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of SSJ-100. Reports of technical problems dogging SSJ-100 appeared before, and now could hit state carrier Aeroflot the hardest. The carrier had been pushed by the government to become the largest user of Sukhoi Civil Aircraft machine, having almost 50 SSJ's in its fleet. As reported by bne IntelliNews, Aeroflot's development strategy is under question, as it relies on deeper domestic regional penetration through creation of four regional aviation hubs and heavy use of medium-range SSJ-100s. In addition, the Finance Ministry is reportedly unwilling to support the largest carriers in compensation rising costs of jet fuel. In these conditions Aeroflot's rival S7 Group could gain an edge, as its development strategy is based on becoming the first carrier in Russia to completely revamp its mid-range fleet with foreign Airbus 320/321 neo and Boeing 737 MAX new generation jets.
In 1Q 2019, Aeroflot Group’s revenue increased by 23.3% year-on-year to RUB138,041mn. Revenue from scheduled passenger flights increased by 24.5% year-on-year to RUB113,391mn, due to an increase in passenger traffic. Revenue growth was affected by an increase in yields on both international and domestic flights. Revenue from charter flights increased by 1.3% to RUB5,864mn. Cargo revenue rose by 10.5% to RUB4,173mn year-on- year as cargo and mail volumes grew by 3.7%. Other revenue increased by 29.7% year-on-year to RUB14,613mn due to a rise in FX-denominated revenues from agreements with other airlines and a rise in revenues from frequent flyer programme.
Aeroflot announced April and 4M19 Operating Result on May 24: Aeroflot carried 4.7mn passengers (13.2% up y/y) in April, with RPK up 13.6% and ASK up 13.8%. Passenger Load Factor (PLF) stood at 80.6% – 30bp higher vs March and 10bps down vs April 2018. For January-April, RPK rose 16%, with international flights showing 17% growth and domestic – 14%. ASK increased by 17%. PLF stood at 78.6% vs 79.1% year-on-year. Passenger volumes and turnover grew in 4Q19 due to 11% fleet increase in 2018. In addition, as seen from Aeroflot’s 1Q19 RAS financials, yields also grew 5-6%, providing a positive read through for 1Q19 IFRS revenue, which is expected to be up at least 20%. Meanwhile, pressure on costs remains strong, coming from higher y/y fuel prices (in RUB) and dollar inflation, hence, strong revenue growth is unlikely to translate into similar growth in operating profits.
9.2.4 Construction & Real estate corporate news
LSR Group (LSR) generated net operating cash of RUB20bn in 2018, rebounding after three years of negative performance. This allowed the company to lower net debt RUB12.8bn to RUB30bn and net debt/EBITDA to 0.8x as of YE18. Declining leverage and robust sales (1Q19 volumes stood at 162,000sqm, comparable with the high base of the previous year) were necessary milestones for a decent dividend payment. “We view LSR’s P/NAV of 0.43x as an appealing exposure to the development sector, with favourable sustainability for the new regulatory framework (further supported by LSR being included into the list of backbone enterprises) and quality dividend distribution, at a 12% dividend yield,” Maria Kolbina of VTB Capital (VTBC) said in a note.
9.2.5 Retail corporate news
● X5
120 RUSSIA Country Report June 2019 www.intellinews.com