Page 109 - RusRPTAug19

Global Markets on July 25 welcomed the "mildly positive" 2Q19 results, noting that net income also beat the estimates "coming just 5% lower q/q at $441mn."
Magnitogorsk Iron and Steel Works (MMK) has reported its 2Q19 trading update, which showed a slight uptick in steel sales volumes, a solid sales mix and strong growth in the average realized steel price. We expect EBITDA to grow some 15% q/q to $505mn in 2Q19, for a 25% margin. FCF generation should be pressured by higher capex q/q and a working capital buildup. We expect leveraged FCF to contract 50% q/q to around $125mn, for a 1.6% yield. We anticipate a 100% dividend payout from LFCF. Consolidated steel sales grew 2.7% q/q to 2.86mn tonnes, driven mainly by better volumes in Turkey (up 12% q/q from the low base of 1Q19 to 197 kt) and from the Lysva plant (up 23% q/q to 74 kt), while sales volumes from the MMK plant were flat. The share of HVA products in consolidated sales volumes increased a further 2 pp q/q to 50%, while the share of domestic shipments from the MMK plant was almost flat at a record high of 90%. Since the Russian domestic HRC benchmark grew 10% q/q in 2Q19, MMK showed strong price growth across the board, with its average realized price growing 8.1%, which was better than the performance of peers.
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Russian aluminium major Rusal increased its exports of the metal by 18% year-on-year in January-June 2019 to 1.5mn tonnes, according to Tass citing Russian Railways (RZD) data. The growth in exports came amid decline in overall cargo turnover transportation posted recently by RZD. As reported by bne IntelliNews, after the US sanctions were lifted from Rusal in February 2019, the company was expected to deliver solid results starting in 2Q19, and plans to tap debt markets again as its credit ratings remained intact. In June, UC Rusal’s aluminium exports fell 2.9% m/m to 0.24mn tonnes, but daily June exports remained mostly flat m/m (-1%) likely due to the seasonal increase in domestic demand, BCS Global Markets commented on July 4. Rusal previously guided for aluminium demand to rise by 3% y/y in 2019 to 68mn tonnes versus 3.6% growth seen in 2018, while planning to restore the market position including share of value-added products sales, aiming to recover the profitability.
Russian aluminium major United Company (UC) Rusal reported 21% quarter-on-quarter growth in sales in 2Q19 on the back of inventory release and improvements in the product mix, the company said on July 25. Sberbank CIB expects Rusal's Ebitda to grow 37% q/q to $310mn and leveraged free cash flow (FCF) at $85mn making a 1.2% yield. At the same time Rusal said it was concerned that aluminum demand in 2H19 could come under pressure from the uncertainty about US-China trade tensions and the slowdown in global manufacturing activity. BCS Global Markets also believes that the results create a strong base for IFRS financials and see the trading update as positive for Rusal's shares, on which it has Buy recommendation. "We maintain our positive view on the name with M2M P/E of just 4.5x – 50% discount to global peers," BCS GM wrote.
Struggling Russian diamond producer Alrosa has reported more disappointing sales in June that continues a poor year, the company said on July 10. June rough diamond sales were down 43% y/y to $219mn, which is also 43% below the historical level for June. Sales have been in the basement for much of this year pulling the company’s results down. “The drop was the largest YTD and highlights the absence of improvement in the diamond
109 RUSSIA Country Report August 2019 www.intellinews.com