Page 157 - RusRPTMar21

RUSAL reported 11 February, that it has agreed to buy the business and assets of Aluminium Rheinfelden GmbH. The deal should receive the formal approval of Germany’s Federal Cartel Office and Federal Ministry for Economic Affairs and Energy. As its name suggests, Aluminium Rheinfelden is located in Rheinfelden, Baden. The company has exposure to downstream aluminum manufacturing along with production volumes of up to 30ktpa. In September 2020, Aluminium Rheinfelden Group applied to begin insolvency proceedings. RUSAL’s acquisition of Aluminium Rheinfelden should expand the Russian producer’s downstream integration and its exposure to automotive and industrial end-users, we consider.
Norilsk Nickel has reported positive FY20 accounts: the company met EBITDA expectations despite a palladium inventory build-up, while FCFE in 2H20 exceeded our expectations by 21%.
As global trends toward cleaner transport supports its commodity basket, the company is on track to print further earnings improvement in 1H21F, in our view, meaning an 8% FCFE yield despite the environmental claim and higher capex (13% DY). Our unchanged 12-month Target Price of $41 implies a 31% ETR and a Buy recommendation.
Palladium inventory built-up, but revenues in line. Higher copper and rhodium sales volumes offset reduced PGM sales (inventory build-up of palladium and lower resales). As such, both revenues and EBITDA matched our and consensus expectations. The company is on track to announce $3.26bn FY20 dividends in May (DPS of $2.1/DR, 6% semi-annual yield).
Richer FCFE on lower capex. FCFE of $3.74bn was 21% above our expectations due to lower income tax payments, and capex of $1.76bn, which was below $2.0bn reduced, and $2.2-2.4bn initial, guidance.
2021 capex is set to rise as guided before. The company reiterated its $3.0- 3.4bn capex guidance for 2021. It underperformed its capex guidance by 30% in 2018-2020, but 2020 contractual capital commitments doubled y/y to $2.02bn, pointing to a capex increase in 2021.
Commodity basket outlook improved a touch. The company improved its fundamental outlook on the commodity basket, as it reduced its estimate of the 2021 global copper surplus almost to zero. It now expects the palladium market to remain in a deficit of 0.2mnoz (2% of global demand). This was partly offset by a 3% increase in its nickel surplus estimate, to 90+kt. The company reiterated its negative
157 RUSSIA Country Report March 2021 www.intellinews.com