Sistema makes $5.3bn loss in Q4 after losing Bashneft

By bne IntelliNews April 2, 2015

bne IntelliNews -


The Russian industrial holding Sistema reported a net loss of $5.3bn in the fourth quarter of 2014 compared to a  $48mn net profit for the same quarter of 2013, the company said on April 2. Adjusted net loss, not accounting for the recent loss of core asset Bashneft, amounted to $2.6mn.

Sistema, which is owned by billionaire Vladimir Evtushenkov, had to return its stake in oil company Bashneft to the state in October after a Russian court deemed its acquisition in 2009 an "improper privatisation". Sistema's 2014 revenues dropped by 29.5% y/y to $3.9bn, attributed also to a 46% ruble devaluation in Q4. 

It also reported a $290mn loss on mobile asset impairment in India and $92.5mn in provisions for cash and deposits in a Ukrainian bank

Evtushenkov was placed under house arrest for three months last September on charges of money laundering and freed in December. Meanwhile, on October 30, a Moscow court ordered Sistema to return Bashneft to the state.

The same court later awarded Sistema damages of RUB70.7bn ($1.1bn) from Ural Invest for losses arising from the seizure of Bashneft. Ural Invest was one of the sellers of a major stake in the oil company to Sistema. But Russian legal experts told business daily Vedomosti that it was unlikely that Sistema will be able to recover the funds from Ural Invest.

In March, Fitch Ratings affirmed the long-term Issuer Default Rating (IDR) of Sistema at BB-, setting a stable outlook and removing the ratings from the Rating Watch Negative (RWN) list. The rating of Sistema was removed from RWN, as Fitch believes that the holding is no longer at risk of litigation in connection to Bashneft.

The loss of Bashneft had only a limited negative credit impact on Sistema, Fitch said. The loss of dividends was compensated by removing Bashneft's debt from the balance sheet, reducing off-balance liabilities and cost-cutting measures. Over the span of owning Bashneft, the company received about RUB190bn in dividends vs RUB84bn paid for the asset, Fitch estimates.

Sistema is a diversified holding company with its main asset being a controlling stake in MTS (BB+/Stable) wireless major operating in Russia and the CIS. 

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