Page 184 - RusRPTSept21

therefore, management does not expect them to recur in 2022. Based on the company’s estimates, the addition of export duties has already taken Norilsk’s overall tax burden (around 9% of revenue) well above its global peers and other countries when solid mineral resources are mined. The company says it is not in a position to comment on the government’s considerations, but believes that the risk of an increase in taxation is high.
Divi core too, 70-100% payout of FCF should be comfortable in our view On the dividend and new shareholder agreement, another key theme, the company is not a party to the negotiations between the core shareholders, but we see a 70-100% FCF payout range as comfortable for the company. The company is not comfortable with the EBITDA-based formula, which suggests 100%+ FCF payout, especially in light of the ongoing CapEx hike plans, which the company has reiterated to reach $4bn within the next couple of years (140% higher vs 2020).
Strong re-rating story on production recovery and dividends Overall, we affirm Norilsk as a Buy and a core holding in our L-T Portfolio, given the outlook for a new still generous dividend policy and full restoration of operations. The spot-based 12MF P/E multiple of 6.5x, thus, may turn into 8-9x, which implies a 25-40% re-rating potential, which is rather easy to expect assuming the drivers above materialize.
RUSAL reported a strong set of 1Н21 results on 13 August, with margins driven up by favorable pricing.
The $1.4bn received from MNOD’s buyback helped RUSAL to reduce its net debt by over $1.5bn. Despite its strong FCF generation, the company’s BoD decided not to declare an interim dividend for 2021, citing potential pricing volatility in the future.
Although the aluminium price in 1Н21 ($2,287/t) was up 30% YoY, the market remains optimistic about the spot price ($2,603/t, COB 13 August). Sales volumes also added 110kt (+6% YoY), which increased sales revenue 36% YoY to $5.5bn. A supportive FX environment contributed to the 500% YoY increase in the company’s EBITDA to $1.3bn, with the EBITDA margin expanding to 24% (vs. 5% in 1H20). OCF fell to $700mn due to the $600mn expansion in working capital, but the company received $1.4bn from its participation in MNOD’s most recent buyback (MNOD announces $2bn buyback to purchase
184 RUSSIA Country Report September 2021 www.intellinews.com