DJ Severstal reports Q3 & 9M 2020 financial results
PAO Severstal (SVST)
Severstal reports Q3 & 9M 2020 financial results
22-Oct-2020 / 09:00 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 2020 financial results
- Delivering 31% EBITDA and 101% FCF growth q/q; EBITDA margin reaches 35.0%
-
Moscow, Russia - 22 October 2020 - PAO Severstal (MICEX-RTS: CHMF; LSE:
SVST), one of the world's leading steel and steel-related mining companies,
today announces its Q3 & 9M 2020 financial results for the period ended 30
September 2020.
CONSOLIDATED FINANCIAL RESULTS FOR Q3 AND 9M 2020
$ million, Q3 2020 Q2 2020 Change, % 9M 2020 9M 2019 Change, %
unless
otherwise
stated
Revenue 1,875 1,590 17.9% 5,242 6,319 (17.0%)
EBITDA1 656 501 30.9% 1,712 2,203 (22.3%)
EBITDA 35.0% 31.5% 3.5 ppts 32.7% 34.9% (2.2 ppts)
margin, %
Profit from 538 382 40.8% 1,345 1,850 (27.3%)
operations
Operating 28.7% 24.0% 4.7 ppts 25.7% 29.3% (3.6 ppts)
margin, %
Free cash 382 190 101.1% 626 998 (37.3%)
flow2
Net profit 167 391 (57.3%) 630 1,393 (54.8%)
Basic EPS3, 0.20 0.47 (57.4%) 0.76 1.69 (55.0%)
$
Net 0.77 0.82 0.77 0.43
Debt/EBITDA
4
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 Q3 2020 and Q2 2020, 9M 2020 and 824 million shares for
9M 2019.
4) Net Debt/EBITDA ratio is calculated as net debt divided by EBITDA for
the last 12 months and is included in Severstal's quarterly financial
statements. Net debt equals the total debt less cash and cash equivalents
at the end of the reporting period.
Q3 2020 vs. Q2 2020 ANALYSIS:
? Group revenue increased by 17.9% q/q to $1,875 million (Q2 2020: $1,590
million) driven by steel prices recovery q/q and steel sales volumes
growth.
? Group EBITDA increased by 30.9% q/q to $656 million (Q2 2020: $501
million), reflecting topline growth. Severstal's vertically integrated
business model delivered an EBITDA margin of 35.0%, maintaining the
Group's position of having one of the highest EBITDA margins in the steel
industry globally.
? Free Cash Flow surged by 101.1% q/q to $382 million in Q3 2020 (Q2 2020:
$190 million), primarily reflecting earnings growth and positive changes
in net working capital q/q.
? Net profit was $167 million (Q2 2020: $391 million), including a FX loss
of $262 million, which mainly reflects an accounting loss on the
translation of USD debt balances due to the devaluation of the rouble in
the third quarter.
? Cash CAPEX amounted to $341 million (Q2 2020: $331 million).
? Net debt declined to $1,782 million at the end of Q3 2020 (Q2 2020:
$2,006 million).
? Severstal is committed to returning maximum 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 0.77 as
at the end of Q3 2020. The Board of Directors has therefore recommended a
dividend of 37.34 roubles per share for Q3 2020.
9M 2020 vs. 9M 2019 ANALYSIS:
? Group revenue declined by 17.0% y/y to $5,242 million in 9M 2020 (9M
2019: $6,319 million). This drop in revenue y/y was due to weaker pricing
dynamics for steel products and lower sales volumes in the period.
? Group EBITDA declined 22.3% y/y at $1,712 million in 9M 2020 (9M 2019:
$2,203 million), primarily reflecting lower revenues, which were partially
offset by a reduction in the cost of sales. The Group's EBITDA margin
remained high at 32.7% (9M 2019: 34.9%).
? The Company generated $626 million of FCF in 9M 2020 (9M 2019: $998
million), mainly reflecting a decline in EBITDA and CAPEX growth y/y.
FINANCIAL POSITION HIGHLIGHTS:
? At the end of Q3 2020, cash and cash equivalents increased to $781
million (Q2 2020: $584 million).
? Gross debt remained almost unchanged at $2,563 million (Q2 2020: $2,590
million).
? Net debt declined to $1,782 million at the end of Q3 2020 (Q2 2020:
$2,006 million). The Net debt/EBITDA ratio was 0.77 at the end of Q3 2020
(Q2 2020: 0.82). Severstal's Net debt/EBITDA ratio remains one of the
lowest among 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 $781 million in cash
and cash equivalents in addition to unused committed credit lines and
overdraft facilities of $1,009 million, more than covering the Company's
short-term principal debt of $556 million.
Alexander Shevelev, CEO of Severstal Management, commented:
"The health and safety of all Severstal employees remains our first
priority. Our response to COVID-19 pandemic has proved effective so far, and
we have avoided any large-scale outbreak of COVID-19 and our operations have
continued without interruption. Considering the autumn increase in
incidence, we have again decided to send our office personnel to remote
working, cancelled all business trips; all staff continue to work adhering
to our strict sanitary policies.
To our great regret, in Q3 2020 we have recorded one fatality of our
employee. We remain committed to reach our 2025 safety goals, which are to
eliminate fatalities and reduce LTIFR by 50% to 0.5. As of the end of 9
months of 2020 it stood at 0.68. In October 2020, we announced the
appointment of a new Director for Health, Safety and Environment. We hope
that his significant experience, expertise and leadership will help us make
a significant step change in our improvement in the area of workplace
safety.
Recovery in global markets impacted positively on steel price dynamics.
Increase in revenues in Q3 enabled us to deliver EBITDA of $656 million and
to increase EBITDA margin from 31.5% to 35.0%, which is the highest in the
global steel industry.
Market-wise, favourable domestic price dynamics allowed us to reallocate a
portion of our sales volumes to Russia in Q3 2020. The weighted average
steel selling prices increased by 2% due to sales of HVA finished goods
which reduced our stock levels. HVA share amounted to 49% in Q3.
We increased sales of steel products by 18% q/q, sales volumes of iron ore
pellets and of iron ore concentrate increased by 3%. As a result, total
revenue grew by 18% q/q.
Despite the COVID-19 pandemic our transformation programme continues and
remains a very high priority for us.
Severstal's financial position remains strong with Net Debt/EBITDA ratio of
0.77 times at the end of Q3 2020, the Board remains confident in its outlook
and is recommending a dividend of 37.34 roubles per share for Q3 2020".
SEVERSTAL RUSSIAN STEEL (RSD)
$ million, Q3 2020 Q2 2020 Change, % 9M 2020 9M 2019 Change, %
unless
otherwise
stated
Revenue 1,874 1,588 18.0% 5,232 6,219 (15.9%)
EBITDA 412 351 17.4% 1,133 1,225 (7.5%)
EBITDA 22.0% 22.1% (0.1 ppts) 21.7% 19.7% 2.0 ppts
margin, %
RSD steel product sales increased by 18% q/q to 3.02 mln tonnes in Q3 2020
(Q2 2020: 2.56 mln tonnes) reflecting production growth, a lower share of
export shipments with a longer realisation period vs the previous quarter
and finished goods stock reduction.
The Company increased its share of domestic steel shipments to 63% (Q2 2020:
56%) in response to demand recovery in Russia in Q3 2020.
The share of high value-added (HVA) products within the sales portfolio
amounted to 49% (Q2 2020: 43%) as a result of delayed demand for HVA
products. The Company reduced HVA finished goods stock levels q/q.
The weighted average selling price for the whole range of steel products in
Q3 2020 increased by 2%, due to positive steel pricing dynamics and a higher
share of HVA products in the sales mix q/q. RSD topline increased by 18.0%
q/q to $1,874 million (Q2 2020: $1,588 million). EBITDA increased by 17.4%
q/q to $412 million (Q2 2020: $351 million). The EBITDA margin remained
almost flat at 22.0% (Q2 2020: 22.1%).
The total non-integrated cash cost of slab production per tonne at the
Cherepovets Steel Mill in Q3 2020 increased by $18/t q/q to $270/t (Q2 2020:
$252/t) affected by higher input cost and devaluation of the rouble. The
integrated cash cost of slab in Q3 2020 declined by $11/t q/q to $173/t (Q2
2020: $184/t).
SEVERSTAL RESOURCES
$ million, Q3 2020 Q2 2020 Change, % 9M 2020 9M 2019 Change, %
unless
otherwise
stated
Revenue 473 402 17.7% 1,275 1,767 (27.8%)
EBITDA 261 182 43.4% 614 1,093 (43.8%)
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