Plagued by default fears, Russian e-commerce player Ozon boosts spending

Ozon Holdings

27/05/2022 17:29

May 27 (Reuters) - Flagging escalating fears it may default
on some corporate debt, Russian e-commerce player Ozon  OZON.O 
said it has increased its capital expenditure and seen free cash
flow turn negative as it seeks to head off supply chain
interruptions.  
    Nasdaq-listed Ozon, trading in whose shares was suspended on
Feb. 28, warned of bond payment issues in early March and has
since entered into discussions with an ad hoc group of holders
of its $750 million, 1.875% unsecured convertible bonds.
    Late on Thursday, in a quarterly results disclosure, Ozon
said a substantial portion of bondholders were entitled to
receive principal and interest on May 31 and that failure to pay
by June 14 would place it in default.
    Ozon, which has not been targeted by Western sanctions, said
Russian capital controls and the ever-changing regulatory
backdrop were restricting it from diverting funds from its
Russian subsidiaries, creating the risk that it will have
insufficient liquidity at the required time. 
    "It is important to understand that a possible technical
default on bonds does not mean insolvency of the company," Ozon
said on Friday, adding that it planned to sign an agreement with
bondholders on restructuring by year-end. 
    Ozon is one of a handful of Russian companies in the
peculiar situation of having the funds, but being unable to pay.
It mirrors the quandary facing the Russian government, which is
on the cusp of being pushed into a bond default by sanctions,
not lack of cash.  urn:newsml:reuters.com:*:nL2N2XH2NT
    
    CAPEX JUMP
    While many Russian companies have shied away from reporting
financials, Ozon said its loss for the first three months had
widened to 19.1 billion roubles ($293.7 million), but its
revenue was up 90% year-on-year to 63.6 billion roubles and
gross merchandise value (GMV) - a measure of online transactions
volumes - jumped 139% to 177.4 billion roubles. 
    Free cash flow slid to negative 46.9 billion roubles, for
several reasons including "accelerated purchases of IT,
warehouse and other equipment to ensure uninterrupted supply."
    Across Russia's highly fragmented e-commerce market, there
is strong competition for market share, said Gazprombank TMT
analyst Anna Kupriyanova.
    "Companies with good funding, like those as diversified as
Yandex  YNDX.O  are in a better position versus niche players
like Ozon," she said. "This whole situation will intensify
consolidation of the market and I expect the largest four
players to get over 50% market share in one to two years."
    ($1 = 65.0330 roubles)

 (Reporting by Reuters)