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Segezha Group announces IFRS results for Q2 2019
Revenue in roubles grew by 17.2% year-on-year, to RUB 15.5bn.

Segezha Group, a subsidiary of Sistema PJSFC and a leading Russian vertically integrated forest holding with a with a full cycle of logging and advanced wood processing, announces its unaudited consolidated financial results prepared in accordance with International Financial Reporting Standards (IFRS)1 for the second quarter of 2019.

Key financial indicators of Q2 2019

  • Revenue in roubles grew by 17.2% year-on-year, to RUB 15.5bn.
  • OIBDA rose by 40.4% year-on-year, up to RUB 3.7bn. OIBDA margin was 24.1%.

Mikhail Shamolin, President and Chairman of the Management Board of Segezha Group, said,

"In the first half of 2019 we managed to significantly improve the Group's financials as compared to the first half of 2018, even though global prices for plywood and sawn timber have been on the decline. All of the Group's business lines contributed to revenue and OIBDA growth.

“In the first six months of 2019, Segezha Group's OIBDA was up by RUB 7.7bn, which is 59% higher than the OIBDA earned in the first half of 2018. OIBDA margin was 25.7% vs. 19.1% in H1 2018. This was made possible by year-on-year OIBDA growth and our cost optimisation programme.

“Our revenue in H1 2019 was 18.3% higher than in H1 2018. Investments made in 2017-2018, aimed at increasing paper and plywood outputs, as well as efficiency optimisation steps taken across our production facilities, were among the factors contributing to our improved financial results.

Segezha Group continues to implement a cost-cutting campaign, working hard to reduce production, selling, and administrative expenses. In the first six months of 2019, OpEx was up by only 9% YoY, although revenue was up 18%. Production costs were up 7% as a result of higher volumes. We have been successful in maintaining level production costs thanks to the growing share of timber coming from the Group's own woodland, reducing expenditure on fuel oil and electricity, and improving energy efficiency.

As was expected, the second half of 2019 has brought along a reduction in global prices for timber products, paper, and pulp, mostly due to a slowdown in the construction segment of the world's most significant markets, such as China, Egypt, and Saudi Arabia. In anticipation of this trend, the Group spent the first half of the year working hard to optimise sales efficiency. We substantially diversified the geography of our sales in plywood and paper, as we ramped up deliveries to Europe, the USA, Canada, Africa, and the Middle East. We also re-directed a sizeable portion of our sales in sawn timber to markets demonstrating higher demand, increasing the overall share of high-margin sizes in the structure of sales. In an effort to optimise interaction with customers and sales channels, we took steps to reduce trader fees and to increase direct sales to end users in industrial segments. Last but not least, we reinforced our product portfolio by marketing new products, such as plywood laminated with special films as well as innovative high-margin types of paper and paper packaging. All these efforts resulted in improved efficiency of sales and profit margins, which made for a significant contribution to OIBDA margin growth.

Given the global backdrop of sliding prices for most products in the pulp & paper and wood processing segments, in addition to other global and industry-specific challenges, Segezha Group has been focused on improving efficiency across all of its assets, limiting the growth of production and logistics costs, and increasing the proportion of production using the company's own logging."

Key financials

RUB bn Q2 2019 Q2 2018 Change
Revenue2 15.5 13.2 17.2%
OIBDA 3.7 2.7 40.4%
OIBDA margin 24.1% 20.1% 4.0 p.p.
Operating income 2.4 1.5 59.3%
Net income/(loss) 1.3 (0.8) -
Net debt3 37.9 38.4 (1.4%)
Net debt / LTM OIBDA 2.4 4.2 (43.2%)
CAPEX4 2.0 1.8 10.3%
Share of foreign-currency revenue 70.0% 69.7% 0.3 p.p.

 

  • Revenue growth has been primarily driven by improving sales of paper and paper packaging in Q2 2019, while prices for most of Segezha Group's products remained high. A drop in prices for sawn timber was offset by an increase in production volumes driven by efficiency enhancement steps. The commissioning of new plywood production facilities in the city of Kirov in July of 2018 brought along production growth that in turn fueled the increase of plywood sales year-on-year despite a significant drop in plywood prices observed worldwide.

  •  OIBDA increased in Q2 2019 on the back of growing revenue, product portfolio re-shaping towards higher-margin paper sacks, and reduced costs of dark oil and electricity consumed at SPPM to produce paper, which in turn resulted from the launch of a multi-fuel boiler (along with other initiatives). OIBDA margin also increased year-on-year as a result of improved business efficiency amid still-high prices for paper and packaging.

  • In Q2 2019 the Group posted a net income of RUB 1.3bn, a significant improvement from the net loss of RUB 0.8bn posted in Q2 2018. Net income has improved on the back of growth in operating income in an environment with no adverse exchange rate fluctuations, which was the major cause of the losses posted in Q2 2018.  

  • CAPEX in Q2 2019 was RUB 2.0bn, with most of the money going towards mandatory routine maintenance of existing production plants, the construction of a CLT production facility, and machinery upgrades at Segezha PPM and Vyatka Plywood Mill.

1 Here and hereinafter the consolidated financial results of LLC Segezha Group and its subsidiaries for 2018 are presented in accordance with the new reporting standards IFRS 9, 15 and 16, unless specified otherwise.

2 Revenue disclosed in Q2 2018 was RUB 12.4bn, as up until Q4 2018 the Group's revenue and selling expenses were adjusted for shipping costs (post risk transfer).

3 Total outstanding loan payments minus cash.

4 CAPEX is calculated as a sum of actual investment payments made throughout the reporting period.

Источник: PRESS RELEASE

29.08.2019

SBO-PAPER.RU


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