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ALROSA posted a 14.7 billion rouble net loss in 1H 2009 by RAS

17 august 2009

Russian diamond miner ALROSA posted a net loss worth 14.675 billion roubles in the first six months of 2009 by the Russian Accounting Standards (RAS) versus 3.43 billion roubles of profit compared to one year ago, the company’s statement says.
“The loss in the first half of this year was stipulated by the situation in the world diamond market," the company’s representative explained."ALROSA did not sell anything during this period and returned to the market only last July. However, the company preserved its level of output and continued the construction of underground mines. So the loss was the result of these factors.”
It is noteworthy that ALROSA’s net loss in the first quarter of 2009 reached about 13 billion roubles (as against 112.57 million roubles of profit in the first quarter of 2008). Thus, in the second quarter the company managed to reduce its loss in a considerable way.
During the six months ALROSA gained 13.412 billion roubles of sale proceeds, a decrease by 2.4 times compared with the first half of the past year. The company’s plan for sale proceeds – 27.99 billion roubles – was fulfilled by 47.9%. Rough sales were down 79.6% compared with the first six months last year, while polished sales slumped 82.8%.
The cost of goods sold was 11.584 billion roubles as against 16.69 billion roubles in January-June last year.
The company’s accounts payable reached 155.2 billion roubles as of June 30, 2009 including 63.642 billion roubles worth of payables due in less than one year.
ALROSA was agile in attracting loans to finance its program of constructing underground mines (there are three mines currently under construction and worth about one billion dollars each) in the absence of cash proceeds from sales. As reported, ALROSA’s net debt in the end of 2008 amounted to 115.545 billion roubles. It means that the company managed to boost its debit by another 34%.
At the same time, starting from last July ALROSA stopped to increase its indebtedness and began to reduce it. “The company has used its own funds to pay back the first part of its bank credit worth 2.8 billion roubles to Alfa-Bank. Besides, it has come to agreement with this bank on how to re-structure the remaining part of the debt,” ALROSA’s spokesman said. The company started to re-pay the debt due to its resumed sales on the market. According to reports, last July ALROSA sold $150 worth of rough on the market, the major part of it bought under long-term contracts. The company’s spokesman said that from the beginning of last July ALROSA has already earned about $66 million from rough and polished sales.
Rough sales to the government may become another source to settle the company’s debts. Earlier ALROSA informed it was holding negotiations with Gokhran for additional sales of rough diamonds worth 1.5 billion to the Russian State Repository during this year and for an equivalent amount in 2010.
It was also reported that in 2009 the Russian government already bought 12 billion roubles worth of rough diamonds from ALROSA. This amount included the 3.69 billion roubles annually earmarked for purchasing by Gokhran in the period of 2008-2010. ALROSA shipped this amount of rough to Gokhran in early 2009. Around 8.4 billion rubles were allocated for additional purchasing (7.1 billion roubles for rough diamonds and 1.3 billion roubles for VAT payments). This stock was sold by ALROSA to Gokhran last June.
Besides, the company may reduce its liabilities by selling its non-core assets. A market source informed that ALROSA’s hydrocarbon assets deal involving their sale to VTB for $620 million was nearly completed and the company was waiting for money transfer. The source did not specify the oil and gas assets in question, however previously ALROSA held negotiations to sell OOO Urengoyskaya Gazovaya Compania and ZAO Geotransgaz. The company also owns two hydrocarbon assets in Yakutia: ZAO Irelyakhneft and a controlling stake in OAO Sakhaneftegaz, which was subject to judicial supervision since late last year.