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Concorde Capital29 page report
published Feb 09, 2007
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Concorde Capital
In our view, Ukrainian ferroalloy names remain unduly overlooked by the market lagging the performance of the metals & mining sector. We see the stocks as an opportunity to diversify from heating up steel, while staying within the sector. Improving transparency of ferroalloy companies is supportive to our bullish view on two of them.
Robust Market Prospects. Overall, the development of the Ukrainian ferroalloys industry in 2006 was in line with our forecasts: sale prices grew, cost-cutting measures at Zaporizhya and Stakhaniv Ferroalloy continued, manganese alloy output accelerated on growing steel production. Ukrainian alloys output grew by 4% to ~1.58 mln mt in 2006 thanks to insatiable demand. We think the market environment for ferroalloys will remain much the same in the next two-three years as it was in 2006: high demand and higher prices on the back of a global supply shortage.
Financials Recovered. As we expected, the two Privat-related producers, Zaporizhya and Stakhaniv Ferroalloy, improved their profitability in 9M06 (EBITDA 5.9% and 7.5%, respectively) from the negative in 9M05. Nikopol’s EBITDA margin remained close to zero, as it suffered from trepidation surrounding its unresolved court cases. We estimate the true EBITDA margin for Ukrainian ferroalloy producers at 25-30% and believe Privat group will feel increasing pressure to go be transparent in the mid-term: the group lost much of its political power in the last year.
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| Source: | Concorde Consulting
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| Document ID: | cc4
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| Country: | Ukraine
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| Free Sample: |
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| Format: | | PDF |  |
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Concorde Capital is a full service investment and consulting company, with offices in Ukraine and Russia and operations throughout CIS financial markets. Concorde Capital's information products include daily news & research reports (equity, fixed income, industry/market, macro and strategy), covering all sectors of the economy.
