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PAO Severstal (SVST)
Severstal reports Q1 2019 financial results
22-Apr-2019 / 23:42 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Severstal reports Q1 2019 financial results
- Free cash flow generation remains strong despite challenging market
conditions -
Moscow, Russia - 22 April 2019 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST),
one of the world's leading steel and steel-related mining companies, today
announces its Q1 2019 financial results for the period ended 31 March 2019.
CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER ENDED 31 MARCH 2019
$ million, Q1 2019 Q4 2018 Change, % Q1 2019 Q1 2018 Change, %
unless
otherwise
stated
Revenue 2,031 2,085 (2.6%) 2,031 2,173 (6.5%)
EBITDA1 663 794 (16.5%) 663 706 (6.1%)
EBITDA 32.6% 38.1% (5.5 ppts) 32.6% 32.5% 0.1 ppts
margin, %
Profit from 555 685 (19.0%) 555 585 (5.1%)
operations
Operating 27.3% 32.9% (5.6 ppts) 27.3% 26.9% 0.4 ppts
margin, %
Free cash 389 233 67.0% 389 289 34.6%
flow2
Net profit3 428 578 (26.0%) 428 461 (7.2%)
Basic EPS4, 0.52 0.70 (25.7%) 0.52 0.57 (8.8%)
$
Notes:
1) EBITDA represents profit from operations plus depreciation and
amortisation of productive assets (including the Group's share in
depreciation and amortisation of associates and joint ventures) adjusted for
gain/(loss) on disposals of PPE and intangible assets and its share in
associates' and joint ventures' non-operating income/(expenses). A
reconciliation of EBITDA to profit from operations is presented in
Severstal's quarterly financial statements.
2) Free Cash Flow is determined as the aggregate amount of the following
items: Net cash from operating activities, CAPEX, proceeds from disposal of
PPE, interest received and dividends received. A reconciliation of free cash
flow to net cash from operating activities is presented in Severstal's
quarterly financial statements.
3) Net profit after FX fluctuations and other non-cash items.
4) Basic EPS is calculated as net profit divided by the weighted average
number of shares outstanding during the period: 822.5 million shares for Q1
2019, 821.2 million shares for Q4 2018, 814.1 million shares for Q1 2018.
Q1 2019 vs. Q4 2018 ANALYSIS:
? Group revenue marginally decreased 2.6% q/q to $2,031 million (Q4 2018:
$2,085 million), as growth in steel sales volumes was offset by a decline
in steel prices q/q.
? Group EBITDA declined to $663 million (Q4 2018: $794 million),
reflecting lower revenues as well as a higher cost base. The Group's
vertically integrated business model delivered an EBITDA margin of 32.6%,
remaining one of the highest in the industry globally despite global steel
prices softening.
? Free cash flow surged 67.0% to $389 million (Q4 2018: $233 million),
which primarily reflects positive changes in net working capital q/q
despite lower earnings.
? Net profit totalled $428 million (Q4 2018: $578 million) and includes a
FX gain of $71 million.
? Cash CAPEX was $209 million (Q4 2018: $224 million). Severstal's
investment programme for 2019 is expected to amount to $1.45 bn.
? Net debt declined to $863 million by the end of Q1 2019 (Q4 2018: $1,227
million), primarily reflecting growth of cash balances.
? Severstal is committed to returning value to its shareholders whilst
managing and maintaining a low level of debt. Severstal's financial
position remains strong with a Net debt/EBITDA ratio of 0.3 as at the end
of Q1 2019. The Board of Directors has therefore recommended a dividend of
35.43 roubles per share for Q1 2019.
Q1 2019 vs. Q1 2018 ANALYSIS:
? Group revenue declined 6.5% y/y to $2,031 million (Q1 2018: $2,173
million). The drop in revenue y/y was a result of weaker pricing for steel
and lower steel sales volumes y/y.
? Group EBITDA was 6.1% lower y/y, at $663 million (Q1 2018: $706
million), primarily reflecting the lower revenues which were partially
offset by a lower cost of sales. EBITDA margin therefore remained almost
flat at 32.6% (Q1 2018: 32.5%).
? The Company generated $389 million of free cash flow, which represents
an increase of 34.6% y/y (Q1 2018: $289 million) as a result of positive
net working capital changes y/y.
FINANCIAL POSITION HIGHLIGHTS:
? At the end of Q1 2019, cash and cash equivalents stood at $583 million
(Q4 2018: $228 million), reflecting FCF generation for the period.
? Gross debt remained broadly unchanged during the period at $1,446
million (Q4 2018: $1,455 million).
? Net debt declined to $863 million by the end of Q1 2019 (Q4 2018: $1,227
million), primarily reflecting growth of cash balances. The Net
debt/EBITDA ratio declined to 0.3 at the end of Q1 2019 (Q4 2018: 0.4).
Severstal's Net debt/EBITDA remains one of the lowest amongst steel
companies globally and enables Severstal to maintain a low level of debt
whilst returning value to its shareholders.
? The Group's liquidity position remains strong, with $583 million in cash
and cash equivalents and unused committed credit lines and overdraft
facilities of $1,188 million, more than covering the short-term principal
debt of $336 million.
Alexander Shevelev, CEO of Severstal Management, commented:
"I am pleased to highlight that in Q1 2019 Severstal delivered a sustainable
financial performance despite the combination of weak pricing for steel
products versus rising cost of the raw materials busket. Our strong results
once again demonstrated the competitive advantages of our vertically
integrated business model, which enables us to maintain high profitability
and cash flow generation in any market conditions, to deliver sustainable
returns. The Company generated $389 million of free cash flow, which
represents an increase of 34.6% y/y as a result of positive net working
capital changes.
At our Capital Markets Day in November 2018 we committed to growing our
EBITDA by 10-15% annually, and presented investment projects for the coming
five years that should ensure this growth. In Q1 2019 our operational
efficiency improvements, increased self-sufficiency in raw materials and
cost reductions have enabled us to deliver a positive EBITDA effect of $106
mln.
I would like to list some strategic and operational highlights for Q1 2019:
? In February, we announced an agreement with Tenaris to form a joint
venture to build a welded pipe plant, combining Tenaris's know-how in oil
country tubular goods (OCTG) pipe manufacturing and sales with Severstal's
expertise in producing high quality steel products. We have committed to
providing our clients with unique solutions based on a deep understanding
of their needs.
? In March we launched Severstal SteelTech Accelerator - Russia's first
full-scale industrial accelerator for start-ups in the metallurgical
industry. Its main goal is to find innovative solutions in the industrial
sector, which can be successfully integrated into Severstal's production
cycle.
? The majority of CAPEX for the period was committed to our hot-end
modernisation programme, which will reduce cash costs, increase
productivity and reduce environmental impact. We have already launched
construction works and completed groundwork at our Blast Furnace #3.
We remain focused on improving our sustainability performance. In Q1 2019,
Sustainalytics increased Severstal's rating and upgraded us to
'Outperformer'. In 2019, we will continue to improve our ESG disclosure,
minimise our negative impact on the environment and ensure the health and
safety of our employees and contractors.
The Board remains confident of Severstal's future prospects, which allows to
recommend a dividend of 35.43 roubles per share for Q1 2019, bringing the
dividend payout to more than 100% of the quarterly free cash flow."
SEVERSTAL RUSSIAN STEEL (RSD)
$ million, Q1 2019 Q4 2018 Change, % Q1 2019 Q1 2018 Change, %
unless
otherwise
stated
Revenue 1,966 1,845 6.6% 1,966 2,025 (2.9%)
EBITDA 395 449 (12.0%) 395 535 (26.2%)
EBITDA 20.1% 24.3% (4.2 ppts) 20.1% 26.4% (6.3 ppts)
margin, %
RSD steel product sales increased 3% to 2.84 mln tonnes in Q1 2019 compared
with the previous quarter (Q4 2018: 2.77 mln tonnes), following short-term
maintenance works at rolling-mill facilities in the previous quarter and an
increase in aggregates productivity. The share of domestic sales rose to 65%
due to the increased attractiveness of domestic sales (Q4 2018: 62%).
The share of high value-added (HVA) products within the sales portfolio
remained flat at 44% (Q4 2018: 44%), driven by a decline in sales of
semi-finished products and higher sales of galvanised, colour coated and hot
rolled thick plate.
Severstal increased production of colour-coated and galvanised products
following the launch of new product lines, which reached their full
utilisation rates in Q1 2019.
LDP sales volumes declined 9% q/q due to the specifics of the product range
at the Izhora Pipe Mill (IPM) where the utilisation rate continued to remain
high in Q1 2019. Thick plate sales increased 11% q/q.
Average selling prices for the majority of steel products declined in Q1
2019 in line with global benchmarks. Declining steel prices were offset by a
3% growth in steel sales volumes, which led to topline growth of 6.6% q/q
for RSD, at $1,966 million (Q4 2018: $1,845 million). Higher raw material
costs resulted in a 12.0% q/q decrease in EBITDA, to $395 million (Q4 2018:
$449 million). The EBITDA margin was 20.1% (Q4 2018: 24.3%).
The total non-integrated cash cost of slab production at the Cherepovets
Steel Mill in Q1 2019 decreased $11/t and totalled $331/t (Q4 2018: $342/t)
as a result of lower raw material and repair expenses. The integrated cash
cost of slab in Q1 2019 grew $12/t to $220/t (Q4 2018: $208/t) as a result
of lower profitability at the Resources Division.
SEVERSTAL RESOURCES
$ million, Q1 2019 Q4 2018 Change, % Q1 2019 Q1 2018 Change, %
unless
otherwise
stated
Revenue 511 563 (9.2%) 511 402 27.1%
EBITDA 295 343 (14.0%) 295 188 56.9%
EBITDA 57.7% 60.9% (3.2 ppts) 57.7% 46.8% 10.9 ppts
margin, %
Coking coal concentrate sales volumes from Vorkutaugol declined 1% q/q due
to long-wall repositionings at the Vorgashorskaya, Zapolyarnaya and
Komsomolskaya mines, but remained at historically high levels due to high
production rates.
Steam coal sales at Vorkutaugol remained almost flat in Q1 2019 vs Q4 2018
but increased by 5% y/y, reflecting production growth.
Iron ore pellet sales declined 4% to 2.83 mln tonnes (Q4 2018: 2.94 mln
tonnes) as a result of lower production volumes and stock sell-off in Q4
2018.
Iron ore concentrate sales decreased 9% to 1.30 mln tonnes (Q4 2018: 1.43
mln tonnes) due to seasonal factors and short-term maintenance works.
Revenue at the Resources Division declined 9.2% q/q to $511 million (Q4
2018: $563 million) as a decline in sales volumes reflected a high base
effect from the previous quarter. EBITDA decreased 14.0% q/q to $295 million
(Q4 2018: $343 million) due to the revenue decrease. Despite this, EBITDA
margin declined only 3.2 ppts q/q to 57.7%, supported by the favourable
pricing environment for raw materials and efficiency initiatives at the
Resources Division.
Lower processing volumes and stock movement at Vorkutaugol brought Q1 2019
cash costs up to 70$/t (Q4 2018: $56/t). ?ash cost per tonne at Karelsky
Okatysh remained almost flat at $26/t (Q4 2018: $25/t) despite sales volumes
decline q/q. Cash cost per tonne at Olcon increased $6/t to $30/t (Q4 2018:
$24/t) reflecting lower sales volumes q/q.
DIVIDEND
The Board is recommending a dividend payment of 35.43 roubles per share for
the three months ended 31 March 2019.
Approval of the dividend is expected at the Company's EGM which will take
place on 7 June 2019.
The record date for participation in the EGM is 13 May 2019. The recommended
record date for the dividend payment is 18 June 2019. The approval of the
record date for the dividend payment is also expected at the Company's EGM
which will take place on 7 June 2019.
OUTLOOK
In Q2 2019, we expect our financial results to be positively impacted by
seasonal construction recovery in China and Russia, as well as the effect of
higher iron ore prices in Q1. Steel demand in Russia is expected to grow by
1% in 2019, supported by increased consumption in the automotive and energy
industries.
Severstal's proximity to export routes continues to be a major competitive
advantage, giving Severstal the flexibility to quickly redistribute
shipments between domestic and export markets to take advantage of higher
prices.
The Board is confident that Severstal will continue to be well-placed
relative to both local and global peers.
NOTES
1. Full financial statements are available at
http://www.severstal.com/eng/ir/results_and_reports/financial_results/index.
phtml [1]
2. The Annual Report 2018 is available at
http://www.severstal.com/eng/ir/results_and_reports/annual_reports/index.pht
ml [2]
For further information, please contact:
Severstal Investor Relations
Evgeny Belov
T: +7 (495) 926-77-66
evgenii.belov@severstal.com
Vladimir Zaluzhsky
T: +7 (495) 926-77-66
vladimir.zaluzhsky@severstal.com
Severstal Public Relations
Anastasia Mishanina
T: +7 (495) 926-77-66
anastasia.mishanina@severstal.com
Vladimir Zaluzhsky
T: +7 (495) 926-77-66
vladimir.zaluzhsky@severstal.com
Severstal's financial communications agent - Hudson Sandler
Andrew Leach / Emily Dillon
T: +44 (0) 20 7796 4133
A conference call on Q1 2019 results for investors and analysts hosted by
Alexey Kulichenko, Chief Financial Officer, will be held on 23 April 2019 at
13.00 (London)/ 15.00 (Moscow).
Conference ID: 2895677
International Dial:
+44 (0)330 336 94 11
Russian Dial:
+7 495 646 9190 (Local access)
8 10 8002 8675011 (Toll free)
The call will be recorded and there will be a replay facility available for
7 days as follows:
Replay Passcode: 2895677
International Dial:
+44 (0) 207 660 0134 (Local access)
Russian Dial:
810 800 2702 1012 (Toll free)
***
P?? Severstal is one of the world's leading vertically integrated steel and
steel related mining companies, with assets in Russia, Latvia and Poland.
Severstal is listed on RTS and MICEX and the company's GDRs are traded on
the LSE. Severstal reported revenue of $8,580 million and EBITDA of $3,142
million in 2018. Severstal's crude steel production in 2018 reached 12.0
million tonnes. www.severstal.com [3]
ISIN: US8181503025
Category Code: QRF
TIDM: SVST
LEI Code: 213800OKDPTV6K4ONO53
Sequence No.: 8294
EQS News ID: 802179
End of Announcement EQS News Service
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(END) Dow Jones Newswires
April 22, 2019 16:42 ET (20:42 GMT)
