Russian forestry firm Segezha announces IPO price range, strong results

Russian forestry firm Segezha announces IPO price range, strong results
Russian forestry group Segezha has set its IPO price range, giving it a $2bn valuation and reported operating revenue jump of 80% in the first quarter
By bne IntelliNews April 21, 2021

Russia’s leading timber and paper group Segezha Group set the price range for its upcoming IPO on the Moscow Exchange (MOEX) and announced strong results for the first quarter of this year on April 21.

The indicative price range was set at between RUB7.75 and RUB10.25 per share in an IPO where additional 32.4% of its current share capital be offered to raise at least RUB30bn ($390mn). The IPO would set the company’s market capitalisation at between RUB122.5bn and RUB152.4bn ($1.6bn-$2bn).

Bookbuilding starts today and the final price is expected to be announced on or around 28 April, the company said in a press release.

Owned by the multi-industry and London-listed conglomerate Sistema, Segezha has built up the leading Russian timber, paper and pulp business in Russia, as bne IntelliNews described in a recent cover story “Russia’s Green Gold.”

The other major forestry businesses dealing in soft wood are Canada, which mainly focuses on the US market, and Scandinavia, which competes with Russia but has tapped out its timber resources, leaving Segezha in a position to pick up a large share of the steadily growing demand for paper and pulp not just in Europe, but also Asia.

Operating income jumps 80%

In the same press release the company also reported very strong financial results for the first quarter.

Revenue for the first quarter of this year is expected to be in the range of RUB18.0bn to RUB18.5bn ($235mn-$241mn), an increase of 25.9% to 29.4% year on year respectively.

Operating income before depreciation and amortisation (OIBDA) for the period is expected to be in the range of RUB4.7bn to RUB5.3bn, an increase of 80.8% to 103.8% respectively.

The OIBDA margin for Q1 2021 is expected to be in the range of 25.4% to 29.4%, compared with 18.4% in Q1 2020.

Revenue and OIBDA rose across all segments of the business in the first quarter of 2021 on the back of price increases for Segezha Group’s key products.

“I am pleased with the positive response we have seen from the global investment community to Segezha Group’s proposed IPO. This again underscores the attraction of Segezha Group’s robust and highly efficient business model built around full vertical integration, which underpins our key competitive advantages, including supply security and control of our entire production chain and production costs,” Mikhail Shamolin, president of Segezha Group, said in the press release.  

“Segezha Group has demonstrated robust growth across key operational and financial indicators throughout its history, and our FY 2020 IFRS financial results were the strongest in our history,” Shamolin added. “The recovery in markets for our products that we saw beginning in late 2020 has continued through the first months of 2021, and we expect this favourable operating environment to continue throughout the year. The market recovery post-COVID, combined with strong long-term fundamental demand drivers for our products, creates a solid basis for further expansion of the business, driving top line growth while maintaining strong margins. We expect our current investment projects to increase production volumes of packaging, CLT and bleached paper to contribute to further growth of our operational and financial results as early as this year.”

“Our IPO comes at a time when investors and the broader global public increasingly view sustainability as a key business issue and are looking to sectors such as the forestry industry. Segezha Group is well positioned both to become a leader among sustainable businesses in Russia, and to benefit from the global sustainability trend, which will continue to strengthen in future. I strongly believe that Segezha Group represents a distinctive investment proposition, and look forward to demonstrating the strengths of our business model as well as our future growth potential to investors,” Shamolin concluded.