2021 sustainability report

Finance
and tax
management

Economic efficiency

Economic efficiency is essential for us to meet our strategic goals and finance ESG transformation.

Economic efficiency is essential for us to meet our strategic goals and finance ESG transformation.

In 2021, our consolidated revenue increased by 15% to USD 17.9 bn mainly due to higher exchange metals prices and stronger sales of palladium stocks accumulated in 2020. This helped offset the production decline caused by 1H 2021 incidents.

EBITDA rose by 37% to USD 10.5 bn on the back of revenue growth, with Bystrinsky GOK EBITDA reaching USD 1.1 bn. EBITDA margin totalled 59%.

Our CAPEX for the year increased by 57% to a record USD 2.8 bn due to the strategic CAPEX growth for key projects. Expenses under the Sulphur Programme, which has entered the active phase, exceeded USD 500 mln, while investment in the South Cluster project and expansion of Talnakh Concentrator saw a three- and four-fold increase, respectively. Expenses on capitalised overhauls, industrial safety and fixed assets upgrade at the Group companies grew by more than 40% and surpassed USD 800 mln.

Our net debt remained almost flat at USD 4.9 bn, with the net debt/ EBITDA ratio amounting to 0.5x as at 31 December 2021.

Tax strategy

GRI 207-1

Timely payment of taxes and compliance with tax laws are vital for achieving Nornickel’s strategic goals in sustainable development.

Nornickel is Russia’s major taxpayer in the metals and mining industry.

The key document governing the Company’s tax matters is its Tax Strategy Policy, which sets general operating principles for the tax functions of MMC Norilsk Nickel and its subsidiaries and improves the efficiency of their financial and economic operations by managing the tax burden and tax risks.

The Head of the Tax Department, who reports to Nornickel’s Senior Vice President and CFO, is in charge of the tax strategy development. The tax strategy and any substantial amendments thereto are subject to approval by MMC Norilsk Nickel’s Management Board. Updates and significant changes are introduced as needed, but at least once every three years.

Approach to taxation

The Group is committed to openness and transparency in managing its tax compliance, including by:

  • disclosing relevant information for stakeholders on its corporate portal to the maximum practicable extent;
  • taking a zero-tolerance approach to non-transparent corporate structures used for tax avoidance.

The Company has in place the Tax Department, which prepares internal regulations (guidelines, explanations, information letters) based on the current legislation, arbitration practice, regulatory clarifications and other circumstances, and communicates them to the Group’s business units If necessary, the Tax Department requests specific clarifications from competent authorities or a reasoned opinion of the tax authority required for the companies participating in tax monitoring.

Nornickel takes a conservative approach to all controversial tax issues arising in all jurisdictions across the Group’s footprint. The Group considers unacceptable any use of aggressive tax planning schemes.

All intra-group transactions between the Group’s companies are made using market prices. In terms of transfer pricing, the Group complies with the basic principles set out in the Organisation for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and follows the laws and regulations of Russia and other countries of operation.

The Group’s foreign entities interpret applicable tax legislation and resolve controversial tax issues independently.

Financial highlights*

GRI 102-7

Indicator
2017
2018
2019
2020
2021

Indicator

Revenue, RUB bn

2017

536.8

2018

728.9

2019

877.8

2020

1,116.9

2021

1,316.9

Indicator

Gross profit, RUB bn

2017

270.2

2018

408.2

2019

543.1

2020

752.2

2021

888.8

Indicator

EBITDA, RUB bn

2017

236.4

2018

389.2

2019

513.7

2020

552.4

2021

775.9

Indicator

EBITDA margin, %

2017

44

2018

53

2019

58

2020

49

2021

59

Indicator

Net profit, RUB bn

2017

127.4

2018

187.8

2019

387.6

2020

263.8

2021

512.9

Indicator

Assets, RUB bn

2017

958.3

2018

1,059.5

2019

1,205.5

2020

1,529.5

2021

1,741.2

Indicator

Total CAPEX*, RUB bn

2017

116.7

2018

99.2

2019

85.3

2020

128.7

2021

202.9

Direct economic value generated and distributed*, RUB bn

GRI 201-1

Indicator
2017
2018
2019
2020
2021

Indicator

1. Direct economic value generated

2017

541.0

2018

734.6

2019

884.6

2020

1,123.3

2021

1,324.1

Indicator

2. Economic value distributed, including:

2017

519.0

2018

684.6

2019

918.4

2020

990.5

2021

1,141.2

Indicator

Operating expenses*

2017

194.1

2018

228.5

2019

239.1

2020

449.0

2021

281.8

Indicator

Community investments and charity*

2017

17.7

2018

12.9

2019

14.4

2020

36.4

2021

76.0

Indicator

Payroll and other employee remuneration and benefits, including payroll taxes

2017

120.4

2018

128.8

2019

136.8

2020

146.6

2021

163.6

Indicator

Payments to providers of capital (interest, dividends*)

2017

128.6

2018

243.1

2019

383.7

2020

213.8

2021

412.2

Indicator

Gross tax payments

2017

58.3

2018

71.3

2019

144.4

2020

144.8

2021

207.6

Indicator

3. Economic value retained

2017

22.0

2018

50.0

2019

-33.8

2020

132.8

2021

182.9

Tax management at Nornickel Group

GRI 102-26 GRI 207-2

Participant
Key functions

Participant

Board of Directors

Key functions

  • Review the report on the efficiency assessment of Nornickel Group corporate risk management framework

Participant

Management Board

Key functions

  • Approve the Tax Strategy Policy
  • Review the reports on tax risk management

Participant

Senior Vice President and CFO at PJSC MMC Norilsk Nickel

Key functions

  • Oversee the activities of the Tax Department
  • Organise and control the implementation of the Risk Management Regulations

Participant

Tax Department

Key functions

  • Provide tax support for Russian and foreign Group companies:
  • collect the requests from tax authorities and prepare responses
  • prepare internal regulations (guidelines, explanations, information letters) for the Group’s Russian companies
  • set up the Legal Information Portal, a database of internal explanations and documents on taxes
  • oversee tax compliance of Nornickel’s Russian and foreign companies
  • manage tax risks of the Group’s Russian companies

Participant

Tax experts of the Shared Services Centre, tax experts in business units, employees of local accounting business units

Key functions

  • Prepare tax accounts and reports

Participant

Employees of the financial services of foreign companies

Key functions

  • Prepare tax accounts and reports
  • Interpret tax legislation and resolve controversial tax issues
  • Manage tax risks

Participant

Corporate Trust Line

Key functions

  • Collect reports of unethical or illegal tax practices

Participant

Independent external auditor

Key functions

  • Conduct statutory audits of consolidated financial statements, including tax disclosures*

Key regulations: MMC Norilsk Nickel’s Risk Management Regulations

Cooperation with tax authorities

GRI 207-3

Just like other stakeholders, our relations with tax authorities are governed by openness, partnership, timeliness of response handling, and completeness of disclosure. The Group’s companies interact with tax authorities as part of tax control, when obtaining clarifications on the current legislation, and when signing pricing agreements.

Nornickel participates in the tax monitoring system, which provides tax authorities with real-time access to the Company’s tax and accounting data and eliminates the need for inspections. By giving tax authorities direct access to its corporate accounting system, the Group clearly demonstrates its highly professional and ethical approach to tax matters.

2021 tax payments breakdown, RUB bn*

Income tax
Mineral extraction tax
Licences and similar payments
Total

MMC Norilsk Nickel Group

Income tax

152,273

Mineral extraction tax

31,000

Licences and similar payments

11

Total

183,284

South Cluster

Income tax

6,181

Mineral extraction tax

5,804

Licences and similar payments

0

Total

11,985

Kola MMC Group

Income tax

-39

Mineral extraction tax

1,981

Licences and similar payments

Total

1,942

NN Harjavalta

Income tax

1,065

Mineral extraction tax

Licences and similar payments

Total

1,065

GRK Bystrinskoye

Income tax

1,300

Mineral extraction tax

248

Licences and similar payments

0

Total

1,548

Other mining businesses

Income tax

0

Mineral extraction tax

0

Licences and similar payments

0

Total

0

Other non-metals businesses

Income tax

2,060

Mineral extraction tax

Licences and similar payments

Total

2,060

Total

Income tax

162,840

Mineral extraction tax

39,033

Licences and similar payments

11

Total

201,884

2021 tax payments by country, RUB bn

Income tax
Mineral extraction tax
Licences and similar payments
Total

Russia

Income tax

160,072

Mineral extraction tax

39,033

Licences and similar payments

11

Total

199,116

Finland

Income tax

1,065

Mineral extraction tax

Licences and similar payments

Total

1,065

Switzerland

Income tax

1,670

Mineral extraction tax

Licences and similar payments

Total

1,670

Other countries

Income tax

33

Mineral extraction tax

0

Licences and similar payments

Total

33

Total

Income tax

162,840

Mineral extraction tax

39,033

Licences and similar payments

11

Total

201,884