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AVTOVAZ announces 9M 2016 results: Q3 2016 operational loss decreased by 63% vs. Q3 2015
› Total 9M sales reached RUR 130.5 B, almost stable vs 2015 (-0.6%)
› The operating loss before impairment was reduced by 17% and amounted to RUR 12.1 B.
› For Q3 alone, AVTOVAZ reduced operating losses by 63% vs Q3 2015, showing an acceleration of the improvement.
› AVTOVAZ applied an impairment of RUR 19.0 B, already posted in our HY1 results
AVTOVAZ Group announces the results for 9M 2016. The LADA market share in the Russian PC market grew to 19.9% vs 18.1% last year. The total LADA sales amounted to 189 852 cars, which is 6.7% lower vs the same period 2015. The total market dropped by 15.1%.
Group’s revenue over 9M 2016 reached RUR 130.5 B. The sales volumes have remained at the level of 2015 (-0,6%) despite the Russian market decrease. The operational loss (EBIT) before impairment amounted to RUR 12.1 B. (17% better vs the same period last year). Among others, administrative expenses decreased by 35%.
An impairment test, conducted under IFRS rules, reserved RUR 19.0 B. The impairment was already reflected in our first half results. Impairments are non-cash loss, representing a correction of assets in accounting, and are made to reflect the decreasing automotive market. They are reversible in case of a significant improvement of the market and the company’s profit outlook.
As a result of ongoing restructuring, AVTOVAZ cut operating losses in Q3 2016 vs. Q3 2015 from RUR 9.35 B to RUR 3.5 B, a 63% improvement.
The President of PJSC AVTOVAZ Nicolas Maure, said: “The recovery of the company is accelerating. The measures taken in Q2 focused on an increased cross-functional effectiveness. Q3 results show first positive trends. We also thank our shareholders, State and Regional authorities and banks for their support”. Mr. Maure added: “But our intensive recovery program must continue in full speed to reach break-even and offset potential risks regarding Russian market volumes and FX”.
The Company’s intensified recovery program consists of a number of actions, among them:
• Recruitment of a Chief Recovery Officer in July
• Set up of Cross-functional “Monozukuri” teams identifying and realizing cost reductions across the whole Company;
• Intensified collaboration with our suppliers and support of their restructuring plans;
• Improvement of all administrative cost positions;
• Localization of components supply to reduce imports and FX exposure.
• Re-launch of export activities for cars and components.
The implementation of the Program is already providing positive outcome. To remind, Q3 became the second in row quarter, when the Company is showing better operational results. Q2 results (before impairments) were 3 times better than Q1. Q3 results show even bigger signs of further successful financial recovery.
The new LADA models Vesta and XRAY show encouraging sales results. The LADA Vesta was the 5th most selling model on the market during the first 9M. With the Vesta, LADA is increasing its market share with new customers in large cities. 8% of LADA Vestas were sold in Moscow, 5% in Saint-Petersburg. The start of sales of a 1.8 l engine version with 122 h.p., as well as the upcoming “Exclusive” version with luxury trim, are expected to further grow sales.
In 2017, AVTOVAZ increased LADA domestic vehicle sales by 17%, and Group revenues by 22%. The Group posted a positive operating margin of 0.7%, and a positive free cash flow
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AVTOVAZ Group increased revenue by +4.8% in 2016 and reduced operating loss by 37%, before impairment and restructuring costs