Page 105 - RusRPTNov18

Pirelli Tyre Russia, the 75/25 joint venture of Italian Pirelli and state technology agency Rostec, will double the capacity of its plant in Voronezh to 4mn tyres annually at the cost of about €100mn, Vedomosti said on October 24 citing the memorandum signed by two Rostec and Pirelli. The expansion seeks to match the growing Russian car market , as well as to increase exports. Currently the joint venture exports to CIS, Europe, and Scandinavia. Until now the joint investment in Russia amounted to €470mn, with €222mn spent on asset acquisition and €250mn in development. In 2017 Pirelli Tyre Russia went profitable with RUB319mn bottom line versus RUB430mn loss in 2016. Revenues in 2017 amounted to RUB19.9bn. Sales of cars and light commercial vehicles (LCVs) in Russia increased by 6.2% year-on-year in September and by 14.9% y/y for January-September 2018 to 0.157mn units and 1.3mn units, respectively, according to the latest data by the Association of European Businesses (AEB). The growth rate of the car sales slides into the single-digit zone, as 2018 marks the second year of market recovery exhausting the base effect. But the front-loaded purchases of cars are expected to continue until the end of the year, with consumers avoiding higher prices on weaker ruble and VAT hike.
9.2.3 Aviation corporate news
Rising fuel prices remain one of the chief disappointments of the Aeroflot investment story : the oil price has risen 20% YTD to above $80/bbl, the highest in four years. It might be argued that a higher oil price has an indirect positive influence, by boosting the economy and thus serving as a balancing factor. However, the policy limits the stimulation effect on GDP and real wage growth -- both expected to grow 2% and below for 2019-21F. Assuming a $75/bbl oil price in 2019-26F (vs. the earlier $72.5/bbl in 2019F and $70/bbl onwards). That trims BCS 12-month Target Price to RUB 110 (from RUB 138), implying a 14% ETR, including a 4% dividend yield. Hold reiterated.
Russian national air carrier Aeroflot plans to transport 90mn-100mn passengers in 2023 , almost double from 50mn passengers carried in 2017, the CEO of the group Vitaly Sevelyev told President Vladimir Putin. Overall passenger turnover in Russia amounted to 124mn people, out of which domestic carriers accounted for 105mn. Savelyev estimated that Aeroflot could take at least half of the market that would reach 189mn people annually by 2023 at 6.4% annual growth. The comments of the CEO makes a notable upwards revision of the previous strategy that expected 70mn people carried by 2025. The goal could be reached by deepening regional penetration. In September reports suggested that Aeroflot plans to launch four regional aviation hubs in addition to the one in Moscow's Sheremetyevo airport, potentially developing more routes from St Petersburg, Sochi, Krasnoyarsk, and one of the cities of the Urals region.
Russian state aviation agency Rosaviatsia certified the PD-14 engine,
making the first domestically produced turbo jet engine, Vedomosti daily said on October 18 citing the Minister of Industry and Trade Denis Manturov. The engines are assembled by United Engine Construction Corporation (ODK), a subsidiary of state technology agency Rostec. PD-14 will power MC-21 (MS-21) single-aisle twinjet airliners produced by Irkut, a branch of the United Aircraft Corporation (OAC). In 2017 Manturov estimated that OAC will sell over 1,000 MC-21 jets by 2037. Only one other Russian airliner, the regional Sukhoi Superjet 100 , has been manufactured from scratch in the post-Soviet
105 RUSSIA Country Report November 2018 www.intellinews.com