Page 117 - RusRPTJun20

that both CCC and LPP have issued profit warnings that mentioned closed operations and a lack of demand as material risks for the business, thus moving EBITDA and earnings to a negative zone at least this year. Apart from that, the warnings noted that inventory levels are high, which are likely to have to be lowered by way of promo activities throughout the year, as well as a certain reallocation of the spring collection to the autumn; the companies said they had lowered purchases for 2H20 by around 50%. We see all these comments as likely applying to Obuv Rossii, too, as half of the company’s business is generated by retail operations. It is our view that the company’s cash loans business, which is around 15% of revenue, but almost 40% of EBTIDA, is unlikely to be able to compensate forthose trends.
Obuv Rossii ​posted traffic and revenue decline in March​, the most important spring season month, and had its outlook clouded by the coronavirus (COVID-19) epidemic​. Nevertheless, in 2019 overall the company delivered strong Ebitda growth of 26% year on year and net income of 27% y/y, driven by 50% gains in Ebitda in its cash loans business that Obuv has been rolling out since 2018. "The loan business turned out to be a key profit driver," BCS GM notes, believing that the cash loan share of total Ebitda will continue to rise, increasing from 37% in 2019 to 49% by end-2021. After more than doubling the number of stores in the past two year of extensive openings, Obuv is halting its expansion, while allocating funds to IT development, market place/infrastructure development.
9.2.6​ Agriculture corporate news
One of Russia's largest producers of turkey meat, ​Damate​ of Naum Babaev, will acquire one of the largest producers of duck meat Donstar from Rosselkhozbank (Russian Agricultural Bank), Reuters reported on May 26. As followed by ​bne IntelliNews​, the Russian poultry market underwent rapid consolidation in 2019 ahead of the lucrative opening of the export market to China. Cherkizovo meat major emerged as the market leader, vying with Damate for control in another producer Eurodon (aka Evrodon)​. Now Damate will take over Donstar, which has an annual capacity of 16,500 tonnes in the small niche of duck meat.
Leading Russian agricultural company​ ​RusAgro​ has published decent 1Q20 IFRS results, ​with modest prices offset by capacity build-ups and higher demand for consumer-branded goods during the March stocking-up. Consolidated EBITDA matched our estimates, while the EBITDA margin improved 4pp y/y to 16%, mostly on the inclusion of the financial results of the SolPro assets, which now make the vegetable oil segment the largest EBITDA contributor (39% of total in 1Q20). The aggressive organic growth and M&A means still-elevated net debt/EBITDA of 2.7x as of March amid certain deleveraging (RUB4.2bn FCF in 1Q20). Sugar remains the prime drag on Rusagro’s results this season, but we flag a Ministry of Agriculture estimate of a 16% y/y decline in the beet planting area for next season (September-August), which, subject to weather conditions in summer, could yield improvement of the supply-demand balance. Rusagro’s GDRs gained 47% from their lows in mid-March vs. a 33% bound in the RTS index and now trades at a 2020F EV/EBITDA of 6.1x.
• Revenues increased 18% y/y to RUB33bn as the volume expansion across the oil, meat, and sugar segments offset pressured prices
117​ RUSSIA Country Report​ June 2020 ​ ​www.intellinews.com