NCSP Announces Interim Condensed Consolidated Financial Results for 9M

OREANDA-NEWS. January 11, 2011. Novorossiysk Commercial Sea Port (LSE: NCSP, RTS and MICEX: NMTP) announces interim condensed consolidated financial results (unaudited) for the nine months ended 30 September 2010 in accordance with International Financial Reporting Standards (IFRS).

The full text of interim condensed consolidated financial statements (unaudited) for the nine months ended 30 September 2010 of the NCSP Group are available on the Group’s website at: http://nmtp.info/en/holding/investors/reporting/msfo/

Key financial indicators of the Group (USD ‘000)

* The amount is either a non-IFRS measure or according to management reporting data

** Calculated as Profit Before Income Tax increased by Depreciation and Amortization expense, Finance Costs, and Foreign Exchange Loss (Gain).

*** Calculated as Interest Income on Deposits minus Finance Costs.

Revenue

NCSP Group consolidated revenue for nine months of 2010 amounted to USD 499 372 thousand versUSD 508 238 for the same period last year.

Thousand USD	9 months 2010	9 months 2009	Change, %
Total, including:	499 372	508 238	(1.7%)
Stevedoring services	391 600	399 100	(1.9%)
Additional port services	63 612	66 879	(4.9%)
Fleet services	34 491	35 662	(3.2%)
Ship repair services	1 488	445	-
Other	8 181	6 192	32.1%

Revenue from stevedoring services (transshipment of liquid, bulk, general and container cargo, including bunkering) for 9 months of 2010 reduced by 1.7% as a result of the 3.9% reduction of NCSP Group cargo traffic. Whereas only the grain export ban effective from 15 August 2010 resulted in unearned revenues of USD 7 045* thousand. On the other hand, it is worth mentioning that revenues from handling of containers in the reporting period increased by 59.5%, revenues from timber cargo loading increased by 36.9%, revenues from loading of bulk mineral fertilizers – by 43.5%, and revenues from handling of non-ferrous metals grew by 28.8%.

Revenues from Additional Port Services (forwarding, storage, customs documentation, repacking, etc) and Fleet Services for the 9 months of 2010 decreased by 4.9% and 3.2% respectively, influenced by changes in the cargo turnover.

Revenue from Ship Repair Services in the first three quarters of 2010 has more than tripled compared to that of the same period last year and totaled USD 1 488 thousand as a results of completing more ship-repair orders for external clients.

Revenue from Other Services in the reporting period increased by 32.1% mostly thanks to implementing the project for tugboat fleet expansion and providing tug-and-towing services in new markets.

Cost of Services and SG&A

NCSP Group cost of services under IFRS totaled USD 178 260 thousand for the nine months of 2010 versUSD 169 623 thousand for the same period of 2009.

Key factors affecting Group’s cost of services in the first three quarters of 2010 versus same period of 2009 were:

-          Depreciation charge increase as a result of commissioning of new equipment added USD 4 324* thousand to the Cost of Services;

-          Appreciation of the Russian ruble against the representation currency (US dollar) during nine months of 2010 as compared to nine months of 2009 caused the Cost of Services to grow in dollar terms by USD 8 560* thousand;

-          Reduction of pension liabilities according to new actuarial calculations and changes in provisions for probable economic outflows allowed to offset the growth in other cost items (including power and utility costs, and repair and maintenance expenses) and reduced the total Cost of Services by USD 4 247* thousand.

Selling, general, and administrative expenses of NCSP Group in the reporting period totaled USD 28 086 thousand versUSD 38 931 thousand in the same period of 2009. SG&A reduction was mostly conditioned by reversal of earlier accrued reserves connected with advance payments in the course of the investment program implementation (USD 8 456 thousand) and changes in provisions for probable economic outflows (USD 2 710 thousand).

EBITDA Adjusted

In order to provide comparability of the data for 9 months of 2010 and 9 months of 2009, the calculation of EBITDA* for both periods was adjusted for foreign exchange loss (gain) on assets and liabilities nominated in foreign currency, which have been caused by the fluctuations of the ruble-dollar exchange rates. EBITDA Adjusted*** for the 9 months of 2010 amounted to USD 362 145* thousand versUSD 353 959* thousand for the same period last year.

These are the key factors affecting Group’s EBITDA Adjusted change in the reporting period:

-          Increase of interest income on deposits increased EBITDA Adjusted by USD 8 440* thousand;

-          Group’s cost optimization efforts and foreign exchange loss (gain) brought EBITDA Adjusted up by USD 6 235* thousand;

-          Decline of cargo turnover and changes in the cargo mix reduced EBITDA Adjusted by USD 4 241* thousand;

-          Reduction of additional port services decreased EBITDA Adjusted by another USD 2 156* thousand.

Net Profit Adjusted

In order to provide comparability of the data for 9 months of 2010 and 9 months of 2009, the calculation of the net profit for both periods has to be adjusted for foreign exchange gains/losses and their effect on the profit tax. Taking into account the above, Adjusted Net Profit in the reporting period totaled USD 235 564* thousand versUSD 225 990* thousand for the same period of 2009.

Growth of Net Profit Adjusted was conditioned by:

-          Increase of interest income on deposits from USD 8 038 thousand in 9 months of 2009 up to USD 16 478 thousand in the same period of 2010;

-          Reversal of earlier accrued reserves connected with advance payments in the course of the investment program implementation, and changes in provisions for probable economic outflows;

-          Reduction of Finance costs following the repayment of the USD 118 million syndicated loan facility on 17 July 2010.

Credit burden and net debt

NCSP Group indebtedness totaled USD 327 017 thousand as of 30 September 2010, of which the current portion of long-term debt due within 12 months from the reporting date comprised USD 28 488. Massive reduction of the Group’s credit burden and the current portion of debt resulted from repayment of the USD 118 million syndicated loan facility on 17 July 2010.

As of reporting date NCSP Group net debt comprised USD 19 286 thousand, taking into account the Groups cash resources in the amount of USD 307 731 thousand, as follows:

-          Cash and cash equivalents in the amount of USD 58 635 thousand;

-          Deposits maturing in more than 3 but less than 12 months in the amount of USD 249 096 thousand.

As at 30 September 2010, the average effective borrowing rate according to IFRS was 7.19% per annum versus 6.67% per annum as at 31 December 2009. This growth was conditioned by the repayment of the USD 118 million syndicated loan facility (with 4.8% annual interest rate).

The Group’s borrowings as of 30 September 2010 are repayable as follows:

in thousand USD	Capital element	Contractual interest liability
Total, of which:	327 017	43 795
Due within three months	7 834	11 107
Due from three to six months	1 511	509
Due from six to 12 months	19 143	11 121
Exceeding 1 year	298 529	21 058

Investment Program Implementation

In the reporting period NCSP Group continued to implement its investment program aimed at construction of new, and expansion of existing stevedoring facilities.

According to management accounts, in the first nine months of 2010 investments totaled USD 80 557* thousand versUSD 55 434* thousand in the same period of 2009, including:

-          Maintenance CAPEX of USD 22 968* thousand in 9M 2010 versUSD 19 802 thousand in 9M 2009;

-          Investment in construction of new stevedoring capacity comprised USD 57 589* thousand for 9M 2010 versUSD 35 632* thousand for 9M 2009.