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ALROSA’s net profit will be 2 or 3 times higher than in 2015 - CEO

12 october 2016
(Finmarket.ru) - ALROSA will drive its sales to 37 million carats (which is equal to its output) in 2016, Andrey Zharkov, the company’s president said in an interview with television channel "Russia 24".
A year earlier, ALROSA sold 30 million carats of diamonds. The increase is due to the shortage of rough occurred in the midstream (diamond and jewelry manufacturing) this year, which was caused by lower sales on the part of diamond producers in 2015 due to a sharp drop in demand, Andrey Zharkov said.
The company expects to increase its revenue by 15%, while its net income will grow 2 or 3 times - "by a multiple factor" – to the level of 2015, he said. ALROSA's consolidated revenue last year amounted to RUB 224.5 billion, while its net profit under IFRS reached RUB 32.2 billion.
That said, rough diamond prices in 2016 will generally fall by 2-3% compared to last year, the president of ALROSA added.
"Initially, while drawing up the budget, we projected a decline of 5-6%. I do not think there will be a rise in prices based on the results of this year, instead I think prices will fall by an average of 2-3%," he said.
By the end of the 1st half of the year, ALROSA held a diamond stock of 16 million carats. The company’s target for this year was not to increase its stock over the level of 2015, at the end of which it reached 22 million carats.
According to Andrey Zharkov, ALROSA’s stock decreased due to higher sales.
This year, ALROSA has lowered its production target to 37 million carats from 39 million carats in response to falling demand. However, ALROSA is still pursuing the goal to ramp up its diamond output to about 41 million carats in the nearest years.
The miner’s net cash flow permits to allocate 50% of its net profit to dividends, as it was last year, Andrey Zharkov said.
Asked about the prospects of floating an 8-percent state-owned interest in ALROSA, the head of the company said that "at present the shareholders composition is balanced." "I do not think that the state is going to further reduce its stake. This is a decision, which depends entirely on the wishes of the shareholder, but I think that the state is interested to maintain a balanced ownership composition," the president of ALROSA said.
ALROSA's net debt will drop to $ 2.45 billion at year-end ($ 2.78 billion at the beginning of 2016), if the early repayment of $ 350-370 million announced by the company in September will take place, Andrey Zharkov said. ALROSA deferred the repayment of its major debt of $ 720 million maturing in 2017 to 2019.
This year, the company’s share in sales on the domestic market (just over 10% in 2015) will slightly decrease due to the cancelled export duty on rough diamonds as of September 1, 2016, which was a tool to support the Russian diamond manufacturing industry. "Therefore, demand (on the domestic market) may fall," Andrey Zharkov said.