Tariffs are growing and bring profit: we analyze the report of NCSP

Тарифы растут и приносят прибыль: разбираем отчет нмтп

NMTP (MCX: NMTP) — the largest port operator in Russia. The main shareholder of the company is the state company Transneft, which owns 50,1% shares.

Over the past two months, NCSP's share price on the Moscow Exchange has increased by more than 20%, but then followed the correction to 10%. Not so long ago, the company presented financial statements for the first half of the year and data on consolidated cargo turnover.

I propose to consider the main financial and operational indicators, to figure it out, are there any fundamental reasons for such high volatility in recent months.

Disclaimer: if we write, that something has risen or fallen by X%, then by default we mean comparison with the report data for the same period last year, unless otherwise stated.

Freight turnover

In the overall structure of NCSP's cargo turnover, the main share is occupied by hydrocarbons. Oil and oil products accounted for 77,9% of the total consolidated cargo turnover. Therefore, the company's operating and financial results are highly dependent on developments in the oil market.: the higher the volume of marine supplies of oil and petroleum products from Russia to Europe, the higher the potential income, taking into account the tariffs for the provision of port services.

For the first half of the year, NCSP's cargo turnover decreased by 2% — up to 67.38 million tons, renewing the multi-year minimum for the second year in a row. The main reason is the drop in the volume of transshipment of crude oil from Russia due to the restrictions of OPEC +.

At the last meeting of OPEC +, which took place 1 september, increased oil production by 0,4 million barrels per day monthly until September next year. The volume of oil exports from Russia in the coming year will grow, which will have a positive impact on NCSP's operating performance.

Structure of cargo turnover for the first half of 2021

Crude oil47%
Petroleum products30,9%
Ferrous metals and cast iron9,2%
Containers4,2%
Iron ore raw materials3,4%
Chemical cargoes1,1%
Coal1,1%
Non-ferrous metals0,8%
Other2,3%

47%

Liquid cargoes. The turnover of liquid cargo - liquid or liquefied gaseous - decreased by 4%, to 53,12 million tons. On the fall, normally, influenced by OPEC + restrictions. Compared to the pre-crisis 2019, the drop in crude oil turnover this year was 16%.

Dry cargo. Dry cargo turnover increased by 6% and made 11,26 million tonnes due to low base of the past, crisis year.

In the first half of the year, the turnover of chemical cargo increased by 48%, coal - on 8%, perishable products - on 64% and sugar - on 1400%. Sugar is not a joke, the rise in prices and the abolition of import duties stimulated the growth of sugar imports to Russia. But not all categories are growing. So, volumes of cargo turnover of iron ore raw materials and other ore cargoes fell by 23%, timber cargo — on 28%, and non-ferrous metals — on 6%.

As we can see, no quick recovery occurred, and in the first half of the year, the volume of cargo transportation is still noticeably below the dock period.

Cargo turnover for the first half of the year, million tons

Liquid cargoesDry cargoGeneral
201764,5416,985,2
201859,2216,3879,8
201967,1414,0885,16
202055,5910,6368,97
202153,1211,2667,38

Revenue and profit

Despite the drop in cargo turnover, NCSP's revenue increased by 9% - to 26,93 billion rubles - due to an increase in the average tariff for the provision of port services. In the revenue structure 96,9% accounts for loading and unloading and other services of the port, of them 73,2% brings the port of Novorossiysk, port of Primorsk - 24,1%, and Baltiysk - total 2,7%.

Operating expenses excluding depreciation increased by 12% - to 8,68 bln rubles - due to the growth of expenses for wages of employees, ship repair and fuel purchase. Depreciation costs increased by 16% - to 3,07 billion rubles. As a result, NCSP's operating profit increased by 5% and made 15,19 billion rubles.

Net finance costs decreased by a third to 1,15 RUB bln - amid falling interest expenses on loans and borrowings due to a decrease in debt burden. Moreover, the company made a profit on exchange rate differences in the amount of 0,62 billion rubles. As a result, the total net profit of NCSP increased by more than 2 times and reached 12,71 billion rubles.

Financial performance of the company for the first half of the year, billion rubles

RevenueOperating profitNet profit
201726,0317,2714,27
201828,5217,588,33
201929,7319,0741,19
202024,7414,456,0
202126,9315,1912,71

Debts

NCSP's total debt decreased by 21% and made 35,3 billion rubles amid a decrease in long-term loans and borrowings from 26,8 to 18,1 billion rubles.

The company's net debt fell by 41% - to 18,1 billion rubles - due to a reduction in total debt and an increase in the volume of money in accounts and their equivalents from 14,1 to 17,2 billion rubles.

As a result, the port operator's debt burden in terms of net debt / EBITDA ratio decreased from 1 × at the end of 2020 to 0.5 × by 30 June 2021, which has become the minimum of recent years and indicates a low level of business debt.

Debt load, billion rubles

Total debtNet debtNet debt / EBITDA
201768,761,71,6×
201869,757,71,3×
201950,8240,6×
202044,530,4
1п202135,318,10,5×

Dividends

Before the crisis of 2020, the company's management presented to investors a new strategy of NCSP until 2029. The presentation suggested sending at least 50% from the consolidated net profit for dividend payments. This allowed investors to count on no less than 13 kopecks per share at the end of 2020. But in reality, shareholders were only paid 6 kopecks per share.

The company motivated the decision by insufficient loading of port facilities and a large investment program.

Dividends per share

20160 Р
20170,78 Р
20180,5 Р
20191,35 Р
20200,06 Р

0 Р

What is the bottom line

Despite the drop in cargo turnover, NCSP increased revenue by 9% compared to 2020 due to increased tariffs for port services, and the company's profits even doubled from last year's low base.

Nevertheless, it is worth stating, that there will be no rapid recovery in international trade, and business is still highly dependent on the volume of supply of oil and petroleum products to the European market. OPEC+ predicts an increase in oil consumption in 2022 to 100,83 million barrels per day, which will allow to exceed the volume of consumption in the "pre-covid" period.

Russia is gradually increasing production this year as the current restrictions on the oil market ease. Moreover, the company directs significant funds to maintain and develop port infrastructure. According to the strategy of the controlling shareholder of Transneft, plans to build new port terminals, and also to build a universal transshipment complex in Novorossiysk, which will increase the volume of goods, passing through NCSP ports.

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