Page 127 - RusRPTFeb22

● Steel
Novolipetsk Mining Kombinat (NLMK) reported a moderately upbeat 4Q21 trading update 20 January. The Russian steel producer posted a 16% QoQ increase in crude steel production, albeit against the weak base of 3Q21, which was affected by operational issues at Lipetsk. Sales of semi-finished steel remained static (0% QoQ), while finished steel sales gained 12% QoQ in 4Q21, resulting in an 8% QoQ increase in consolidated sales. Russian flat products were at the forefront of the growth, adding 23% QoQ, while NLMK US was the weakest link within the group in 4Q21, recording an 11% QoQ drop in sales. The company acknowledged strong pricing appreciation for coking coal (+48% QoQ, AUS export) while reporting an 18% QoQ drop in Russian flat steel prices and a 16% QoQ decline in slab prices on the export market (FOB, Black Sea). With Chinese crude steel production under pressure (Chinese crude steel output continues to fall, down 22% YoY in November, 23 December 2021), we expect the negative pricing dynamics to continue in 1Q22.
● Fertilisers
Acron's 4Q21 operating numbers are its strongest ever quarterly results.
Total fertilizer output increased 17% y/y to 2mnt. The key drivers were UAN (up 67% y/y) and Urea (up 41%) production. Prices were at record levels as well, up 4x y/y, on average (see table below). We forecast 4Q21F IFRS revenues at an impressive RUB90bn (up 166% y/y) and EBITDA at RUB45-50bn (up 342% y/y), more than the company has earned in any single full year before. Overall, we consider the numbers to be strong, though they are most likely already reflected in the stock price (Acron is up 64% since September 2021). We reiterate our 12-mo TP of RUB12,500 (ETR +15%) and Hold recommendation.
● Other
Nicosia District Court imposed injunctive measures on Mechel’s asset.
Kommersant reported. On 22 December, the Cypriot Court imposed measures on assets belonging to Mechel in the framework of a lawsuit filed by Advalor-Consult, which owns 25% of Kuzbassenergosbyt since March 2021 (72% is controlled by Mechel). The case is at a preliminary stage and now interim measures have been imposed, which prohibit companies and individuals who are named as defendants (Zoneline ltd, Skyblock ltd, Igor Zyuzin, Mechel PJSC, Mechel-Energo LLC, Yuzhno-Kuzbass GRES PJSC) from disposing their assets in the damage amount (EUR80mn). In accordance with these measures 40% of preferred shares owned by Skyblock (Mechel’s subsidiary) were arrested. To remind, Advalor-Consult is trying to get EUR80mn ($91mn) damages from intra-group transactions from Mechel.
Norilsk Nickel 4Q21 operating results were solid q/q, but some weakness
127 RUSSIA Country Report February 2022 www.intellinews.com