UPDATE 2-Russia's Norilsk sees nickel price recovery in 2014

Mon Apr 7, 2014 6:32am EDT

* Norilsk says is "cautiously positive" on 2014 prospects

* Concerned with deteriorating emerging market risk appetite

* 2013 net profit down 64 percent to $765 million (Reledes on price outlook, adds comments by chief executive)

MOSCOW, April 7 (Reuters) - Norilsk Nickel, the world's biggest producer of nickel and palladium, sees nickel prices recovering this year, it said on Monday after reporting a 64 percent drop in net profits due to write-offs.

The Russian firm, part owned by Chief Executive Vladimir Potanin and aluminium giant Rusal, had to trim spending last year and focus on its lucrative Soviet-era operations in Russia's far north to cope with weak prices for its key metals.

"Last year was a challenging and volatile year in commodity markets with prices for the majority of metals in the Norilsk Nickel portfolio declining that had a clear impact on our top-line performance," Potanin said in a statement.

The management is cautiously positive on 2014 with improving commodity prices in the beginning of the year but is also concerned over a deteriorating emerging market risk appetite in the global investment community, he added.

Norilsk has not been hit by the political tension over Ukraine so far, but all Russian companies would suffer should the situation escalate, its deputy chief executive, Andrei Bougrov, said last week.

Norilsk said on Monday it expected the nickel price to continue to recover in 2014 and 2015 as an export ban on cheap nickel ore by top producer Indonesia takes hold.

"There are increasing indications that the ban on the export of nickel ore from Indonesia will be sustained, which leads us to expect the nickel market to be balanced in 2014, but developing a sizeable deficit in 2015," the company added.

Norilsk's view contradicts an estimate from the Lisbon-based International Nickel Study Group (INSG), which expects the global nickel surplus to shrink to about 50,000 tonnes this year from last year's 170,000 tonnes on stronger demand and the export ban in Indonesia.

WRITE-OFFS SLASH PROFIT

The Russian firm said its net profit dropped to $765 million last year, although before the write-offs it would have been down just 15 percent at $2.6 billion, beating the average forecast of $2.3 billion given in a Reuters poll of analysts.

The company wrote off $841 million from property, plant and equipment, including a $307 million impairment on upstream operations in the Kola peninsula, and has taken an additional $728 million revaluation loss related to financial assets, including its stakes in Russian energy companies.

Revenue was down 7 percent at $11.5 billion due to lower nickel, copper and platinum prices offset by resilient palladium prices.

The company's earnings before interest, taxation, depreciation and amortisation (EBITDA) fell 15 percent to $4.2 billion in 2013, matching analysts' forecasts. Its net debt amounted to $4.6 billion at the end of 2013.

The firm has a dividend policy, approved by its shareholders last year, which states that its dividend target for 2013-14 should be not less than $2 billion per year. The firm had previously returned to shareholders $1.1 billion in dividends for the first nine months of 2013.

Norilsk's dividend payments support all shareholders, especially loss-making and indebted aluminium firm Rusal, which is in talks with lenders to amend the terms of syndicated facilities covering $3.7 billion of debt.

Norilsk's shares were flat in Moscow on Monday with broader metals and mining index down 0.3 percent. (Reporting by Polina Devitt; Editing by Elizabeth Piper, Greg Mahlich)

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