Page 157 - RusRPTOct20

company’s iron ore output numbers for 2020. The news is therefore slightly negative, in our view
Russian metals major ​Magnitogorsk Iron and Steel Works​ (MMK) has halted mining operations at its Chertinskaya mine due to a mine collapse​, according to a report by Interfax. As reported by ​bne IntelliNews,​ previously in 2Q20 MMK saw a dive in revenues, but ​maintained the bottom line close to expectations and surprised on dividends​. VTB Capital (VTBC) estimated on September 14 that the Chertinskaya mine accounts for 1.3% of MMK’s 2020 forecasted Ebitda. "Given that it is not clear how long operations are to be on hold, we note that there might be some risk for MMK’s 2020 coal production, as the mine accounts for almost half of MMK’s coal production," VTBC warns, while still maintaining a Buy recommendation on the name. Just like its ​metals peers NLMK​ and ​Severstal​, MMK's management previously predicted the recovery of domestic demand that emerged in late 2Q20 to continue into 3Q20.
● Fertilisers
Russian phosphate fertiliser major ​Phosagro​ reported its 2Q20 IFRS results, with revenue growth of 3% year on year to RUB60bn ($814bn) and Ebitda of $281mn beating the consensus expectations ​by 11%, making a strong margin of 34%. As reported by ​bne IntelliNews,​ prior to the publication of the results the company ​surprised with a recommendation on 2Q20 interim dividend​. Overall Phosagro and ​Russian fertiliser majors are seen as gaining​ as a result of the coronavirus (COVID-19) crisis, due to the ruble depreciation, cheaper costs and other factors. "Despite the strong Ebitda line, reported FCF [free cash flow] was weak, as expected, at just $28mn, for a 0.6% yield. It was pressured by a $69mn working capital buildup (versus a $142mn release in 1Q20)," Sberbank CIB wrote on August 31. BCS Global Markets on August 31 commented that the results were "decent" and beating the consensus expectations, while estimating that announced interim dividends make a payout ratio of 62% of profit. BCS GM maintained the Buy recommendation on the name with a target price of $16. Sberbank CIB also noted that the 62% payout will be above the 50% level stipulated by the dividend policy, while seeing the market outlook for 3Q20 as generally positive, supported by stable demand from India and Brazil alongside the upcoming seasonal increase in demand in Europe and Africa.
● Other
Russian environmental watchdog Rosprirodnadzor sued the metals major ​Norilsk Nickel​ for RUB148bn ($2.1bn) over the environmental damage in the Arctic​, ​Vedomosti d​ aily reported on September 10 citing the press-serviceofthewatchdog.Asreportedby​bneIntelliNews,​ thecompany's ESG reputation was overshadowed by a ​series of environmental
157 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com