Alrosa - Weak 1H19 IFRS; 2019 Sales Guidance Cut Materially
Alrosa reported a weak set of 2Q19 financial results today. It slashed its guidance for diamond sales volumes for the year by 13-16% to 32-33 mln cts and cut capex guidance from R28.0 bln to R23.4 bln. We see 35-40% downside risk to our 2H19 EBITDA forecast of $0.8 bln (15-20% downside risk to our full-year forecast), and also see 2H19 leveraged FCF possibly coming in close to zero. As the dividend policy is linked to leveraged FCF, the dividend for 2H19 (to be paid in 2020) could be at risk. We note that after the dividend payment for 1H19, Alrosa's stock may lose dividend support and become a sole bet on a recovery in the diamond market.AK Alrosa PAO. AK Alrosa PAO (Aktsionernaya kompaniya ALROSA PAO or ALROSA Company PJSC), formerly AK Alrosa OAO, is a Russia-based company which is principally engaged in the exploration, mining, manufacture and sales of diamonds. Its operations include five Integrated Mining and Processing Complexes: Mirny, Udachny, Aikhal, Anabar and Nyurba located in the Sakha Republic; sorting divisions and diamond cutting and polishing division. The Company is a member of variable diamonds associations. It operates through several representative offices, branches and subsidiaries, including Alrosa-Nyurba OAO, Almazy Anabara OAO and Severalmaz OAO.
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