WOOD Flash – NLMK: 3Q19 financial results - EBITDA broadly in line, but dividend weaker than we had expected on higher capex
NLMK has published its 3Q19 financial results, with EBITDA of USD 654m, broadly in line with consensus and down 11% qoq. Net income was 11% below consensus, due to a higher tax rate than expected and a small FX loss, but we see this as immaterial. FCF of USD 249m was down 3% qoq and 18% below our estimate, due to capex of USD 316m, +39% qoq and USD 56m above our forecast. NLMK has recommended a dividend of RUB 3.22/share, or USD 0.50/GDR, down from the RUB 3.68 in 2Q19. This is based on 120% of FCF but missed our forecast by 22%, as FCF was weaker than we had expected. This represents a c.2.6% quarterly yield based on the GDR price, lower than the c.3.1% yield announced by Severstal for 3Q19. With dividend payments in 3Q19 exceeding FCF, net debt also rose 34% qoq, resulting in 0.59x ND/EBITDA vs. only 0.39x at the end of 2Q19, a trend that is likely to continue as prices fall. Overall, we consider the results as slightly negative for the share price, due to the conservative dividend payment. We would expect significantly weaker results in 4Q19E due to the recent fall in export steel prices, despite NLMK’s guidance for higher volumes in 4Q19E.
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.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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