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dynamics of 1Q18. Thus, the company’s 1H18 financials might depict a more moderate YoY reduction. At the same time, despite the profitability slide we expect, Enel Russia’s commitment to a 65% net income payout in dividends suggests a 10% dividend yield, which limits the downside for the stock, in our view.
Unipro has published its 2Q18 and 1H18 production data. 2Q18 electricity production came 8% lower YoY, bringing 1H18 production down 7% YoY to 22,688mn kWh. The heat send-out, though, was up 10% YoY in 2Q18, and up 8% YoY in 1H18 to 1,293th GCal. Unipro also released its 1H18 RAS results the same day with 1% YoY revenue growth to RUB 39,310mn, but net income down 51% YoY to RUB 10,375mn due to the insurance of RUB 20bn received in 2Q17. Adjusting for this, net income was up YoY, despite the slide in production, supported by capacity payments. Although the continuing slide in production is unfavourable, management has committed to maintaining stable dividends (implying an 8% dividend yield pa, on our estimates) and so the news is relatively neutral. Furthermore, and independently of this (as shown by the 1H18 RAS results), although the 1H18 IFRS financials are going to be down YoY, that is only optically due to the high base of 1H17 driven by insurance in 2Q17. The actual underlying profitability will continue to be decent, in our view.
9.2.11 Metallurgy & mining corporate news
The co-founder and the former CEO of the gold mining company Petropavlovsk Pavel Maslovsky has been elected back on the board of the company along with Roderick Lane and Robert Jenkins, the company said on June 29. Petropavlovsk is struggling in an otherwise growing Russian gold market . The company has been through a shake-up recently in which Russian oligarch Viktor Vekselberg, who has a minority stake in the company, carried out a boardroom coup that ousted the chairman and founder Peter Hambro at the annual general meeting in June 2017. Maslowski and Hambro founded the company on a shoestring over a decade ago, but came a cropper thanks to debt and the devaluation of the ruble in 2014.
The Russian government has approved a plan for development of the aluminium sector, which could help stimulate domestic demand for the metal and help the sanctioned aluminium major Rusal of Oleg Deripaska that exports 80% of its output, Kommersant daily reported on July 16. Rusal almost saw its business collapse after the company’s owner and Kremlin insider Deripaska was singled out for especially stringent treatment in the April 6 round of sanctions. US businesses were banned from doing any business with Deripaska or his companies, and international investors were also banned from holding the company’s shares or debt. While Rusal's business recovered somewhat in May after partial softening of the sanctions, the company’s exports are still down by two-thirds on the levels prior to the April sanctions in both physical and monetary terms. Now the government is reportedly preparing a roadmap including 22 measures that would strengthen the demand for aluminium, including state purchasing, tariff and customs regulation, subsidies, and widening the scope of domestic use of the metal. Previously government officials and Deripaska said that domestic consumption could be increased to 2.5mn tonnes annually by 2024, which would require RUB140bn ($2.2bn) spending.
85 RUSSIA Country Report August 2018 www.intellinews.com