ALROSA has benefited from the significant growth in diamond prices in the third quarter. The company’s EBITDA margin during this period reached nearly 55%.
According to the recent report for the third quarter of 2011 released by ALROSA under the International Financial Reporting Standards, its receipts increased by 12.6% to 36.5 billion rubles, Anastasia Mishanina says in her article posted on the RBC daily portal. The company's EBITDA increased by 3% to 22.5 billion rubles, while its EBITDA margin remained at 55%. However, ALROSA’s net profit in the third quarter was lower than in the second – 9.3 billion rubles (down 36.4%). Given that the majority of mining companies in the third quarter dipped into the red, this can be considered an achievement, analysts say.
The results of the first nine months of 2011 were even more impressive. ALROSA's net profit in January - September went up 3.2 times compared with one year ago and climbing to 35.5 billion rubles. Sales revenues were higher by 18.8% reaching 107.3 billion rubles. The company’s adjusted EBITDA for the period doubled to 58.4 billion rubles and EBITDA margin went up from 32.3% to 54.4%.
Higher financial performance makes it possible for the company to increase its investments: in the first nine months of 2011 ALROSA allocated for this purpose 13.3 billion rubles, whereas for the full year 2010 this amount was 12 billion rubles. In addition, the company can afford to avoid a squeeze on social expenses: in the first three quarters ALROSA spent 615 million rubles for charity purposes (almost 45% more than during the same period last year), while its financing to maintain the local infrastructure in the mining areas increased by 75% to about 1.6 billion rubles.
According to Vadim Astapovich of VTB Capital, ALROSA has managed to achieve high performance numbers largely due to higher prices and demand for diamonds. "The diamond market lives by its own laws. Despite the overall market decline in the third quarter diamond prices rose by 19% to $142 per carat," the analyst explains.
According to Andrey Tretelnikov, an analyst of Rye, Man & Gor Securities, ALROSA’s revenue in 2011 will reach 140 billion rubles, its EBITDA will be about 75 billion rubles, while the company’s net income may come around 45 billion rubles, but this figure will largely depend on currency fluctuations. ALROSA itself predicts a profit of about 47 billion rubles for 2011.
The company hopes that its high performance results will attract investors in the future. Last week [December 5-11], during a meeting with Prime Minister Vladimir Putin the head of ALROSA, Fyodor Andreev reminded that the company plans to hold an IPO. And, as it turned out, ALROSA was going to float its shares on the Russian stock exchange. The CEO did not specify the presumed timing for the IPO.
"Today, ALROSA looks better than in its entire history and of course its securities will attract investors. But now it is not the best time for placement," Sergei Goryainov of Rough&Polished reflects. According to his forecast, the company may hold an IPO in the third quarter of 2012. Previously, ALROSA said it would be ready for a public offering at the end of 2012 - beginning 2013: investors may be offered up to 20% of the company’s shares.
