URALKALI: Next Buyback in March 2018?
We believe Uralkali is on track to reduce its net leverage to below 4.0x EBITDA by YE17. The latter is the ratio level prescribed by its covenant, and being freed of this restriction would open the door for another buyback in Mar 2018. On MtM potash price and RUB FX, sales should amount to 6.2mt in 2H17 which, in our view, is easily achievable, and implies a 6% HoH decrease and 94% capacity utilisation. The free float market cap is $410mn, slightly above Uralkali’s semi-annual FCF of $250-300mn, and we believe that another market buyback would be favoured above a tender offer. We have a SELL rating on the name, but reiterate that the stock no longer trades on fundamentals.
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