Russia’s largest carmaker AvtoVaz posted net profit of 5.86 billion rubles ($90.5 million) in 2018 — the company’s first profit in a decade. The results for 2018 follow on from $148 million losses under international financial reporting standards (IFRS) in 2017, the company said, according to Vedomosti.
While some carmakers in Russia have been hit hard by a deep dive in the market in 2015-2016, AvtoVaz, helped by its largest shareholder Renault, consolidated its market share and emerged on top from the crisis.
Russia’s car market has started to recover from a deep contraction that began in 2018. Car sales have been growing slowly for the last two years but contracted for the first time since 2016 in February, before returning to growth again in March. The makeup of the market has also changed: in the boom years Avtovaz lost out to foreign brands as consumers bought on credit, but since the downturn Russians have returned to the cheaper Avtovaz models en masse, and they are now the best selling cars in Russia.
The company boosted its Lada model sales by 16 percent year-on-year to 0.36 million vehicles in 2018 with a market share of 20 percent, and increased revenues by almost 25 percent to 283 billion.
Renault-Nissan is the largest shareholder in Avtovaz, together with Russian state technology agency Rostec. Since autumn last year, Rostec and Renault Nissan have been seeking to consolidate 100 percent in Avtovaz. In April 2018 the company completed the second stage of a $1 billion recapitalization by the French car major and Rostec, which brought their joint stake in the company to 83.5 percent.
Avtovaz’s net debt as of the end of 2018 was cut by 27 percent to 61.5 billion rubles, as estimated by VTB Capital, due to both operational improvements and the recapitalization program. Ebitda is estimated to have jumped 2.6-fold year-on-year to 22 billion rubles with margins doubling to 7.8 percent.
Russia’s Ministry of Industry and Trade has signed a 10-year special investment contract with Avtovaz to increase the localization of parts that go into the maker of the iconic Lada’s production.
