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Year: Month: All releases Economy Sectors Companies
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Regional Fixed Income Market Watch | September 2017

10 Oct, 2017

Highlights

  • US GDP growth in 2Q17 was revised up to an annualized 3.1% y/y (3rd estimate) from an annualized 3.0% y/y (2nd estimate). Revised figures show that GDP growth in EU19 came in at 2.3% y/y in 2Q17 after 2.0% y/y growth in 1Q17. The Turkish economy grew 5.1% y/y in 2Q17 after 5.2% y/y in 1Q17.
  • Based on rapid estimates, economic growth in August 2017 came in at 7.8% y/y in Kazakhstan, 4.3% y/y in Georgia, 2.8% y/y in Russia, and 2.4% y/y in Armenia. In 8M17, GDP was up 1.6% y/y in Belarus and down 1.1% y/y in Azerbaijan. GDP in Ukraine was revised down to an annualized 2.3% y/y in 2Q17 (from 2.4% y/y).
  • Annual inflation in the US was up to 1.9% in August 2017 from 1.7% in the previous month. Based on the Eurostat flash estimate, annual inflation in EU19 has remained unchanged at 1.5% in September 2017.
  • In September 2017, annual inflation increased in Turkey (11.2%), Kazakhstan (7.1%), Georgia (6.2%), and Armenia (1.0%) and decreased in Russia (3.0%). August 2017 figures indicate an increase in annual inflation to 16.2% in Ukraine and a decrease to 14.0% and 5.3% in Azerbaijan and Belarus, respectively.
  • In September 2017 the Russian and Belarusian central banks lowered their policy rates in response to low inflation to 8.5% and 11.5%, respectively. The policy rate has remained unchanged in other countries.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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Georgian Oil and Gas Corporation - 1H17 update

3 Oct, 2017

GOGC released strong 1H17 unaudited results. Revenue increased 18.1% y/y to US$ 166.0mn, largely due to a 28.1% y/y increase in sale of gas to US$ 104.8mn, while operating expenses were up 23.3% y/y to US$ 124.3mn. Adjusted EBITDA in 1H17 reached US$ 49.9mn, up 6.2% y/y. Strengthening of GEL vs. US$ in 1H17 led to a non-cash FX gain of US$ 18.7mn, which boosted net income to US$ 64.2mn, up 58.9% y/y. 14 companies expressed interest in the international tender announced by GOGC for the engineering, procurement, installation, and commissioning (EPIC) of the gas storage reservoir. Selected companies will be asked to submit technical and price proposals at the second stage of the tender in the beginning of 2018.

GOGC reported 1H17 revenue of US$ 166.0mn, up 18.1% y/y. Strong growth in sale of gas (+28.1% y/y) accounted for 90.4% of total revenue growth. The increase was driven by a surge in sales volume (+28.2% y/y) to 879mmcm. Based on our estimates, higher gas consumption by thermal power plants accounted for about 30% of the increase in gas sales volume. Pipeline rental revenues also increased 20.8% y/y to US$ 16.1mn, due to higher volumes of gas transported. Electricity sales were up 5.9% y/y to US$ 39.2mn. Revenue from the sale of crude oil dropped off 44.2% y/y to US$ 2.0mn, while oil transportation revenue was flat at US$ 3.9mn.  

1H17 operating expenses increased 23.3% y/y to US$ 124.3mn, on the back of a 29.0% y/y increase in cost of gas. The latter includes cost of gas used in electricity generation and cost of gas sold. Cost of gas sold was the main driver, up 35.1% y/y and accounting for 85.6% of cost of gas. The increase was largely the result of higher purchase volumes, coupled with a slight increase in average purchase price (+5.5% y/y to US$ 103.6/mcm).

Strong growth in sale of gas was the main driver behind a 6.2% y/y increase in adjusted EBITDA to US$ 49.9m. The adjusted EBITDA margin contracted from 33.4% in 1H16 to 30.1% in 1H17, largely as a result of the increase in operating expenses. Strengthening of GEL against US$ in 1H17 led to a non-cash FX gain of US$ 18.7mn, which boosted net income to US$ 64.2mn.

Operating cash flow was at US$ 37.1mn in 1H17, compared to US$ 19.6mn in 1H16. According to company sources, the increase was largely driven by collection of past receivables. However, the accounts receivable balance remains elevated at US$ 76.0mn. In May 2017, GOGC repaid the remaining portion (US$ 53.6mn) of the outstanding GEOROG 05/17 bonds. Investing cash flow was at US$ 25.6mn, reflecting a US$ 29.6mn increase in term deposits. The adjusted EBITDA coverage ratio was up from 4.8x in 1H16 to 5.0x in 1H17.

14 companies expressed interest in the international tender announced by GOGC for the engineering, procurement, installation, and commissioning (EPIC) of the gas storage reservoir, with storage capacity of 210-280mmcm. Selected companies will be asked to submit technical and price proposals at the second stage of the tender in the beginning of 2018. Construction of Gardabani CCPP II is expected to commence by end-2017.


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Georgian Railway - 1H17 update

15 Sept, 2017

GR released 1H17 unaudited results and Management Discussion and Analysis. Revenue decreased 12.0% y/y to US$ 77.4mn due to lower freight traffic volumes. Operating expenses, which are mostly fixed in GEL, decreased 10.0% y/y to US$ 71.5mn. As a result, adjusted EBITDA declined 16.1% y/y, from an already low base, to US$ 28.4mn, with the adjusted EBTDA margin down to 36.7%. Strengthening of GEL vs. US$ in 1H17 led to a non-cash FX gain of US$ 44.0mn, which propped up net income at US$ 46.2mn. The modernization project is proceeding as planned, expected to be completed by late 2019. The bypass project remains under review.

Freight transportation revenue declined 16.9% y/y to US$ 50.6mn in 1H17 from the low base of 1H16 (-41.8% y/y). Freight handling declined 7.8% y/y to US$ 9.9mn, while logistic service posted a 3.2% y/y increase to US$ 9.1mn. These three categories together accounted for 89.9% of 1H17 revenue. Freight car rental revenue decreased 27.4% y/y to US$ 2.3mn, while passenger traffic increased 14.8% y/y to US$ 3.2mn. Other revenue was up 48.4% y/y to US 2.3mn due to the increase in the sale of scrap.

1H17 operating expenses, which are mostly GEL-denominated, declined 10.0% y/y to US$ 71.5mn, helped by the 7.4% higher average USDGEL rate in 1H17 vs 1H16. There were declines across all major expenses, but the largest contributor to the overall decline in costs was the ‘Other’ category, down 23.4% y/y to US$ 7.3mn, largely due to reduced logistic costs.

In freight transportation, the downward trend persisted in both liquid and dry cargoes. Revenue from liquid cargo transportation decreased 17.6% y/y to US$ 22.5mn, while dry cargo revenue was down 16.3% y/y to US$ 28.0mn. Crude oil transportation dropped off 57.3% y/y to US$ 2.2mn, with its share in liquid cargo revenues down to a mere 9.6%. A sharp decline (-90.0% y/y) in crude oil transportation from Turkmenistan was the main culprit. Despite higher oil products transportation volume in 1H17, oil products transportation revenue also decreased 8.5% y/y to US$ 20.4mn, as GR lowered tariffs and freight origin shifted from Azerbaijan to Kazakhstan. In dry cargo, precipitous declines in ferrous metals and scrap and sugar transportation were the leading drivers. Ferrous metals and scrap dropped 64.0% y/y to US$ 2.0mn due to an unfavorable shift in the freight destination mix, while sugar transportation shrank 32.8% y/y to US$ 3.3mn due to lower volumes to Azerbaijan.

1H17 adjusted EBITDA declined 16.1% y/y to US$ 28.4mn. As a result, the adjusted EBITDA margin contracted from 38.5% in 1H16 to 36.7%. Strengthening of GEL against US$ in 1H17 led to a non-cash FX gain of US$ 44.0mn, accounted for as finance income, which propped up net income at US$ 46.2mn.

Operating cash remained relatively flat at US$ 32.0mn in 1H17. Investment in new passenger trains and significant modernization project expenses drove the 41.5% y/y increase in capital spending to US$ 50.9mn. The purchase of trains was financed by new debt, which contributed to a deterioration of the adjusted EBITDA coverage ratio from 1.7x in 1H16 to 1.4x in 1H17. 


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Regional Fixed Income Market Watch | August 2017

8 Sept, 2017

Highlights

  • US GDP growth was up to an annualized 3.0% y/y (second estimate) in 2Q17 from an annualized 1.2% y/y in 1Q17.  GDP growth in EU19 came in at 2.2% y/y in 2Q17 after 1.9% y/y growth in 1Q17. Based on preliminary estimates, the Russian economy grew 2.5% y/y in 2Q17.
  • Based on rapid estimates, economic growth in July 2017 came in at 7.0% y/y in Armenia, 4.3% y/y in Kazakhstan, 3.8% y/y in Georgia, and 1.8% y/y in Russia. In 7M17, GDP was up 1.1% y/y in Belarus and down 1.0% y/y in Azerbaijan. GDP in Ukraine was up 2.4% y/y in 2Q17.
  • Annual inflation in the USA was up to 1.7% in July 2017 from 1.6% in the previous month. Based on the Eurostat flash estimate, annual inflation in EU19 edged up to 1.5% in August 2017 from 1.3% in July 2017.
  • In August 2017, annual inflation declined in Georgia (5.7%), Russia (3.3%), and Kazakhstan (7.0%); increased in Turkey (10.7%); and remained stable in Armenia (0.9%). July 2017 figures indicate an increase in annual inflation to 15.9% and 14.6% in Ukraine and Azerbaijan, respectively, and a decrease to 6.0% in Belarus.
  • Central Bank policy rate was lowered in Kazakhstan from 10.50% to 10.25% in August 2017 and has remained unchanged in other countries.
     

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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