‑USD 76 million);
  • comparative effect of change in metal inventories y‑o‑y leading to the cost of metal sales increase by USD 1,542million.

Cash operating costs

In 2023, total cash operating costs decreased 19% (or ‑USD 1,234 million) to USD 5,289 million mainly due to decrease in purchases of refined metals for resale (‑USD 432 million), decrease in mineral extraction tax and other levies (‑USD 319 million), decrease in materials and supplies (‑USD 98 million), decrease in labour costs (‑USD 266 million) partly offset by introduction of export customs duties from October 1, 2023 (+USD 121 million).

Inflationary growth of cash operating costs amounted to +USD 428 million while Russian rouble depreciation against US Dollar amounted to cash operating costs decrease of ‑USD 889 million.

Cost of metal sales, USD million
Indicators 2022 2023 Change
Labour 2,123 1,857 –13%
Materials and supplies 1,069 971 –9%
Mineral extraction tax and other levies 1,192 873 –27%
Third party services 784 659 –16%
Transportation expenses 257 216 –16%
Fuel 166 157 –5%
Export customs duties – 121 100%
Electricity and heat energy 136 115 –15%
Purchases of raw materials and semi‑products 33 33 0%
Purchases of refined metals for resale 437 5 –99%
Other costs 326 282 –13%
Total cash operating costs 6,523 5,289 –19%
Depreciation and amortisation 1,015 939 –7%
Decrease/ increase (‑) in metal inventories –1,448 94 n.a.
TOTAL 6,090 6,322 4%

Labour

In 2023, labour costs decreased 13% (or ‑USD 266 million) to USD 1,857 million amounting to 35% of the Group’s total cash operating costs driven by the following factors:

  • ‑USD 409 million – Russian rouble depreciation against US Dollar;
  • +USD 86 million – increase in headcount in Norilsk industrial region;
  • ‑USD 77 million – one‑off incentive payment to personnel in 1H2022:
  • +USD 45 million – payments to personnel within the programme "Digital investor";
  • +USD 89 million – other increase in labour costs mainly due to indexation of salaries and wages.

Materials and supplies

In 2023, expenses for materials and supplies decreased 9% (or ‑USD 98 million) to USD 971 million driven by the following factors:

  • +USD 219 million – inflationary growth of materials and supplies;
  • ‑USD 133 million – lower material and supplies expenses primarily due to decreased repairs as part of production efficiency measures;
  • ‑USD 184 million – effect of the Russian rouble depreciation against US Dollar.

Mineral extraction tax and other levies

In 2023, mineral extraction tax and other levies decreased 27% (or ‑USD 319 million) to USD 873 million primarily due to lower metal prices and lower ore mined.

Third‑party services

In 2023, cost of third‑party services decreased 16% (or ‑USD 125 million) to USD 659 million mainly driven by:

  • ‑USD 61 million – primarily due to decrease in repairs as part of production efficiency measures;
  • +USD 79 million – inflationary growth of third‑party services;
  • ‑USD 143 million – effect of the Russian rouble depreciation against US Dollar.

Transportation expenses

In 2023, transportation expenses decreased 16% (or ‑USD 41 million) to USD 216 million driven by the following factors:

  • ‑USD 23 million – primarily decrease in transportation volume of metal products;
  • +USD 20 million – inflationary growth of expenses;
  • ‑USD 38 million – effect of the Russian rouble depreciation against US Dollar.

Fuel

In 2023, fuel expenses decreased 5% (or ‑USD 9 million) to USD 157 million mainly due to Russian rouble depreciation against US Dollar partly offset by inflationary growth of fuel expenses in Norilsk industrial region.

Electricity and heat energy

In 2023, electricity and heat energy expenses decreased 15% (or –USD 21 million) to USD 115 million primarily due to Russian rouble depreciation against US Dollar.

Purchases of raw materials and semi‑products

In 2023, purchases of raw materials and semi‑products remained unchanged y‑o‑y and amounted to USD 33 million.

Purchases of refined metals for resale

In 2023, purchases of refined metals for resale decreased 99% (or ‑USD 432 million) to USD 5 million, primarily due to cease of refined metals purchases.

Other costs

In 2023, other costs decreased 13% (or ‑USD 44 million) to USD 282 million primarily due to Russian rouble depreciation against US Dollar partly offset by price inflation.

Depreciation and amortisation

In 2023, depreciation and amortisation expenses decreased 7% (or ‑USD 76 million) to USD 939 million mainly due to Russian rouble depreciation against US Dollar partly offset by increase in property, plant and equipment.

Decrease / Increase (with minus) in metal inventories

Сomparative effect of change in metal inventory amounted to +USD 1,542 million resulting in a respective increase in cost of metal sales mainly due to increase in metal inventories in 2022 driven by the extension of logistics and refocusing sales to new markets.

Cost of other sales

In 2023, cost of other sales decreased by USD 108 million to USD 721 million due to Russian rouble depreciation against US Dollar, which was partially compensated by increase in the cost of resale of icebreaking and sea transportation services.

Selling and distribution expenses

Selling and distribution expenses, USD million
Indicators 2022 2023 Change
Transportation expenses 118 132 12%
Export customs duties  – 43 100%
Marketing expenses 52 29 –44%
Staff costs 29 27 –7%
Other 56 54 –4%
TOTAL 255 285 12%

In 2023, selling and distribution expenses increased 12% (or USD 30 million) to USD 285 million driven by:

  • +USD 43 million – export customs duties introduced from October 1, 2023;
  • +USD 14 million – increase in transportation expenses primarily due to extension of logistics chains;
  • ‑USD 23 million – decrease in marketing expenses.

General and administrative expenses

General and administrative expenses, USD million
Indicators 2022 2023 Change
Staff costs 833 684 –18%
Third party services 230 147 –36%
Depreciation and amortisation  107 110 3%
Property tax and other miscellaneous taxes 94 75 –20%
Transportation expenses 9 6 –33%
Other 80 71 –11%
TOTAL 1,353 1,093 –19%

In 2023, general and administrative expenses decreased 19% (or ‑USD 260 million) to USD 1,093 million. Positive effect of the Russian rouble depreciation against US Dollar amounted to USD 242 million. Changes of the general and administrative expenses in real terms were primarily driven by the following factors:

  • ‑USD 42 million – decrease in third‑party services primarily driven by consulting services expenses;
  • +USD 22 million – increase in depreciation due to growth of fixed assets.

Other operating expenses

Other operating expenses, NET, USD million
Indicators 2022 2023 Change
Social expenses 407 205 –50%
Change in decommissioning obligations 12 53 4x
Change in other allowances 43 40 –7%
Loss on disposal of property, plant and equipment 70 36 –49%
Expenses on industrial incidents response 35 10 –71%
Change in provision on production and mining facilities shut down 14 –1 n.a.
Change in environmental provisions 93 –32 n.a.
Other, net 4 –42 n.a.
TOTAL 678 269 –60%

In 2023, other operating expenses, net decreased by USD 409 million to USD 269 million driven by the following factors:

  • ‑USD 202 million – decrease in social expenses;
  • ‑USD 125 million – lower environmental provisions related to compensation for environmental damages;
  • +USD 26 million – comparative effect of changes in provision on production and mining facilities shut down and in decommissioning obligations;
  • ‑USD 34 million – decrease in loss on disposal of property, plant and equipment;
  • ‑USD 25 million – decrease in industrial incidents response expenses.

Finance costs

Finance costs, NET, USD million
Indicators 2022 2023 Change
Interest expense, net of amounts capitalised  330 337 2%
Unwinding of discount on provisions 185 147 –21%
Fair value loss / gain (‑) on the cross‑currency interest rate swap contracts 18 60 3x
Interest expense on lease liabilities 16 35 2x
Income received as a result of early debt repayment –172 – 100%
Gain (‑) / loss from currency conversion operations 111 –5 n.a.
Other, net 5 –7 n.a.
TOTAL 493 567 15%

In 2023, finance costs, net increased 15% to USD 567 million. Finance costs, net decreased by USD 98 million in 2023 without taking into consideration profit from the early repayment of debt with a discount in 2022. The primary drivers of the change were:

  • ‑USD 116 million – decrease in foreign currency conversion costs due to lower intraday volatility in the foreign exchange market;
  • ‑USD 38 million – decrease in expenses related to unwinding of discount on provisions and due to significant volatility of discount rates during 2023, as well as changes in provisions;
  • +USD 42 million – increase in expenses driven by fair value revaluation of cross‑currency interest rate swaps primarily related to Russian rouble depreciation against US Dollar in 2023. In 2022, negative result of revaluation of financial instruments during a period of high exchange rate volatility was partially compensated by the appreciation of Russian rouble against US Dollar.

Income tax expense

The breakdown of the income tax expense, USD million
Indicators 2022 2023 Change
Current income tax expense 1,306 966 –26%
Deferred tax /benefit (‑) /expense 219 –302 n.a.
TOTAL INCOME TAX EXPENSE 1,525 664 –56%

In 2023, income tax expense decreased by USD 861 million driven mostly by lower profit before tax.

EBITDA

EBITDA, USD million
Indicators 2022 2023 Изменение
Operating profit 7,581 5,540 –27%
Depreciation and amortisation 1,026 1,165 14%
Impairment of non‑financial assets, net 90 179 99%
EBITDA 8,697 6,884 –21%
EBITDA margin 52% 48% –4 p.p.

In 2023, EBITDА decreased 21% (or ‑USD 1,813 million) to USD 6,884 million primarily driven by lower revenue, which was partially offset by Russian rouble depreciation against US Dollar in 2023.

Statement of cash flows

Statement of cash flows, USD million
Indicators 2022 2023 Change
Cash generated from operations before changes in working capital and income tax 8,897 7,121 –20%
Movements in working capital –3,184 –229 –93%
Income tax paid –1,127 –1,164 3%
Net cash generated from operating activities 4,586 5,728 25%
Capital expenditure –4,298 –3,038 –29%
Other investing activities 149 –4 n.a.
Net cash used in investing activities –4,149 –3,042 –27%
Free cash flow 437 2,686 6x
Interest paid –599 –791 32%
Payments of lease liabilities –50 –45 –10%
Dividends paid to non‑controlling interest –73 –503 7x
Other financing activities –4,342 –1,065 –75%
Net cash used in financing activities –5,064 –2,404 –53%
Effects of foreign exchange differences on balances of cash and cash equivalents 962 –25 n.a.
Net change in cash and cash equivalents –3,665 257 n.a.

In 2023, net cash used in investing activities decreased 27% to USD 3,042 million primarily driven by decrease in capital expenditures.

In 2023, free cash flow increased 6 times to USD 2,686 million following the increase in net cash generated from operating activities and the decrease in cash used in investing activities.

In 2023, free cash flow less regular financing outflows (interest paid, payments of lease liabilities, dividends paid to non‑controlling interest of GRK Bystrinsky) increased by USD 1,632 million and amounted to USD 1,347 million following the increase in free cash flow.

Net working capital changes between the balance sheet and cash flow statement, USD million
Indicators 2022 2023
Change of the net working capital in the balance sheet –2,734 911
Foreign exchange differences –218 –780
Change in income tax balance –165 208
Change of provisions, reserves and long term components of working capital included in cash flow –225 –412
Other changes 158 –156
CHANGE OF WORKING CAPITAL PER CASH FLOW –3,184 ‑229
Capital investments breakdown by project, USD million
Indicators 2022 2023 Change
Polar Division, including: 1,543 1,223 –21%
Skalisty mine 90 90 0%
Taymirsky mine 83 73 –12%
Komsomolsky mine 40 41 3%
Oktyabrsky mine 14 5 –64%
Talnakh Enrichment Plant (TOF‑3) 194 123 –37%
Capitalised repairs 222 93 –58%
Purchase of equipment 322 219 –32%
Other Polar Division projects 578 579 0%
Kola MMC 350 233 –33%
Environmental program (Sulfur Program at the Nadezhda Smelter) 893 454 –49%
South cluster 298 248 –17%
Energy and gas infrastructure modernization 465 408 –12%
Bystrinsky project (Chita) 72 65 –10%
Other production projects 607 355 –42%
Other non‑production assets 70 52 –6%
TOTAL 4,298 3,038 –29%

In 2023, CAPEX decreased 29% (or ‑USD 1,260 million) to USD 3,038 million driven by the effect of the Russian rouble depreciation against US Dollar, optimization of settlements with contractors as well as the rescheduling of investment projects as voluntary self‑sanctions imposed by foreign suppliers of equipment and technologies resulted in redesign of investment projects.

Debt and liquidity management

Debt and liquidity, USD million
Indicators As of 31 December 2022 As of 31 December 2023 Change
USD million %
Non‑current loans and borrowings 7,189 5,377 –1,812 –25%
Current loans and borrowings 4,295 4,335 40 1%
Lease liabilities 233 520 287 2x
Total debt 11,717 10,232 –1,485 –13%
Cash and cash equivalents 1,882 2,139 257 14%
Net debt 9,835 8,093 –1,742 –18%
Net debt /12M EBITDA 1.1x 1.2x 0,1x n.a

As of December 31, 2023, the Company's total debt decreased by 13% to USD 10,232 million compared to December 31, 2022 partly following the depreciation of Russian rouble against US Dollar in 2023.

As of December 31, 2023, the Company's net debt decreased by USD 1,742 million due to decrease in total debt.

The Company fully honors its financial obligations in line with transactional documentation and fully complies with existing regulations.