OREANDA-NEWS. Novorossiysk Commercial Sea Port Group (“NCSP Group” or the “Group”) (LSE: NCSP, Moscow Exchange: NMTP) today reports its interim condensed consolidated IFRS financial results for the nine months ending 30 September 2013.

Operational highlights for 9M 2013

Total cargo turnover for the first nine months 2013 was 106.5 mln tonnes, down 12.2% in comparison with 121.3 mln tonnes for the first nine months of 2012.

Crude oil remained the primary factor contributing to the decline in cargo turnover, with volumes decreasing by 16 mln tonnes, or 18.7% year-on-year. Volumes for oil products, however, increased by 36.3%, or 5 mln tonnes, year-on-year.

During the reporting period grain volumes amounted to 2.3 mln tonnes, a decline of 64.2% year-on-year. The start of exports of the new grain harvest in the third quarter has restored monthly volumes to 2012 levels. From July to September 2013 grain volumes reached 1,815 thousand tonnes, four times that of 1H 2013.

Iron ore volumes for the first nine months of 2013 reached 1,493 thousand tonnes, up 10.6% on the same period in 2012.

NCSP Group financial results for 9M 2013

Consolidated revenue in the reporting period was USD 691.4 mln, compared with USD 785.9 mln in the first nine months of 2012. Stevedoring was the Group's main source of revenue, amounting to USD 546 mln in the first three quarters of 2013, compared with USD 630.2 mln a year earlier.

The main factor influencing the change in stevedoring revenue was the reduction in crude oil volumes and the fall in grain volumes compared to 9M 2012, which led to year-on-year declines in revenue for these cargoes of USD 42.6 mln and USD 65.6 mln, respectively.

With the recovery in monthly grain volumes following the start of exports of the new grain harvest in August-September of this year, the year-on-year decline in grain revenue increased only slightly from the USD 61.8 mln shortfall for the first six months of 2013.

The 5 mln tonnes year-on-year increase in oil products volumes was reflected in a USD 26 mln increase in revenue from this cargo. At the same time, revenue growth rates were higher than volume growth rates, at 38.9% and 36.3%, respectively.

Revenue from container handling for the reporting period increased by 5.5%, or USD 2.2 mln compared to 9M 2012.

Changes in revenues for other cargoes and services led to a USD 4.2 mln year-on-year decline in stevedoring revenue.

Revenue from additional port services and fleet services declined by USD 5 mln and USD 6.2 mln year-on-year, respectively, in line with the Group's lower cargo turnover.

There was no significant year-on-year change in cost of sales and SG&A for the reporting period, which had a positive impact on the profitability of the Group's business against the recovery in grain volumes.

The Group's EBITDA for the first nine months of 2013 was USD 379.7 mln, compared with USD 468.8 mln in 9M 2012. The main contributor to the year-on-year decline in EBITDA was the decrease in stevedoring revenue, as a result of which EBITDA fell by USD 68.4 mln; Net changes to cost of services (excluding bunkering) caused a reduction in EBITDA of USD 10.6 mln; and the negative effect of a decline in revenue from additional port services and fleet services amounted to USD 10.1 mln.

The Group's net profit for the first nine months of 2013 was USD 101.8 mln.

Net profit was supported by factors like a year-on-year decrease in finance costs and an increase in interest income of USD 12.4 mln and USD 11.2 mln, respectively, as well as deferred tax revenues of USD 7.5 mln, resulting primarily from the allocation of foreign exchange tax losses to future reporting periods.

The effect of the weakening of the Russian rouble against the US dollar from 30.3727 roubles on 31 December 2012 to 32.3451 roubles on 30 September 2013 on the Group's assets and liabilities denominated in foreign currency was the main cause of the foreign exchange loss of USD 108.1 mln.

The strengthening of the rouble in 3Q 2013 resulted in a lower foreign exchange loss than in 1Q 2013, when it reached USD 129.2 mln.


The Group's total debt as of 30 September 2013 stood at USD 2,182 mln; net debt was USD 1,808 mln.

After the reporting period, NCSP Group on 25 November 2013 completed the important process of signing an additional agreement with Sberbank to change certain conditions of the Group's USD 1,950 mln loan. The agreement significantly improves loan conditions:

From 19 January 2014 the interest rate will be reduced to a floating rate of LIBOR 3M + 5.0% instead of the originally agreed fixed rate of 7.48%;

The loan repayment schedule has been restructured: the loan will be repaid in regular installments every six month starting in June 2014;

The amount of the repayments in 2014-2017 was reduced compared to the previous schedule.

Installment payments will increase towards the end of the loan period, with a final balloon payment equivalent to 40% of the total indebtedness to be made on the last day of the agreement - 18 January 2018.

The parties also agreed more comfortable loan covenants, including a significantly higher net debt/EBITDA threshold and the removal of EBITDA/interest payments testing.

Development strategy

On 7 November 2013 the NCSP Group Board of Directors approved the development strategy for NCSP Group to 2018.

As part of this plan NCSP Group has set the following objectives: to updated the investment programme; to create a system of long-term planning and financial modelling based on potential costs and long-term liabilities; to implement a programme of increased operational efficiency; and to establish an effective reporting and control system.

The Group's development strategy to 2018 is based around the Group's major investment projects:

modernisation of PJSC NCSP, OJSC NovorosLesExport and LLC Baltic Stevedoring Company container terminals ;

comprehensive reconstruction of the Sheskharis oil terminal;

construction of a mineral fertiliser transhipment terminal;

reconstruction of OJSC Novorossiysk Shipyard and PJSC NCSP terminals;

development of existing operations.

Investment in the new development strategy is estimated at up to RUB 21.8 billion (including VAT) for the period 2014-2016. Decisions on the basis for investments and budgets, as well as implementation plans, will be made by the Board of Directors of PJSC NCSP and its subsidiaries in due course.