WOOD Flash – NLMK: 2Q18 financial results – EBITDA in line with consensus, FCF down qoq on higher working capital
NLMK released its 2Q18 financial results this morning (31 July). EBITDA rose 13% (in line with the consensus), but its FCF fell 52% qoq, driven by a USD 356m build-up in working capital, vs. the USD 58m release in 1Q18. This was broadly expected, in our view, and should provoke a neutral share price reaction. However, the qoq EBITDA growth was less than the 24% qoq growth seen by Severstal in its 2Q18 results, which is disappointing in relative terms. In addition, the NLMK group's board of directors recommended that NLMK’s shareholders approve 2Q18 dividends of RUB 5.24/hare (USD 0.84/GDR), which is equivalent to approximately 100% of the company's average free cash flow and net income based on its IFRS consolidated results for 1H18. The 2Q18 dividend yield is 3.2%, or 13.6% annualised. Severstal yielded 8.6% in 1H18, so NLMK’s is lower than this. It is, however, higher than the USD 0.72/GDR consensus estimate on Bloomberg.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
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