Bloomberg News

Ruble Devaluation Will Boost Russian Earnings, Goldman Predicts

November 14, 2008

A devaluation of the ruble will boost Russian companies' earnings as exporters' domestic costs shrink relative to the revenue they receive from selling abroad, Goldman Sachs Group said.

A weakening of the ruble to 35 to the dollar, 22 percent lower than today's exchange rate, at the end of 2009 will boost earnings before interest, taxes, depreciation and amortization, or Ebitda, for the Russian companies Goldman covers by 4 percent next year.

A ruble at 45 to the dollar would boost Ebitda 9 percent in 2009, analysts including Sergei Arsenyev and Rory MacFarquhar wrote in a report dated yesterday.

The ruble currently trades at 27.37 to the dollar, compared with 24.64 to the dollar at the beginning of the year. Goldman Sachs expects the central bank to allow the currency to weaken 18 percent in the next 12 months against the dollar-euro basket that it uses to manage the currency's fluctuations.

Export-oriented oil and gas companies would benefit most from a weaker ruble, while telecommunications companies and retailers would see Ebitda fall 19 percent if the ruble collapses to 45 to the dollar.

Almost 60 percent of Russia's largest companies, including those whose sales are purely domestic, report earnings in the U.S. currency, meaning ruble earnings translate into fewer dollars as the ruble weakens.

OAO Gazprom and OAO Novatek, Russia's biggest natural-gas producers, as well as the preferred shares of OAO Surgutneftegaz, Russia's fourth-biggest oil producer, are among the ``key'' natural-resource stocks that would benefit from the expected ruble devaluation, Goldman said.

To contact the reporter on this story: William Mauldin in Moscow at

To contact the editor responsible for this story: Daniel Hauck at

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