OREANDA-NEWS. December 31, 2010. Chelyabinsk Zinc Plant (LSE, RTS, MICEX: CHZN), Russia's largest producer of zinc and zinc alloys, is pleased to announce its IFRS financial results for the nine months ended September 30, 2010 (Unaudited accounts).

9 MONTHS 2010 HIGHLIGHTS

•           Chelyabinsk Zinc Plant's (CZP) revenue for the nine months 2010 totaled RUB 8,732 million compared to RUB 6,502 million for the same period last year.

•           Nine months 2010 EBITDA amounted RUB 2,029 million and was equivalent to 23% of revenue compared to an EBITDA of RUB 1,155 million, equivalent of 18% of nine months 2009 revenue.

•           Net profit for the nine months 2010 was RUB 1,031 million compared to RUB 268 million for the nine months 2009.

Consolidated interim financial results for the nine months ended September 30

(in millions of Russian Roubles)

2010

2009

Change, %

Revenue

8,732

6,502

34%

Gross profit

2,367

1,253

89%

Gross margin, %

27%

19%

 

EBITDA

2,029

1,155

76%

EBITDA margin, %

23%

18%

 

Profit/(loss) before income tax

1,321

319

314%

Net income/(loss)

1,031

268

285%

Net margin, %

12%

4%

 

Reconciliation of EBITDA to net income is as follows for the periods indicated:

 

Nine months ended September 30

(in millions of Russian Roubles)

2010

2009

Profit/(loss) for the period

1,031

268

Add:

 

 

Depreciation and amortization

646

669

Finance income and costs, net

(11)

109

Foreign currency exchange loss, net

40

2

Income tax expense

290

51

Impairment of property, plant and equipment

12

-

Impairment of assets held for sale

17

-

Exploration and evaluation costs

4

56

EBITDA

2,029

1,155

Production and Sales

January through September 2010, CZP produced 119.8 thousand tonnes of salable SHG zinc and zinc based alloys, an increase of 44% as compared to the same period of 2009 (83.2 thousand tonnes).

CZP sales for the nine months 2010 were 119.7 thousand tonnes, which is 43% more than for the same period of 2009 (83.8 thousand tonnes). 48% (57.3 thousand tonnes) of zinc and zinc alloys was supplied to the domestic market. 51% (61.1 thousand tonnes) - was supplied under a tolling agreement with UMMC. Export constituted 1.3 thousand tonnes.

CZP's affiliated company, Nova Zinc LLC, operator of Akzhal zinc and lead ore mine in Kazakhstan produced 22.4 thousand tonnes of zinc in zinc concentrate for the nine months 2010 (nine months 2009: 26.2 thousand tonnes). Lead in lead concentrate production for January through September 2010 totaled 3.1 thousand tonnes (January through September 2009: 3 thousand tonnes).

CZP's subsidiary, The Brock Metal Company Limited (the leading UK supplier of zinc die- casting alloys) sold 21 thousand tonnes of products for the nine months 2010 (including 18.8 thousand tonnes of zinc alloys), an increase of 34% as compared to the same period of 2009.

Revenue

CZP's revenue increased by 34% for the nine months 2010, to RUB 8,732 mln. The increase was mainly due to the growth of revenue from sales of zinc and zinc alloys by 6%; from sales of lead concentrate - by 60%; from sales of by-products - by 51%.

Revenue structure for the nine months ended September 30

(in millions of Russian Roubles)

2010

2009

Change, %

Zinc and zinc alloys

5,596

5,267

6%

Zinc tolling

1,469

0

n/a

Zinc concentrate

0

152

n/a

Lead concentrate

516

323

60%

Other products

1,151

760

51%

Total revenue

8,732

6,502

34%

Revenue from sale of zinc and zinc alloys increased by 6% for the nine months 2010, to RUB 5,596 mln. It was caused by the growth of zinc and zinc alloys tonnage sales and also by increase of LME zinc prices by 43%. CZP's revenue increase was not proportional due to the fact that part of zinc metal was supplied under a tolling agreement.

Zinc tolling revenue was RUB 1,469 mln. CZP receives fixed processing fee of RUB 24,000 per tonne of zinc.

January through September 2010 revenue of The Brock Metal Company Limited amounted RUB 1,419 mln (January through September 2009 - RUB 864 mln). The main factors of the growth were increase of sales volume and increase of LME zinc prices.

Revenue from sale of lead concentrate for the nine months 2010 increased by 60% to RUB 516 mln as compared to the same period of 2009, due to CZP's sales (nine months 2010: 6.1 thousand tonnes of lead in lead concentrate; nine months 2009: 1.5 thousand tonnes).

January through September 2010 revenue from CZP's other products increased by 51% to RUB 1,151 mln. It was mainly caused by the increase of sulphuric acid, indium and zinc sulfate sales.

Cost of Sales for the nine months ended September 30

(in millions of Russian Roubles)

2010

2009

Raw materials and consumables used in production

3,250

2,687

Utilities and fuel

1,301

909

Production overheads

67

78

Mineral extraction tax

111

48

Repairs and maintenance

442

286

Depreciation and amortization

580

599

Staff cost

503

415

Change in work-in-progress

71

184

Change in finished goods

(69)

24

Reversal of inventory provision

(4)

(186)

Precious metal revaluation

(64)

(55)

Cost of goods and material for resale

165

259

Cost of sales

6,353

5,248

For the nine months ended September 30 2010, cost of sales increased by 21% to RUB 6,353 mln as compared to the same period of 2009.

Cost of material and consumables used primarily comprises the cost of zinc concentrate, materials for alloys production, secondary raw materials and auxiliary materials used in the zinc production process. This cost increased by 21% to RUB 3,250 mln. The main reason is the production volumes growth and increase of LME zinc prices. Cost of material and consumables used also increased disproportionately due to the zinc tolling.

For the nine months 2010 costs of utilities and fuel increased by 43% to RUB 1,301 mln as compared for the same period of 2009. This increase was primarily due to a growth of electricity consumption at CZP's production facilities in Chelyabinsk as a result of an increase in overall production levels and growth of electricity tariffs for CZP. Also costs of fuel of Nova Zinc LLC increased due to the growth of the stripping activities, growth of electricity tariffs (by more than 30%) and diesel fuel price (by more than 40%).

Distribution Costs

Distribution costs include primarily transportation costs and customs duties. For the nine months 2010, these costs grew by 55% to RUB 391 mln due to increase of transportation costs of sulphuric acid and lead concentrate to consumers.

General and Administrative Expenses

General and administrative expenses decreased for the nine months 2010 by 3% to RUB 428 mln, as compared to the same period of 2009.

Profit (loss)

Net profit for the nine months ended September 30, 2010 was RUB 1,031 mln compared to RUB 268 mln for the nine months ended September 30, 2009.