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ALROSA’s Q2 2019 Revenue Falls by 19% Q-o-Q to RUB 57 billion

Aug 20, 2019

ALROSA, announcing its IFRS financial results for Q2 2019, reported that revenue for the period had fallen by 19% q-o-q to RUB 57 billion. This, the Company noted, was driven by a 22% decline q-o-q in diamond sales volumes.

“A 21% y-o-y decline in revenue was attributable to lower sales (down 8% y-o-y) and changes in the sales mix,” ALROSA stated.

The Company’s diamond sales for Q2 2019 decreased 22% q-o-q to 8.3 million carats as compared to 10.6 million carats in the previous quarter. Within this, gem quality diamond sales were down by 24% to 6 million carats from 7.9 million carats in Q1 2019.

In value terms, sales for the period at US$ 796 million were lower by 19% q-o-q, from sales worth US$ 988 million achieved in the previous quarter.

The drop in sales was attributed by ALROSA to “excessive stocks of rough and polished diamonds in the mid-stream”.

While Q2 2019 EBITDA was down to RUB 25 billion marking a slide of 20% q-o-q and 39% y-o-y on a lower topline; EBITDA margin remained flat q-o-q at 44%.

Free cash flow in Q2 2019 amounted to RUB 2.4 billion (RUB 26 billion in Q1 2019) amidst a decline in operating cash flow, seasonal capex growth and increase in working capital, the Company stated.

Net profit decreased by 44% q-o-q to RUB 13 billion. This was “mostly due to lower revenue and high base effect of one-off FX gains in Q1”, ALROSA elaborated.

The Company added: “A 47% y-o-y decline in net profut was attributable to lower revenue and reduced margins (down 13 pp y-o-y).”

Putting out its 2019 guidance update, ALROSA said that production is expected to reach 38.5 million carats, up from c.38 million carats previously; sales are expected at between 32–33 million carats; and capex has been revised to RUB 23.4 billion, down from c.RUB 28 billion previously.

Alexey Philippovskiy, ALROSA’s Deputy CEO, commented: “The diamond market continued to be affected by a number of negative factors that had first emerged as early as the second half of the previous year. These include a slowdown in jewellery sales following strong performance of 2017–2018, particularly as a result of global macroeconomic uncertainties amidst escalating trade wars. As an additional factor, mid-stream and retailers have elevated inventories, while India's cutting and polishing business continues facing difficulties in securing affordable financing. A new trend, i.e. growing share of online jewellery sales mostly in the US, is now gaining its importance for the industry.”

He added: “According to the Dividend Policy, this enables the management to submit a proposal to the Company’s Supervisory Board to pay up to 100% of H1’19 free cash flow, or RUB 28.3 bn, in dividends for the first half of 2019.”

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