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Norilsk's 2009 Profits Better Than Expected

Norilsk Nickel said Tuesday that it made a bigger-than-expected profit in 2009 after a recovery in nickel prices and stringent cost-cutting helped the miner bounce back from a loss the year before.

Net profit stood at $2.65 billion in 2009, compared with a loss of $555 million the year before, the company said in a report Tuesday.

Norilsk's turnaround was largely because of increasing metals prices and the company's cost-cutting policy, said Ilya Makarov, metals and mining analyst at Rye, Man & Gor.

"The prices for the whole group of metals produced by Norilsk Nickel — platinum, palladium, gold and nickel itself — are at a high level," he told The Moscow Times.

Nickel prices bottomed out in March 2009 at about $9,400 per metric ton, before rallying and reaching as high as $19,100 per ton by year-end.

Norilsk, the world's largest nickel producer, cut its selling and distribution expenses 80 percent, while administrative expenses decreased 34 percent, the company said.

Earnings before interest, taxes, depreciation and amortization fell to $4.42 billion, from $5.81 billion the year before, while revenue dropped to $10.16 billion, compared with $13.98 billion a year earlier, the report said.

The miner's debt stood at $5.32 billion at year-end, with almost $3 billion maturing in 2010, the company said.

The company plans to use its existing funds to repay $1.83 billion of its debt by July, Norilsk's chief executive Vladimir Strzhalkovsky said Tuesday, Bloomberg reported.

Norilsk is also considering selling ruble bonds to refinance part of its remaining debt, Strzhalkovsky told journalists after meeting with investors in London.

Taking into account the company's current results, it is likely that Norilsk will pay dividends this year for the first time in two years, Makarov said.

"Their cash amounts to nearly $3 billion. It's basically enough to pay dividends," he said, adding that according to its policy the company might also appropriate up to 50 percent of its net profit to pay dividends.

Oleg Deripaska, owner of aluminum giant RusAl, which owns a stake of 25 percent plus one share in Norilsk, said in April that the nickel producer might pay dividends in 2010.

If the company decides to pay dividends of 50 percent of its net profit, its dividends per share may exceed 200 rubles ($6.50) making for a 4 percent yield, Bank of Moscow said in a note Tuesday.

Norilsk Nickel said in an investor presentation in London that it planned to cut nickel production to 35 percent by 2025 and increase copper production to the same level, Bloomberg reported.

The company also said it planned to spend as much as $1.23 billion to $1.32 billion a year on construction and upgrades of facilities through 2025.

Norilsk Nickel shares closed down 1.01 percent at 5,133.30 rubles on MICEX on Tuesday.

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