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Norvik Research 20.04.2017

20/04/2017 17:02

Global developments

The dollar is down while global stocks are without significant changes before the start of the French elections. The dollar index is down 0.1%, US 10Y Treasury yields are up 1 bp at 2.23%. S&P futures are 0.2% higher while Eurostoxx 600 is just marginally up.

Oil prices rebounded today after yesterday’s slump as Saudi Arabia signalled that OPEC-led supply cuts may be extended. Brent prices are 1.0% higher today at $53.5/bbl.

Russia and CIS area developments and market colour

Weekly inflation in Russia came out at 0.1%. In yearly terms, inflation declined to 4.2% from 4.3% in the previous week.

CBR will hold a monetary policy meeting next week. CBR’s Governor Nabiullina said that a rate cut of either 25 bps or 50 bps will be discussed at the meeting.

Corporate news

Russian steel producer, Severstal, has published quarterly financial results. Revenue rose 61% compared to 1Q 2016 reaching $1.767 billion. EBITDA increased more than twofold to $578 million, with EBITDA margin at 32.7% (24.9% in 1Q 2016). Company‘s net income also went up compared to 1Q 2016 and stood at $359 million. Concerning operational results, steel production was slightly higher at 11.63 million tons (+2% YoY).

As of 1Q 2017, total debt increased 35.5% QoQ and currently stands at $2.727 billion, due to the issuance of $250 million of convertible debt and $500 million of eurobonds. Net debt is slightly lower at $788 million (-8.3% QoQ). Net debt/EBITDA is unchanged at 0.4x.

The company has a solid liquidity position with cash and equivalents standing at $1.939 billion and open credit lines at $675 million, which is more than enough to cover the short-term debt of $1,195 billion.

The company’s management expects that the steel and basic materials market will continue stabilizing in 2017. This forecast is based on growing world economy (3.5% YoY, according to the IMF), which will lead to a higher demand for steel. China, the main driver for growth in demand, will cut excess steel capacity. Steel demand in Russia is also expected to increase, as economic growth picks up to around 2.0% this year.

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