Russia’s uncut diamond monopoly Alrosa reported strong IFRS results for the first quarter of 2016, showing the EBITDA (earnings before interest, taxes, depreciation, and amortization) increasing by 17 percent year-on-year and jumping by 84 percent quarter-on-quarter to USD795 million on June 1, 2016.

On May 31, 2016, Gazprombank stated that strong results from January to March were supported by high sales and a weak rouble, while being largely in line with the bank’s forecast and consensus forecasts.

Alrosa managed to keep revenue growth at 16 percent year-on-year and 75 percent quarter-on-quarter, posting revenues of USD1.37 billion in the first quarter, despite lower diamond prices that declined by nine percent year-on-year and 12 percent quarter-on-quarter for gem-quality diamonds.

The company showed a strong sales volume, advancing by 70 percent quarter-on-quarter and 34 percent year-on-year. The EBITDA margin rose to 58 percent, gaining three percentage points quarter-on-quarter and one percentage point year-on-year. Net earnings received an additional boost from the weaker rouble.

Gazprombank saw the biggest “positive surprise” in strong free cash flow of USD786 million in the first quarter, attributed to improved operating performance, cash inflow from working capital, as well as lower capex and interest.

Free cash flow soared “compared with only a marginally positive figure in the previous quarter,” the bank noted. Free cash flow doubled the 2015 overall figure and beat the expectation of Alfa Bank by 50 percent. Alrosa’s leverage also declined considerably, as the company’s net debt went down by 30 percent quarter-on-quarter, reducing the net-debt-to-EBITDA ratio from 1.4x in the previous quarter to 0.9x in the first quarter of 2016.

The company’s net income came in at USD669 million, more than doubling year-on-year. The income figure was 50 percent above the estimate of Alfa Bank analysts. The good performance results are attributed mostly to currency gains. Overall, Alfa Bank sees the results as positive for Alrosa’s stock, noting that the net income figure in the first quarter contributed some RUB17.5 billion (USD0.27 billion) to 2016 dividends at a 35 percent payout rate (a 3.3-percent yield).

“We believe Alrosa represents the best value among Russian miners,” Alfa wrote in a separate analysis of June 1, while reiterating the RUB106 (USD1.65) target price for the stock with a 49-percent upside.

The bank expects the company to generate a free cash flow yield of some 20 percent and pay a seven-percent dividend yield for 2016.

Alrosa is one of the frontrunners of the government’s renewed privatization efforts. Russia expects to receive more than RUB60 billion (USD940 million) from the sale of the government’s stake in Alrosa, Minister of Economic Development Alexei Ulyukayev said in an interview with Russia 24 TV channel on May 20.

The total share of the Federal Property Agency in the company amounts to 43.9 percent. Previously, Russian officials mentioned the sum of “at least RUB50 billion (USD0.78 billion).”

According to latest reports, Alrosa is looking at placing a 10.9-percent stake in the company on the Asian markets, including Hong Kong, while Russia’s state-owned Sberbank said it will organize a roadshow for potential investors in the United States and the U.K.

On May 12, 2016, President Vladimir Putin signed a decree amending the list of strategic enterprises, under which the state’s share in VTB Bank is reduced to 42.83 percent and the share in the diamond producer Alrosa to 33.01 percent.

Just prior to the signing, Alrosa reported an 11-percent increase in its total diamond resources from 2013 to 1.077 billion carats, including 658 million carats of reserves.

The updated numbers show that Alrosa managed to more than offset last year’s mine depletion (group production stood at 38.3 million carats) and retained the status of the world’s largest company by resource base. “De Beers lags behind Alrosa, with only 480 million carats of reserves as of the end of 2015,” Sberbank CIB analysts said in a research note.

“We’re trying to do a little road show in New York, in Europe, and in England,” the first deputy chairman of Sberbank Maxim Poletayev said without specifying the dates. “In the case of Alrosa it makes sense to invite quite a wide range of interested parties, as the company is worth opening to the market.”