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ALROSA Q3 and 9M 2018 IFRS results

ALROSA reports on financial results for the 3rd quarter and 9 months of 2018

Key indicators for 9 months of 2018

Revenue grew by 11% to 238 billion rubles. against the background of a rise in the price index and average diamond sale prices, as well as an improvement in the sales structure, despite a 9% decrease in carat sales.

EBITDA increased by 29% to 129 billion rubles owing to revenue growth and a slight decrease in production costs.

EBITDA margin increased by 7 points to 54%.

Net profit for the first 9 months rose to 82.5 billion rubles. (+ 33% YoY) amid growing EBITDA.

Free cash flow (FCF) grew by 38% owing to growth in profitability amid an increase in investment by 2.4 billion rubles, as well as the release of funds from working capital owing to growth in sales from stocks.

Key indicators of Q3 2018

Revenue decreased by 3% q / q to 70.1 billion rubles due to a decrease in sales in carats (-26% q / q) amid rising average prices. A 19% yoy increase was owing to an increase in the price index and an improvement in the sales structure.

EBITDA in Q3 decreased by 3% q / q to 40 billion rubles by reducing sales in carats by 26%. In part, this factor was offset by rising average selling prices amid cost control. Growth of 47% yoy is owing to cost reduction and improved pricing environment.

EBITDA margin in Q3 remained at 57%.

Net profit in the 3rd quarter decreased to 24.2 billion rubles (-5% q / q). Growth of 87% y / y is associated with improved market conditions.

Free cash flow rose to 23.6 billion rubles (+ 13% q / q, +2 times yoy) against the background of an increase in operating cash flow (+ 15% q / q, + 75% yoy).

The increase in net debt (from 6 to 36.6 billion rubles) is mainly associated with a decrease in cash, which was used to pay dividends for 2017 (38.6 billion rubles).

Net debt / EBITDA was 0.2x, which is below the target value of 0.5-1.0x.

Dividends: according to the results of 6 months of 2018. The general meeting of shareholders on September 30 decided to pay dividends in the amount of 5.93 rubles. per share (70% of FCF).

Forecast: the estimate of sales in 2018 was revised to 37-38 million carats due to a decrease in demand for small-sized raw materials in the 2nd half of the year.

Sergey Ivanov, CEO - Chairman of the Board of ALROSA PJSC:

“The recovery in demand for final products and price improvement, as well as our efforts to improve business profitability, both through an active sales policy and through the implementation of an operational efficiency program, allowed us to demonstrate strong financial performance. EBITDA margin increased by 7 pp up to 54%, which confirms the status of the Company as a leader in the industry, not only by market share, but also by profitability. The growth in operating cash flow and stabilization of investment allowed us to increase free cash flow by 38% to 86 billion rubles, which in turn led to improved financial stability - net debt to EBITDA decreased to 0.2 from 0.7 a year ago.

In October 2018, the Company began industrial diamond mining at the Verkhne-Munskoye field with a capacity of 1.8 million carats of diamonds per year. The launch of this deposit, as well as the increase in productivity on the already operating assets, will partially compensate for the volumes lost due to the cessation of work at the Mir mine and increase production in 2019 to 38 million carats.

Stable free cash flow allowed the Company's shareholders to accept the recommendation of the Supervisory Board and approve a high level of dividends for 6 months of 2018 in the amount of 5.93 rubles per share.”

EBITDA is profit for the preceding 12 months before interest, income tax and depreciation of fixed assets and intangible assets, determined in accordance with international standards for the preparation of consolidated financial statements (IFRS).

Free cash flow (FCF) - cash flow from operating activities minus the amount of investments (capital investments) in the main production, determined in accordance with IFRS.

Net debt is the amount of debt liabilities minus cash and cash equivalents at each reporting date, which is determined in accordance with international standards for the preparation of consolidated financial statements (IFRS).

Source: ALROSA