Page 9 - FSUOGMWeek352019

FSUOGM PERFORMANCE FSUOGM
Lukoil boosts profit 26% in 2Q19
RUSSIA
Lukoil’s bottom line outperformed the expectations in the reporting quarter due to foreign currency gain, while cash ow got
a boost from working capital release.
RUSSIA’S second-largest oil producer independ- ent Lukoil reported 24% quarter-on-quarter net pro t increase to $2.8bn in 2Q19, beating con- sensus by strong 25%. e company’s free cash ow in the reporting quarter remained positive at $2.5bn, in line with consensus and up by 17% q/q.
“Although strong P&L is partly attributable to destocking and oil price hedges, high CFY increases probability of buyback extension in 2H19,” BCS Global Markets commented on August 28 referring to $3bn share buyback pro- gramme that analysts anticipate the company to prolong.
Lukoil’s bottom line outperformed the expec- tations in the reporting quarter due to foreign currency gain, while cash ow got a boost from working capital release.
Revenue gained 17% q/q to $32.9bn (beating consensus by 7%) due to 9% higher oil price q/q and 15% q/q increase in crude oil and 13% q/q oil products sales volumes, as the Lukoil was sell- ing inventories accumulated during 1Q19, BCS commented, having a Buy recommendation on the company’s shares with a target price of $110 per GDR.
Lukoil’s Ebitda was up 14% q/q to $5bn despite higher export duties and higher mineral extraction tax (MET), also due to the positive effect of the inventories release ($340mn q/q gain) and pro t from oil price hedges of $180mn.
Lukoil has extensive overseas operations that supported its performance in the rst quarter of 2019, when the company reported stable earn- ings growth in 1Q19 despite revenue decline on lower oil prices. As reported by bne IntelliNews, the company also considers LNG projets overseas and is the main candidate for possible opening of Russian o shore extraction to local players.
In June the shares of Lukoil made it to the global top 10 of 2019 Value Creators Rankings by the Boston Consulting Group (BCG), bring- ing investors returns of 27.1% for the period of 2014 to 2018.
Analysts surveyed by Vedomosti daily attributed the growth in Lukoil’s share value to improved dividend policy and the share buyout programme launched last year. e company is seen as generating strong cash ow at low lever- age and capex, making a positive dividend out- look. ™
Week 35 04•September•2019 w w w . N E W S B A S E . c o m P9