Novatek (MCX: NVTK) — one of the largest producers of natural gas in Russia. 27 In October, the company published financial statements on the results of the first 9 months of this year.
Revenue reached a record level, exceeding the results of the pre-crisis period against the backdrop of rising prices for hydrocarbons, and the company's net profit increased by more than 9 times relative to last year's low base.
I propose to consider the main indicators of the company, to understand, how the favorable price environment affected the financial results of the business and what it means for investors.
Disclaimer: if we write, that something went up or down by X%, then by default we mean a comparison with the report data for the same period last year, unless otherwise stated.
Revenue and profit
The market situation favors Novatek: revenue increased by 60% and reached 785.7 billion rubles, which was a historic high for business. Against the backdrop of growing volumes and sales prices of hydrocarbons, all key business segments grew.
In the revenue structure, about 43,3% accounted for the sale of natural gas, which mainly goes to the domestic market, where prices are regulated by the state and therefore are much less volatile compared to quotations on major global gas hubs. That is why the company has not benefited as much from high natural gas prices in European and Asian markets in 3 quarter of the current year. Furthermore, it was the revenue from the sale of natural gas that showed the worst dynamics compared to other products, where state regulation could not have such a strong impact on market prices.
Revenue structure for 9 months of 2021, billion rubles
| Revenue | The change | Share in revenue | |
|---|---|---|---|
| Natural gas | 340,3 | 34% | 43,3% |
| Naphtha | 144 | 89% | 18,3% |
| Oil | 91,7 | 65% | 11,7% |
| Other products of gas and gas condensate processing | 70,2 | 70% | 8,9% |
| Liquefied petroleum gas | 69,5 | 124% | 8,8% |
| Stable gas condensate | 55,4 | 105% | 7,1% |
| Other revenue | 14,6 | 86% | 1,9% |
Following the revenue, the operating expenses of the company also increased. 50% — up to 581 billion rubles. The main reason is the increase in expenses for the purchase of natural gas and liquid hydrocarbons from 163.2 to 318.4 billion rubles due to high prices for raw materials.
As a result, operating income increased by 3,6 times - up to 205.9 billion rubles.
Against the backdrop of revaluation of exchange rates and reduction in interest income, Novatek recorded expenses on financial activities in the amount of 15.8 billion rubles. But the company's profit from participating in various joint projects for the first 9 months of 2021 reached 135.2 billion rubles - against a loss of 160 billion rubles for the same period last year.
All this allowed Novatek to increase its net profit by 9,2 times - up to 291.4 billion rubles. Excluding the effect of various non-recurring and non-cash items in the financial statements Normalized net income, relating to the company's shareholders, grew up in 2,4 times - up to 269.7 billion rubles, — which was a record result for the business and exceeds the pre-crisis figures.
Financial performance of the company for 9 months of 2021, billion rubles
| Revenue | Operating profit | Net profit | Adjusted net income | |
|---|---|---|---|---|
| 2017 | 414,2 | 116,8 | 118,6 | 113 |
| 2018 | 594,6 | 171,7 | 135,6 | 166,7 |
| 2019 | 641,8 | 842,5 | 834,3 | 178,6 |
| 2020 | 492,272 | 57 | 31,5 | 110,5 |
| 2021 | 785,742 | 205,9 | 291,4 | 269,7 |
Investments, debts and dividends
Last year, despite the crisis in the industry, Novatek's investment program reached a record level, and capital expenditures exceeded 200 billion rubles. Following the first 9 months of the current year, the capital investments of the holding decreased by 4% and amounted to 136.4 billion rubles. Management directs a significant part of investments to the development of LNG projects and the development of oil and gas fields.
Net debt of Novatek since the beginning of the year has decreased by 2,6 times - up to 15.1 billion rubles, which was the minimum of recent years and is mainly due to a decrease in the amount of long-term and short-term loans and borrowings. The level of debt burden by the ratio "net debt / EBITDA for 12 months" amounted to only 0.02×, which indicates low debt load and good financial stability of the business.
Dividend policy of the holding, approved in December 2020, proposes to allocate at least 50% from IFRS profit, adjusted for various non-recurring and non-cash items. The company pays dividends twice a year based on the results of the reporting half-year.
Based on the results of 1 half of 2021, the board of directors recommended that 27,67 P per share - 50% from adjusted net profit.
IN 3 quarter business has already earned 17,6 R per share in the form of dividends, and c 4 quarter results are unlikely to be lower, given the high prices and demand for hydrocarbons at the height of the heating season. Consequently, it is possible with a high degree of confidence to predict record dividends for the entire 2021.
Dynamics of capital investments for 9 months of 2021, billion rubles
| 2017 | 26,6 |
| 2018 | 56,6 |
| 2019 | 110,2 |
| 2020 | 142,3 |
| 2021 | 136,4 |
26,6
Net debt dynamics, billion rubles
| 2017 | 89,8 |
| 2018 | 102,9 |
| 2019 | 15,106 |
| 2020 | 39,557 |
| 9м2021 | 15,075 |
89,8
Amount of dividends per share based on the results of the reporting period
| 2015 | 13,5 R |
| 2016 | 13,9 R |
| 2017 | 14,95 R |
| 2018 | 26,06 R |
| 2019 | 32,33 R |
| 2020 | 35,56 R |
| 1п2021 | 27,67 R |
13,5 R
What's the bottom line?
The favorable situation in the hydrocarbon market for the oil and gas industry allowed the business to demonstrate strong financial results following the results of the first 9 months of this year and set new records for revenue and adjusted net income, exceeding the results of pre-crisis 2019.
At the same time, revenue growth occurred in all major types of products.. Which is ironic, taking into account record natural gas prices in European and Asian markets, it was natural gas sales that showed the weakest dynamics, as only a minor part of production goes abroad in the form of LNG, and a large one is sold in Russia at prices, which are regulated by the state and do not depend directly on stock quotes.
Worth noting also, what's the business, despite a significant investment program, associated with the development of LNG projects and the launch of new fields, there is practically no debt load. Besides, current price situation allows you to calculate, what is the result 2 half of the year, the company will be able to pay shareholders even more dividends, than the results 1 Half, and the total amount of annual payments for 2021 promises to be a record for the company.
