Apr
27
This Monday NLMK announced its consolidated financial results of 2007. Sales formed 7,719.1 mn USD (+28% to 2006 level), operating income formed 2,998.4 mn USD (+34%), EBITDA totaled 3,366.2 mn USD (+28%), net income formed 2,247.3 (+9%). But, if we exclude the influence of nonrecurrent events (sales of Lebedinsky GOK and KMAruda enterprise in 2006, Prokopyevskugol and Lipetskkombank in 2007 then net income will form 2,185.9 mn USD (+36.9%). We must first note that primary reason of growth was positive price environments. Sales prices of 2007 were at average of 20% above the previous year. Though company’s effectiveness remained virtually the same, which indicates that expenses and raw material costs had fully complied with steel price dynamics.
Company’s board also recommended its shareholders to approve dividends of 2007 in 3 RUR per one common share during shareholder’s annual meeting. Considering already paid interim dividends of 6 months 2007 at 1.5 RUR per one common share, board recommended to pay 1.5 RUR more per share. Though note that back in 2006 shareholders got 3 RUR per share. Therefore current dividends are in no way generous versus past year, even despite slow growth of income. On the other hand dividends form the third of net income, which is also low comparing to other Russian metallurgy companies.
Overall – we find published results to be expected, as our forecasts on income and expenses have complied at 98.4% depending on the value. Therefore we mark the report as neutral for NLMK Business value. The review of model and fair price was caused mostly by change of mid-term forecast and current prices of steel, as well as by results of comparable analysis. As a result – we have acquired a new fair price for company’s shares at 5.36 USD apiece. The acquired target at lat 2008 is slight, yet positive, thus we confirm our “ACCUMULATE” recommendation on company’s stock.
NLMK: US GAAP 2007 results - no surprises - April 25, 2008 (PDF)