Page 141 - RusRPTDec21

Novatek has reported its 3Q21 IFRS results. They came in line with us and the consensus on EBITDA, and were somewhat better on net income. FCF was above what we expected thanks to $0.2bn dividends received from Arcticgas and slightly lower capex.
The company’s reported normalised net income implies 3Q21 DPS of RUB17.28 under a 50% payout assumption, or a 0.95% quarterly contribution to the FY DY. Overall, we treat the results as solid but expected, and therefore not market-moving. The company is to hold a conference call on its results on 28 October.
EBITDA comes in line. Novatek reported $3.76bn of revenues, up 69% y/y, which was slightly below (-1%) our forecast and 0.7% higher than the consensus.
Overall operating costs also came in line: 4-5% higher materials and purchase costs were offset by lower-than expected non-income taxes and transport costs. G&A expenses were flat y/y. All in all, EBITDA was virtually in line with what we and the consensus had forecast, at $1.15bn, up 75.5% y/y.
Strong Net Income and FCF. Below EBITDA, the company reported $0.84bn income from associates, 11% greater than the $0.76bn we projected. The beat came entirely from the FX effect and not from JV operating performance. The company also posted a $105mn FX loss (which was smaller than the $139mn we had projected) and a $28mn monetary gain from the revaluation of loans made to JVs (we did not account for it in our forecast). Hence, non-operating items altogether came in $0.14bn greater than we expected. Together with a smaller effective tax rate (10% vs. the 15% we expect), this resulted in net income being more than 14% above us and 9% above the consensus, at USD1.5bn, 8.6x up y/y.
The normalised net income for the quarter implies a DPS contribution of RUB17.28 under a 50% payout (a 0.95% dividend yield implied), we calculate. FCF (excluding the $59mn decrease in working capital) came in at $0.74bn, which exceeded the $0.3bn expected by us. This was due to the RUB16.25bn ($0.2bn) dividend from JV Arcticgas, slightly lower capex ($0.60bn vs. the $0.65bn that we projected) and lower cash taxes.
Novatek held a conference call on its 3Q21 results. The key statements were as follows.
Pre-FEED works continue at the Obsky Gas Chemical Complex. At the first stage, it is planned to produce more than 2mnt/y of ammonia and some 120kt/y of hydrogen. More than 4 mnt/y of CO2 is to be captured and pumped into storage in geological formations (more than 90% of the CO2 from the technological process).
FY21 capex guidance was reiterated at RUB 200bn.
141 RUSSIA Country Report December 2021 www.intellinews.com