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Norilsk Nickel's H1 net profit drops 30% due to ruble appreciation

PJSC Norilsk Nickel Co.'s net profit plummeted 30% year over year in the first six months of 2017 to US$915 million, the company reported in its first-half financials Aug. 15. The drop was attributed to the appreciation of the Russian ruble against the U.S. dollar and a one-off increase in social-related expenses.

EBITDA slipped 3% to US$1.74 billion in the first half, also impacted by the changing dollar-ruble dynamic.

Revenue climbed 11% to US$4.25 billion for Russia's largest nickel producer, driven by higher realized metal prices.

A US$1.2 billion January payment of an interim dividend for nine months of 2016 coupled with an increase in working capital increased the net debt/EBITDA ratio to 1.5x as of June 30, with a total debt of US$5.60 billion.

The company noted that the increase in working capital was mostly due to a payment made to state holding Rostec for the purchase of copper concentrate.

Norilsk Nickel President Vladimir Potanin described the results as "solid" despite unfavorable movement in exchange rates and volatility in the commodities markets. Labor costs were particularly affected by the ruble appreciation, growing by 27% year over year in the first half to US$687 million, comprising 41% of the company's total cash operating cost.

Nickel sales fell 27% to 106,000 tonnes, from 145,000 tonnes the prior year, accounting for 27% of the company's total metal revenue, down from 36%. Norilsk Nickel said this was due to a stronger performance of copper and palladium and decreased metal output from third-party feeds.

Copper sales decreased by 3% to 176,000 tonnes and accounted for 26% of the company's total metals revenue, an 18% increase year over year mainly related to higher realized copper prices.

In the first half, Norilsk Nickel sold 1.3 million ounces of palladium, which was the largest contributor to the company's metals revenue, accounting for 30%. Platinum sales fell by 16% to 311,000 ounces, making up 8% of the metals revenue.

The company reduced its deficit forecast for nickel from 100,000 tonnes to 45,000 tonnes, citing the resumed export of unprocessed ore from Indonesia. Norilsk Nickel said China's consumption of the metal is expected to accelerate in the second half of the year.

As of Aug. 14, US$1 was equivalent to 59.58 Russian rubles.