S&P raises Alrosa, bond to BB

S&P said it raised its long-term corporate credit rating on Alrosa PJSC to BB from BB- and affirmed the short-term rating at B.

The outlook is positive.

The agency also raised its issue rating on Alrosa's $1 billion Eurobond to BB from BB-.

S&P said the action reflects its view of Alrosa’s improved operating efficiency supported by the weaker Russian ruble, which has boosted the company's profitability and cash flow generation.

In the first quarter of 2016, the company reported record high EBITDA of RUB 60 billion (about $800 million), including adjustments, compared to RUB 47 billion in the first quarter of 2015, with the EBITDA margin reaching 59%. The cost of production per carat was as low as RUB 1,900 for open-pit mining and RUB 2,400 for underground mining ($30 and $38, respectively, using the spot rate).

The agency said it thinks that these positive results indicate Alrosa’s operating efficiency is better than previously assumed, and S&P expects the company will continue to demonstrate this going forward. S&P therefore revised its assessment of Alrosa’s business risk profile to fair from previously weak.

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