Page 108 - RusRPTSept19

due to two-fold increase in finance expenses (out of which interest on leases surged 71% y/y), currency loss of RUB0.7bn, and higher tax rate. BCS GM sees the results as mixed, but notes that FY19 Ebitda guidance f the management remained optimistic at +10-15%, suggesting a 1.5%-6.1% upside to BCS model. InterRAO is to announce the new strategy by May 2020, but for now plans to spend RUB120bn-200bn on modernization of combined heat & power production facilities (CHPs) by 2031.
9.2.11 Metallurgy & mining corporate news
● Gold
Polyus reported 2Q19 IFRS results that were in line with consensus estimates across the board. On the conference call, it reiterated its full-year guidance on production, costs and capex.At the spot gold price and USD/RUB rate, Polyus is trading at a 2020E EV/EBITDA of 6.5, an 8% LFCF yield and a 6% dividend yield. EBITDA grew 25% q/q and 32% y/y to $604mn in 2Q19, for a 67% margin. This was on the back of higher gold sales (up 20% q/q and 29% y o y) and a good cash cost performance, with TCC of $352/oz, which was down 2% q/q thanks to an increased antimony by-product credit ($12/oz in 2Q versus $7/oz in 1Q) and higher processing grades at Olimpiada and Blagodatnoye. We note Natalka's continued outperformance on TCC, which came in at $372/oz in 2Q19, below the $400-500/oz guidance for the full year (provided on the 1Q19 earnings call) due to an increase in ore throughput and lower power tariffs q/q. The management now expects Natalka's 2H19 TCC to be near the 1H level, which was $397/oz. Polyus reiterated its consolidated full-year production guidance of 2.8 moz and TCC guidance of below $425/oz. Leveraged FCF (adjusted lower by $27mn in payments on cross-currency swaps, and excluding $6mn in Omchak power grid capex, which was financed by a government grant) came in at $198mn in 2Q19, slightly lower q/q, as we expected. Capex (including capitalized stripping) rose 27% q/q to $189mn in 2Q19. Capex excluding capitalized stripping (which is what is guided) was $253mn in 1H19, or just 36% of the full-year guidance of around $700mn. To recap, Polyus guides for $725mn in capex at $/RUB60, so the implied guidance at the current $/RUB64-65 is slightly below the official figure.
● Steel
Russia's metals and steel major MMK (Magnitogorsk Iron and Steel Works) reported 2Q19 IFRS results with revenues gaining 9% quarter-on- quarter to $2bn, Ebitda increasing by 13% quarter-on-quarter to $497mn at a margin of 25%, and adjusted net income going up by 16% q/q to $302mn. The revenues and earnings came in line with expectations, are attributed to seasonal growth in sales of finished products, improvements to sales mix and growth of domestic prices. However, in 2Q19 MMK posted a surprise dive of 77% q/q in Free Cash Flow (FCF) to $61mn, on the back of a $79mn working capital increase and a 56% q/q rise in capex to $246mn. "In 1H19, capex came to 47% of the initial full-year guidance of around $860mn, ahead of the run rates of Severstal and NLMK," Sberbank CIB commented on August 2.
● Other
The net profit of Russian fertilizer producer EuroChem almost tripled on the year to $612mn in January–June, as calculated under International Financial Reporting Standards (IFRS), the company said in a statement on August 6. Earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 21% to $819mn.
108 RUSSIA Country Report September 2019 www.intellinews.com