Economic Performance
Operational performance Being the largest mining and metallurgical company in Russia, OJSC MMC Norilsk Nickel is a major contributor to the national economy. Collectively, the Group entities run a full production cycle from geological exploration, ore mining, concentration and metallurgy to sales of base and precious metals. In 2009, the Group’s output (see Table 2.1) of saleable nickel decreased by 5.9% (from 301 thousand tonnes to 283 thousand tonnes) compared to the previous year, while the output of copper decreased by 4.1% (from 419 thousand tonnes to 402 thousand tonnes). The output of palladium remained at the previous year’s level – 3,194 thousand ounces, while the output of platinum was 779 thousand ounces (1% more than in 2008). Key areas of investment development The main objective of investment activities of OJSC MMC Norilsk Nickel is the improvement of the cost-effectiveness of its operations, in particular, on the basis of introduction of advanced technologies corresponding to the international best practice levels. Major investment programs at the Russian entities of the Group were: Construction of mining facilities; Modernization and technology upgrade of ore concentration and metallurgical facilities; Addressing the issue of oxygen supply of metallurgical facilities. In 2008, the Company continued implementing its project of the construction of an icebreaker fleet, which would form the foundation of the Company’s new transportation logistic system. Currently MMC Norilsk Nickel is the only company in the world with an Arctic cargo fleet of its own comprised of five ice-class container ships with innovative design and technology features. Transition from hiring ships to the use of Company’s own fleet will ensure full transport independence of the Company and allow to reduce the costs of shipping products to customers by 25-30%. Financial performance In 2009, the revenue from metal sales amounted to USD 8,441 billion, profit/(loss)1 – to USD 2,651 billion, assets – to USD 22,760 billion. Sales markets The geography of the Company’s sales (see Figure 2.2) includes more than twenty counties. In the recent years Norilsk Nickel increased its sales in the Asian market; in the reporting period the Company was ranked first in terms of ined nickel sales to China and India. In 2009, Norilsk Nickel opened a new sales office in Shanghai to serve the internal market of China and doubled the amount of nickel sold to customers in that country. The Company also entered new regional markets, including Indonesia and Thailand. In 2009, all metal products by Norilsk Nickel were sold at prices above the respective annual average market prices. The Company achieved this despite weak international market conditions and aggressive marketing efforts of its competitors. The key success factors included the high quality of products and customer service, as well as an effective system of direct customer relationships that was built for years. In 2009, Norilsk Nickel increased its presence in high-premium sectors of nickel market, doubling the share of sales to the special alloys and special steels sectors in its overall sales mix, and considerably increasing sales to the electroplating sector. This helped the Company reduce its dependence on the stainless still sector characterized by the highest risks associated with replacement of nickel cathodes with cheaper forms of the metal. The Company has an extensive international sales network. Its sales divisions are located in Russia, Switzerland, the United Kingdom, the USA, and China. Norilsk Nickel conducts regular studies of its markets, and, based on the results, takes measures to ensure an effective geographical and sectoral diversification of its sales that would provide for the marketability of all products of the Company. As a member of the Nickel Institute – an international association of nickel producers – the Company participates in joint activities aimed at protection and development of the markets. _________________________ |
