Page 99 - RusRPTAug20

increased DAP/MAP sales 25% y/y and Acron raised NPK production by 16%. The share of domestic sales (with prepay terms) declined q/q, while South American and Asian customers, which pay with delays, were more active during 2Q20. We expect this to create some pressure on the company’s cash flow, but for it to pay off in the longer term, as these markets provide higher premia. We forecast that, along with the 12% y/y weaker $/RUB, reported sales volumes growth will support PhosAgro’s margin and offset pressure coming from the 20% price decline.
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Norilsk Nickel​ increased nickel output by 5% y/y in 2Q20 ​due​ ​to ramp-up of Kola MMC refinery; output stayed in line with our expectations. On a negative side - PGMs output fell by 5-6% y/y in 2Q20 due to a decrease in volumes of concentrate processed from Rostec. We note that palladium output was 6% below our expectations in 2Q20. Chita production significantly exceeded our expectations: +19% in copper and +19% in gold, while iron ore production was 10% below our expectations. Copper output remained flat y/y, slightly exceeding our expectations. However, excluding Chita results, copper production lost 3.9% y/y due to lower concentrate processing. Company reiterated its production guidance for 2020F. Given historical strong results in 3Q-4Q (51-52% of total year result) and current close to 50% fullfilment rate of the guidance, we see 2020FY guidance achievable. As Nornickel's reported sales volume for 2Q20 were slightly below our expectations, we slightly lowered our forecasts on company's financials for 1H20 compared to our previous estimations. We expect EBITDA to rise +3% y/y $3.8bn, supported by more than +50% y/y increase in palladium prices. We estimate FCFF at $2.7bn (7% yield), but note upside risk from lower capex. Based on our EBITDA (including provisions) forecasts, we expect the company to announce $1.46/DR 1H20 DPS, offering 6% yield.
Norilsk Nickel​ – Diesel spill damage estimate at 33% of FY20F FCF. Russian environmental watchdog Rosprirodnadzor estimates the environmental damage from the 21kt diesel spill in Norilsk at $2.07bn. This is not an official fine, but only a damage estimate that the watchdog wants Norilsk "to compensate voluntarily". Neither Norilsk Nickel nor we have previously estimated what the company’s fine might be; however, we note that the aforementioned number is higher than the $150mn the company expects to spend on clean-up costs. The amount represents some 20% of NTM SPOT and VTBC 2020F EBITDA and 40% of 12-mo fwd SPOT FCF, on our numbers. As the fine is likely to be a before-EBITDA item, it might imply at least a 20% risk to the 2020 dividend yield: from 12% at SPOT to 9-10%. The stock has declined 6% since the announcement and more than 20% since the spill happened in late May ($10bn of market cap lost). While we believe even such a large fine has already been more than offset by market cap loss, we expect the negative newsflow around the company's impact on the environment, and corresponding negative sentiment, to remain the biggest driver for the stock in the near term. BNKMM VTBMM Tuesday, 7 July 2020 at 10:58:30
Zagorsky Trubny Zavod (ZTZ or Zagorks) large-diameter pipe producer is considering acquiring its peer, ​Chelyabinsk Truboprokatny Zavod (ChTPZ or ChelPipe), ​belonging businessman Andrei Komarov, RBC business daily reported on July 7 citing unnamed sources close to the deal. As reported by ​bne IntelliNews i​ n detail, ​ChTPZ was considering an IPO​, but the deal with ZTZ could replace a public offering. ZTZ emerged as the
99​ RUSSIA Country Report​ August 2020 ​ ​www.intellinews.com