Net profit/ 2,334 (2,266) - (7,299) 20,915 - (loss) attributable to Sistema Adj. net profit / 2,598 3,363 (22.7%) (4,876) 26,541 - (loss) attributable to Sistema In 3Q 2020, Sistema's consolidated revenue grew by 9.6% year-on-year due to increases in revenue across key assets. At MTS, revenue increased as a result of growth in mobile service revenue and the robust performance of the Fintech, Media and B2B Digital & Cloud segments. Segezha Group saw revenue increase amid growth in output and sales of paper and sawn timber, and backed by rouble depreciation, while revenue growth at Agroholding Steppe was largely driven by increased sales volumes in agricultural products in the Crop Production and Agrotrading segments, higher grain prices, and positive dynamics in the Dairy Farming segment. At Medsi, revenue increased as a result of deferred demand for medical services, growth in revenue from COVID-19 diagnostics and treatment, and the development of home care services. Adjusted OIBDA[4] rose by 14.0% year-on-year to RUB 71.7 billion backed by increases in the adjusted OIBDA of subsidiaries including: MTS, following revenue growth due to reduction of commercial and personnel expenses; Segezha Group, driven by revenue increase as a result of an increase in the share of higher-margin products and amid rouble depreciation; as well as gains from the sale of Detsky Mir shares in September 2020. Adjusted net profit decreased by 22.7% year-on-year and amounted to RUB 2.6 billion in 3Q 2020. The Group's selling, general and administrative expenses (SG&A) declined by 10.5% year-on-year in 3Q 2020 mainly driven by a decline in the Corporate Centre's SG&A as a result of the high base effect - bonuses were paid out in 3Q 2019 due to the monetisation of assets, and the reduction of commercial and personnel expenses at MTS. CAPEX increased by 4.8% year-on-year and amounted to RUB 30.6 billion in 3Q 2020 due to increased investment by MTS in network development, growth in the foreign currency component amid rouble depreciation, and the expansion of production capacities at Segezha Group. OVERVIEW OF PORTFOLIO COMPANIES ******************************* MTS LEADING TELECOMMUNICATIONS OPERATOR AND DIGITAL SERVICES PROVIDER IN RUSSIA (RUB 3Q 2020 3Q Change 9M 9M Change million)[5 2019 2020 2019 ] Revenue 129,048 123,04 4.9% 366,3 349,04 5.0% 5 86 2 Adj. 58,804 57,435 2.4% 161,8 160,82 0.6% OIBDA[6] 12 9 Adj. OIBDA 45.6% 46.7% (1.1 44.2% 46.1% (1.9 margin p.p.) p.p.) Operating 33,451 33,377 0.2% 85,85 89,018 (3.5%) profit 9 Adj. net 9,436 9,197 2.6% 24,81 22,626 9.7% profit 2 attributab le to Sistema[7] In 3Q 2020, MTS's revenue grew by 4.9% year-on-year to RUB 129.0 billion, primarily backed by an increase in mobile service, and the strong performance of the Fintech, Media, and B2B Digital & Cloud segments. In 3Q 2020, adjusted OIBDA increased by 2.4% year-on-year and amounted to RUB 58.8 billion, driven by revenue growth and reduced commercial and personnel expenses, and despite a fall in revenue from international roaming. Adjusted OIBDA margin amounted to 45.6% in 3Q 2020. In 3Q 2020, adjusted net profit rose by 2.6% year-on-year largely due to steady revenue from the core telecom business and lower net interest expenses on the back of lower interest rates. CAPEX. In 3Q 2020, capital expenditure grew year-on-year primarily as a result of increased investments in the network development and growth in the foreign currency component of the capital expenditure amid rouble depreciation. OUTLOOK FOR 2020 MTS forecasts revenue growth of over 3% and OIBDA growth of up to 2%. Capital expenditure will remain at the level of RUB 90 billion, including the realised effect from the use of derivative financial instruments. KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD Russia's first 5G license. In July 2020, MTS was granted Russia's first license for 5G operations in the 24.25-24.65 GHz mmWave band under the 5G/IMT-2020 standard. The license covers 83 Russian regions. Business clients and large industrial enterprises will be the first to use the 5G network. Dividends. In September 2020, the Extraordinary General Meeting of Shareholders approved dividends for 1H 2020 to the amount of RUB 8.93 per ordinary share. Credit rating upgrade. In September 2020, S&P upgraded its credit rating on MTS to the BBB- investment grade. Partnership with Spotify. MTS has announced a partnership with the Spotify streaming service. As part of an exclusive offer, MTS subscribers receive a free subscription to Spotify Premium for six months. Forestry Holding Segezha Group LEADING RUSSIAN VERTICALLY INTEGRATED FORESTRY HOLDING (RUB million) 3Q 2020 3Q Change 9M 9M Change 2019 2020 2019 Revenue 18,966 13,74 38.0% 50,17 43,73 14.7% 5 7 8 Adj. OIBDA 5,079 2,469 105.8% 11,28 10,22 10.4% 4 1 Adj. OIBDA 26.8% 18.0% 8.8 22.5% 23.4% (0.9 margin p.p. p.p.) Operating 3,509 998 251.7% 6,612 6,126 7.9% profit Adj. net (loss) / (3,319) 247 - (5,38 4,302 - profit attributable to 3) Sistema In 3Q 2020, Segezha Group's revenue rose by 38.0% year-on-year and amounted to RUB 19.0 billion primarily due to a surge in the volumes of sales and production of paper and sawn timber. The growth of the average FX rate against the rouble year-on-year, - EUR by 20%, USD by 14% - had a significant impact on the dynamics of export revenues. Segezha Group's adjusted OIBDA increased more than twofold year-on-year and amounted to RUB 5.1 billion in 3Q 2020 following the growth in revenue due to increased share of higher-margin products, and amid rouble depreciation. Adjusted OIBDA margin grew by 8.8 p.p. year-on-year to 26.8% in 3Q 2020. Adjusted net loss amounted to RUB 3.3 billion in 3Q 2020, largely driven by the negative effect of FX differences from the revaluation of the company's FX-denominated debt. Paper output increased by 16.4% year-on-year to 102,710 tonnes[8] in 3Q 2020 primarily due to improved operating efficiencies and the postponement of planned annual equipment maintenance works from 3Q to 4Q 2020. Paper sales increased by 58.1% to 81,200 tonnes following the growth of production volumes and as a result of inventory reduction. Additional volume was sold to existing customers. The output volume of paper sacks declined by 1.0% year-on-year to 335.6 million units amid a fall in demand in the Russian market during the COVID-19 pandemic. Sales of paper sacks increased by 4.9% year-on-year to 358.9 million units[9] due to an increase in sales volumes, on the back of a recovery in demand from the European construction industry, following a downturn in 1H 2020 due to the COVID-19 pandemic. The recovery in demand has allowed for a reduction in warehouse inventory. In 3Q 2020, birch plywood output amounted to 45,800 cu m, a decrease of 2.7% year-on-year. Plywood sales volume declined by 21.1% year-on-year to 38,100 cu m in 3Q 2020 largely due to the weakening of demand within the main sectors of plywood consumption during the COVID-19 pandemic. Revenue from plywood sales remained flat compared with 3Q 2019 due to an increased share of higher-margin products in sales to key markets, and the promotion of a new plywood type in Australia, New Zealand and North America. Sawn timber output increased by 17.2% year-on-year to 325,600 cu m following the acquisition of Karelian Wood Company LCC, a logging and woodworking enterprise, in early 2020, and due to an increase in production volumes at existing enterprises. Output was also significantly impacted by the redistribution of production capacity at the Sokol PPM from glulam products to sawn timber, due to the commissioning of a new splicing line. The new line will increase glulam production capacity at the Sokol PPM by 20%. In 3Q 2020, sales of sawn timber rose by 55.9% year-on-year to 339,300 cu m on the back of the increase in output. Year-on-year growth was also driven by an uneven distribution of revenue in the segment between 3Q and 4Q 2019. KEY EVENTS IN 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD Launch of a new technical powdered lignosulphonates production facility. In August 2020, the Sokol PPM launched a new production facility for technical powdered lignosulphonates, which are used in the production of black carbon for cement manufacturing and road construction, with an annual capacity of 21,000 tonnes. Launch of a new splicing line of glued products. In July 2020, a new splicing line of glued products, with a capacity of 25 cu m per hour, was launched at the Sokol Wood Processing Plant in the Vologda region. The new
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