Research Notes

Metafrax is Russia's biggest producer of methanol (methyl alcohol). Thanks to red hot methanol prices, which have been effective on the global market over the past six months, the company managed to exhibit impressive growth in its financial indicators, which led to a spike in its stock valuations. Alongside this, conditions on the methanol market are quite variable, as a result of which the enterprise is actively involved in upgrading its production facilities in order to offer value-added products to become less reliant on price fluctuations. The strong investment appeal of the company's shares is determined by the following factors.

At present, Metafrax is Russia's largest methanol producer, commanding 25% of national output. Moreover, it holds leadership positions on the market of methanol-based products: formalin (56%), amino-formaldehyde concentrate (75%), pentaerythritol (70%), urotropine (79%) and polyamide (64%).

The company has exhibited stable growth in its financial performance. 2006 sales jumped 20% y-o-y to $230 mln and net income surged 27% to $45 mln. Q107 revenues soared 62%, operating profit shot up 2.5 times and net income tripled.

In 2006 methanol output was hiked to 1 mln tons. Also last year the company launched a new formalin production line with capacity of 270,000 tons of formalin a year. Over the past three years the company has commissioned three units to manufacture amino-formaldehyde concentrate (AFC) with aggregate capacity of 180,000 tons a year.

The enterprise's new focus from methanol output to the production of value-added items has been visible in its revenue mix: almost 50% of all revenue falls to secondary goods and this portion will most likely rise in the future.

Michael Frolov

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