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Half-yearly report for the six months ended 30 June 2018

21 August 2018

Polymetal International plc (LSE, MICEX: POLY; ADR: AUCOY) (together with its subsidiaries — “Polymetal”, the “Company”, or the “Group”) is pleased to announce the Group’s financial results for the six months ended 30 June 2018.

“I am delighted to report strong earnings on the back of solid operational delivery in the first half of the year”, said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. “We expect stronger production and free cash flow generation for the second half and remain focused on steadily progressing our further growth pipeline, including full ramp-up of Kyzyl, while generating meaningful dividends to our shareholders”.

FINANCIAL HIGHLIGHTS

  • Revenue in 1H 2018 increased by 16% to US$ 789 million compared to 1H 2017 (“year-on-year”), primarily driven by gold equivalent (GE) production growth of 11%. Gold sales were 445 Koz, up 17% year-on-year, while silver sales were down 2% to 12.1 Moz, in line with production volume dynamics. Average realised prices largely tracked market dynamics: gold was up 6% year-on-year, while silver was down 4%.

  • Group Total cash costs ("TCC")1 were US$ 683/GE oz for 1H 2018, up 4% year-on-year, and well within the Company’s guidance of US$ 650-700/GE oz. All-in sustaining cash costs ("AISC")1 amounted to US$ 893/GE oz, decreasing by 1% year-on-year. Both cost measures are expected to decline in 2H on the back of seasonally higher production and sales, notably at Mayskoye and Svetloye.

  • Adjusted EBITDA1 was US$ 305 million, an increase of 19% year-on-year, mostly driven by higher production volumes and commodity prices. The Adjusted EBITDA margin increased by 1% to 39% (1H 2017: 38%).

  • Net earnings2 were US$ 175 million versus US$ 120 million in 1H 2017, reflecting an increase in EBITDA. Underlying net earnings1 increased by 32% to US$ 155 million (1H 2017: US$ 117 million).

  • Regular dividends for 2017 of US$ 0.30 per share (total of US$ 136 million) were paid in May 2018. An interim dividend of US$ 0.17 per share (1H 2017: US$ 0.14 per share) representing 50% of the Group’s underlying net earnings for 1H 2018 has been proposed by the Board in accordance with the dividend policy, while complying with the hard ceiling of 2.5x Net debt/Adjusted EBITDA .

  • Net debt increased to US$ 1,652 million during the period (31 December 2017: US$ 1,420 million), representing 2.08x of last twelve months Adjusted EBITDA, driven by a seasonal working capital increase. As in prior years, stronger production and a traditional seasonal working capital drawdown should drive stronger free cash flow generation in 2H 2018.

  • Polymetal remains on track to meet its 2018 production guidance of 1.55 Moz of gold equivalent. TCC and AISC are expected to be within the guidance range of US$ 650-700/GE oz and US$ 875-925/GE oz, respectively. This guidance remains contingent on the RUB/USD exchange rate that has a significant effect on the Group’s Rouble-denominated operating costs.

Financial highlights3

1H 2018

1H 2017

Change, %

Revenue, US$m

789

683

+16%

Total cash cost, US$/GE oz

683

656

+4%

All-in sustaining cash cost, US$/GE oz

893

906

−1%

Adjusted EBITDA, US$m

305

257

+19%

Average realised gold price, US$/ oz

1,312

1,240

+6%

Average realised silver price, US$/ oz

15.6

16.3

−4%

Net earnings, US$m

175

120

+46%

Underlying net earnings, US$m

155

117

+32%

Return on Assets, %

13%

12%

+1%

Return on Equity (underlying),%

12%

10%

+2%

Basic EPS, US$/share

0.40

0.28

+43%

Underlying EPS, US$/share

0.35

0.27

+30%

Dividend declared during the period, US$/share4

0.30

0.18

+67%

Dividend proposed for the period, US$/share

0.17

0.14

+21%

Net debt, US$m

1,652

1,4205

+16%

Net debt/Adjusted EBITDA6

2.08

1.91

+9%

Net operating cash flow, US$m

93

35

+166%

Capital expenditure7, US$m

169

193

−12%

Free cash flow8, US$m

(64)

(163)

NM9

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Conference call and webcast

Polymetal will hold a conference call and webcast on 21 August 2018 at 10:00 London time (12:00 Moscow time), where senior management will discuss the results.

To participate in the call, please dial:
8 800 500 98 63 access code 39962809# (free from Russia), or
+44 203 009 24 62 (free from the UK), or
+1 646 722 49 13 (free from the US), or

follow the link: http://polymetal210818-live.audio-webcast.com.

Please be prepared to introduce yourself to the moderator or register.

A recording of the call will be available immediately after the call at +44 20 3364 5147 (from within the UK), +1 646 722 4969 (USA Toll Free) and +7 495 249 16 71 (from within Russia), access code 418783030#, from 12:30 Moscow time Tuesday, 21 August, till 12:30 Moscow time Tuesday, 28 August, 2018.



1The financial performance reported by the Group contains certain Alternative Performance Measures (APMs) disclosed to compliment measures that are defined or specified under International Financial Reporting Standards (IFRS). For more information on the APMs used by the Group, including justification for their use, please refer to the “Alternative performance measures” section below.
2Profit for the financial period.
3Totals may not correspond to the sum of the separate figures due to rounding. % changes can be different from zero even when absolute amounts are unchanged because of rounding. Likewise, % changes can be equal to zero when absolute amounts differ due to the same reason. This note applies to all tables in this release.
41H 2018: Final dividend for FY 2017 paid in May 2018. 1H 2017: Final dividend for FY 2016 paid in May 2017.
5As at 31 December 2017.
6On a last twelve months basis. Adjusted EBITDA for 2H 2017 was US$ 488 million.
7Purchases of property, plant and equipment in the consolidated statement of cash flows.
8Net cash flows from operating activities less cash flows used in investing activities excluding acquisition costs in business combinations and investments in associates and joint ventures.
9NM — not meaningful.

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THIS RELEASE MAY INCLUDE STATEMENTS THAT ARE, OR MAY BE DEEMED TO BE, “FORWARD-LOOKING STATEMENTS”. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE OF THIS RELEASE. THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, INCLUDING THE WORDS “TARGETS”, “BELIEVES”, “EXPECTS”, “AIMS”, “INTENDS”, “WILL”, “MAY”, “ANTICIPATES”, “WOULD”, “COULD” OR “SHOULD” OR SIMILAR EXPRESSIONS OR, IN EACH CASE THEIR NEGATIVE OR OTHER VARIATIONS OR BY DISCUSSION OF STRATEGIES, PLANS, OBJECTIVES, GOALS, FUTURE EVENTS OR INTENTIONS. THESE FORWARD-LOOKING STATEMENTS ALL INCLUDE MATTERS THAT ARE NOT HISTORICAL FACTS. BY THEIR NATURE, SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS BEYOND THE COMPANY’S CONTROL THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY’S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE IN THE FUTURE. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE. THERE ARE MANY FACTORS THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE COMPANY’S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED.
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Investor Relations Contacts

Tel. +44.20.7016.9506

Eugenia Onuschenko

Tel. +44.20.7016.9503

Maryana Nesis

Tel. +7.812.313.5964

Michael Vasiliev
ir@polymetalinternational.com Media Contacts

Tel. +44.20.3727.1000

Leonid Fink
Viktor Pomichal