PAO Severstal (SVST)
Severstal reports Q1 2020 financial results
24-Apr-2020 / 09:01 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 2020 financial results
- Navigating through a challenging environment -
Moscow, Russia - 24 April 2020 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST),
one of the world's leading steel and steel-related mining companies, today
announces its Q1 2020 financial results for the period ended 31 March 2020.
CONSOLIDATED FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED 31 MARCH 2020
$ million, Q1 2020 Q4 2019 Change, % Q1 2020 Q1 2019 Change, %
unless
otherwise
stated
Revenue 1,777 1,838 (3.3%) 1,777 2,031 (12.5%)
EBITDA1 555 602 (7.8%) 555 663 (16.3%)
EBITDA 31.2% 32.8% (1.6 ppts) 31.2% 32.6% (1.4 ppts)
margin, %
Profit 425 477 (10.9%) 425 555 (23.4%)
from
operations
Operating 23.9% 26.0% (2.1 ppts) 23.9% 27.3% (3.4 ppts)
margin, %
Free cash 54 101 (46.5%) 54 389 (86.1%)
flow2
Net profit 72 374 (80.7%) 72 428 (83.2%)
Basic 0.09 0.45 (80.0%) 0.09 0.52 (82.7%)
EPS3, $
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 and intangible assets, interest received and dividends
received. A reconciliation of FCF 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
million shares for Q1 2020 and Q4 2019, and 823 million shares for Q1
2019.
Q1 2020 vs. Q4 2019 ANALYSIS:
? Group revenue fell slightly by 3.3% q/q to $1,777 million (Q4 2019:
$1,838 million) due to lower average sales prices for steel products which
was partially offset by increased sales volumes.
? Group EBITDA declined by 7.8% q/q to $555 million (Q4 2019: $602
million), reflecting lower revenues, but partially mitigated by a
reduction in cost of sales. The Group's vertically integrated business
model delivered an EBITDA margin of 31.2%, maintaining its position as one
of the highest in the industry globally.
? Free Cash Flow was $54 million (Q4 2019: $101 million), primarily
reflecting lower earnings and an increased net working capital
requirement, which was partly offset by lower CAPEX q/q.
? Net profit totalled $72 million (Q4 2019: $374 million) and includes a
FX loss of $378 million, which mainly reflects an accounting loss on the
translation of USD debt balances as a result of the rouble's devaluation.
? Cash CAPEX amounted to $344 million (Q4 2019: $431 million).
? Net debt declined to $1,528 million at the end of Q1 2020 (Q4 2019:
$1,570 million).
? 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 0.6 as
at the end of Q1 2020. The Board of Directors has therefore recommended a
dividend of 27.35 roubles per share for Q1 2020.
Q1 2020 vs. Q1 2019 ANALYSIS:
? Group revenue declined by 12.5% y/y to $1,777 million (Q1 2019: $2,031
million). This drop in revenue y/y due to weaker pricing for steel
products and lower volumes.
? Group EBITDA was 16.3% lower y/y at $555 million (Q1 2019: $663
million), primarily reflecting lower revenues partially offset by a
reduction in cost of sales. The Group's EBITDA margin remained high at
31.2% (Q1 2019: 32.6%).
? The Company generated $54 million of FCF (Q1 2019: $389 million), mainly
reflecting a decline in EBITDA, CAPEX growth and an increased net working
capital requirement y/y.
FINANCIAL POSITION HIGHLIGHTS:
? At the end of Q1 2020, cash and cash equivalents were broadly unchanged
at $1,042 million (Q4 2019: $1,081 million).
? Gross debt declined to $2,570 million (Q4 2019: $2,651 million) which
mainly reflected the FX effect of RUB-nominated debt.
? Net debt remained almost unchanged at $1,528 million at the end of Q1
2020 (Q4 2019: $1,570 million). The Net debt/EBITDA ratio was steady at
0.6 at the end of Q1 2020 (Q4 2019: 0.6). Severstal's Net debt/EBITDA
remains one of the lowest amongst steel companies globally and allows the
Company to maintain a comfortable level of debt, whilst continuing to
return value to its shareholders.
? The Group's liquidity position remains strong, with $1,042 million in
cash and cash equivalents in addition to unused committed credit lines and
overdraft facilities of $1,007 million, more than covering the short-term
principal debt of $23 million.
Alexander Shevelev, CEO of Severstal Management, commented:
Before commenting on Q1 2020 financial results I want to emphasise that the
health and safety of our employees is always our first thought and never
more so than at this challenging time in the face of the global coronavirus
crisis. Maintaining the business and providing humanitarian assistance to
our employees and across our regions of presence are our key priorities
today. At the same time, we continue our many business transformation
initiatives in order to ensure we achieve our long-term goals.
To minimise operational risks for Severstal's business in the face of the
coronavirus pandemic, and closely following the recommendations of public
authorities, since March 2020 we have introduced:
? Mandatory sanitation and disinfection at all premises;
? Employee temperature checking on arrival at work;
? Cancelled business travel abroad;
? Discontinuation of mandatory entrance breathalyser checks;
? Remote working, where possible;
? Established a hotline and a special committee.
In terms of social security, in April 2020, all Severstal employees will
receive an annual salary increase of 3% - in line with the official level of
inflation. In addition, 50,000 of Severstal's employees, excluding the
top-100 managers, have received a one-time payment of RUB 10,000 in April
2020, to help with additional costs while self-isolating.
Moving to the financial results for Q1 2020, the first three months were
extremely challenging for all the world's steelmakers. In February, China,
the world's largest steel market, faced an outbreak of COVID-19. Stringent
quarantine measures led to automotive plants and construction projects
shutting down, resulting in lower demand for steel products. After that
initial outbreak of coronavirus, restrictions came into force in Europe and
Russia.
The anticipation of an economic slowdown and weaker steel demand led to
negative steel price dynamics starting from March 2020, although that price
level is still significantly higher than our costs. In Russia the national
currency devaluation and seasonal slowdown in demand led to the redirection
of part of our sales to the export market. Using the flexibility of our
distribution channels we increased the share of steel export shipments to
45% in Q1 2020.
While we face many challenges, Severstal is experienced in dealing with
volatile market environments and has navigated through a number of
downturns. We have a proven strong track record of successfully executing
our strategic priorities, cost control and operational optimisation. This,
in combination with the flexibility of our distribution channels, wide
product range and strong financial position enables us to move with
certainty through this difficult time and continue to implement our
strategic plans.
The Board remains confident in its outlook and is recommending a dividend of
27.35 roubles per share for Q1 2020."
SEVERSTAL RUSSIAN STEEL (RSD)
$ million, Q1 2020 Q4 2019 Change, % Q1 2020 Q1 2019 Change, %
unless
otherwise
stated
Revenue 1,770 1,806 (2.0%) 1,770 1,966 (10.0%)
EBITDA 370 303 22.1% 370 395 (6.3%)
EBITDA 20.9% 16.8% 4.1 ppts 20.9% 20.1% 0.8 ppts
margin, %
RSD steel product sales increased 4% q/q to 2.76 mln tonnes in Q1 2020 (Q4
2019: 2.66 mln tonnes).
RSD increased its share of steel export shipments to 45% (Q4 2019: 41%)
responding to a seasonal slowdown in domestic demand.
The share of high value-added (HVA) products within the sales portfolio
amounted to 42% (Q4 2019: 45%), due to increased shipments of hot rolled
coil and long steel product and decreased sales of LDPs.
Cold rolled coil sales volumes declined 10% q/q due to short-term scheduled
maintenance works at the four-stand cold rolling mill in Q1 2020. Meanwhile,
RSD increased sales of hot rolled coil by 12% q/q.
LDP sales volumes declined to 19,000 tonnes for Q1 2020, primarily
reflecting changes in the product mix and the accumulation of stock levels
at the Izhora Pipe Mill (ITZ).
The weighted average selling price for the whole range of steel products in
Q1 2020 declined by 6% q/q as a result of various factors affecting global
markets, including steel pricing volatility in both export and domestic
markets, as well as the Russian currency devaluation. RSD topline declined
by 2.0% q/q to $1,770 million (Q4 2019: $1,806 million). EBITDA increased by
22% q/q to $370 million (Q4 2019: $303 million). The EBITDA margin increased
to 20.9% (Q4 2019: 16.8%).
The total non-integrated cash cost of slab production per tonne at the
Cherepovets Steel Mill in Q1 2020 declined by $35/t q/q to $271/t (Q4 2019:
$306/t) as a result of lower raw material input costs and devaluation of the
rouble. The integrated cash cost of slab in Q1 2020 totalled $209/t
declining by $18/t q/q (Q4 2019: $227/t).
SEVERSTAL RESOURCES
$ million, Q1 2020 Q4 2019 Change, % Q1 2020 Q1 2019 Change, %
unless
otherwise
stated
Revenue 400 402 (0.5%) 400 511 (21.7%)
EBITDA 171 155 10.3% 171 295 (42.0%)
EBITDA 42.8% 38.6% 4.2 ppts 42.8% 57.7% (14.9 ppts)
margin, %
Coking coal concentrate sales volumes from Vorkutaugol declined 29% q/q to
0.95 mln tonnes as a result of a decrease in run-of-mine production due to
the scheduled long-wall repositioning at the Komsomolskaya mine in Q1 2020.
Iron ore pellet sales grew 6% to 2.97 mln tonnes (Q4 2019: 2.81 mln tonnes)
reflecting demand recovery in Q1 2020.
Iron ore concentrate sales volumes declined 8% to 1.47 mln tonnes (Q4 2019:
1.60 mln tonnes) impacted by a planned decline in production at Olcon.
Revenue at the Resources Division remained almost flat q/q at $400 million
(Q4 2019: $402 million), mainly affected by improved sales volumes and
pellet prices at Karelsky Okatysh q/q offset by lower iron ore and coking
coal sales volumes. EBITDA increased by 10.3% q/q to $171 million (Q4 2019:
$155 million) due to lower cost of sales q/q. The EBITDA margin amounted to
42.8%.
At Vorkutaugol, cash cost of coal concentrate per tonne increased to $78/t
(Q4 2019: $60/t) reflecting 29% sales volumes decline q/q. The cash cost of
iron ore pellets per tonne at Karelsky Okatysh remained flat at $27/t (Q4
2019: $27/t). At Olcon, cash cost per tonne of iron ore concentrate was
almost unchanged q/q at $30/t (Q4 2019: $29/t) despite sales volumes
reduction q/q.
DIVIDEND
The Board of Directors has recommended a dividend of 27.35 roubles per share
for Q1 2020. Approval of the dividend is expected to take place at the
Company's AGM on 5 June 2020. The record date for participation in the AGM
is 11 May 2020. The recommended record date for the dividend payment is 16
June 2020. Approval of the record date for the dividend payment is also
expected to take place at the Company's AGM on 5 June 2020.
OUTLOOK
In Q1 2020 global steel demand was affected by the spread of COVID-19. China
faced strong restrictions on economic activity in February leading to a
sizable accumulation of steel inventories, but a gradual restart of
activities in March supported steel market sentiment.
Whereas raw material prices were supported by high production levels, steel
prices for export destinations were sensitive to the drop in demand and
further restrictions, especially across ex-China regions.
At the start of 2020, Russian domestic steel demand was growing y/y, however
it is likely to deteriorate due to Russian GDP contraction and the
introduction of stricter measures to combat COVID-19.
However, despite a number of potential headwinds on both export and domestic
markets, Severstal's low cost position allows us to remain competitive in
the market and the Board remains confident in the resilience of the
Company'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 2019 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 Q1 2020 results for investors and analysts hosted by
Alexey Kulichenko, Chief Financial Officer, will be held on 24 April 2020 at
08.30 (London)/ 10.30 (Moscow).
Conference ID: 572901
International Dial:
+44 (0)330 336 9401
Russian Dial:
+7 495 705 9270 (Local access)
8 10 800 2796 5011 (Toll free)
The call will be recorded and there will be a replay facility available for
seven days as follows:
Replay Passcode: 6443866
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 $8,157 million and EBITDA of $2,805
million in 2019. Severstal's crude steel production in 2019 reached 11.8
million tonnes. www.severstal.com [3]
ISIN: US8181503025
Category Code: QRF
TIDM: SVST
LEI Code: 213800OKDPTV6K4ONO53
Sequence No.: 60186
EQS News ID: 1029019
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(END) Dow Jones Newswires
April 24, 2020 02:01 ET (06:01 GMT)
