OREANDA-NEWS. April 26, 2010. According to provisional data, Avtovaz sustained a loss in the range of RUB 3.8 bn to RUB 4 bn (USD130-137 mn) in 1Q2010, a rise of RUB 500 mn (USD 17 mn) over company expectations. The main reason behind the substantial loss lies in the automotive market contraction over the quarter. Russian Technologies head Sergei Chemezov also announced that the state corporation would remit to Avtovaz RUB 28 bn before the end of April to refinance its banking loans.

According to the European Business Association, car sales by Avtovaz dropped 19% y-o-y in 1Q2010, while the Russian automotive market as a whole shrank 25% in the same period. We expect the carmaker’s conditions to change for the better in 2Q, thanks to a cash-for-clunker old car disposal program, which primarily benefits Avtovaz.

According to our estimates, full-year sales by Avtovaz may expand 10-15% in 2010. In addition, by refinancing its banking loans using Russian Technologies funds, the carmaker will see its interest payments decline significantly, which should benefit net income. In so doing, Avtovaz should be able to save RUB 3.0-3.5 bn (USD 103-120 mn) annually, as our estimates show.