Russian carmaker Avtovaz posts first profit since 2012

Russian carmaker Avtovaz posts first profit since 2012
Russia carmaker Avtovaz makes first profit in five years
By bne IntelliNews April 27, 2018

Russian largest carmaker Avtovaz posted its first net quarterly net profit since 2012, a IFRS net profit of RUB609mn ($10mn) for the first three months of this year, reversing the RUB2.8bn loss for the same quarter of 2017.

In January-September 2017 Avtovaz became operationally profitable for the first time in five years, and was a top car seller in 2017 on the recovering Russian market. 

In the first quarter company's revenues grew by 41% year-on-year to RUB64.8bn, with operational profit of RUB2.1bn versus RUB1bn net loss a year ago. The improved results were attributed to the conversion of debt in the recent recapitalisation, as well as higher sales, growing prices, and cost cutting measures. 

In April Avtovaz completed a second stage of recapitalization by its main shareholders French car major Renault and state technology agency Rostec. The recapitalisation of Avtovaz has been on agenda since 2016 and its completion marks the support of Renault to Avtovaz throughout the crisis and now counts to see its moneys worth on the recovering Russian car market.

Both shareholders converted a total of RUB61.4bn ($1bn) or RUB30.7bn of debt each into shares of Avtovaz, issued in a  closed subscription. As a result, the joint venture of Renault and Rostec Alliance Rostec Auto B.V. increased its stake in Avtovaz from 64.6% to 83.5%.

At the same time in the first-quarter report's press release the head of the company Nicolas Maure underlined that the results "must not be overestimated at this stage". 

"Significant FOREX fluctuations in the beginning of April 2018 might negatively impact the Russian automotive market and AVTOVAZ financial results later this year," Maure warned, noting that the company intends to keep the highest localisation ratio in the Russian automotive industry (86%), continue optimize both variable and fixed costs and further develop the Lada model range to overcome the headwinds.