Rusal - 3Q19 Trading Update Review and Earnings Preview
Rusal has released its 3Q19 trading update, which showed a further inventory release of 90 kt but a relatively small increase in the share of VAPs. Given this, as well as the weak aluminum price dynamics, we expect another soft set of financials, with EBITDA down 22% Q-o-Q to $235 mln and close to zero LFCF from the aluminum business in 3Q19. Rusal received around $520 mln in dividends from its non-core business in the quarter, which should bring its total LFCF to $510 mln. At spot commodity prices and the current USD/RUB, Rusal is trading at a 2020E EV/EBITDA (including dividends from the non-core business) of 6.0 and a leveraged FCF yield of 8% (adjusted for the one-off working capital release).
United Company Rusal is a producer of aluminium and alloys. Co.'s production chain include bauxite and nepheline ore mines, alumina refineries, aluminium smelters and casting houses, foil mills and packaging production centres. Co. operates in four reportable segments: Aluminium, which is involved in the production and sale of primary aluminium; Alumina, which involved in the mining and refining of bauxite into alumina and the sale of alumina; Energy, which include the mining and sale of coal and the generation and transmission of electricity; Mining and Metals, which includes the equity investment in Co.'s joint venture, PJSC MMC Norilsk Nickel.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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