Page 94 - RusRPTJune18

the Kola Peninsula of the North Western Murmansk Region, the company's Vice President Elena Bezdenezhnykh said on May 25. Murmansk is home to Russia’s only warm water port on the western side of the country and has been thriving in the last years as it is also home to several major industrial concerns as well as being a transport hub. Last year the region was one of the fastest growing in Russia.
Russia's largest gold producer Polyus Gold posted first-quarter revenues of $617mn and Ebitda of $387mn flat year-on-year at a flat margin of 63% as the sales decline was offset by an increase in the average realised gold price. Company's net income slipped by 8% quarter-on-quarter, missing the consensus estimates by 6%. Free cash flow (FCF) stood at $70mnm down by 55% y/y due to $50mn working capital build up driven by inventory build up and higher capex ($191mn versus $113mn a year ago). Previously in the fourth quarter company's cash flow was already under pressure due to a surge in capex to $321mn (above the $250mn forecast). While Aton Equity on May 30 saw the first-quarter results as "unremarkable", the FCF drop is seen as minor, but temporary disappointment. "In 2Q18 we expect a strong earnings improvement on a weaker RUB FX, higher gold sales, and by-product revenues," Aton noted. The analysts expect the market to ignore the first-quarter results as the "share price is currently being driven by sanction concerns", which is seen as "the only explanation for the enormous 45% Natalka-adjusted discount to global majors", referring to Polyus major gold mine Natalka which is said to operate at 80% of its capacity in the first quarter. VTB Capital also believes that Polyus "23% underperformance vs. the FTSE Gold mines index on sanctions rhetoric (which has calmed down recently) creates an attractive entry point."
Russia's largest steel pipemaker TMK reported 6% quarter-on-quarter revenue growth to $1.27bn in the first quarter of 2018 and 5% q/q Ebitda growth to $160mn, both beating consensus expectations by 5%. Higher revenues and earnings in the reporting quarter were attributed to strong performance in the Russian division, supported by stronger prices and an improved seamless pipe product mix, thanks to seasonally higher consumption for oil and gas producers, Aton Equity said on May 20. Russian division posted Ebitda of $124mn in the reporting quarter, up by 12% q/q, beating Aton's forecast of $115mn due to higher seamless pipe prices. At the same time America's division's Ebitda shrank by 35% q/q to $26mn, and European division's Ebitda was down 3% to $10mn. At the same time free cash flow (FCF) of the company was negative at -$19mn in the first quarter, on a $25mn working capital build-up, and the net leverage ratio was flat at 4.35x.
The London High Court started another hearing the case involving billionaire Russian shareholders of Norilsk Nickel metals major Vladimir Potanin (controls Interros), Roman Abramovich (controls Crispian Investments) and sanctioned Oleg Deripaska (controls Rusal aluminium major). The old shareholder conflict in one of Russia's largest metal miners flared up again this year as Deripaska's Rusal (32.9% in NorNickel) said it would initiate a "shootout" procedure with Potanin's Interros (holds 32.9% in NorNickel and heads the company) as means of solving a sharp conflict over the management of NorNickel's cash flow. However, since both Deripaska and Rusal were sanctioned on April 6 by the US Department of Treasury (USTD), the shootout is seen as highly unlikely and Deripaska had to withdraw his
94 RUSSIA Country Report June 2018 www.intellinews.com