17 Nov 2023 12:18

Avtovaz expects IFRS profit in 2023 despite sanctions - company head

MOSCOW. Nov 17 (Interfax) - Avtovaz , Russia's leading carmaker, expects to earn an IFRS profit in 2023, like it did last year, despite more difficult planning conditions due to sanctions, company president Maxim Sokolov told reporters on the sidelines of the Transport Russia-2023 forum.

Avtovaz has not published consolidated financial statements for 2022, but Sokolov said in January that the company's IFRS net profit was 1.6 billion rubles. He said at the time that sanctions-related risks "are not only not leaving the horizon, they are also in many ways manifesting themselves in even more threatening form."

"Avtovaz's two months of operations as part of the Renault group last year in a normal situation - January and February, as well as, essentially, March, made it possible to achieve some sort of, so to speak, not zero and not negative result. To a large extent the financial model for Avtovaz's operations in the first half of this year assumed far worse parameters," Sokolov said at the forum.

He said planning difficulties this year were related to the significant growth of component costs, the weakening of the ruble, key interest rate hikes, and risks that were not anticipated in the initially approved financial model when it was cleared by the board of directors of logistics.

"We had certain instances related to underutilization of assembly lines, substantial organizational costs. All this time, until September, Avtovaz's financial model balanced on the verge or, perhaps, sometimes beyond the verge of marginality," Sokolov said, adding that the situation only appeared to improve toward September.

"But exactly in September, as if by design, we were included in the [U.S.] SDN List and everything started happening again: disruption of [supply] chains, the need to advance mutual settlements. Advance payments when lending rates are so high lead to big financial losses," Sokolov said.

Nonetheless, Avtovaz expects to close the year with a profit, he said. "Actually, we're optimistic, I'd say. And I'm fairly confident that the financial model for Avtovaz's operations this year will not be lossmaking to IFRS," Sokolov said.

It was reported earlier that sales of Avtovaz's Lada cars in Russia almost doubled to 283,464 vehicles in the first ten months of 2023.