DJ PAO Severstal: Severstal reports Q2 2021 financial and operational results
PAO Severstal (SVST)
PAO Severstal: Severstal reports Q2 2021 financial and operational results
16-Jul-2021 / 10:00 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.
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Severstal reports Q2 2021 financial and operational results
- EBITDA margin expanded to 56%; Delivering 42% EBITDA and 88% FCF growth qoq -
Moscow, Russia - 16 July 2021 - PAO Severstal (MOEX: CHMF; LSE: SVST), one of the world's leading steel and
steel-related mining companies, increased its revenue by 33% qoq to USD2,946 mln, EBITDA reached USD1,647 mln (+42% qoq),
EBITDA margin increased to 55.9% (+3.5 ppts qoq).
KEY CONSOLIDATED OPERATIONAL AND FINANCIAL RESULTS
Q2 2021 Q1 2021 qoq 6m 2021 6m 20206 yoy
Financials, USD million
Revenue 2,946 2,219 32.8% 5,165 3,295 56.8%
EBITDA1 1,647 1,162 41.7% 2,809 1,056 166%
EBITDA margin, % 55.9% 52.4% 3.5 ppts 54.4% 32.0% 22.4 ppts
Free cash flow2 936 497 88.3% 1,433 244 5.9x
Net profit 1,139 721 58.0% 1,860 463 4x
Net debt/EBITDA3 0.37 0.52 (28.8%) 0.37 0.82 (54.9%)
Basic EPS4, USD 1.36 0.87 56.3% 2.24 0.56 4x
Production, kt
Hot metal 2,627 2,674 (2%) 5,301 4,741 12%
Crude steel 2,776 2,961 (6%) 5,737 5,657 1%
Sales, kt
Steel products, incl.: 2,678 2,630 2% 5,308 5,127 4%
HVA 1,308 1,222 7% 2,530 2,250 12%
Iron ore products 1,310 1,024 28% 2,334 3,172 (26%)
Coal 282 345 (18%) 627 757 (17%)
Health and safety
LTIFR (staff) 5 0.57 0.50 14% 0.53 0.89 (40%)
LTIFR (staff + contractors) 0.63 0.69 (9%) 0.66 n/a n/a
Notes: 1. EBITDA represents profit from operations plus depreciation and amortisation of productive assets (including the
Group's share of 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. 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. 4. Basic EPS is calculated as profit for the period divided by the weighted average number of shares outstanding
during the period: 834 mln shares for Q2 2021 and 826 mln shares for Q1 2021; 830 mln shares for 6m 2021 and 825
mln shares for 6m 2020. 5. LTIFR refers to Lost Time Injury Frequency Rate, the number of lost time injuries occurring in a workplace per 1
mln hours worked. The scope covers injuries and hours worked for staff and contractors, using the cumulative data
from the beginning of the calendar year. 6. These data include adjustments made in connection with the change in presentation described in Severstal's
quarterly financial statements.
Q2 2021 vs. Q1 2021 ANALYSIS:
Operational results - Production: Hot metal output decreased by 2% qoq to 2.63 mln tonnes due to scheduled BF repairs. Crude steel
production decreased to 2.78 mln t (-6% qoq), as a result of lower hot metal output and seasonal servicing works in
BOF shop. - Steel sales were up by 2% qoq to 2.68 mln tonnes, mainly due to strong sales of semi-finished and HVA products. The
start of the construction season in Russia supported the demand for CRC, colour coated steel and metalware. Sales
of hot-rolled steel and plate decreased by 7% qoq to 1.1 mln tonnes due to significant scheduled repair works. As a
result, the share of the domestic market increased to 55% (+7 ppts qoq). - Total share of high value-added (HVA) products amounted to 49% (+3 ppts qoq). - Raw materials sales: Sales of coal decreased by 18% qoq to 0.28 mln t, driven mainly by a decline in steam coal
sales as demand softened during the summer season. Severstal continued to focus on implementing its environmental
strategy during the period, and in June 2021 Vorkutaugol announced the termination of steam coal production,
starting from the first quarter of 2022 (press-release). Sales of iron ore products increased by 28% to 1.3 mln
tonnes, driven by strong demand for pellets in Europe (sales grew by 34% qoq), as crude steel production continued
to recover in the EU27.
Financial results - Revenue increased by 33% qoq to USD2,946 mln reflecting a 30% increase in weighted average steel prices qoq and
higher sales volumes. The revenue increase was primarily driven by Russia and Europe where revenues grew by 43% qoq
and 26% qoq respectively. - EBITDA grew to USD1,647 mln (+42% qoq), primarily reflecting the higher revenue fueled by wider price spreads between
slab and raw materials baskets. EBITDA margin reached 56%, maintaining the Group's position as the global leader by
EBITDA margin in the steel industry. - Net profit totaled USD1,139 mln (+58% qoq), as a result of revenue and profitability growth. - Free Cash Flow increased by 88% qoq to USD936 mln, driven by higher EBITDA and marginally lower CAPEX, which amounted
to USD273 mln (-2% qoq). This was partially compensated by a build-up in working capital of USD151 mln
(vs. USD224 mln in Q1 2021) due to an increase in trade accounts receivable (USD134 mln in Q2 2021) and a build-up of
inventories (USD170 mln).
6M 2021 vs. 6M 2020 ANALYSIS:
Operational results - Production: Hot metal production increased by 12% yoy to 5.3 mln tonnes, due to BF-3 commissioning in December
2020. Steel output grew to 5.7 mln tonnes (+1% yoy), driven by the EAF-1 start up in April 2021. - Steel sales were up by 4% yoy to 5.3 mln tonnes. Sales of semi-finished products grew by 181% yoy to 0.58 mln
tonnes following higher output of crude steel, coupled with repairs to the hot-rolled shop. Sales of hot-rolled
steel and plates decreased by 17% yoy due to a large-scale upgrade of one of the continuous slab heating furnaces.
The total share of domestic sales volume went down by 7 ppts yoy to 51% due to favourable export market conditions
in Q1 2021. - High value-added (HVA) sales were up by 12% yoy to 2.5 mln tonnes, mainly due to strong sales of cold-rolled (+32%
yoy to 0.54 mln t) and galvanized steel (+31% yoy to 0.53 mln t). The HVA share in consolidated sales amounted to
48% (+4 ppts yoy). - Raw materials sales: Sales of coal decreased by 17% yoy to 0.63 mln tonnes driven mainly by a decline in coal
concentrate sales on the back of lower output impacted by the long wall repositioning. Sales of iron ore products
decreased by 26% to 2.3 mln tonnes, driven by the redirection of iron ore flow to owned assets following the
start-up of BF-3 in the end of 2020. Sales of iron ore pellets to third parties reduced by 23% yoy to 2.3 mln
tonnes. Iron ore concentrate sales to third parties decrease substantially in Q2 2021, amounting to just 47 kt in
6m 2021 (-74% yoy).
Financial results - Revenue increased to USD5,165 mln (+57% yoy) due to higher steel prices and sales volumes. - EBITDA grew to USD2,809 mln (+166% yoy) due to higher steel prices in 6m 2021. EBITDA margin reached record high 54%. - Net profit totaled USD1,860 mln (increase of 4x yoy), including FX losses of USD13 mln. - Free Cash Flow increased by 5.9x yoy to USD1,433 mln, driven by higher earnings. - CAPEX amounted to USD551 mln.
Financial position - Cash and cash equivalents decreased to USD783 mln (-15% qoq) on the back of the Q4 2020 and Q1 2021 dividend payments
and the execution of convertible bonds rights, partially settled in cash. - Total debt declined to USD2,324 mln (-7% qoq) due to the redemption of convertible bonds. - Net debt declined to USD1,541 mln (-3% qoq). The Net debt/EBITDA ratio amounted to 0.37 (Q1 2021: 0.52). Severstal's
Net debt/EBITDA ratio remains one of the lowest among steel companies globally, and enables the Company to return
value to its shareholders in accordance with its dividend policy. - Strong liquidity position, with USD783 mln in cash and cash equivalents in addition to unused committed credit lines
and overdraft facilities of USD1,148 mln, which more than covers the Company's short-term debt of USD554 mln.
DIVIDEND - The Board of Directors is recommending a dividend of 84.45 roubles per share for Q2 2021. Approval of the dividend
is expected to take place at the Company's EGM on 20 August 2021.The recommended record date for the dividend
payment is 2 September 2021. The approval of the record date for the dividend payment is also expected to take
place at the Company's EGM on 20 August 2021.
MARKET UPDATE AND OUTLOOK - In Q2 2021 steel prices reached another record level in export markets. Iron ore prices also tested all-time highs
due to strong demand in China and a recovery of pig iron production outside China. The coking coal market was
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