Oil prices rose sharply during the month. The Russian market also gained, but not at nearly the same pace. From a historical perspective the market is now quite expensive, which means a certain resistance to new gains, writes the manager of the Carnegie Rysslandsfond fund, Fredrik Colliander.
My view is that higher oil prices are largely priced in, and that positive political and macroeconomic news will be needed to drive the market higher. The ruble denominated MICEX index is now at an all-time high.
The Russian budget deficit has been much discussed during the month, and it is obvious that this is something that worries the Russian government. With the current tax system, the budget deficit will be two to three times greater than it can accept for the next three years. According to a proposal by the finance ministry, taxation of Gazprom and the oil companies will therefore rise substantially next year. However, higher income taxes on the population are being discussed. The current tax rate is very low from an international perspective, at 13 percent.
Gazprom’s report was largely as expected, although EBITDA was slightly lower. Lukoil was slightly worse in terms of EBITDA but better on revenues and net profit. Results from both Gazpromneft and Bashneft came in as expected.
In the metals sector, Norilsk issued really good results. At EBITDA level it was around 10 percent better, primarily due to higher sales volumes of nickel and precious metals. Polymetal’s results were largely as expected. Volumes were 8 percent lower, in line with a planned production cut.
Food chain Dixy issued surprising results. Revenues rose by 24 percent year on year, and the EBITDA margin was 5.6 percent, which is an improvement. Magnit’s results were just as its management had previously indicated. MAIL.RU’s results were unfortunately weak, while the company guided down expectations for the rest of the year. Results from MTS were also disappointing, and its profits fell 8 percent year on year.