WOOD Flash – Alrosa: 1Q20 financial results – slightly better than expected on EBITDA and FCF, plus capex cut
This morning (5 June), Alrosa announced its 1Q20 financial results, with the EBITDA beating our estimate by 7% on lower-than-expected costs (we see no reliable consensus on Bloomberg to compare it to), while the FCF was 8% above our forecast, due to the higher EBITDA and lower-than-expected capex. Net income was 82% below our forecast at RUB 2.9bn, due to a RUB 20.8bn FX loss, but, as dividends are FCF based and this is a one-off element, we see this as immaterial. Alrosa also cut its annual capex guidance officially, from RUB 22bn to RUB 20bn and reiterated the recently reduced 28-31mcts production guidance (vs. 34mcts at the beginning of the year). On the negative side, net debt fell only 3% qoq, as the FCF was largely offset by the negative FX impact on the USD-denominated debt. The balance sheet remains strong at 0.7x ND/EBITDA, but the impact of COVID-19 will be felt strongly in 2-3Q20E, so this should weaken throughout 2020E. Overall, we see the results and capex cut as slightly positive for Alrosa.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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