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.
=----------------------------------------------------------------------------------------------------------------------
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
(MORE TO FOLLOW) Dow Jones Newswires
July 16, 2021 03:00 ET (07:00 GMT)
DJ PAO Severstal: Severstal reports Q2 2021 -2-
divided between China and the rest of the world due to a ban on imports from Australia. As a result, Chinese import
prices approached USD300/t CFR, while Australian export prices were subdued and only recently started to grow to USD190
/t FOB. - Steel demand was strong in Q2 2021 thanks to a recovery in industrial production, low inventory levels and optimism
due to the progress of international vaccination programmes. Supply was unable to meet demand, resulting in longer
lead times in the EU and the USA. - The Asian market was supported by the seasonal increase in consumption during the Spring, but this subsided in
June. Asian supply moved to the Middle East and Europe, causing some weakening of export prices in the Black Sea
region. Turkish demand has also weakened, putting additional pressure on prices. At the same time, market
conditions in Europe and USA remain exceptionally tight due to import barriers and inadequate domestic supply. - The Chinese government is combating higher prices by discouraging steel exports and imposing strict regulation on
futures trading. - As for the domestic market landscape going forward, the Russian Government is imposing a temporary 15% export duty
on steel coming into force from 1 August 2021 until 31 December 2021, which might impact local pricing.
Alexander Shevelev, CEO of Severstal Management, commented:
"The COVID-19 pandemic continues to challenge regions across the world, and Russia is no exception. The number of new cases has grown significantly in recent weeks. The health of our employees is Severstal's number one priority, and we have intensified all preventive measures. As an essential part of our efforts to reduce the risk of infection, we have started an information campaign encouraging our employees and contractors to get vaccinated. Today more than 50% of our staff already has immunity through vaccination or antibodies after infection and we aim to reach 80% by the end of the summer.
Another vital health and safety focus is workplace injury prevention. LTIFR for both our staff and contractors declined in Q2 2021 to 0.63. However, the LTIFR for our staff was unfortunately up 14% to 0.57 qoq and regrettably we had two fatalities in Q2 2021: one fatality among staff and one among contractors.
We also continue to improve our environmental strategy. Thus we set a medium-term goal to reduce the carbon intensity of CO2 emissions per tonne of steel by 10% by 2030. The medium-term target will be achieved through projects including the technical re-equipment of production facilities and the introduction of the best available technologies at all the Company's assets (press-release).
As for the macro-environment, Q2 2021 was remarkably strong. The continued global economic recovery supported steel and raw materials prices across all key regions. This led to a robust set of financial results in the reporting quarter. Revenue grew by 33% qoq to USD2.9bn due to an increase in average prices coupled with a growth in sales volumes and an improved product mix, with the share of HVA products expanding by 3 ppts qoq to 49%. EBITDA rose by 42% to USD1.6bn following a widening of revenue and price spreads.
Management's continuing efforts focused on cash generation resulted in a record FCF of USD0.9bn (+88% qoq). Our net debt/EBITDA ratio decreased to 0.37, which helped us to recommend a dividend in line with our policy.
Severstal's strong performance in Q2 2021 has demonstrated the benefits of our business model and sales flexibility. Although we expect steel and commodity prices to soften later this year, the Board of Directors remains confident in our ability to deliver industry-leading margins and strong returns."
SEGMENTS PERFORMANCE
Severstal Russian Steel (RSD)
USD million, unless otherwise stated Q2 2021 Q1 2021 qoq 6m 2021 6m 20201 yoy Steel sales, kt 2,691 2,642 2% 5,333 5,147 4% Semis 317 259 22% 576 205 181% Commercial 1,066 1,161 (8%) 2,227 2,692 (17%) HVA 1,308 1,222 7% 2,530 2,250 12% Revenue 2,759 2,154 28.1% 4,913 3,286 49.5% EBITDA 1,021 689 48.2% 1,710 721 137.2% EBITDA margin, % 37% 32% 5 ppts 34.8% 21.9% 12.9 ppts
Notes: 1. These data include adjustments made in connection with the change in presentation described in Severstal's
quarterly financial statements. - Steel sales increased by 2% qoq to 2.7 mln t driven by higher sales of semis and HVA products. The Company
increased its share of domestic shipments to 55% (+7 ppts qoq) due to the start of the construction season in
Russia. - Total share of high value-added (HVA) products amounted to 49%. - Revenue increased by 28% qoq to USD2,759 mln. - EBITDA grew by 48% qoq to USD1,021 mln. EBITDA margin expanded to 37% (+5 ppts). - The total non-integrated cash cost of slab per tonne at the Cherepovets Steel Mill increased to USD457/t (+23% qoq)
affected by higher input costs. The integrated cash cost of slab amounted to USD175/t (-5% qoq).
Severstal Resources
USD million, unless otherwise stated Q2 2021 Q1 2021 qoq 6m 2021 6m 2020 yoy ?oal sales, kt 1,149 1,298 (11%) 2,447 2,815 (13%) Iron ore sales, kt 4,659 4,142 12% 8,801 8,872 (1%) Revenue 999 747 33.7% 1,746 802 117.7% EBITDA 733 525 39.6% 1,258 353 256.4% EBITDA margin, % 73.4% 70.3% 3.1 ppts 72.1% 44.0% 28.1 ppts - Coal sales decreased by 11% qoq to 1.15 mln tonnes mainly as a result of coking coal concentrate sales reduction
due to a decline in output qoq affected by the long wall repositioning. - Sales of iron ore increased by 12% qoq to 4.66 mln tonnes due to accelerating of pellets sales to third parties and
concentrate to captive assets. - Revenue from the Resources Division increased to USD999 mln (+34% qoq). EBITDA increased by 40% qoq to USD733 mln. The
EBITDA margin increased to 73%. - At Vorkutaugol, the cash cost of coal concentrate per tonne amounted to USD90/t (+30% qoq). The cash cost of iron ore
pellets per tonne at Karelsky Okatysh was USD33/t (+14% qoq). At Olcon, the cash cost per tonne of iron ore
concentrate decreased to USD27/t (-18% qoq).
NOTES 1. Full consolidated interim condensed financial statements are available at http://www.severstal.com/eng/ir/
results_and_reports/financial_results/index.phtml. This includes the review report from KPMG, Severstal's external
auditor, carried out in accordance with International Standard on Review Engagements 2410. 2. Severstal's Annual Report 2020 is available at http://www.severstal.com/eng/ir/results_and_reports/annual_reports/
index.phtml 3. Each of the directors who is a director at the date of the approval of this document confirms that to the best of
their knowledge: that the consolidated interim condensed financial statements has been prepared in accordance with
IAS34; that the consolidated interim condensed financial statements give a true and fair view of Severstal's
assets, liabilities, financial position and profit or loss; and that this document contains a fair review of
important events that have occurred during the first six months of the year and their impact on the consolidated
interim condensed financial statements; and of the principal risks and uncertainties for the remaining six months
of the year; and that the report contains a fair review of related party transactions.
A conference call on Q2 2021 results for investors and analysts hosted by Alexey Kulichenko, Chief Financial Officer, will be held on 16 July 2021 at 12.00 (London)/ 14.00 (Moscow).
Call Conference ID: 8735792 International Dial:
+44 (0)330 336 9434 (local access)
0800 279 7209 (toll-free)
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 seven days as follows:
Replay pass code: 8735792
International Dial:
+44 (0)20 3859 5407 (local)
0 808 101 1153 (toll-free)
Russian Dial: 810 800 2702 1012 (toll-free)
ANNEX
1. Consolidates sales by product
Sales volumes, kt Q2 2021 Q1 2021 qoq 6m 2021 6m 20201 yoy Coal: 282 345 (18%) 627 757 (17%) Coking coal concentrate 38 35 9% 73 169 (57%) Steam coal 244 310 (21%) 554 588 (6%) Iron ore: 1,310 1,024 28% 2,334 3,172 (26%) Iron ore pellets 1,309 978 34% 2,287 2,988 (23%) Iron ore concentrate 1 46 (98%) 47 184 (74%) Steel: 2,678 2,630 2% 5,308 5,127 4% Semi-finished products 317 259 22% 576 205 181% Hot-rolled steel and plate 1,102 1,191 (7%) 2,293 2,770 (17%) Cold-rolled steel 280 257 9% 537 408 32% Galvanized steel 255 275 (7%) 530 406 31% Color coated coil 119 83 43% 202 211 (4%) Long steel 162 158 3% 320 373 (14%) Metalware 175 142 23% 317 281 13% Large diameter pipes 75 60 25% 135 44 n/a Other tubes, pipes, formed shapes 193 205 (6%) 398 429 (7%)
(MORE TO FOLLOW) Dow Jones Newswires
July 16, 2021 03:00 ET (07:00 GMT)
DJ PAO Severstal: Severstal reports Q2 2021 -3-
2. Russian Steel Division sales by product
Sales volumes, kt Q2 2021 Q1 2021 qoq 6m 2021 6m 20201 yoy Total steel products 2,691 2,642 2% 5,333 5,147 4% Semi-finished products 317 259 22% 576 205 181% Hot-rolled coil and plate 1,101 1,192 (8%) 2,293 2,770 (17%) Cold-rolled coil 280 257 9% 537 408 32% Galvanised and metallic coated coil 255 275 (7%) 530 406 31% Colour coated coil 119 83 43% 202 211 (4%) Long products 174 169 3% 343 391 (12%) Metalware products 176 143 23% 319 282 13% Large diameter pipes 75 60 25% 135 44 n/a Other tubes, pipes, formed shapes 194 204 (5%) 398 430 (7%)
3. Russian Steel Division sales by destination
Sales volumes, kt Q2 2021 Q1 2021 qoq 6m 2021 6m 20201 yoy Total steel products 2,691 2,642 2% 5,333 5,147 4% Russia 1,482 1,256 18% 2,738 2,963 (8%) Export 1,209 1,386 (13%) 2,595 2,184 19% 1. These data include adjustments made in connection with the change in presentation described in Severstal's
quarterly financial statements
4. Russian Steel Division average prices
Sales price, USD/tonne Q2 2021 Q1 2021 qoq 6m 2021 6m 20201 yoy Semi-finished products 624 527 18% 581 376 55% Hot-rolled coil and plate 846 627 35% 732 453 62% Cold-rolled coil 1,001 752 33% 882 556 59% Galvanized and metallic coated coil 1,213 852 42% 1,026 639 61% Colour coated coil 1,427 1,120 27% 1,300 782 66% Long products 673 558 21% 616 423 46% Metalware products 1,097 1,059 4% 1,080 862 25% Large diameter pipes 752 714 5% 735 785 (6%) Other tubes, pipes, formed shapes 941 718 31% 826 500 65% Weighted average selling price 906 696 30% 802 513 56% 1. These data include adjustments made in connection with the change in presentation described in Severstal's
quarterly financial statements
5. Resource Division sales
kt Q2 2021 Q1 2021 qoq 6m 2021 6m 2020 yoy Coal 1,149 1,298 (11%) 2,447 2,815 (13%) Coking coal concentrate 905 988 (8%) 1,893 2,227 (15%) Steam coal 244 310 (21%) 554 588 (6%) Iron ore 4,659 4,142 12% 8,801 8,872 (1%) Iron ore pellets 3,001 2,645 13% 5,646 5,499 3% Iron ore concentrate 1,658 1,497 11% 3,155 3,373 (6%)
6. Vorkutaugol operating highlights
kt Q2 2021 Q1 2021 qoq 6m 2021 6m 2020 yoy Run of mine: coal production, 2,047 2,294 (11%) 4,341 5,231 (17%) Coking coal concentrate sales 905 988 (8%) 1,893 2,227 (15%) Internal consumption 867 953 (9%) 1,820 2,058 (12%) Third party 38 35 9% 73 169 (57%)
7. Karelsky Okatysh ("KO") iron ore pellets production and sales volumes
kt Q2 2021 Q1 2021 qoq 6m 2021 6m 2020 yoy Production 2,916 2,851 2% 5,767 5,420 6% Pellets sales 3,001 2,645 13% 5,646 5,499 3% Internal consumption 2,238 2,293 (2%) 4,531 5,499 (18%) Third party 763 352 117% 1,115 0 n/a
8. Iron ore concentrate sales volumes
kt Q2 2021 Q1 2021 qoq 6m 2021 6m 2020 yoy Olcon 1,088 996 9% 2,084 2,106 (1%) Korpanga 570 501 14% 1,071 896 20% KO 0 0 n/a 0 371 n/a Total 1,658 1,497 11% 3,155 3,373 (6%)
For further information, please contact:
Severstal Investor Relations
Vladimir Zaluzhsky, Nikita Klimantov
T: +7 (495) 926-77-66
vladimir.zaluzhsky@severstal.com
na.klimantov@severstal.com
Severstal Public Relations
Anastasia Mishanina
T: +7 (495) 926-77-66
anastasia.mishanina@severstal.com
Severstal's financial communications agent - Hudson Sandler
Andrew Leach / Emily Dillon
T: +44 (0) 20 7796 4133
***
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 MOEX and the company's GDRs are traded on the LSE. Severstal reported revenue of USD6,870 mln and EBITDA of USD2,422 mln in 2020. Severstal's crude steel production in 2020 reached 11.3 mln tonnes. www.severstal.com -----------------------------------------------------------------------------------------------------------------------
ISIN: US8181503025 Category Code: IR TIDM: SVST LEI Code: 213800OKDPTV6K4ONO53 OAM Categories: 3.1. Additional regulated information required to be disclosed under the laws of a Member State Sequence No.: 117744 EQS News ID: 1219500 End of Announcement EQS News Service =------------------------------------------------------------------------------------ Image link: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1219500&application_name=news
(END) Dow Jones Newswires
July 16, 2021 03:00 ET (07:00 GMT)
