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SISTEMA PUBLIC JOINT STOCK FINANCIAL CORPORATION

(AFKS)
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Sistema PJSFC : Sistema announces financial -2-

06/15/2021 | 03:02am EDT
Investor Relations       Public Relations 
Nikolay Minashin         Sergey Kopytov 
Tel.: +7 (495) 730 66 00 Tel.: +7 (495) 228 15 32 
n.minashin@sistema.ru    kopytov@sistema.ru 

SISTEMA RESULTS REVIEW

(RUB mln)                                1Q 2021 1Q 2020  Change 
Revenue[4]                               171,536 158,246  8.4% 
Adj. OIBDA                               56,930  53,654   6.1% 
Operating profit                         25,384  22,895   10.9% 
Net (loss) attributable to Sistema       (2,400) (10,214) - 
Adj. net (loss) attributable to Sistema  (2,400) (9,409)  - 

Sistema's consolidated revenue increased by 8.4% year-on-year to RUB 171.5 billion, driven by revenue growth at key assets: at MTS thanks to higher consumption of core telecommunications and financial services, increased sales of handsets and accessories, as well as the positive contribution of digital and cloud solutions for business and media products; at Segezha Group as a result of higher prices for sawn timber and plywood amid a recovery in demand from the construction industry, as well as the depreciation of the rouble; at Agroholding Steppe thanks to increased revenue in all key segments; and at Medsi thanks to a recovery in demand for routine medical care amid continued demand for services related to COVID-19.

Group adjusted OIBDA [5] increased by 6.1% year-on-year to RUB 56.9 billion, primarily due to increases in adjusted OIBDA at portfolio companies: at MTS following revenue growth, despite a significant decrease in revenues from international roaming; at Segezha Group stemming from higher prices for plywood and sawn timber, measures to contain production costs and a weaker rouble; at Steppe due to an effective commercial strategy for exports of its own and third-party agricultural products, an increase in prices for wheat and corn prior to the imposition of export duties, as well as an increase in production and growth in the number of high-yielding dairy cows in the Dairy Farming segment; and at Medsi following revenue dynamics.

The year-on-year contraction in adjusted net loss was mainly due to growth in operating profit and the effect of the significant FX loss in the first quarter of 2020.

Group SG&A costs were nearly unchanged year-on-year. The Corporate Centre's SG&A increased due to the accrual of payments under the LTI programme, which had been suspended in 2018 and was reinstated in 2020.

Group capex increased by 34.5% year-on-year to RUB 37.7 billion as a result of an increase in investments at MTS in network development with a focus on expanding 4G capacity, as well as an increase in capex at Segezha Group. Investments were aimed at purchasing logging equipment, upgrading the Segezha Pulp and Paper Mill, introducing an SAP S /4HANA system and purchasing converting lines.

OVERVIEW OF PORTFOLIO COMPANIES

MTS

LEADING TELECOMMUNICATIONS OPERATOR AND DIGITAL SERVICES PROVIDER IN RUSSIA

(RUB mln)[6]                                1Q 2021 1Q 2020 Change 
Revenue                                     123,940 117,475 5.5% 
Adj. OIBDA                                  55,425  52,166  6.2% 
Adj. OIBDA margin                           44.7%   44.4%   0.3 p.p. 
Operating profit                            28,640  27,168  5.4% 
Adj. net profit attributable to Sistema[7]  8,090   9,031   (10.4%) 

In 1Q 2021, MTS's revenue increased by 5.5% year-on-year to RUB 123.9 billion, driven by increased consumption of the company's core telecommunications and financial services, increased sales of handsets and accessories, and positive contributions from digital and cloud solutions for business and media products.

In 1Q 2021, adjusted OIBDA totalled RUB 55.4 billion, up 6.2% year-on-year on the back of revenue growth, despite a significant reduction in revenue from international roaming.

The adjusted OIBDA margin in 1Q 2021 was 44.7%, an increase of 0.3 p.p. year-to-year.

In 1Q 2021, adjusted net profit decreased year-on-year due to the high base effect from the same period last year on account of FX revaluation. At the same time, net profit was supported by sustainable growth of the core business, the contribution of MTS Bank and lower financial expenses as a result of the optimisation of the debt portfolio amid declining interest rates.

Capex. In 1Q 2021, capex increased by 45.3% year-on-year to RUB 29.3 billion mainly due to increased investments in network development, with an emphasis on expanding 4G capacity.

OUTLOOK FOR 2021

For 2021 MTS forecasts revenue growth of no less than 4%, OIBDA growth of no less than 4% and capex of RUB 100-110 billion.

KEY HIGHLIGHTS IN 1Q 2021 AND AFTER THE END OF THE REPORTING PERIOD New streaming service. In April 2021, MTS launched a new streaming service called KION. Its catalogue includes more than 200 TV channels and thousands of films, series, animated films and documentaries. High dividend payments. In April 2021, MTS's Board of Directors recommended that the Annual General Meeting of Shareholders approve annual dividends in the amount of RUB 26.51 per ordinary share of MTS (RUB 53.02 per ADR). Stock buyback programme. In March 2021, a programme was announced for the repurchase of up to RUB 15 billion worth of the company's shares by the end of 2021. Exchange-traded social bonds. In March 2021, MTS placed RUB 4.5 billion worth of series 001P-18 exchange-traded social bonds on Moscow Exchange. Creation of an ESG Committee. In March 2021, MTS announced the creation of a Board of Directors ESG Committee. Strong credit ratings. In February 2021, NCR assigned MTS a rating of AAA.ru with a stable outlook - the agency's highest-possible assessment of creditworthiness. In March 2021, Expert RA upgraded MTS Bank's credit rating to ruA- with a stable outlook, taking into account the Bank's growing role in MTS's digital ecosystem.

SEGEZHA GROUP

LEADING RUSSIAN VERTICALLY INTEGRATED FORESTRY HOLDING

(RUB mln)                                  1Q 2021 1Q 2020 Change 
Revenue                                    18,217  14,332  27.1% 
OIBDA                                      5,028   2,627   91.4% 
OIBDA margin                               27.6%   18.3%   9.3 p.p. 
Operating profit                           3,388   1,091   210.4% 
Net profit/(loss) attributable to Sistema  2,361   (5,221) - 

Segezha Group's revenue saw a significant increase of 27.1% year-on-year to RUB 18.2 billion in 1Q 2021, mainly due to higher prices for sawn timber and plywood amid recovery in demand from the construction industry. Increases in average exchange rates - 22.7% for EUR and 12.2% for USD - had a considerable impact on positive revenue dynamics in the reporting period.

Segezha Group's OIBDA increased by 91.4% year-on-year in 1Q 2021 to RUB 5.0 billion mainly due to higher prices for plywood and sawn timber. The depreciation of the rouble and measures taken to constrain growth in production costs also had a considerable impact on OIBDA growth.

The OIBDA margin increased by 9.3 p.p. year-on-year to 27.6% in 1Q 2021. Net profit was RUB 2.4 billion in 1Q 2021, compared with a loss of RUB 5.2 billion a year earlier. This result was achieved on the back of OIBDA growth and due to the effect of revaluation of the company's FX-denominated debt. Capex amounted to RUB 3.9 billion[8] in 1Q 2021. Investments were aimed at purchasing logging equipment, upgrading the Segezha Pulp and Paper Mill, introducing an SAP S/4HANA system and purchasing converting lines. Paper production decreased by 9.7% year-on-year to 89.6[9] thousand tonnes in 1Q 2021 mainly due to renovations at the Segezha Pulp and Paper Mill. Paper sales volumes decreased by 22.1% to 51.7 thousand tonnes following a decline in production volumes in the reporting period and due to high opening inventories at the beginning of 2020. In 1Q 2021, Segezha Group sold 305.4[10] million paper sacks, a 2.6% year-on-year decrease in sales volumes. Carry-over of some shipments from 1Q to 2Q at Russian facilities exerted pressure on sales volumes. The lower sales figure for the Russian market was partially offset by higher shipments at the Group's European facilities on the back of restored demand from the construction industry, which led to increased sales of sacks for cement. Production volume rose 1.6% year-on-year to 339.6 million units thanks to sales growth at Western assets.

Plywood production totalled 49.8 thousand cubic metres in 1Q

2021, unchanged from a year earlier. Sales volumes in the reporting period totalled 47.2 thousand cubic metres, down 3.4% year-on-year due to higher inventories in the corresponding period last year. Revenue from the sale of plywood increased due to higher prices and an increased share of sales of high-margin products. Global price growth has been driven mainly by pent-up demand from the construction industry.

Sawn timber production decreased by 9.2% year-on-year to 241.7 thousand cubic metres in 1Q 2021, mainly due to the reallocation of a larger volume of marketable sawn timber at the Sokolsky PPM for the production of glulam products and CLT panels. At the same time, sawn timber sales volumes decreased by only 0.7% in the reporting period thanks to the sale of existing inventories. Global sawn timber prices continued to rise mainly due to pent-up demand from the construction industry.

KEY HIGHLIGHTS IN 1Q 2021 AND AFTER THE END OF THE REPORTING PERIOD

Launch of a new CLT plant. In February 2021, the first plant in Russia for the production of CLT panels, with an annual capacity of 50 thousand cubic metres, was commissioned in the town of Sokol in the Vologda region.

ESG progress. In March 2021, Segezha Group joined the UN Global Compact and signed an agreement with WWF Russia on the conservation of old-growth forests in the Arkhangelsk region.

In April 2021, Segezha Group adopted a new sustainability strategy and policy. The strategy focuses on four key areas: an innovative forestry business, making Russia's forest regions a better place to live, climate-focused forest management and production, and a responsible forest supply chain.

(MORE TO FOLLOW) Dow Jones Newswires

June 15, 2021 03:01 ET (07:01 GMT)

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Financials (USD)
Sales 2021 10 665 M - -
Net income 2021 376 M - -
Net Debt 2021 10 275 M - -
P/E ratio 2021 9,16x
Yield 2021 1,37%
Capitalization 3 848 M 3 829 M -
EV / Sales 2021 1,32x
EV / Sales 2022 1,19x
Nbr of Employees -
Free-Float 33,2%
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Number of Analysts 9
Last Close Price 0,40 $
Average target price 0,61 $
Spread / Average Target 51,9%
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Managers and Directors
Vladimir Sanasarovich Chirakhov President, Chief Executive Officer & Director
Vladimir Petrovich Evtushenkov Chairman
Vladimir Semenovich Shukshin VP, Head-Information Technologies & Security
Ali Mussayevich Uzdenov Chief Investment Director
Roger Llewelyn Munnings Independent Director