Segezha group hopes for the best – Business – Kommersant

Segezha group boosted its financials in the first half of the year due to high prices and purchases of new assets last year, although quarterly OIBDA fell by 28% due to the strengthening of the ruble. Against the backdrop of uncertain prospects, the company slowed down the implementation of the investment program, stopping the expansion of a number of capacities. At the same time, according to the results of 2022, the company expects to maintain indicators at last year’s level, including through the strengthening of the ruble, and so far does not refuse to pay dividends.

The revenue of the largest Russian timber holding Segezha Group (part of AFK Sistema) for the first half of the year increased by 48% to 63.3 billion rubles. As explained in companies, such dynamics was provided by an increase in average prices, as well as the effect from the consolidation of assets of NLHK JSC and Inter Forest Rus LLC, which were part of the group in the third and fourth quarters of 2021. OIBDA for January-June increased by 34% to RUB 17.7 billion, net profit increased by 58% to RUB 12 billion, including due to a positive effect from exchange rate differences and currency interest rate swaps.

At the same time, the company’s net debt increased 3.3 times to RUB 95.2 billion. The company borrowed for the investment program over the past 12 months, as well as for the purchase of new assets and the payment of interim and final dividends, specify in Segezha.

Revenue of the second quarter, according to Kommersant’s calculations, increased by 13% to 27.7 billion rubles. compared to the same period in 2021, OIBDA decreased by 28% to RUB 5.9 billion. Rovshan Aliyev, Segezha’s vice-president for finance and investment, explained to reporters that the main reason for the fall was the pressure of the ruble exchange rate, while revenue continued to grow due to large sales volumes after a seasonal decline in the first quarter.

The company’s capital expenditures in the first half of the year decreased by a quarter to 6.4 billion rubles. given the high macroeconomic uncertainty. In particular, the company completed construction and started commissioning at the Galich plywood mill (capacity – 125 thousand cubic meters, group investment – 3.2 billion rubles). At the same time, the expansion of the capacity of the Vyatka Plywood Mill has been suspended “due to the rupture of supply chains and the restrictions on the import of birch plywood into the EU that have come into force,” and the timing of the project is being adjusted. At the same time, as Rovshan Aliyev explained, the implementation of investment projects at Sokolsky Pulp and Paper Mill and Lesosibirsky LDK continues in full, however, work on Onega LDK has slowed down due to logistical bottlenecks. Two more large investment projects, Segezha West and Segezha Vostok, are at the stage of completion, they are under review of equipment purchases, the top manager noted.

The company notes that in general there are no sharp failures in the main products. Thus, the market for sack paper remained in high demand and limited supply. Buyers sought to replenish stocks as much as possible in anticipation of the entry into force of restrictions on the import of Russian-made paper into Europe from July 10, 2022, Segezha explains.

The company increased sales of industrial bags in Russia, the CIS, Turkey, South Africa, and also developed alternative routes to the countries of Latin America, MENA, Southeast Asia, which made it possible to reduce the cost of delivery and resume shipments to those countries where logistics was previously temporarily absent.

Selling prices for Segezha Group rose by 31% to €821 per tonne in the second quarter. The cost of paper bags and consumer packaging of Segezha Group in the global market in the second quarter increased by an average of 38% to €232 per thousand pieces.

The birch plywood sector in Russia saw a decline in production and exports to Europe and the US, putting pressure on prices. The company notes that in September-October the European market will begin to experience a shortage of these products and, as Rovshan Aliyev admits, in the future the ban on imports of Russian products to Western countries may be lifted. At the same time, according to Segezha, in the second quarter in some markets there was a drop in demand and prices for sawn timber. For example, in China, many sawnwood processing companies have been closed or significantly reduced capacity utilization due to lower export orders amid tight anti-COVID measures. In addition, a decrease in demand was observed in Egypt against the background of the introduction of restrictions on opening letters of credit for buyers, which led to the impossibility of making payments for deliveries, as well as due to the devaluation of the national currency.

Also, the company notes, in 2022, Russian exporters of woodworking products and the pulp and paper industry faced a shortage of containers and an increase in container transportation rates due to a reduction in supply from the largest logistics operators. In particular, the cost of logistics increased by 1.5–2 times.

At the end of the year, Segezha expects to maintain positive dynamics of financial indicators. “There is a high probability that the result will be no worse than last year, we are definitely striving for this,” said Rovshan Aliyev. In addition, the company still maintains the current dividend policy (from 3 billion to 5.5 billion rubles until 2023 inclusive), but will monitor the development of the situation. One of the key parameters that will influence it, according to the top manager, will be the ruble exchange rate, given that 70% of the company’s products are exported. So, according to Mr. Aliyev’s calculations, a change in the exchange rate by 1 rub. has an effect on the group’s OIBDA of 700–800 million rubles, that is, a depreciation of the national currency to 70–75 per dollar will have a positive effect of 10–14 billion. import recovery account.

Olga Mordyushenko