Russia 090505 Basic Political Developments

Russian Railways seeks extra state aid-paper

http://www.guardian.co.uk/business/feedarticle/8489819
Reuters, Tuesday May 5 2009

MOSCOW, May 5 (Reuters) - Russian Railways, the country's largest employer, will seek an extra 30 billion roubles ($910 million) in state help as this year's losses could be double what was previously expected, Kommersant reported on Tuesday.

The rail monopoly, with 1.2 million workers, has already announced plans to cut 54,000 jobs to adjust to the slump in freight and passenger numbers as Russia weathers its first recession in a decade.

The government has pledged 50 billion roubles out of this year's budget to compensate Russian Railways for hiking tariffs by only 8 percent rather than the planned 14 percent.

A high-level source at the company, however, told Kommersant newspaper that it was seeking another 30 billion roubles in state cash.

"The money could come from the (federal) budget, or in the form of a tariff hike," the source was quoted as saying, adding that a one percentage point tariff hike would bring in around 9 billion roubles in extra revenue.

The company has said it expects a loss of around 50 billion roubles this year, but its board of directors discussed a much gloomier figure of 97 billion, according to Kommersant.

The extra state cash, coupled with receiving the original 50 billion roubles as a subsidy rather than as a capital injection could help Russian Railways to declare a small profit this year according to Russian accounting standards, the paper said. Staying profitable, if only on paper, will help Russian Railways maintain its credit ratings and will make it easier to secure loans from banks, analysts say.

In November, the company postponed a Eurobond issue of up to $4 billion until the second half of this year ($1=32.96 Rouble) (Writing by Toni Vorobyova; editing by Simon Jessop)
Evraz Pledged Loan to Plant

http://www.themoscowtimes.com/article/1009/42/376801.htm

Evraz Group pledged plants in Canada and Siberia to borrow $1.8 billion from the VEB to refinance foreign loans, according to its annual report.

Evraz in November used 100 percent of its shares in Zapadno-Sibirsky Metallurgichesky to secure a $1 billion loan from Vneshekonombank, or VEB, the steelmaker said in its annual report, published on its web site on April 30.

The steelmaker, part-owned by billionaire Roman Abramovich, also pledged almost 100 percent of Evraz NA Canada, formerly known as Ipsco, and the unit's property, to secure $800 million from VEB on Dec. 10, according to the report.(Bloomberg)

NLMK cuts Q1 revenue a third, halves earnings (Part 2)

http://www.interfax.com/3/491726/news.aspx
MOSCOW. May 5 (Interfax) - Novolipetsk Steel (NLMK) (RTS: NLMK) saw

its sales revenue to Russian Accounting Standards (RAS) plummet 33.4%

year-on-year in the first quarter of 2009 to 25.714 billion rubles, the

Russian steel major said in a financial statement.

Net profit almost halved to 138.8 million rubles.

NLMK did not make any forecasts for the year owing to the

persisting uncertainty over sales volumes and prices, but it confirmed

it aimed to produce 10 million tonnes of steel in 2009.

NLMK plans to cut production costs in Q2 2009, primarily due to

significant cuts in raw materials prices, the cost of raw materials and

lower SG&A expenses.
NLMK financial highlights, '000 rubles:

Q1 2009 Q1 2008 % change

Sales revenue 25 714 204 38 608 829 -34,4

Gross profit 3 968 126 13 539 094 -70,69

Operating profit 400 668 9 781 391 -95,90

Net profit 138 858 7 417 181 -98,13

The NLMK group includes the Russia-based iron ore miner Stoilensky

GOK (RTS: SGOK), coke producer Altai Koks, VIZ-Stal and Maxi Group in

addition to the main production site in Novolipetsk.
VIZ-Stal financial highlights to RAS ('000 rubles):

Q1 2009 Q1 2008 % change

Sales revenue 1 265 315 4 864 255 -73,99

Gross profit 736 186 3 073 639 -76,05

Operating profit 601 388 2 945 498 -79,58

Net profit 572 675 2 351 668 -75,65

Stoilensky GOK ('000 rubles):

Q1 2009 Q1 2008 % change

Sales revenue 2 853 181 6 128 790 -53,45

Gross profit 1 292 689 4 322 708 -70,10

Operating profit 1 092 919 4 098 984 -73,34

Net profit 1 057 770 3 490 869 -69,70

Altai-Koks ('000 rubles):

Q1 2009 Q1 2008 % change

Sales revenue 2 749 465 6 295 902 -56,33

Gross profit -534 618 1 748 776 -

Operating profit -777 786 1 121 908 -

Net profit 527 794 811 782 -65

NLMK said global demand for transformer steel decreased in Q1 2009

due to the economic downturn and customers' significant stockpiles

accumulated in the previous periods. This led to cuts in export and

domestic sales volumes and decreased VIZ-Stal's Q1 2009 financial

results.

The poorer market environment for steel and raw materials led to

the decline in prices for Stoilensky products and, hence, lower

financial results in Q1 2009. The decline in Q1 2009 revenue

year-on-year is attributable to 30% lower sales volumes to the Lipetsk

based production site, and lower prices for the salable products.

Provisions for coal and coke inventories impairment accrued in

December 2008 and positive foreign exchange differences secured Altai-

Koks' Q1 2009 net profit.

Car maker Sollers could pass on 2008 dividends

http://www.interfax.com/3/491689/news.aspx
MOSCOW. May 5 (Interfax) - Directors at car maker Sollers (RTTS:

SVAV) are recommending that shareholders waive their final dividend for

2008, the company said.

This year's AGM takes place June 26. The register closes May 9.

Sollers has paid an interim dividend of 16 rubles per share for the

first half of 2008.

It paid 29.18 rubles a share or a total of 1 billion rubles for

2007.

Sollers has 34,270,159 issued ordinary shares, par value 12.5

rubles each.

The company, which used to be known as Severstal Auto, was spun off

from Alexei Mordahsov's Severstal (RTS: CHMF) steel group at the

beginning of 2002. Severstal Auto chief Vadim Shvetsov bought Mordashov

out of the car maker in 2007 and currently owns 58% of the shares in

Sollers.
GAZ unlikely to be bidding for Opel

http://www.businessneweurope.eu/dispatch_text8531

Troika, Russia

Tuesday, May 5, 2009

A consortium of US company Magna, GAZ and Sberbank is considering a bid for a stake in Opel, according to German and Russian newspaper reports citing German regional authorities. The reports, however, have not been confirmed by any of the involved parties. We believe that there was some misunderstanding on the part of the German authorities regarding the possible role of GAZ in buying a stake in Opel.

We do not think that GAZ would be able to acquire even a small stake in Opel, as GAZ is currently in survival mode and attempting to restructure its $1.5bn debt, despite lacking the ability to raise financing. GAZ focuses on the commercial vehicle segment, but has failed to date in its efforts to capture the passenger car market (Volga and Volga Siber models) which is Opel's core business. Moreover, GAZ' investment track record is poor, as none of its core projects (Maxus LDV, Volga Siber and light diesel models ) have succeeded. We also do not see any meaningful synergy between GAZ and Opel.

Regarding the reported consortium, it appears that Magna is the only true bidder for Opel and will likely be competing with Fiat for the stake. In this competition, Magna will probably promote a strategic plan to strengthen Opel's position in Eastern Europe and Russia, the car markets of which still have room for rapid growth in coming years. Opel also has strong positions in Russia, having sold almost 100,000 vehicles in 2008 (accounting for 7% of Opel's global sales and ranking eighth among foreign brands in Russia), but lacks its own local production facilities, unlike other foreign producers.

Therefore, we do not rule out that Magna may be interested in using some of GAZ' facilities (in particular the Nizhni Novgorod plant) to localize its production of a few Opel models for Russian and CIS markets should its bid win out over that of Fiat.

Gennady Sukhanov