Analysis of Norilsk Nickel's results and forecast of annual dividends

Разбор результатов «Норникеля» и прогноз годовых дивидендов

Norilsk Nickel (MOEX: GMKN) — leader of the mining and metallurgical industry in Russia, the world's largest producer of palladium and high-grade nickel, as well as a major producer of platinum and copper.

At the end of January, the company published production results for the fourth quarter of 2021.. They recorded the output of the Oktyabrsky and Taymyrsky mines at full capacity, which were previously partially closed due to groundwater flooding, as well as the Norilsk concentrating plant: in February 2021, an accident also occurred at the facility - the building of the ore reloading point and the gallery of the crushing shop collapsed. Key indicators of Norilsk Nickel:

  • nickel production in the fourth quarter of 2021 increased by 25% compared to the previous quarter to 63 thousand tons;
  • copper production remained virtually unchanged and amounted to 119 thousand tons;
  • production of palladium and platinum increased by 18 And 23% compared to the third quarter to 704 thousand ounces and up to 178 thousand ounces;
  • activity at the South African asset of Norilsk Nickel - Nkomati - was not carried out: in the second quarter, it was put into conservation mode due to the cessation of production.


The main activity of Norilsk Nickel is the production of a large number of non-ferrous and precious metals, of which palladium is considered key, nickel, copper and platinum. The company extracts them with the help of its three business divisions: Norilsk, Kola and Transbaikal.

Palladium and platinum. The most profitable segment of the company, which brings the company more 40% income. Norilsk Nickel mines platinum group metals in the Norilsk and Kola divisions. Against the backdrop of accidents, that happened in the first quarter at the Oktyabrsky and Taimyrsky mines, as well as at the Norilsk enrichment plant, the company in 2021 reduced its production by 8%, but was able to overfulfill my plan: for palladium 10%, after platinum on 1%.

Palladium and Platinum 4Q 2021 Results Still Slightly Lower than Last Year. Palladium production was 704 koz, up from 773 koz in Q4 2020, platinum - 178 thousand ounces vs. 182 thousand ounces.

The lag is explained by the longer production cycle from mining to the final product of platinum group metals compared to other non-ferrous metals, that is why the company could not 100% quickly restore the operation of their production chains after accidents at mines.

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Nickel. Norilsk Nickel's second most profitable metal, which the company produces in the Norilsk and Kola divisions. 2021 the year for this segment was very difficult.

Nickel production decreased by 18% compared to 2020 amid a temporary suspension of production at the Oktyabrsky and Taymyrsky mines, they returned to design indicators in May and December, as well as the temporary suspension of the work of the Norilsk concentrator due to an accident - the factory only started working at full capacity in December 2021.

Moving on to Q4 2021 results, it is worth noting, what are they on 25% outperformed the third quarter, because the company managed to fully restore work at three emergency facilities. Nickel production increased quarter-on-quarter from 50,575 to 63,148 thousand tons.

Copper. Third segment of Norilsk Nickel, which mines copper in all three divisions: Norilsk, Kola and Transbaikal. In 2021, the company's copper division showed the weakest results due to the previously described accidents - total annual production decreased by 20% from 442 to 337.12 thousand tons.

In the fourth quarter of 2021, copper production, vice versa, grew by 3% compared to the third quarter to 119 thousand tons. Weaker growth rates in comparison with other metals are explained by the fact, that the Oktyabrsky mine, with a higher grade of copper in ores, recovered after the second quarter, therefore, the increase in metal production in the fourth quarter was small.

Annual indicators of Norilsk Nickel

2017 2018 2019 2020 2021
Palladium, thousand ounces 2780 2729 2922 2826 2616
Nickel, thousand tons 217,112 218,770 228,687 235,709 193,006
Copper, thousand tons 401,081 473,654 499,119 487,186 406,841
Platinum, thousand ounces 670 653 702 695 641

Dynamics of production results of the fourth quarter

4к2020 3к2021 4к2021
Palladium, thousand ounces 773 598 704
Nickel, thousand tons 67,956 50,575 63,148
Copper, thousand tons 128,598 115,617 118,531
Platinum, thousand ounces 182 145 178

Management Forecast

Following the publication of the fourth quarter operating results, management summed up the results: in 2021, the company achieved adjusted forecasts for nickel and copper and exceeded the target for the production of platinum group metals. As for the results of 2022, then management confirms its past production forecast, presented at Strategy Day in November 2021.

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Management Forecast

Forecast of 2021 year Actual result 2021 of the year Forecast of 2022 year
Palladium, thousand ounces 2350— 2410 2616 2451—2708
Nickel, thousand tons 190—200 190 205—215
Copper, thousand tons 400—425 407 429—453
Platinum, thousand ounces 580—640 641 604—667

Dividends and comparison with competitors

The current dividend policy of Norilsk Nickel is valid until the end of 2022 and provides for the following payout ratios:

  • the company distributes 60% EBITDA, if the ratio is "net debt" / EBITDA" will be less 1,8;
  • from 30 to 60% EBITDA, if this multiplier will be from 1,8 to 2,2;
  • 30% EBITDA, if "net debt" / EBITDA" will be more than 2,2.

If management does not violate this principle, then the total dividend for 2021 can reach 41,05 $, or 3071 R at the current rate, given the fact, that Norilsk Nickel's annual EBITDA is $10.512 billion. But also shareholders should not forget, that the Russian company had already distributed the payment for the first nine months of 2021 in the amount of 1523 R per ordinary share, which means, what is the remaining dividend from last year, according to calculations, will be about 1548 R.

Comparison with competitors

EV / EBITDA P / E net debt / EBITDA
Norilsk Nickel 4,64 5,80 0,67
VSMPO-AVISMA 18,08 39,90 1,32
Vale 2,78 4,66 0,07
Freeport-McMoRan 6,21 14,80 0,21
Southern Copper 8,63 16,23 0,62

What's the bottom line?

Norilsk Nickel reported generally neutral operating results for the fourth quarter of 2021, which were on average 18% better than last quarter and 5-10% worse than Q4 2020.

The nearest short-term growth driver of the company will be the second dividend payment for 2021: even taking into account all the difficulties and problems, management can distribute a dividend yield to its shareholders 6,8%. The predicted total dividend yield for 2021 in this case will be 13,6%.

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