Page 155 - RusRPTNov20

(vs. 55-56% in 1H20). The better mix was achieved thanks to higher sales of CRC, HDG and PPGI steel, as well as other downstream products, sold primarily on the domestic market.
Despite the much better mix, the average steel price of $510/t was 4% below our expectations, mainly due to higher discounts vs. the benchmarks for HRC and CRC.
The resources division volumes were, on average, 10% below our upbeat expectations, but were still little changed q/q. 9mo20 coking coal output of 3.45mnt suggests that the company might come slightly below its 5mnt guidance for 2020, but remains generally on track for the 5.4mnt target by 2023.
The reported figures suggest a robust 20% q/q increase in revenues to $1.91bn. Thanks to higher volumes as well as the slightly weaker RUB$(-1% q/q), we expect the company’s slab cash cost to decline 6% q/q to $174/t. This, coupled with a 2% q/q rise in average steel prices are likely to have a favourable effect on the EBITDA margin. As such, we expect 3Q20F EBITDA to rise 28% q/q to $646mn.
We expect the company to report FCFE of $204mn (2% quarterly yield), up from $97mn in 2Q20, as higher EBITDA and the inventory release offset higher capex. Given that the company’s leverage is to remain below 1.0x by the end of 3Q20, we expect the company to target a dividend payout of 100% of FCFE adjusted for maintenance capex ($800mn/a). Given that 1H20 was slightly higher, we think the 3Q20 payout might be within 90-100%, suggesting DPS of $0.36/DR, or $300mn in total (a 2.8% yield).
Novolipetsk Metallurgical Kombinat​ (NLMK) reported 3Q20 IFRS results that were in line with analysts EBITDA estimate and 40% ahead of the FCF projection (on a bigger working capital release).
Revenues rose 3% q/q to $2.23bn on 2% higher consolidated sales volumes and a 2% higher average realized price at the Russian flat steel division, driven by a better sales mix. EBITDA for the quarter came in at $579mn (flat q/q), 4% below the consensus but in line with our estimate. Despite the revenue growth and slightly weaker ruble q/q, EBITDA was pressured by the accident at the Stoilensky iron ore asset, which cost the company $60mn (slightly above our estimate of $50mn). (Stoilensky was relaunched on September 23 and is now running at full capacity.) EBITDA gains from executing on the company's strategy were reported at $55mn in 3Q20, which brought the 9m20 total to $170mn. The latter figure includes $124mn from operating efficiency gains (above the full-year guidance of $100mn)
155 ​RUSSIA Country Report​ November 2020 www.intellinews.com