Earnings Report /
Russia

Alrosa: 3Q21 financials review – Down q/q but ahead of consensus; Neutral-to-positive

  • ALROSA released its 3Q21 financial results which were expectedly lower q/q due to lower sales volumes

  • The net working capital change was RUB 2.2 bn which positively impacted the FCF line.

  • The y/y comparison of 9M21 showed a structurally better situation in the sector with revenue

Boris Krasnozhenov
Boris Krasnozhenov

Head of Research (Managing Director)

Yulia Tolstykh
Yulia Tolstykh

Analyst, Metals & Mining

Alfa
11 November 2021
Published by

ALROSA (ALRS.RX, O/W, RUB 159.1/share) released its 3Q21 financial results which were expectedly lower q/q due to lower sales volumes and changes in the sales mix but they beat both the consensus and our estimates. Quarterly revenue including the positive effect of income from government grants dropped 20% q/q to RUB 77bn, but still beat the consensus forecast by 2%. EBITDA dropped 24% q/q to RUB34.6 bn, but surpassed the consensus by 4%, reflecting a top line decrease and non-production cost increase which was balanced by lower other operating expenses q/q. Free cash flow for the quarter delivered a positive surprise soaring 105% q/q to RUB 24.5 bn, which was 12% above the market expectations. The net working capital change was RUB 2.2 bn which positively impacted the FCF line. ALROSA recorded an increase in advances from customers which mitigated seasonal growth in materials, growth in diamond stocks and other developments.

The y/y comparison of 9M21 showed a structurally better situation in the sector with revenue and EBITDA gains exceeding 9M20 by over 100% y/y, reflecting sustainable rough diamond demand amid limited supply. ALROSA reported RUB114 bn of EBITDA in 9M21 which implies that the company is on track to beat our RUB152 bn forecast for FY21. ALROSA’s financial position remains healthy with a net debt/EBITDA ratio at 0.1x as of the end of the quarter. A FY21e dividend yield of 10% looks like a realistic target, in our view. Capex and production guidance was reiterated at the previously announced level.

The company will hold the conference call for investors and analysts today at 09:00 am (New York), 2:00pm (London), 5:00 pm (Moscow) Dial-in details: +7 495 646 9190 (Russia); 0800 279 72 09 (UK); +1 929 477 0448 (USA). Conference ID: 2385532.