Page 102 - bne IntelliNews Russia Country report May 2017

EBITDA margin declined by a minor 2 ppts but remained at a healthy 29%. Mechel's net income swelled to RUB13.9bn from RUB1.6bn in the previous quarter, as a surge in the contracted 1Q17 coking coal price to $285/t (from $200/t in 4Q) helped to offset the negative effect of the 7% stronger RUBand an 8% decline in coking coal sales. The Mining segment's EBITDA increased to RUB20bn (+11% Q/q) and its margin expanded to 49% despite seasonally higher winter production cash costs. As expected, the Steel segment's EBITDA dropped to RUB3.6bn (-51% Q/q) on higher raw material costs and a seasonal decrease in construction activity; the margin fell to 8%. Mechel's net leverage declined to RUB421mn, and the net leverage ratio to 5.3x from 6.6x at end-2016.
9.2.11 Transport corporate news
Evraz has agreed to sell the Nakhodka port to Lanebrook Limited for $354mn . Lanebrook, which controls 63.9% of Evraz, is jointly owned by Roman Abramovich, Alexander Abramov, Alexander Frolov, and Eugene Shvidler. The transaction is classified as related-party, and is subject to the approval of the company's shareholders excluding Lanebrook at the General Meeting on 23 May. The net proceeds for Evraz are expected to amount to $295mn, and will be used primarily for deleveraging. In 2016 the port, the main customers of which are Evraz and Sibuglemet, had gross assets of $50mn and net income of $44.5mn.
Russia’s United Wagon Company has said it is to soon start supplying freight wagons to Iran as part of a €300mn deal signed in February to provide 6,000 goods cars, the Financial Tribune newspaper reported on May 15. The deal will form part of an effort to achieve a long-awaited overhaul of Iran’s crumbling industrial rail infrastructure. The country intends to invest billions of euros in rail infrastructure in the next few years.
9.2.12 Other sector corporate news
Phosagro posts expectedly weak 1Q17 financials. Revenue remained generally flat y/y at $755mn, while EBITDA fell by 36% to $215mn; net profit declined to $208mn. The company exercised good cost control as cost of sales in RUBterms increased only 2% y/y despite a 9% increase in phosphate and nitrogen fertiliser output. Nevertheless strong headwinds from a strengthened RUB(RUB58.6/$from RUB74.4/$in 1Q16) pushed costs higher and resulted in EBITDA margin falling 16 ppts to 29%. Phosagro confirmed that all major development projects are on track. Separately, the company said that new capacity from Morocco and Saudi Arabia would be a limiting factor for DAP price increases, although in the short-run, the high season in South Asia, Latin America, and Russia should support prices. These are expectedly weak results, again demonstrating how a strengthening RUB harms exporters' margins. No consensus estimates were available, but we believe the market was expecting the numbers to be substantially weaker y/y.
Russian fertilliser major Acron saw its Ebitda decline by 28% year-on-year in the first quarter of 2017 due to ruble strengthening and higher costs of output, the company said on May 30. Acron's Ebitda stood at RUB7.43bn or $126mn in the reporting quarter, with the Ebitda margin down by 10pp to 31% compared with the same quarter of last year. Revenues declined by 4% y/y to RUB24bn, while net profit dropped by 88% y/y to
102 RUSSIA Country Report May 2017 www.intellinews.com