Mechel. Mechel Results - main
14th meeting this year.
14th meeting this year.
I think the second most important after Lenenergo. The share with the largest charter-guaranteed dividend per preferred share in the entire market.
For reference, here is a report from last year.
01.07.2016, 09:29
AGM Mechel 2016
Report from the AGM of Mechel. I settled on Dynamo, so I went to the meeting early. As a result, the very first came. I was not at the EGM, so the Palace conquered me. The organization of the meeting is very decent. And most importantly, I was able to talk with Alexei Lukashov, who is responsible for relations with investors. Then all the guys from the group came and in general ...
I was 10 minutes late, the meeting was again held at the Petrovsky Travel Palace on the Dynamo. A stadium has almost been built nearby.
The AGM was already in full swing. There were 50-70 investors. Cyril took my place.
Then questions and answers began. The management explained everything in detail. My question was first or second.
"When Beloretsk Metallurgical Plant starts paying dividends, I am interested in how the owner of 0.1% of the shares?"
Oleg Korzhov says "BMK is a hardware giant, a promising industry, but we compete with Severstal, we need to invest a lot, a lot of money in modernization, which is what we are doing, so there is no time for dividends. Plus the FRP helps there. ...
So my advice is not to buy stocks just with low multiples and without real drivers, it is basically pointless, as practice shows. Cubes, denominations, P / E, whatever they come up with, but all this does not matter without understanding the method and perspective of disclosing value. For example, my BMK there is a low P / E at the pod more capitalization at times, but what's the point?
The meeting with young active shareholders certainly contrasted sharply with yesterday's boring FSK, where state managers seized power, and everyone just looked at them, some with the hope that they would give something from the master's table.
There was an interesting question, the throughput of the railway is 350,000 tons per month, but how will you transport coal through this narrow neck if production on the Elga grows to 9 million tons? Korzhov said that they are not transporting pure coal, but concentrate. and it is less. I asked, what is the yield of the concentrate? Says 0.4-0.5.
Further, Oleg Korzhov repeated several basic things like "revised the approach to business, focus on Elga and RBS, as well as doubling the transshipment capacity of the Posiet port. Market conditions helped, but it was obvious that in 2013-2014, when everything went below the cost price, that prices will return. And now we are in profit. None of the creditors are pulling now, we have restructured almost everything and pay regularly. "
He also later said that 76% of the loans had already been restructured. The rest is three parts. VEB, foreign syndicate and pre-export financing.
VEB has already de facto restructured. The syndicate was waiting for us to come to an agreement with the state banks, and 1.5 months ago we finally settled everything with them and soon we will settle everything with them.
A question about the road. He literally said the following: "We walked around for several circles, we still could not decide what to do with it and to whom to sell it. Now, having discussed everything with Russian Railways and Gazprombank, we came to the conclusion that the best option is a concession and in a realistic foreseeable time frame we are we will conclude a deal. We have an understanding of what to do. "
"As soon as we decide with the road, the next step is to increase the power of Elga." Now the shelf is 5 million tons, we want 13 million tons. How much does it take to bring it to full capacity? Previously, we thought that we needed $ 2 billion from VEB for everything (and the completion of the railroad too), I don’t know how much after the devaluation, I don’t know.
We ourselves cannot finish building Elga, we will sell our stake, but if debt / EBITDA normalizes, then banks will give us money. For reference, debt / EBITDA
A question about the sale of a stake in Elga. There is an investor from South-East Asia, I cannot give details. He will give money for the completion. Later there was a question, and whose share is sold to you or GPB? We are considering both options.
It was also said that Elga will receive new tax breaks.
The shareholder asked the question, why are you greedy, wait for normal prices, would sell assets, for example, Korshunovsky GOK or a stake in Mechel Mining, now at any price and your debt would decrease, you wouldn’t have to spend money on interest and would be ready plan B in case the price of raw materials and steel falls.
Rezontov says that it is necessary to sell at a price of 5-7 EBITDA, now the assets are at the bottom, it is not profitable to sell. I asked, and the sale of 50% in YUNK about which the media wrote? No comment yet.
Plan B is to build up RBS at full capacity, it does not depend on raw materials, it now provides $ 160-200 million in EBITDA and will be more. About RBS there was a separate block of answers that you can't cook porridge with Russian Railways, all hope is for HSR and new markets where the company is entering, and these are the CIS, the Baltic States and Europe. We plan to reach 100% load.
Why is the production of Southern Kuzbass and Korshunovsky GOK falling? Will they pay divas? This is all due to the underfunding crisis, and if you increase production from next year, there will be no divas.
VTB Option. Issued as part of the restructuring, implementation until 04.2018. Payment by money. Divas for 2016 will receive these 5% from Mechel.
I asked Oleg Korzhov when everyone started to leave. And this is by chance not one-time divas? Will you pay further? Of course, this is our priority, this is our strategy!
It was certainly a huge success for our project !!! This is a historic event! Thank you all for coming, the company noticed and appreciated it!
To carry the paper from the very crisis and many have received dividends of 100% of the invested !!!
I will write forecasts and plans for my stake in Mechel to ALENKA IIS for June.
The AGM 2017 season is over.
Economist. Over 15 years of experience in finance. Date: March 30, 2018. Reading time 5 minutes.
For the second year in a row, Mechel has been working in profit, which allows management to pay decent dividends on preferred shares after several years of minimal payments. So, in 2017, for 1 prefecture, shareholders received an income of 10.28 rubles. In 2018, the company will pay dividends in the amount of RUB 16.66 per preferred share, spending RUB 2.3 billion for this purpose. Payments will begin on July 19, 2018.
Mechel PAO is one of the world's leading mining and metallurgical companies. Consists of more than 30 industrial enterprises located in the regions of Russia, Lithuania, Ukraine. The products are sold in the Russian and foreign markets, our own transport and sales companies, three trade ports help in this matter. The company is one of the recognized leaders in the production of coking coal and its concentrate. We have our own sources of raw materials: coal and iron ore concentrate.
When Mechel pays dividends
The company offers investors ordinary (ordinary) and preferred (preferred) shares in a total of 555 million shares, 25% of which are preferred.
The securities are listed on the Moscow (MICEX) and New York (NYSE) stock exchanges under the tickers MTLR, MTLRP and MTL, respectively. By the way, Mechel was the first Russian mining and metallurgical company to place its shares on the New York stock exchange.
The management pays the main income on prefs. According to the adopted dividend policy, 20% of the company's net profit for the reporting year is spent on the payment of income on preferred shares.
Interesting fact! If the dividends for the usual turn out to be higher, then the dividend for the preferred share should be increased to this size, at least.
Mechel has been in a difficult financial condition for a long time. At the end of 2013, there was a crisis that led to a collapse in stock prices and capitalization. It was caused by ineffective expansion, acquisitions, and risky financial policies.
For several years, the manufacturer has been operating at a loss, only made profit in 2016 at the level of RUB 8.8 billion. against a loss in 2015 equal to 114.6 billion rubles. Based on the results for 9 months of 2017, Mechel has further improved its results: revenue amounted to RUB 222.8 billion, net profit - RUB 11.1 billion, EBITDA - RUB 59.1 billion.
Due to financial instability, management did not pay dividends for several years, restoring payments in 2017.
Table 1. Terms and amount of dividend paymentsMechel in 2017. Source: investfuture.ru
The current yield is 9.86%, the DSI is 0.57.
Briefly. According to the dividend policy, Mechel has the right to pay income to shareholders in interim and annual dividends, but it does so traditionally once a year.
Table 2. Forecast for the timing and amount of dividend paymentsMechel in 2018. Source: investfuture.ru
What dividends will Mechel pay in 2018?
Experts believe that a noticeable improvement in financial results makes it possible to pay good dividends on the company's shares in 2018: the cumulative annual profit for 2017 is expected to be about RUB 15 billion, and a significant portion of this money will go to Mechel shareholders ...
Important! The payment of dividends will not affect the company's operations.
Table 3. History of dividend paymentsMechel 2010-2017 with a forecast for 2018Source: dohod.ru, official website
Period (year of payment) | Amount per share ordinary, rub. | Amount per share privileged, rub. | Total amount of dividends, RUB |
2018 | non-payment | 16,66 | 2.3 billion |
2017 | non-payment | 10.28 | 1.43 billion |
2016 | non-payment | 0.05 | 6.9 million |
2015 | non-payment | 0.05 | 6.9 million |
2014 | non-payment | 0.05 | 6.9 million |
2013 | non-payment | 0.05 | 6.9 million |
2012 | 8,06 | 31.28 | 20.1 billion |
2011 | 8,73 | 26.21 | 7.3 billion |
2010 | 1,09 | 3,29 | 910.2 million |
How to receive dividends and become a Mechel shareholder?
The decision on payment / non-payment of the General Meeting of Directors is based on the recommendations received from the Board of Directors, which in turn evaluates the financial performance for the reporting year, external and internal factors affecting the operating activities of the company. If the payment of income to shareholders does not call Mechel's financial stability into question, management will try to pay dividends.
All information about how the decision is made and other points is described in the dividend policy.
A person wishing to receive money on the shares of a mining company is obliged to buy them before the date of the register closing (cutoff), when a list of securities holders for whom payments will be made is drawn up.
It is possible to get into the register by purchasing shares in advance: at least 2 working days before the cutoff.
Briefly. In 2018, the register is closed on July 18, and in order to receive dividends, Mechel's securities must be purchased no later than July 16.
Each shareholder should follow the official news of the company and all decisions taken at the meeting of shareholders on the website www.mechel.ru.
You can buy Mechel shares by contacting a certified stock market participant: a broker or an investment company. The intermediary will use the client's money to make a purchase and send information about the owner to the register (name, details, etc.).
Dividends are transferred by the company in cash by transferring money to a bank account or by postal order (depending on the information specified in the register).
Video. Forecast for the value of Mechel shares and the amount of dividends for 2018:
Higher education. Orenburg State University (specialization: economics and management at heavy engineering enterprises).
March 30, 2018.
). Fantasies turned out to be far from reality, and once again I overestimated Mechel's operational prospects. In the context of 2017 prices, it seemed to me that Mechel would earn not 81, but 95 billion rubles and finally start deleveraging. This did not happen (a striking difference from Teck, Evraz, Warrior Met Coal !!!). Since this was clear even before the report, at the moment when preferred shares reached 150 rubles in early February, I cut my position by 2/3 and used the money to buy AFK Sistema, Rusagro and, a little, En +. What was left I decided to hang until the results of the year and then decide what to do next.
Results - the main
Until the 20-K annual report came out, we do not have complete information and transcripts, so the conclusions are preliminary. What is important:
- EBITDA of only 81 billion rubles or an increase of 23% (in $ growth of 41%)
- Net debt practically did not decrease, although its composition improved slightly
- Potential dividend per preferred share RUB 16.7
If the ruble had not strengthened, then it is quite possible that EBITDA would have grown by 41% in terms of rubles, i.e. would have amounted to 93 billion rubles and then deleveraging and higher dividends were possible. The strong ruble has a very negative impact on the cost of our raw materials companies. Look how in the same Rusal, largely due to the course, the cost of aluminum production increased!
But, what is, that is, which means in the basic scenario, i.e. at stable prices and without strong fluctuations in the exchange rate, EBITDA will remain at the same level. This means that debt repayment will be slow, without taking into account the potential sale of shares, stakes or a concession on the railroad of Russian Railways. What will happen if the course strengthens? And will coal prices fall? And they will fall, the whole question is when.
Fair assessment
In general, according to the main scenario, it turns out that dividends will remain at the current level, or grow extremely slowly. I will not consider the nightmarish and optimistic scenarios, since they balance each other.
How much is the fair price of the prefe in this case? Let's calculate using the Gordon model, where Price \u003d Dividend in the next year / (Required return for investor minus Dividend growth rate). Required return - 20%, Growth rate - 10%, Dividend in the next year \u003d 16.7 * 1.1 \u003d 18.3.
Fair price then \u003d 18.3 / (20% - 10%) \u003d 183 rubles.
Minus 20% to be more conservative (with Mechel, as practice has shown, it never interferes) and we get 146.4 rubles.
latest comments
- I don't understand the people who hold ordinary Mechel shares - in all respects they are less valuable for a minority shareholder than preferred ones. I wrote about this many times.
- The conclusions are possible, but unlikely, to be adjusted after the conference call and the 20-K exit.
And, finally, some personal reflections.
Mechel is my professional mistake
Yes, that's right, despite the solid profit on the position. In the case of Mechel, I disrupted my own investment process several times and as a result missed a number of more interesting opportunities:
- I preferred Mechel to such Evraz companies at the end of 2015, despite the fact that Evraz's comparative assessment was an order of magnitude more attractive and there were less risks. Cause? I didn’t want to fix the losses (the prefs then cost about 40-45, and I bought for 50-60 rubles). As a result, since then, preferred shares have grown by 220%, and Evraz by 400%, but this is not a shame, but the fact that I have broken my investment principles and process, just not to fix losses. I succumbed to emotions - the enemies of a successful investor.
- Mechel's results have consistently been below my estimates and estimates (and still are, although I try to be conservative). This means that if not from the first call, then from the second or third it was necessary to proceed to the exit. But as the saying goes, "the hopes of young men nourish."
Learn from your mistakes, become the best investors and people!
Investment idea from the experts of BCS Express. Buying a simple and understandable dividend story amid falling ruble rates
Trading plan
Purchase from the level of 267.15 rubles. for the purpose of 280 rubles. for a period of 5 months. During this period, it is envisaged to receive dividends in the amount of 8.68 rubles. Potential return 8%.
In detail
MTS securities are a popular dividend chip on the Russian stock market. For several years, their dividend policy has remained relatively stable. Since the current year, the amount of annual payments has been increased from 26 rubles. up to 28 rubles. Dividends are paid twice a year.
Investors' confidence in the stability of dividends in the future is reinforced by the fact that AFK Sistema, which controls about 50% of MTS, needs a constant flow of funds to service and pay off its high debt burden. In this regard, MTS is the main donor for the parent company.
Accordingly, confidence in the stability of dividend payments (not a decrease) gives us the opportunity to bet on a potential revaluation of MTS shares, which may be mainly due to the effect of a decrease in ruble rates.
According to the baseline scenario, the Bank of Russia will continue to progressively soften its monetary policy until mid-2020. This may be due to low inflation rates, a general trend in the actions of key world central banks, and a desire to stimulate economic activity.
As a goal, the Bank of Russia focuses on inflation of 4% and a neutral policy, which implies a key rate premium of 2-3%. Thus, the rate may gradually drop to the range of 6-7%. In my opinion, these expectations are not yet fully embedded in the quotes of Russian dividend chips and should support them in the medium term. In this regard, MTS is the most understandable story with an additional driver in the form of overall business growth.
The shares are now trading at the same levels that were in the second half of 2018. But then the Central Bank of the Russian Federation raised the rate, and MTS dividends were 2 rubles. below. At the same time, I would like to note that the growth of securities to the target indicated within the framework of this idea is about 280 rubles will assume a forward dividend yield of 10% (12 months ahead). That is, in this case, it is obvious that if we talk about the long-term fair potential, then it is noticeably higher than 280 rubles.
In addition, MTS's business is actively developing. Debt load remains comfortable even after write-offs in the case in Uzbekistan (Net debt / OIBDA 1.3x). Financial indicators are growing moderately. MTS has the fastest growing revenue among the Big Three. In addition to the conservative telecommunications business, the company now receives about 20% of its revenue from new businesses, and this share is only growing. Long-term development prospects for MTS are an additional option to the idea in the company's shares based on revaluation by reducing rates.
Rising inflation or geopolitical risks may force the Central Bank to take a wait and see attitude and stop the progressive rate cut.
Potential rejection of US listing could trigger local sales.
A general wave of sales in the stock market amid the flight of investors from risky assets.
I propose to consider buying MTS shares from the level of 267 rubles. for the purpose of 280 rubles. for a period until the end of 2019 or about 5 months. During this period in October, it is envisaged to receive dividends in the amount of 8.68 rubles. The potential yield of the idea is 8% (19.2% per annum).
Important: If the target level is 280 rubles. will be reached before the dividend cut-off, then the overall target for this idea will shift to 288.68 rubles. (until October 10).