Page 4 - FSUOGM Week 08 2020

FSUOGM COMMENTARY FSUOGM
Russia’s top petchem producer Sibur holds off on IPO
Russia’s top petrochemicals producer Sibur has traversing difficult market conditions, but is looking forward to its major new ZapSibNefteKhim project reaching full capacity
RUSSIA
WHAT:
Sibur’s profits were up in 2019 but its revenues were down because of weak market conditions.
WHY:
The petrochemical outlook is bearish over the next two years, because of new capacity coming online.
WHAT NEXT:
An IPO is unlikely before 2022.
RUSSIA’SleadingpetrochemicalproducerSibur won’t hold its highly anticipated IPO this year, or even next year, as profits were up but reve- nues were down on poor market conditions. However, the shareholders remain committed to listing the company when the market condi- tions improve, Sibur’s CEO Dmitry Konov told bne IntelliNews at an investors’ day in London on February 20.
“The shareholders are committed to taking the company public, but the timing will depend on both the situation on the Russian market and the petrochemical industry as a whole,” Konov told bne IntelliNews.
The situation on the Russian capital markets have improved noticeably in the last year. Rus- sian stocks were amongst the world’s best per- forming in 2019, up almost 50% y/y. This year the markets are doing less well after a good start in the first half of January and have sold off on the back of the coronavirus epidemic fears. How- ever, analysts say that the fundamentals remain good and expect the stock market to recover in the second half of this year once the first phase of the epidemic passes.
The outlook for the petrochemical industry over the next two years is also not so rosy as new capacity comes online and depresses prices, according to Konov. That means the earliest the IPO could happen is probably not before 2022.
Butinthemeantimethecompanycontinues to develop. Last year saw its new facility ZapS- ibNeftekhim (ZapSib) begin commissioning operations.
With the completion of ZapSib, Sibur’s current investment cycle has come to an end. Although ZapSib has yet to add to revenues, the cash flow of the company has already improved as its capex on the plant falls away.
In a testament to the improving financial standing of the plant, despite the market condi- tions, last year the shareholders decided to take advantage of the improving free cash flow and awarded themselves a bigger dividend payout, hiking the ratio from 25% of net profits to 35%.
Market conditions remain tough
Sibur announced results in London that saw net profit rise by 27.6% to RUB141.4bn in 2019 y/y despite challenging market conditions. It expects that 2020 will also be a tough year thanks to a range of issues, including new capacity coming online in the global petrochemical business, as well as the US-China trade war and the decreas- ing oil price. However, as both global and Rus- sian demand continue to grow faster than the rate of GDP growth business should pick up after that.
“Our revenues were down in 2019, but by less than the sector average and as demand continues
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w w w . N E W S B A S E . c o m Week 08 26•February•2020