Page 156 - RusRPTMar21

full-year FCF jumped 39% y/y to $601mn (for a 9.4% yield), mainly thanks to 15% lower capex y/y.
PhosAgro provided a good market outlook, noting that strong demand for phosphate fertilizers in China has limited exports from the country, while India's purchases this year should start earlier than usual because of its low stockpile levels. Meanwhile, the DAP/MAP shortage in the US has persisted thanks to a drop in imports from Russia and Morocco due to newly established import duties. PhosAgro's volumes are already sold out until the end of March.
The decision on 4Q20 dividends has been postponed and will be made at one of the upcoming BoD meetings - PhosAgro says it will be announced by the end of April. The company guided that the dividend would reflect the improving market outlook, so we reiterate our forecast of a $100mn payment for the quarter (for a 1.6% yield), which would be well beyond what is called for by the dividend policy at around 100% of adjusted net income (the policy stipulates a minimum of 50%) and 2.7 times FCF.
PhosAgro plans to keep its net debt at around $2.0-2.2bn throughout 2021 (it was $2.1bn at end-2020), which implies dividend payouts of close to 100% of FCF versus the 50-75% stipulated by the dividend policy. The stock is trading at 10% FCF and dividend yields for 2021E on our base-case numbers. At the spot DAP price ($530/tonne FOB Tampa, 22% above our base case), it is trading at a 20% FCF yield.
● Other
Rusal has published robust 4Q20 operating results: aluminium production and sales were 1% and 3% above forecast, respectively. VAP sales recovered for the second consecutive quarter, as market conditions improved. The company plans to report its FY20 earnings on 17 March: we intend to focus on the improvements in the VAP share and the aluminium market outlook. Production and sales slightly above our forecast. Rusal’s 4Q20 aluminium production slightly exceeded our expectations, while total sales were 3% above our forecast due to higher third party resales volumes (Figure 1). Sales mix improves amid market recovery. The share of VAP in the sales mix continued to recover in 4Q20, reaching 47% vs. 45% in 3Q20 and 37% in 2Q20, which was above 43% average share for 4Qs. This might have been driven by overall market recovery (for details, see our Non-Ferrous Metals Watch - January 2021). Alumina output beats our forecast, while bauxite missed. In the raw materials division, 4Q20 alumina production beat our forecast 5%, while bauxite production was 10% below us, declining 12% YoY. We note that low bauxite production volumes were mainly due to a decrease in shipments at the Timan refinery in December, as a result of unfavourable weather conditions.
156 RUSSIA Country Report March 2021 www.intellinews.com