Page 102 - RusRPTJul19

9.2.2 Automotive corporate news
Chinese carmaker Great Wall began production at a car factory in the Tula region. The opening ceremony took place on June 5th. The company will produce cars under the brand Haval. Production began with the F7 crossover, in the future, the H9 SUV and the F7x coupe-crossover will be added to it. Cars are produced in full cycle - with welding, painting, as well as local stamping. Now the plant employs more than 800 people, their number is planned to increase to 2000. The capacity of the automobile plant is up to 80,000 cars per year, in the future it will be increased to 150,000 units. in year. Production itself by 2020 will reach 25,000 vehicles per year, said Interfax. For comparison: in 2018, 3213 Haval cars were sold in Russia, the brand took 0.2% of the market, according to AEB data. Following the results of four months of 2019, Russian dealers of Haval sold 2055 cars, cites the data of Avtostat. The construction of the Great Wall plant in the Tula region began in 2015. $ 500 million was invested in the project. Additional expected investments are up to 20 billion rubles, Interfax reports with reference to the materials of the Tula region government.
The Office of Foreign Assets Control (OFAC) of the US Treasury Department has postponed the deadline for negotiations to lift the sanctions against Russian carmaker GAZ by four months to November 8. This makes the sixth time that the deadline for the talks about sacntions on GAZ have been delayed. Currently 65.56% in GAZ is held by Russian billionaire and Kremlin-insider Oleg Deripaska’s Russian Machines, with a capitalisation of RUB8bn as of June 1. While the sanctions on Deripaska's major assets Rusal and EN+ were dropped in December last year, those on GAZ were last time extended by four months to July 6, 2019 in March. Previously in April Deripaska claimed he is ready to give up control of the GAZ Group automotive conglomerate as he manoeuvres to strike a joint venture deal with Germany’s Volkswagen. As reported by bne IntelliNews, GAZ has also recently asked the government for RUB30bn ($469mn) in subsidies after Deripaska warned that the company is facing bankruptcy due to US sanctions imposed on the company last year.
9.2.3 Aviation corporate news
Aeroflot’s 1Q19 IFRS brought two major surprises. First, the company achieved 21% growth in EBITDA despite 10% higher fuel prices. Second, there was a technical revision of EBITDA, with an unexpected treatment of repairs. Adjusted for the latter, the restated 2018 EBITDA would come at RUB165bn, above theBBG consensus as of 19 June for 2019 EBITDA of RUB158bn. We expect to see consensus upgrades in the coming weeks. This, together with the 3% YTD lower jet fuel, strong performance of Pobeda, and 9% DY for 2019F might put Aeroflot back on investors’ radar screens. We reiterate our Buy recommendation, as our 12-month Target Price of RUB130 implies an ETR of 40%. Good results for the weakest quarter of the year. Aeroflot’s sales grew 23% y/y in 1Q19, driven by the 17% y/y increase in RPK and 5% y/y increase in yields. EBITDA grew 21% y/y. Unfavourable FX increased the net loss to RUB17bn (+54% y/y), although that might be offset during the year.
Russian air carrier Aeroflot Group posted 12% passenger turnover growth to 5mn passengers in May 2019, beating the industry's 11.5%. In the reporting month RPK (revenue passenger kilometres) was up 12.1% and
102 RUSSIA Country Report July 2019 www.intellinews.com