On October 14, 2023, the Supervisory Board of Navoi Mining and Metallurgical Combine, Uzbekistan’s largest enterprise, discussed various matters concerning NGMK’s operations, including a forecasted decline in profits for 2023. Although the board meeting took place on April 8, the news about it surfaced this month. Financial expert Otabek Bakirov was the first to draw attention to it. The Supervisory Board consists of Deputy Prime Minister and Minister of Economy and Finance Jamshid Kuchkarov, First Deputy Advisor to the President on Industry Development, Investment, and Implementation of Foreign Trade Policy Timur Ishmetov, Advisor to the President on Socio-Political Development Ruslanbek Davletov, Director of the Agency for Management of State Assets Akmalkhon Ortikov, and Deputy Minister of Energy Akmal Zhumanazarov.
The board meeting included a business plan for the company for 2023, which anticipates an increase in revenue from 56.6 trillion to 59.7 trillion soms. However, the plan also forecasts a decrease in net profit to 9 trillion soms ($735 million), which is nearly 6.4 trillion soms lower than in 2022 (15.39 trillion soms), as well as lower than the figures for 2021 (11.3 trillion soms) and 2020 (10 trillion soms).
Expenses are planned at 39.9 trillion soms, including production expenses of 27.5 trillion soms. It is expected that compared to the previous year, revenue from product sales will increase by 3.1 trillion soms, reaching 59.7 trillion soms (+5.4%), while dividends paid to the government will decrease from 15.3 trillion to 7.8 trillion soms, and tax payments will decrease from 18 trillion to 17.2 trillion soms. Members of the supervisory board noted a sharp increase in expenses compared to 2022 and the cost of gold production, which is expected to lead to a decrease in net profit. Nevertheless, the board provisionally approved the business plan and tasked NGMK’s management with developing measures to optimize expenses for this year and submitting a revised business plan within two weeks. “Gazeta.uz” has sent a request to the Ministry of Economy and Finance regarding the updated business plan but has not yet received a response.
Following the publication by financial expert Otabek Bakirov, NGMK’s press service announced that the business plan had been revised in collaboration with experts from the Ministry of Economy and Finance, taking into account gold prices on the global market, changes in the exchange rate of the som to the dollar, and a review of expenditure composition. According to the updated forecast, NGMK’s net profit in 2023 will amount to 14 trillion soms (instead of the previously projected 9 trillion soms). However, this is 1.3 trillion soms less than in 2022.
Umidjon Kostaev, Head of the Budgeting and Controlling Department at NGMK, stated in an interview with “Gazeta.uz” that expenses are projected to increase from 28 trillion soms in 2022 to 32 trillion soms by the end of the year. Initially, the forecasted expenses in April were expected to reach 39.9 trillion soms, but they have been revised. “We calculated the expenses, coordinated them with the Cabinet of Ministers, and presented them to the supervisory board. After the business plan for 2023 is approved, it will be published on the website,” he said.
Kostaev explained the projected 4 trillion soms increase in expenses by the rise in electricity tariffs (+25%) and gas tariffs (+38%), which he claimed are the largest expenditure items. Earlier, Minister of Energy Zhurabek Mirzamakhmudov informed “Gazeta.uz” that the energy resource tariffs for NGMK and Almalyk Mining and Metallurgical Combine (AGMK) had been increased in accordance with a government resolution, meaning these enterprises have been paying higher rates since April 2022.
Furthermore, starting from October 1st, “Navoiyazot” has increased the price of chemical reagents, necessary for gold production, by 40%. According to Umidjon Kostaev, the changes in profit forecast, from 9 trillion to 14 trillion Uzbekistani som, were attributed to the implementation of a “strict cost-saving regime.”
Kostaev explained that they have improved procurement processes by ordering essential goods and materials. They have also closely monitored material expenses for each process and instructed specialists to critically review and develop measures to reduce their volumes.
The Head of Budgeting and Controlling Department also mentioned that repair works have been postponed. These measures have allowed for a significant reduction in expenses, he added.
As a result, NGMK expects to generate an income of 64 trillion som by the end of 2023, compared to the previous forecast of 59.7 trillion som in April. Kostaev attributed this change to fluctuations in gold prices.
The updated forecast indicates that dividend payments to the government will range from 11 to 13 trillion som, while tax payments are expected to reach 20 trillion som, compared to the earlier projection of 7.8 trillion som for dividends and 17.2 trillion som for taxes.
Regarding the production cost of gold, Kostaev emphasized that NGMK has the lowest cost worldwide. The cost of producing one ounce of gold is $778, which is the lowest among the top 10 gold-producing companies, as highlighted by NGMK.
However, Kostaev acknowledged the objective reasons behind the increase in production costs.
It is worth noting that NGMK is the largest enterprise in Uzbekistan, responsible for nearly 15% of the state budget’s revenue (its share was 17.82% in 2022 and 20.1% in 2020).
The representative of NGMK mentioned that the composition of the supervisory board has changed, and there have been no meetings involving its members since April 8th.