ALROSA releasing its IFRS financial results for Q3 and 9M 2018 said that revenue for the nine-month period increased by 11% to RUB 238 billion “on the back of higher price index and average diamond selling prices and a better sales mix”. This, the Company stressed, was achieved despite a 9% drop in sales in terms of carats.

However, revenue for Q3 decreased by 3% to RUB 70.1 billion as compared to the previous quarter, “on the back of weaker sales in carats (down 26% q-o-q) amid rising average prices. The Company added that it had logged a 19% y-o-y growth for the quarter which “was driven by a higher price index and a better sales mix”.

For 9M 2018, EBITDA grew by 29% to RUB 129 billion, “supported by higher top line and slightly lower production costs”; and EBITDA margin expanded by 7 p.p. to 54%.

The net profit for 9M grew by 33% y-o-y to RUB 82.5 billion, on the basis of a stronger EBITDA.

ALROSA reported that free cash flow (FCF) for 9M 2018 grew by 38% as a result of the “profitability expansion” while investments increased by RUB 2.4 billion. “An additional driver for the FCF growth was a working capital release due to increased sales from inventory,” the Company said.

For Q3 2018, EBITDA declined by 3% to RUB 40 billion as compared to the previous quarter. This was attributed “to a 26% drop in sales in carats, which was partially offset by higher average selling prices supported by cost control measures”, the Company remarked. For the period, ALROSA recorded a 47% growth y-o-y which was due to a combination of lower costs and better prices. In Q3 2018, EBITDA margin remained flat at 57%.

ALROSA noted that net profit in Q3 decreased by 5% compared to the previous quarter to RUB 24.2 billion. However, the Company saw a 87% growth y-o-y, which, it said, was driven by the improved market environment.

Free cash flow for the period increased to RUB 23.6 billion, a 13% increase q-o-q and two-fold y-o-y. This was a result of a stronger operating cash flow, which was higher by 15% q-o-q and 75% y-o-y.

ALROSA’s net debt increased from RUB 6 billion to RUB 36.6 billion. This, the Company attributed “mainly due to a decrease in cash following a 2017 dividends payment (RUB 38.6 bn)”.

The Company also noted that the net debt to EBITDA stood at 0.2x, below the target range of 0.5–1.0x.

The Company has revised its guidance for 2018 sales to 37–38 million carats due to weaker demand for small-size rough diamonds in  H2 2018.

ALROSA’s CEO Sergey Ivanov commented: “Our strong financial performance was driven by the recovery in demand for end products and higher prices, coupled with our efforts to improve margins through a more aggressive sales policy and implementation of the operational excellence programme.”  

He added: “In October 2018, the Company started commercial mining operations at the Verkhne-Munskoye deposit, which will produce 1.8 million carats of diamonds per year. With the deposit put on stream and an increased output at the existing assets, ALROSA will be able to partially make up for the volumes lost due to the shutdown of the Mir underground mine, and increase diamond production to 38 million carats in 2019.”

Ivanov announced that on the recommendation of the Supervisory Board, ALROSA's shareholders have approved 6M 2018 dividends of RUB 5.93 per share based on “a stable free cash flow”.

Meanwhile the miner has also announced sales results for October 2018. ALROSA’s sales of rough and polished diamonds for the month reached US$ 242.8 million

In the period, the Company’s sales of rough diamonds amounted to US$ 233.9 million; while polished diamond sales stood at US$ 8.9 million.

ALROSA’s total diamond sales for the January-October 2018 period grew 6% y-o-y  to US$ 3.9 billion. During the first ten months of 2018, rough diamonds sales touched US$ 3.8 billion; while polished diamond sales amounted to US$ 83.0 million.

“In October, demand for small-size inexpensive rough diamonds continued to remain weak. Seasonal slowdown on the threshold of Diwali, the main Indian holiday, was exacerbated by weakening Rupee/USD FX rate, a number of minor bankruptcies in India and tighter credit conditions for the cutting and polishing sector in this country,” said ALROSA Deputy CEO Yury Okoemov. “We expect the situation to stabilise through December this year to the first quarter next year – rough diamond sales are expected to be in the range of 37-38 million carats.  While in value terms, our 2018 sales should be higher compared to the last year results.”