ALROSA’s diamond production outlook for 2021 remains unchanged - 31.5 m cts

On Tuesday, ALROSA announced its IFRS results for Q1 2021 saying that the company’s revenue decreased by 8% q-o-q to RUB 90.8 bn, on the back of weaker diamond sales, which was partially offset by a better sales mix and growth of average realised prices. A 45% y-o-y revenue increase was driven by higher sales volumes (up 65% y-o-y) and the rouble depreciation.
EBITDA added 5% q-o-q and amounted to RUB 33.5 bn, mainly due to lower SG&A expenses and higher average realised prices. A 12% y-o-y rise was attributable to sales growth and the rouble depreciation. EBITDA margin was up 5 pp q-o-q to 37% (down 11 pp y-o-y).
Net profit increased by 13% q-o-q to RUB 24 bn, on stronger return on sales. 7.9x y-o-y growth was related to increasing sales volumes and less pronounced negative FX effect.
Free cash flow (FCF) in Q1 stood at RUB 52.7 bn (down RUB 12.5 bn q-o-q, up RUB 30.9 bn y-o-y) supported by lower working capital on the back of consistently high stock sales, recovery in prices and a seasonal reduction in investments.
Capex seasonally went down by 46% q-o-q to RUB 2.4 bn (down 10% y-o-y).
Net debt / LTM EBITDA as at the end of Q1 dropped to minus 0.2x (Q4’20: 0.4х).
The 2021 outlook remains unchanged: Production – 31.5 m cts; Capex – ca. RUB 25 bn.
Alexey Philippovskiy, ALROSA’s CFO: “Q1 saw a continued increase in demand for diamond jewelry from end consumers across all key markets, mainly in the US and China. In particular, the US market demonstrated a double-digit growth even against the 2019 results. Thanks to strong demand and relatively low stocks in the cutting sector, diamond producers managed to significantly improve sales, while prices recovered to the early 2020 levels by the end of Q1’21. ALROSA’s Q1 sales totalled 15.5 m cts, up 65% y-o-y and 47% more than in Q1'19, delivering robust financial results for the quarter, with RUB 91 bn in revenue and a  5% y-o-y growth in EBITDA which came at RUB 33.5 bn. Impressive sales volumes, which were more than twice as high as production, and a seasonal decrease in capex translated into a 2.4x growth in Free Cash Flow toRUB 52.7 bn, record-high for this period. On the back of the strong free cash flow, the Company’s net debt turned negative to minus RUB 22 bn. As a result, ALROSA’s leverage (Net Debt / EBITDA) as at the end of Q1 totalled -0.2x (Q4’20: 0.4x). The Company’s stable cash flow generation and material leverage improvement resulted in historically high half-year dividends – the recommended amount for H2’20 is RUB 70.3 bn, or RUB 9.54 per share. The dividend payment is to be discussed at the Annual General Meeting of Shareholders on 16 June 2021. Our outlook for the end consumer market remains positive. The market is recovering faster than expected. Meanwhile, diamond supply is still 20% below the pre-COVID levels and the production is unlikely to bounce back in the mid-term.”

Vladimir Malakhov, Rough&Polished