NCSP Group Announced Financial Results to IFRS for 2010

OREANDA-NEWS. April 21, 2011. Novorossiysk Commercial Sea Port (LSE: NCSP, RTS and MICEX: NMTP) hereby announces audited consolidated financial results for year ended 31 December 2010 in accordance with International Financial Reporting Standards (IFRS). In the reporting period NCSP Group has increased its net profit by 2.5% versus that of 2009 reaching USD  258 440 thousand.

The complete NCSP Group’s audited consolidated financial statements for year ended 31 December 2010 are available on the Group’s website under Investor Relations at: http://nmtp.info/en/holding/investors/reporting/msfo/

Commenting on the company’s financial results for 2010, Chief Executive Officer Igor Vilinov said: "Last year the company operated in a very difficult, rapidly changing market. Due to the government ban on export of grain, we missed substantial volume of one of our most profitable cargos. Nonetheless, even in these conditions NCSP Group managed to increase its net profit. This is the best confirmation that a diversified cargo base is the cornerstone of stability and the launchpad for further growth of our business".

Key financial indicators of NCSP Group (USD ‘000)

* Here and below, based on management accounts data

** Calculated as profit before tax, increased by the amount of depreciation charges, net financial costs and exchange rate differences

*** Calculated as the difference between interest income on deposits and financial costs

Revenue

NCSP Group’s consolidated revenue totaled USD 635 315 in 2010 compared to that of USD 675 060 in 2009.

‘000 USD	2010	2009	Change, %
TOTAL, of which:	635 315	675 060	-5,9%
Stevedoring services	494 804	534 168	-7,4%
Additional port services	81 213	84 663	-4,1%
Fleet services	45 028	46 874	-3,9%
Ship repair	2 254	915
Other	12 016	8 440

The main factor that had a positive impact on revenue from stevedoring services (including cargo transshipment and bunkering services) in the reporting period was growth of Group’s cargo turnover in a number of key categories: container cargo by 100.8%; nonferrous metals by 28.8%; mineral fertilizers by 23%; and timber cargo by 14.3%. Revenue from these cargoes grew by USD 23 548* thousand, including by USD 14 271* thousand from container cargo, USD 3 050* thousand from nonferrous metals, USD 2 936* thousand from mineral fertilizers, and USD 3 289* thousand from timber cargo.

On the other hand, revenue was negatively affected by a decline of volumes in 2010 versus 2009 for a range of cargoes (grain, iron ore, ferrous metals, and liquid cargo), which caused corresponding revenues to decrease by USD  63 291* thousand. Major portion of this – USD 39 995* thousand – accounts for losses suffered from the ban on grain exports that the Russian government imposed on August 15, 2010.

Thanks to operative management of cargo traffic, the management of NCSP Group was able to compensate for the decline of stevedoring revenue from all types of cargoes except grain, the volume of which fell due to non-market, external factors.

Group revenue from stevedoring services in 2010 comprised USD  494 804 thousand which is by USD 39 364 thousand less that that 2009.

Revenue from additional port services (storage, forwarding, repacking, customs documentation processing, etc.) and fleet services in 2010 declined by respectively USD 3 450 thousand and USD 1 846 thousand in line with changes in the cargo turnover.

Revenue from ship repair services, however, more than doubled in 2010 on the back of growth in the number of third-party repair contracts.

Revenue from other services surged by USD 3 576 thousand in 2010 on the back of new revenue from leasing of fixed assets that the Group has commissioned.

Cost of Services and SG&A

NCSP Group’s cost of services totaled USD 242 069 thousand in the reporting period compared to USD 236 813 in 2009. The main factors affecting the Group’s cost of services in 2010 compared to 2009 included:

-        growth of depreciation charges resulting from commissioning new equipment in operation increased cost of services by USD 4 369 thousand;

-        strengthening of the ruble versus the presentation currency (US dollar) in 2010 compared to 2009, which increased the cost of services in dollar terms by USD 7 278* thousand;

-        a reduction of pension obligations under updated actuarial calculations, enabled the Group to offset growth of some other costs resulting in final reduction of the cost of services by USD 6 391* thousand.

Selling, general and administrative expenses of NCSP Group totaled USD  46 643 thousand in 2010 compared to USD 68 232 thousand in 2009. These expenses were reduced primarily by recovering provisions for advance payments on the investment program in the amount of USD 16 912* thousand, and recovering provisions for future expenses in the amount of USD  5 170* thousand.

Adjusted EBITDA

In order to ensure comparability of data for 2010 and 2009, EBITDA for both periods is adjusted for exchange rate differences, resulting from fluctuations in the Russian ruble’s exchange rate against the US dollar, on Group assets and liabilities nominated in foreign currency. Adjusted EBITDA amounted to USD 415 975* thousand in 2010 compared to USD 431 015* in 2009.

Changes in Adjusted EBITDA was affected by the following factors:

-        the decline in cargo turnover, primarily due to the export ban on grain, reduced EBITDA by USD 24 458* thousand;

-        in line with the decline in cargo turnover, EBITDA from additional port services declined by USD 2 277* thousand;

-        optimization of operating expenses and exchange rate differences offset the decline in EBITDA by USD 11 696* thousand.

Leverage and net debt

NCSP Group debt on loans and other borrowing totaled USD 321 312 thousand as of December 31, 2010, with the current portion of long-term debt due within 12 months after the reporting date amounting to USD 15 900 thousand. The total debt and current debt decreased substantially thanks to the repayment of a syndicated loan of USD 118 million on July 15, 2010.

NCSP Group’s net debt amounted to USD 9 972  as of the reporting date, which includes monetary resources at the Group’s disposal, as follows:

-        cash and cash equivalents of USD 265 017 thousand;

-        deposits maturing in more than three months but less than 12 months totaling USD 46 323 thousand.

The average effective interest rate on loans and other borrowing was 6.84% to IFRS as of December 31, 2010 compared to 6.67% as of December 31, 2009.

NCSP Group loans and other borrowing as of December 31, 2010 are due to be repaid as follows:

‘000 USD	Principal debt	Interest
TOTAL, of which:	321  312	32 781
Due within three months	3 333	222
Due in three to six months	5 900	10 638
Due in six to twelve months	6 667	11 040
Due in more than one year	305 412	10 881

Investment program

NCSP Group in 2010 virtually doubled capital expenditures to USD 129 707* thousand from USD 72 854*  in 2009. This included:

-        USD 96 489* thousand invested in construction of new terminals, compared to USD 47 899* thousand in 2009;

-        USD 33 218* thousand invested in current operations (modernization of plant and equipment), compared to USD 24 955* thousand in 2009.

Events after the balance sheet date

NCSP Group on January 21, 2011 acquired 100% of PTP Ltd. from Omirico Limited for USD 2.153 billion in cash. To finance the acquisition the Group received a loan of USD 1.95 billion from Sberbank of Russia.