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Norilsk Nickel Faces Sharp Decline Amid Sanctions and Price Drop

Norilsk Nickel Reports 37% Net Profit Decline due to Sanctions. The Moscow-based miner is struggling with financial metrics, impacted by geopolitical issues and falling metal prices.

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AI Rating:   4

Performance Impacted by External Factors

Norilsk Nickel reported a significant decline across multiple financial metrics, with a 37% drop in net profit. This decline is primarily attributed to ongoing western sanctions and declining metal prices, both of which have critically affected the company's revenue and profitability.

The company's consolidated revenue decreased by 13% year-on-year to US$12.5 billion, while EBITDA saw a more substantial reduction of 25%, landing at US$5.2 billion. These figures illustrate the adverse impact of external pressures on the company's financial health.

Company President Vladimir Potanin emphasized that the geopolitical landscape, compounded by reduced access to western equipment, further strained Norilsk Nickel’s cash flow generation. This statement underscores the severity of the situation, as sanctions not only affect revenue but also the operational capacity of the business.

Dividend Suspension Indicates Financial Concerns

The fact that Norilsk Nickel's CFO announced that the board would not recommend paying dividends for 2024 indicates a significant level of financial distress. This decision signifies that the company is prioritizing cash preservation in a challenging market environment.

Market Outlook and Future Challenges

Looking ahead, the company anticipates a global nickel surplus of 150,000 metric tons in 2025, mirroring the projection for 2024. This continued surplus reflects ongoing supply-demand imbalances, largely driven by Indonesian production boosts and slow demand growth. Such market conditions could continue to exert downward pressure on prices.

The nickel market's struggles are exacerbated by price volatility; after a brief price surge, it settled within the US$15,000 to US$15,200 range by the end of the year. This fluctuation paints a bleak picture for investors considering potential returns from such investments.

Stocks:  NILSY