According to Deutsche Bank, the company’s total sales may reach RUR76.8bn ($2.5bn) in 1H12 under the IFRS. The bank’s statement says:
Alrosa to report 1H12 IFRS and production results on 4 October
Our original 1H12 forecast called for total sales of RUR68.9bn (~$2.3bn, incl. other sales of $165m) off 16.4m carats produced and sold at an average price of $127.5/ct. On this top line we expected a 44% EBITDA margin to a RUR30.3bn EBITDA. In mid-September, Alrosa’s supervisory board disclosed 1H12 diamond sales of ~$2.4bn. We believe that the higher-than-expected top-line number reflects a combination of price realization and inventory movement. Taking this into account, we expect total sales of RUR76.8bn ($2.5bn, +7%/+16% HoH/YoY) and EBITDA of RUR35bn ($1.14bn,+30%/+1% HoH/YoY), implying a 46% EBITDA margin (+8pp/-7pp HoH/YoY). We forecast an unadjusted net profit of RUR22.3bn (726mn). Given the potential inventory drawdown, we would expect a working capital release to boost the OCF in the period to well cover Alrosa’s 1H12 capex plans.
Stronger-than-expected 2Q12 likely to be reversed in 3Q12
While 1H12 may beat our original estimates, 3Q12 will likely fall short. On 24 Sep, the company announced 9M12 diamond sales (incl polished) at around $3.175mn. This is broadly in line with our original 9M12 forecast but implies 3Q12 diamond sales of only ~$850mn in 3Q12 (~-30% vs 1/2Q12). Despite a potentially stronger 2Q12, we therefore maintain our FY12 forecasts at this point.
Conf call details and focus
Alrosa will host a conference call on the 1H12 results at 14.00 (London) on Oct 4 on UK/Russian dial in +44 20 7162 0025/81 0800 2806 3011 with conference ID 923090. On the call, we expect more detail sales and pricing, on Alrosa’s 1H12 production results, the investments in Karprinskaya and underground developments at Mir and Udachny as well as on the progress on the sale of 49%+1 share in Timir to Evraz/VEB and the sale of the company’s gas assets. If the sale of the gas assets is pushed into 1H13, Alrosa may, in our view, need to consider refinancing its short-term commercial paper.
