3 June 2009 | Russia Economic Scan

3-June-2009

Russia Economic Scan

In this edition: Russian natural gas output falls 12% in May, Russia to encourage private sector to assist in funding 2014 winter Olympics, Novolipetsk posts $194m loss in Q1, VEB to issue $2bln bonds, Russian stocks surge over 7%.

Top headlines

Russian May Natural Gas Output Falls 12% on Month

• Russia’s natural gas output fell 12% in May led by OAO Gazprom, as the world’s biggest producer of the fuel cut production on flagging European demand amid the global economic turmoil and warmer weather.
• Russia’s total output fell to 1.29 billion cubic meters a day, or 40 billion cubic meters, from 1.47 billion cubic meters a day in April, the Energy Ministry’s CDU TEK unit said in an e- mailed statement. Output fell 29% compared with May 2008, according to Citigroup Inc. (Bloomberg)

Firms to take up slack as Russia cuts Games cash

• Russia will slash its state budget for the 2014 Winter Olympics by more than $600 million due to the economic crisis but promised that state-controlled companies would make up the difference.
• Russia has pledged $12 billion in private and public money on developing the Black Sea resort of Sochi, where the Games will be held. But cash is becoming harder to find as the financial crisis bites deeper into the economy. (Reuters)

Novolipetsk Posts Loss on Currency, Steel Inventory

• Novolipetsk lost $193.8 million in the first quarter compared with net income of $617.7 million a year earlier, Lipetsk, central Russia-based Novolipetsk said today in a statement. Its margin on earnings before interest, tax, depreciation and amortization slipped to 15% from 36%. Novolipetsk shares fell as much as -7.1% in Moscow trading.
• “Novolipetsk’s results looked disappointing: low-margin, no good in outlook for the market, no positive surprises,” Alexander Pukhaev, an analyst at VTB-Capital in Moscow who has a “buy” recommendation on the stock, said by telephone. (Bloomberg)

VEB of Russia to Sell $2 Billion Bond in Debut Issue

• The sale of one-year notes will be the first of $10 billion of issuance through private transactions with commercial financial institutions and the central bank, according to the Moscow-based lender. VEB, which was the foreign-debt agency in Soviet times, set the coupon on the issue at 2.24%, it said in a regulatory filing today.
• VEB’s note sale will be the second issue in dollars by a Russian borrower this year, after OAO Gazprom sold $2.25 billion of debt in April. Russian companies are struggling to refinance $146.7 billion of foreign debt due in 2009, including $33.6 billion maturing this quarter, after the global financial crisis cut access to funding, according to central bank data. (Bloomberg)

Russian Equities Surge Over 7% Following UBS Reports

• The 50-stock RTS Index added +7.3% to 1,167.42, the most in almost 3 months. The ruble- denominated MICEX Index jumped +7.4% to 1,206.2, closing above 1,200 for the first time since Sept. 8. The ruble strengthened as much as +1.3% to 30.58 per dollar, the highest since Jan. 9.
• "Russia is still a relatively cheap market," Stephen Jennings, chief executive officer at Renaissance Group in Moscow, said Monday. "What we've seen is a return to normality." (Moscow Times)

Source: Russia Economic Scan