Research Notes

FY04 was quite successful for AvtoVAZ: sales surged 31% to $5.5 bln, while COGS, despite an increase in the cost side due to steel price hikes, grew 29% to $4.6 bln.

As a result, EBITDA stood at $551 mln, net profit reached $159 mln. Profit margins underwent marginal changes (see the table below). Net debt altered fractionally and equaled $575.5 mln.

FY2004 IAS

As opposed to 2004, from the very beginning this year was expected to a difficult one and lax financial results were largely anticipated. Output sank (down 4% on the first six months, although the auto producer is currently experiencing heightened demand for its autos), costs jumped, a competitive struggle has been stiffened by foreign autos, with some of which approaching the price levels exhibited by AvtoVAZ, thereby stripping it of its leading edge – low prices for finished products. In 2004 the auto producer's market share was cut to 42% against 47% in 2003. According to our forecasts, AvtoVAZ's market share is estimated at 38-39% in 2005 and could take a slow fall in subsequent years.

The auto producer's H105 RAS sales stood at $2.1 bln, EBITDA crashed 29% to $197.5 mln and net profit nosedived 28% to $89 mln. Based on H1 2005 results, EBITDA margin came in at 9% and net profit margin was 4%.

H1 2005

As regards the equity market, we believe that at the present time AVAZP shares are not viewed as an interesting investment vehicle.

Nataly Kocheshkova

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