PAO Severstal (SVST)
Severstal reports Q3 & 9M 2019 financial results
18-Oct-2019 / 09:02 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 Q3 & 9M 2019 financial results
- Exceptional margins supported by vertical integration-
Moscow, Russia - 18 October 2019 - PAO Severstal (MICEX-RTS: CHMF; LSE:
SVST), one of the world's leading steel and steel-related mining companies,
today announces its Q3 & 9M 2019 financial results for the period ended 30
September 2019.
CONSOLIDATED FINANCIAL RESULTS FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2019
$ million, Q3 2019 Q2 2019 Change, % 9M 2019 9M 2018 Change, %
unless
otherwise
stated
Revenue 2,111 2,177 (3.0%) 6,319 6,495 (2.7%)
EBITDA1 787 753 4.5% 2,203 2,348 (6.2%)
EBITDA 37.3% 34.6% 2.7 ppts 34.9% 36.2% (1.3 ppts)
margin, %
Profit from 670 625 7.2% 1,850 2,022 (8.5%)
operations
Operating 31.7% 28.7% 3.0 ppts 29.3% 31.1% (1.8 ppts)
margin, %
Free cash 346 263 31.6% 998 1,368 (27.0%)
flow2
Profit for 490 475 3.2% 1,393 1,473 (5.4%)
the period
Basic EPS3, 0.59 0.58 1.7% 1.69 1.81 (6.6%)
$
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 ("FCF") 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) Basic EPS is calculated as profit for the period divided by the
weighted average number of shares outstanding during the period: 825.4
million shares for Q3 2019, 825.0 million shares for Q2 2019, 824.3
million shares for 9M 2019, 815.7 million shares for 9M 2018.
Q3 2019 vs. Q2 2019 ANALYSIS:
? Group revenue declined 3.0% q/q to $2,111 million (Q2 2019: $2,177
million) due to adverse price dynamics for steel and raw materials.
? Group EBITDA increased 4.5% q/q to $787 million (Q2 2019: $753 million),
reflecting lower cost of sales. The Group's vertically integrated business
model delivered an EBITDA margin of 37.3%, maintaining its position as one
of the highest in the industry globally.
? Free cash flow totalled $346 million (Q2 2019: $263 million), primarily
reflecting positive changes in net working capital q/q.
? Profit for the period totalled $490 million (Q2 2019: $475 million) and
includes a FX loss of $50 million.
? Cash CAPEX amounted to $311 million (Q2 2019: $267 million).
? Net debt decreased to $1,300 million at the end of Q3 2019 (Q2 2019:
$1,469 million), primarily reflecting cash balances growth as a result of
FCF generation for the period, with the proceeds from the Balakovo
mini-mill sale offset by the dividend payout.
? Severstal is committed to returning value to its shareholders whilst
managing and maintaining a comfortable level of debt. Severstal's
financial position remains strong with a Net debt/EBITDA ratio of 0.4 as
at the end of Q3 2019. The Board of Directors has therefore recommended a
dividend of 27.47 roubles per share for Q3 2019.
9M 2019 vs. 9M 2018 ANALYSIS:
? Group revenue declined 2.7% y/y to $6,319 million (9M 2018: $6,495
million). This drop in revenue y/y was a result of weaker pricing for
steel products, which was offset by an overall growth in sales volumes
y/y.
? Group EBITDA was 6.2% lower y/y, at $2,203 million (9M 2018: $2,348
million), primarily reflecting lower revenues. The Group's EBITDA margin
remained at high levels of 34.9% (9M 2018: 36.2%).
? The Company generated $998 million of free cash flow, which represents a
decline of 27.0% y/y (9M 2018: $1,368 million) mainly reflecting a decline
in EBITDA and CAPEX growth y/y.
FINANCIAL POSITION HIGHLIGHTS:
? At the end of Q3 2019, cash and cash equivalents stood at $1,317 million
(Q2 2019: $345 million), reflecting cash received following the placement
of the Eurobond, FCF generation and the proceeds from the sale of Balakovo
mini-mill, which was partly offset by the dividend payout.
? Gross debt increased to $2,617 million (Q2 2019: $1,814 million). In
September 2019, Severstal completed the placement of loan participation
notes due in 2024 of $800 million at 3.15%.
? Net debt decreased to $1,300 million by the end of Q3 2019 (Q2 2019:
$1,469 million), primarily reflecting growth in cash balances. The Net
debt/EBITDA ratio totalled 0.4 at the end of Q3 2019 (Q2 2019: 0.5).
Severstal's Net debt/EBITDA remains one of the lowest amongst steel
companies globally and enables Severstal to maintain a comfortable level
of debt whilst returning value to its shareholders.
? The Group's liquidity position remains strong, with $1,317 million in
cash and cash equivalents and unused committed credit lines and overdraft
facilities of $1,249 million, more than covering the short-term principal
debt of $259 million.
Alexander Shevelev, CEO of Severstal Management, commented:
"We delivered a strong performance in the third quarter of 2019 overall in
spite of volatility in the global steel and raw material markets. An
anticipated deceleration in global steel demand led to falling steel prices,
which contributed to negative iron ore and coking coal dynamics of in Q3
2019. In this environment, Severstal's vertically integrated business model
and the flexibility of our multiple distribution channels supported our
EBITDA, which increased by 4.5% to $787 mln, and our EBITDA margin, which
was 37.3% in Q3 2019. This is one of the highest quarterly margins we have
achieved for several years.
In Q3 2019, we completed the sale of Balakovo mini-mill for $215 million and
will now focus on the HVA products within our portfolio.
In September, we announced the placement of an $800 mln Eurobond due in 2024
at 3.15%, which is one of the lowest coupon rates amongst Russian companies
and steel companies globally.
Our ESG performance is a key focus. Severstal is one of the very first
companies to pilot the World Steel Association's (WSA) Step Up methodology
for reducing greenhouse gas emissions from steel production. At Severstal we
have agreed on a methodology for estimating our ??2 impact and are now
developing a programme of initiatives to support a reduction of emissions.
The Board remains confident in the outlook and is recommending a dividend of
27.47 roubles per share for Q3 2019."
SEVERSTAL RUSSIAN STEEL (RSD)
$ million, Q3 2019 Q2 2019 Change, % 9M 2019 9M 2018 Change, %
unless
otherwise
stated
Revenue 2,102 2,151 (2.3%) 6,219 5,958 4.4%
EBITDA 433 397 9.1% 1,225 1,718 (28.7%)
EBITDA 20.6% 18.5% 2.1 ppts 19.7% 28.8% (9.1 ppts)
margin, %
RSD steel product sales remained flat q/q at 2.85 mln tonnes in Q3 2019 (Q2
2019: 2.85 mln tonnes).
The total share of domestic sales declined 3 ppts, to 67%, but remained at
historically high levels due to the favourable domestic pricing environment
(Q2 2019: 70%).
The share of high value-added (HVA) products within the sales portfolio
remained at 45% (Q2 2019: 46%).
LDP sales volumes declined 6% q/q, reflecting changes in the product mix.
Izhora Pipe Mill maintained its 100% utilisation rate in Q3 2019.
The weighted average selling price for the whole range of rolled steel
products remained almost flat in Q3 2019, reflecting the flexibility of
Severstal's distribution channels as well as the favourable pricing
environment in the domestic market. RSD topline declined by 2.3% q/q to
$2,102 million (Q2 2019: $2,151 million). Decreased raw material expenses
resulted in EBITDA growth of 9.1% q/q to $433 million (Q2 2019: $397
million). The EBITDA margin increased to 20.6% (Q2 2019: 18.5%).
The total non-integrated cash cost of slab production at the Cherepovets
Steel Mill in Q3 2019 decreased $9/t and totalled $346/t (Q2 2019: $355/t)
as a result of lower raw material expenses q/q. The integrated cash cost of
slab in Q3 2019 totalled $208/t due to a decline Resources EBITDA.
SEVERSTAL RESOURCES
$ million, Q3 2019 Q2 2019 Change, % 9M 2019 9M 2018 Change, %
unless
otherwise
stated
Revenue 609 647 (5.9%) 1,767 1,345 31.4%
EBITDA 382 416 (8.2%) 1,093 673 62.4%
EBITDA 62.7% 64.3% (1.6 ppts) 61.9% 50.0% 11.9 ppts
margin, %
Coking coal concentrate sales volumes from Vorkutaugol surged 41% q/q
reflecting the 42% increase q/q in production of run-of-mine coal.
Iron ore pellet sales declined 15% to 2.46 mln tonnes (Q2 2019: 2.90 mln
tonnes) reflecting higher production of iron ore concentrate at Karelsky
Okatysh.
Iron ore concentrate sales volumes increased 35% to 1.93 mln tonnes (Q2
2019: 1.43 mln tonnes) driven by production volumes growth at Karelsky
Okatysh.
Revenue at the Resources Division decreased 5.9% q/q to $609 million (Q2
2019: $647 million) mainly affected by weaker price dynamics at the
division's iron ore segment. EBITDA was down 8.2% q/q to $382 million (Q2
2019: $416 million) due to the revenue decline q/q. The EBITDA margin
totalled 62.7%.
Sales volumes increase at Vorkutaugol brought Q3 2019 cash costs down to
66$/t (Q2 2019: $87/t). ?ash costs per tonne at Karelsky Okatysh stood at
$24/t (Q2 2019: $23/t). Cash costs per tonne at Olcon declined to $26/t (Q2
2019: $28/t).
DIVIDEND
The Board of Directors has therefore recommended a dividend of 27.47 roubles
per share for Q3 2019. Approval of the dividend is expected to take place at
the Company's EGM on 22 November 2019. The record date for participation in
the EGM is 28 October 2019. The recommended record date for the dividend
payment is 3 December 2019. The approval of the record date for the dividend
payment is also expected to take place at the Company's EGM on 22 November
2019.
OUTLOOK
Growth in global steel demand in 2019 is supported by China, while outside
China steel demand was weak, particularly in Europe and in the MENA region.
The deficit in the iron ore market is gradually disappearing. The coking
coal market is well-supplied, with weak demand having resulted in coal
producers margins decline. Global export steel prices are under the pressure
of weak economic sentiment and declining raw material prices.
Despite a number of potential headwinds on both the export and domestic
markets, our low cost position allows us to stay competitive on the market.
The Board remains confident in the resilience of Severstal's business model
relative to its local and global peers.
NOTES
1) Full financial statements are available at
http://www.severstal.com/eng/ir/results_and_reports/financial_results/inde
x.phtml [1]
2) The Annual Report 2018 is available at
http://www.severstal.com/eng/ir/results_and_reports/annual_reports/index.p
html [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 Q3 2019 results for investors and analysts hosted by
Alexey Kulichenko, Chief Financial Officer, will be held on 18 October 2019
at 10.00 (London)/ 12.00 (Moscow).
Conference ID: 9531031
International Dial:
+44 (0) 330 336 9125
Russian Dial:
+7 495 213 1767 (Local access)
8 800 500 9283 (Toll free)
The call will be recorded and there will be a replay facility available for
7 days as follows:
Replay Passcode: 7829368
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: QRT
TIDM: SVST
LEI Code: 213800OKDPTV6K4ONO53
Sequence No.: 23871
EQS News ID: 892303
End of Announcement EQS News Service
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(END) Dow Jones Newswires
October 18, 2019 02:03 ET (06:03 GMT)
