Page 155 - RusRPTMar21

guided for generally higher output in 2021 thanks to coal, we note the strong short-term earnings outlook due to the price environment: export billet and domestic rebar prices are up 30-50% HoH so far in 1H21, while domestic coking coal is 80% above the average for 2H20. As such, Evraz might at least double EBITDA HoH, and drastically decrease its financial leverage, which might provide upside to the dividend payout ratio from the average of 70% for 2020.
Evraz expects its capital expenditures to jump by around 50% on the year to US $1bn in 2021, CEO Alexander Frolov told reporters on Thursday. Evraz also planned its expenditures at $1bn in 2020, but had to revise the plans because of the COVID-19 pandemic in April–June – it delayed construction of a casting and rolling facility at Evraz ZSMK indefinitely, and slightly delayed upgrade of a rail mill at Evraz NTMK and construction of a wheel mill in the Sverdlovsk Region, he said.
Evraz KGOK is to construct a second stage of the Sobstvenno-Kachkanarsky deposit in order to increase ore mining from 60mnt in 2020 to 75mnt. Total capex is estimated at $950mn. The timing is unclear so far and no final decision has been taken. In our view, the main reason for this expansion project is to increase iron ore integration. We estimate that the project, if implemented, would increase Evraz’s iron ore integration to 96%, from 79% at present. Also, the expansion would imply some 3% upside to our forecast of medium-term EBITDA. We also note that on spot commodities prices and FX, the project looks attractive, offering an IRR of more than 20%. However, based on our assumptions, we estimate that the project is not attractive, offering a rate of return of less than 10%. Hence, in our view, the investment decision is going to depend on the performance of iron ore prices.
● Fertilisers
Phosagro reported 4Q20 IFRS results that were generally in line with the consensus estimates.
EBITDA came in at $242mn in 4Q20, which was 3% below our forecast due to slightly lower average realized prices than we expected.
As we had anticipated, FCF in 4Q20 was barely positive at $37mn (for a 0.6% yield) on seasonal sales volume weakness. Full-year capex including capitalized repairs came in at R40.8bn, which was in line with our estimate and the company's guidance (adjusted for capitalized repairs), which, in contrast to previous years, was not revised throughout the year (recall that in 2018 and 2019 PhosAgro consistently raised its full-year capex guidance and ended up exceeding it in 2018). While EBITDA in 2020 was up slightly y/y,
155 RUSSIA Country Report March 2021 www.intellinews.com