Page 119 - RusRPTApr19

Russian diamond mining giant ALROSA plans capital expenditures at 135bn rubles in 2019–2024, as seen by PRIME in the company’s presentation on March 18. ALROSA intends to invest 40bn rubles in mining facilities, 55bn rubles in maintaining the existing facilities, and 40bn rubles in infrastructure. Investment will stand at 26–29bn rubles annually in 2019–2021, 20bn rubles in 2022, 15bn rubles in 2023, and 18bn rubles in 2024.
Russian uncut diamond major Alrosa reported revenues of RUB61.4bn ($921mn) for the fourth quarter of 2019, down by 14% q/q. The company's Ebitda was down 33% q/q to RUB26.9bn, which was 2% below the consensus expectations of analysts.
Earnings for 2018 overall stood at $397mn and missed expectations by 4%. Alrosa's net profit in the reporting quarter was 69% q/q down to $114mn. The decline was attributed to non-operational losses.
"Overall, we expect a mixed market reaction, as Ebitda slightly underperformed the consensus estimates but leveraged FCF [free cash flow] generation was above our expectations, indicating small upside to our dividend expectations," Sberbank CIB commented on March 18.
The FCF for 4Q18 came in 50% above Sberbank's expectations at $257mn. This brought 2H18 leveraged FCF to $617mn for a strong 5.8% yield, Sberbank estimated. In the meantime capex for 2018 overall was 12% below the company's guidance at RUB27.8bn.
Net debt/Ebitda stood at 0.4x as of year-end, which would mean that Alrosa should pay 70-100% of its 2H18 FCF in dividends, according to the company's policy.
"This implies a $430-620 mln dividend for a 4-6% yield, versus our base case of $535mn (and a 5% yield)," Sberbank estimated, believing that the final dividend "may end up coming close to $600mn". While the bank still sees Alrosa as paying good dividends in 2019, given the structural risks facing the natural diamond industry, the analysts have placed a Hold recommendation on the stock.
● Other
One of world's largest aluminium producers Russian Rusal reported 40% year-on-year increase in net profit to $1.7bn in 2018, with Ebitda inching up by 2%, and revenues up by 3% to $10.3bn. The company has been under direct US sanctions since April 2018, but managed to compensate the 18%- 19% dive in sales in the 2Q18 thanks to the higher prices (about 7.2% 9% higher in 2018). bne IntelliNews this month analysed how eased US sanctions would affect Rusal's share price. Following the publication of the 2018 results, Rusal "has resumed normal practice of communication with investor community" and "normal trading with all long-term clients are in the reestablishment phase," BCS Global Markets commented on March 7. Rusal's working capital, which caused almost $1.3bn cash outflow in 2018, is expected to normalize by end-2Q19, with the inflow from the normalization of the working capital expected to amount to $0.6bn-0.7bn by BCS. The credit coverage of Rusal is expected to be resumed within 3-4 weeks, but the management declined to give any detailed comments on dividends yet.
Fitch Ratings assigned Russian-based aluminium company United
119 RUSSIA Country Report April 2019 www.intellinews.com