Severstal reports Q4 & FY2019 financial results (965061)
31 January 2020 - 6:01PM
UK Regulatory
PAO Severstal (SVST)
Severstal reports Q4 & FY2019 financial results
31-Jan-2020 / 10:01 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 Q4 & FY2019 financial results
- Demonstrating strong profitability in challenging macro conditions-
Moscow, Russia - 31 January 2020 - PAO Severstal (MICEX-RTS: CHMF; LSE:
SVST), one of the world's leading steel and steel-related mining companies,
today announces its Q4 & FY2019 financial results for the period ended 31
December 2019.
CONSOLIDATED FINANCIAL RESULTS FOR THE FOURTH QUARTERED 31 DECEMBER 2019
$ million, Q4 2019 Q3 2019 Change, % FY 2019 FY 2018 Change, %
unless
otherwise
stated
Revenue 1,838 2,111 (12.9%) 8,157 8,580 (4.9%)
EBITDA1 602 787 (23.5%) 2,805 3,142 (10.7%)
EBITDA 32.8% 37.3% (4.5 ppts) 34.4% 36.6% (2.2 ppts)
margin, %
Profit 477 670 (28.8%) 2,327 2,707 (14.0%)
from
operations
Operating 26.0% 31.7% (5.7 ppts) 28.5% 31.6% (3.1 ppts)
margin, %
Free cash 101 346 (70.8%) 1,099 1,601 (31.4%)
flow2
Net profit 374 490 (23.7%) 1,767 2,051 (13.8%)
Basic 0.45 0.59 (23.7%) 2.14 2.51 (14.7%)
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 annual 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 FCF to net cash from operating activities is presented
in Severstal's annual 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 Q4 2019, 825.4 million shares for Q3 2019, 824.6
million shares for 2019, 817.1 million shares for 2018.
Q4 2019 vs. Q3 2019 ANALYSIS:
? Group revenue declined by 12.9% q/q to $1,838 million (Q3 2019: $2,111
million) due to lower steel sales volumes and adverse pricing dynamics for
steel and raw materials.
? Group EBITDA declined by 23.5% q/q to $602 million (Q3 2019: $787
million), reflecting topline decline partially offset by a reduction in
cost of sales. The Group's vertically integrated business model delivered
an EBITDA margin of 32.8%, maintaining its position as one of the highest
in the industry globally.
? FCF totalled $101 million (Q3 2019: $346 million), primarily reflecting
lower earnings and higher CAPEX, offset by positive changes in net working
capital q/q.
? Profit for the period totalled $374 million (Q3 2019: $490 million) and
includes a FX gain of $74 million.
? Cash CAPEX amounted to $431 million (Q3 2019: $311 million).
? Net debt increased to $1,570 million at the end of Q4 2019 (Q3 2019:
$1,300 million), primarily reflecting a reduction in cash balances as a
result of the dividend payment.
? 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 Q4 2019. The Board of Directors has therefore recommended a
dividend of 26.26 roubles per share for Q4 2019.
FY2019 vs. FY2018 ANALYSIS:
? Group revenue declined by 4.9% y/y to $8,157 million (FY2018: $8,580
million). This drop in revenue y/y was a result of weaker pricing for
steel products.
? Group EBITDA was 10.7% lower y/y at $2,805 million (FY2018: $3,142
million), primarily reflecting lower revenues offset by a reduction in
cost of sales. The Group's EBITDA margin remained high at 34.4% (FY2018:
36.6%).
? The Company generated $1,099 million of FCF, which represents a decline
of 31.4% y/y (FY2018: $1,601 million), mainly reflecting a decline in
EBITDA and CAPEX growth y/y.
FINANCIAL POSITION HIGHLIGHTS:
? At the end of Q4 2019, cash and cash equivalents stood at $1,081 million
(Q3 2019: $1,317 million), reflecting dividend payout partially offset by
FCF generation.
? Gross debt remained almost flat at $2,651 million (Q3 2019: $2,617
million).
? Net debt increased to $1,570 million by the end of Q4 2019 (Q3 2019:
$1,300 million), primarily reflecting a reduction in cash balances. The
Net debt/EBITDA ratio amounted to 0.6 at the end of Q4 2019 (Q3 2019:
0.4). Severstal's Net debt/EBITDA remains one of the lowest amongst steel
companies globally and enables 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 $1,081 million in
cash and cash equivalents in addition to unused committed credit lines and
overdraft facilities of $1,250 million, more than covering the short-term
principal debt of $282 million.
Alexander Shevelev, CEO of Severstal Management, commented:
"The fourth quarter of 2019 was challenging for steel producers globally,
with both steel demand and prices in decelerating and recovery only starting
in December 2019. In this environment, Severstal's vertically integrated
business model, combined with the flexibility of our multiple distribution
channels, successfully supported our EBITDA margin, which was 33% in Q4
2019. We are proud of our operational results for 2019 with 38% growth in
coking coal and 14% growth in iron ore concentrate sales volumes.
Our overall safety performance improved in 2019 and our LTIFR decreased by
36% to 0.61 (2018: 0.95), which is 27% below our goal for the year of 0.84.
However, we deeply regret that during the year there were two fatalities
among our staff and three among our contractors.
On the environmental side the amount of atmospheric emission of pollutants
per tonne of steel products fell by 7% in the year. In Q4 2019, we set
ourselves a target to increase the share of own energy generation using
secondary sources to 95% by 2025, which is an example of minimising both
costs and our environmental impact.
I am pleased that our efforts to transform the company which we started in
2018 in line with our 5-year strategy continue brining fruits. In 2019, we
earned additionally $224 million at the EBITDA level and are remaining one
of the lowest costs steelmakers globally.
Positive momentum continues with our investments in new technologies. Our
division Severstal Ventures made three new investments recently which should
enable us to offer our customers new materials with unique properties in the
future.
The Board remains confident in its outlook and is recommending a dividend of
26.26 roubles per share for Q4 2019."
SEVERSTAL RUSSIAN STEEL (RSD)
$ million, Q4 2019 Q3 2019 Change, % FY 2019 FY 2018 Change, %
unless
otherwise
stated
Revenue 1,806 2,102 (14.1%) 8,025 7,803 2.8%
EBITDA 303 433 (30.0%) 1,528 2,167 (29.5%)
EBITDA 16.8% 20.6% (3.8 ppts) 19.0% 27.8% (8.8 ppts)
margin, %
RSD steel product sales declined by 6% q/q to 2.66 mln tonnes in Q4 2019 (Q3
2019: 2.85 mln tonnes).
The Company increased its share of steel export shipments to 41% (Q3 2019:
33%) as a result of seasonal slowdown in domestic demand.
The share of high value-added (HVA) products within the sales portfolio
remained flat at 45% (Q3 2019: 45%).
LDP sales volumes declined by 20% q/q, reflecting changes in the product
mix, while at the same time sales volumes of thick plate increased 4% q/q.
The Izhora Pipe Mill maintained its 100% utilisation rate in Q4 2019.
The weighted average selling price for the whole range of rolled steel
products declined in Q4 2019 in line with global benchmarks and due to
seasonal slowdown in local demand. RSD topline declined by 14.1% q/q to
$1,806 million (Q3 2019: $2,102 million). EBITDA declined by 30% q/q to $303
million (Q3 2019: $433 million). The EBITDA margin was 16.8% (Q3 2019:
20.6%).
The total non-integrated cash cost of slab production per ton at the
Cherepovets Steel Mill in Q4 2019 declined by $40/t q/q to $306/t (Q3 2019:
$346/t) as a result of lower raw material expenses q/q. The integrated cash
cost of slab in Q4 2019 totalled $227/t due to lower profitability of the
Resources division.
SEVERSTAL RESOURCES
$ Q4 Q3 Change FY 2019 FY 2018 Change, %
million 2019 2019 , %
,
unless
otherwi
se
stated
Revenue 402 609 (34.0%) 2,169 1,908 13.7%
EBITDA 155 382 (59.4%) 1,248 1,016 22.8%
EBITDA 38.6% 62.7% (24.1 57.5% 53.2% 4.3 ppts
margin, ppts)
%
Coking coal concentrate sales volumes from Vorkutaugol declined by 1% q/q
reflecting a decrease in run-of-mine production q/q.
Iron ore pellet sales grew by 14% to 2.81 mln tonnes (Q3 2019: 2.46 mln
tonnes) reflecting higher production of pellets at Karelsky Okatysh.
Iron ore concentrate sales volumes declined by 17% to 1.60 mln tonnes (Q3
2019: 1.93 mln tonnes) driven by a decline in iron ore concentrate volumes
at Karelsky Okatysh.
Revenue at the Resources Division decreased by 34.0% q/q to $402 million (Q3
2019: $609 million), mainly affected by weaker pricing dynamics for iron ore
and coal products. EBITDA fell by 59.4% q/q to $155 million (Q3 2019: $382
million) due to the revenue decline q/q. The EBITDA margin amounted to
38.6%.
At Vorkutaugol, cash costs of coal concentrate per ton fell to 60$/t (Q3
2019: $66/t) reflecting positive changes in finished good and
work-in-progress cost structure. ?ash costs of iron ore pellets per tonne at
Karelsky Okatysh increased to $27/t (Q3 2019: $24/t) as a result of higher
repair expenses. At Olcon, cash costs of iron ore concentrate per tonne at
Olcon increased to $29/t (Q3 2019: $26/t) due to seasonal factors.
DIVIDEND
The Board of Directors has recommended a dividend of 26.26 roubles per share
for Q4 2019. 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
The Phase 1 agreement between China and the USA and progress with the Brexit
deal in Europe have reduced global economy risks and boosted market optimism
which should support steel demand in the long term. After the sharp drop in
Q4 2019 global steel prices seem to be turning the corner in Q1 2020 thanks
to restocking and production cuts.
In Russia, the construction sector will again remain a key steel demand
driver in 2020, supported by the expected implementation of the National
projects. Good pricing in the Russian market is attributable to the
appreciation of the rouble and limited steel supply due to current
reconstruction works at some mills.
Despite a number of potential headwinds on both the export and domestic
markets, Severstal's low cost position allows us to remain competitive in
the market. 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 will be 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 Q4 2019 results for investors and analysts hosted by
Alexey Kulichenko, Chief Financial Officer, will be held on 31 January 2020
at 09.30 (London)/ 12.30 (Moscow).
Conference ID: 2857830
International Dial:
+44 (0) 330 336 9411
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 Passcode: 2857830
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: FR
TIDM: SVST
LEI Code: 213800OKDPTV6K4ONO53
Sequence No.: 43854
EQS News ID: 965061
End of Announcement EQS News Service
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