PAO Severstal (SVST) PAO Severstal: Severstal reports Q3 2021
financial and operational results 18-Oct-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 Q3 2021 financial and operational results
- EBITDA margin was 54%; EBITDA grew 5% and FCF grew 6% qoq
-
Moscow, Russia - 18 October 2021 - PAO Severstal (MOEX: CHMF;
LSE: SVST), one of the world's leading steel and steel-related
mining companies, increased its revenue by 9% qoq to USD3,206 mln,
EBITDA reached USD1,723 mln (+5% qoq), EBITDA margin amounted to
54% (-2 ppts qoq).
KEY CONSOLIDATED OPERATIONAL AND FINANCIAL RESULTS
Q3 2021 Q2 2021 qoq 9m 2021 9m 20206 yoy
Financials, USD million
Revenue 3,206 2,946 9% 8,371 5,147 63%
EBITDA1 1,723 1,647 5% 4,532 1,712 165%
EBITDA margin, % 54 56 (2ppts) 54 33 21ppts
Free cash flow2 992 936 6% 2,425 626 287%
Net profit 1,237 1,139 9% 3,097 630 392%
Net debt/EBITDA3 0.29 0.37 (22%) 0.29 0.77 (62%)
Basic EPS4, USD 1.48 1.36 9% 3.72 0.76 389%
Production, kt
Hot metal 2,728 2,627 4% 8,029 7,143 12%
Crude steel 2,878 2,776 4% 8,615 8,547 1%
Sales, kt
Steel products, incl: 2,694 2,678 1% 8,002 8,059 (1%)
HVA 1,146 1,308 (12%) 3,676 3,535 4%
Iron ore products 1,092 1,310 (17%) 3,426 4,530 (24%)
Coal 127 282 (55%) 754 1,101 (32%)
Health and safety
LTIFR (staff) 5 0.93 0.57 63% 0.68 0.71 (4%)
LTIFR (staff + contractors) 0.88 0.63 40% 0.73 - -
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 thegain/(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'squarterly financial statements. 2. Free Cash Flow
("FCF") is determined as the aggregate amount of the following
items: Net cash fromoperating activities, CAPEX, proceeds from
disposal of PPE and intangible assets, interest received and
dividendsreceived. A reconciliation of FCF to net cash from
operating activities is presented in Severstal's quarterlyfinancial
statements. 3. Net Debt/EBITDA ratio is calculated as net debt
divided by EBITDA for the last 12 months and is includedin
Severstal's quarterly financial statements. Net debt equals the
total debt less cash and cash equivalents at theend of the
reporting period. 4. Basic EPS is calculated as profit for the
period divided by the weighted average number of sharesoutstanding
during the period: 838 million shares for Q3 2021 and 834 million
shares for Q2 2021; 833 mln sharesfor 9m 2021 and 825 million
shares for 9m 2020. 5. LTIFR refers to Lost Time Injury Frequency
Rate, the number of lost time injuries occurring in aworkplace per
one million hours worked. The scope covers injuries and hours
worked for staff and contractors, usingthe cumulative data from the
beginning of the calendar year. 6. These data include adjustments
made in connection with the change in presentation described
inSeverstal's quarterly financial statements.
Q3 2021 vs. Q2 2021 ANALYSIS:
Consolidated operational results
-- Production: Hot metal output grew by 4% qoq to 2.73 mln
tonnes due to end of scheduled BF repairs. Crudesteel production
raised to 2.88 mln tonnes (+4% qoq), as a result of completed BOF
shop and casting machinesupgrade. The upgrade will allow us to
increase crude BOF steel output by 0.5 mln tonnes per annum.
-- Steel sales were up by 1% qoq to 2.69 mln tonnes, due to
strong sales of pig iron and slabs. Sales of HVAdecreased by 12%
qoq to 1.15 mln tonnes on the back of customer's expectations of
further price decline. Sales ofhot-rolled steel and plate increased
by 1% qoq to 1.12 mln tonnes. The total share of export sales
volume,including sales of pig iron increased by 6 ppts qoq to 51%
due to a softening of the demand in Russia.
-- Total share of high value-added (HVA) products amounted to
43% (-6 ppts qoq) due to softening demand andincrease of pig iron
sales. If we don't take into account the increase in pig iron
shipments, the HVA share in theproduct portfolio has not changed
almost qoq.
-- Raw materials sales: Sales of coal decreased by 55% qoq to
0.13 mln tonnes, driven mainly by a decline insteam coal sales due
lower output qoq because of long wall repositioning. Iron ore sales
were down by 17% qoq to1.09 mln tonnes, driven by a redistribution
of sales to Cherepovets steel mill, coupled with lower
pelletproduction on the back of repairs.
Consolidated financial results
-- Revenue increased by 9% qoq to USD3,206 mln due to higher
sales volumes and increase in weighted averagesteel prices. Sales
growth was primarily driven by export markets with an increase of
revenue from the NorthAmerica region (4x growth qoq) as well as
from the Middle East region (2x growth qoq).
-- EBITDA increased to USD1,723 mln (+5% qoq), higher revenue
was partially impacted by the additional exportduties imposed by
the Russian government. EBITDA margin was 54% (-2 ppts qoq).
-- Free Cash Flow increased to USD992 mln (+6% qoq), driven by
higher EBITDA and lower build-up of workingcapital(-USD58 mln). The
build-up of inventories associated with the growth of export sales
share was partially compensatedby an increase of accounts payable
and advances received. CAPEX amounted to USD284 mln (+4% qoq).
9M 2021 vs. 9M 2020 ANALYSIS:
Consolidated operational results
-- Production: Hot metal production increased by 12% yoy to 8
mln tonnes, due to BF-3 commissioning inDecember 2020. Steel output
grew to 8.62 mln tonnes (+1% yoy), driven by the EAF-1 start up in
April 2021 andcompletion of BOF shop and casting machines
upgrades.
-- Steel sales were marginally lower at 8 mln tonnes (-1% yoy).
Sales of semi-finished products grew by fourtimes yoy to 1.07 mln
tonnes following higher output of pig iron and crude steel, coupled
with repairs in thehot-rolled shop. Sales of hot-rolled steel
(incl. plates) decreased by 20% yoy mainly due to a large-scale
upgradeof one of the continuous slab heating furnaces.
-- High value-added (HVA) sales increased by 4% yoy on stronger
sales of high value added hot-rolled steel,cold-rolled steel (+19%
yoy to 0.79 mln tonnes) and LDP (+74% to 0.23 mln tonnes). The HVA
share in total salesamounted to 46% (+2 ppts yoy).
-- Raw materials sales: Sales of coal decreased by 32% yoy to
0.75 mln tonnes driven mainly by a decline incoal concentrate sales
on the back of lower output impacted by the long wall
repositioning. Sales of iron oreproducts decreased by 24% to 3.4
mln tonnes, driven by the redirection of iron ore flow to own
assets following thestart-up of BF-3 in the end of 2020. Sales of
iron ore pellets to third parties reduced by 23% yoy to 3.3
mlntonnes. Iron ore concentrate sales to third parties decrease
substantially in Q3 2021, amounting to just 78 kt in9m 2021 (-58%
yoy).
Consolidated financial results
-- Revenue increased to USD8,371 mln (+63% yoy) due to higher
steel prices and improved product mix.
-- EBITDA grew to USD4,532 mln (2.6x yoy) due to higher steel
prices in the first 9m of 2021. EBITDA marginreached a record high
of 54%.
-- Net profit totaled USD3,097 mln (increase of 5x yoy),
including FX losses of USD45 mln (vs FX losses of USD472in 9m
2020).
-- Free Cash Flow increased by 4x yoy to USD2,425 mln, driven by
higher earnings.
-- CAPEX amounted to USD835 mln.
Financial position
-- Cash and cash equivalents decreased to USD281 mln (-64% qoq)
on the back of Q2 2021 dividend payments andthe repayment of USD500
mln of eurobonds.
-- Total debt declined to USD1,815 mln (-22% qoq) due to the
redemption of eurobonds with a 3.85% coupon inAugust 2021.
-- Net debt stood at USD1,534 mln (flat qoq). The Net
debt/EBITDA ratio improved to 0.29 (vs 0.37 as at 30June 2021).
-- A strong liquidity position, with USD281 mln in cash and cash
equivalents, in addition to unused committedcredit lines and
overdraft facilities of USD1,158 mln, more than covers the
Company's short-term debt of USD45 mln.
Health and safety performance
-- LTIFR among employees increased to 0.93 (+63% qoq) in Q3
2021. The overall LTIFR for employees andcontractors reached 0.88
(+40% qoq) in the reporting period.
-- In 9m 2021 LTIFR among employees improved to 0.68 (-4% yoy).
The overall LTIFR for employees andcontractors was 0.73. The
improvement is attributed to the deployment of the Contractor
Safety Management and FatalInjury Avoidance projects in all
business units of the company, but regrettably we had five
fatalities in 9m 2021.Each of these cases was investigated with a
change in some internal processes to prevent similar incidents in
thefuture.
DIVID
-- The Board of Directors is recommending a dividend of 85.93
roubles per share for Q3 2021. Approval of thedividend is expected
to take place at the Company's EGM on 3 December 2021.The
recommended record date for thedividend payment is 14 December
2021. The approval of the record date for the dividend payment is
also expected totake place at the Company's EGM on 3 December
2021.
MARKET UPDATE AND OUTLOOK
-- Iron ore prices fell by almost USD100/t CFR China from
all-time maximums due to a softening of Chinesedemand as China
limits steel output. This led also to a decline in steel prices
from the record level reached inQ2. The Chinese steel market is
affected by steel production restrictions which is positive to
price sentiment,however Chinese property market cooling creates the
risk of a weakening of steel demand. At the same time thecoking
coal market entered severe deficit in China and as a result
domestic Chinese coal prices skyrocketed, whichalso pushed prices
in the global market higher. Australian high-grade coking coal
export prices have exceeded USD400/t FOB.
-- In Russia a temporary 15% export duty has caused domestic HRC
price fall below export parity net ofduty.
-- The Russian authorities have confirmed a new tax mechanism
which will replace export duty (a complex setof measures including
introducing a new excise tax and changing the MET calculation
methodology). These changeswill adversely affect Severstal's
financial performance in 2022.
Alexander Shevelev, CEO of Severstal Management, commented:
"We continue to develop our response to the continuing issues
with the COVID-19 pandemic. In our aim to ensure a safe environment
in the workplace for our employees and contractors we continue to
encourage our staff to get vaccinated. Today more than 65% of them
have already been vaccinated. Also we have successfully achieved
our internal target of having employees with immunity through
vaccination or antibodies of more than 80% by the end of the summer
thus creating a safer environment for everyone.
We also continue to focus on injury prevention. LTIFR for our
staff declined in 9m 2021 by 4% to 0.68. However, the combined
LTIFR for both our staff and contractors grew in Q3 2021 to 0.88
and regrettably we had two fatalities in the reporting quarter in
Vorkutaugol. We conducted an investigation of each of these cases,
and took actions to prevent similar incidents in the future. In
particular, we strengthened control over compliance with the
requirements of mine passports, as well as an intensified focus on
the process of assessing and training of our operations managers in
health and safety.
In Q3 2021, we saw first signs of a normalisation in the steel
market. Iron ore prices fell by almost USD100/t from all-time
maximums due to a decrease in the Chinese demand, as China limits
steel output. In line with our expectations, spot steel prices also
declined from the record level of Q2. The semi-conductor shortage
pushed automotive output down in Europe which led to lower steel
demand and declining lead times from steel mills, resulting in
supply and demand being in balance. The introduction of export
duties in Russia caused domestic HRC price to fall to a level below
export parity, net of duty.
However, the growth in sales coupled with higher average selling
prices (due to the lag between spot prices and actual prices)
pushed the Company's financial results to new records. Revenue grew
by 9% qoq to USD3.2bn and EBITDA rose by 5% to USD1.7bn. Continuous
focus on effective management of working capital enabled us to
reach a record FCF of almost USD1bn (+6% qoq). Net debt/EBITDA
ratio declined to 0.29.
Severstal's strong performance in Q3 2021 and financial strength
of the company help the Board to recommend a dividend of 85.93
roubles per share for Q3 2021."
SEGMENTS PERFORMANCE
Severstal Russian Steel (RSD)
USD million, unless otherwise stated Q3 2021 Q2 2021 qoq 9m 2021 9m 20201 yoy
Steel sales, kt 2,704 2,691 0% 8,037 8,093 (1%)
Semis 489 317 54% 1,065 261 308%
Commercial 1,067 1,066 0% 3,294 4,294 (23%)
HVA 1,148 1,308 (12%) 3,678 3,538 4%
Revenue 3,098 2,759 12% 8,011 5,137 56%
EBITDA 1,069 1,021 5% 2,779 1,133 145%
EBITDA margin, % 35 37 (2 ppts) 35 22 13 ppts
Notes: 1. These data include adjustments made in connection with
the change in presentation described inSeverstal's quarterly
financial statements.
-- Steel sales are almost flat. The Company increased its export
sales share to 51% (+6 ppts qoq) owing tothe decline in steel
demand in Russia.
-- Total share of high value-added (HVA) products amounted to
42%.
-- Revenue increased by 12% qoq to USD3,098 mln.
-- EBITDA grew by 5% qoq to USD1,069 mln. EBITDA margin declined
to 35% (-2 ppts qoq) on narrowing pricespreads between slabs and
raw material basket.
-- The total non-integrated cash cost of slab per tonne at the
Cherepovets Steel Mill increased to USD505/t(+11% qoq) affected
mainly by higher coal costs. The integrated cash cost of slab
amounted to USD225/t (+29% qoq).
Severstal Resources
USD million, unless otherwise stated Q3 2021 Q2 2021 qoq 9m 2021 9m 2020 yoy
?oal sales, kt 810 1,149 (30%) 3,257 4,331 (25%)
Iron ore sales, kt 4,560 4,659 (2%) 13,361 13,445 (1%)
Revenue 1,016 999 2% 2,762 1,275 117%
EBITDA 761 733 4% 2,019 614 229%
EBITDA margin, % 75 73 2 ppts 73 48 25 ppts
-- Coal sales decreased by 30% qoq to 0.8 mln tonnes mainly as a
result of steam coal sales reduction.
-- Sales of iron ore were down by 2% qoq to 4.6 mln tonnes due
to the acceleration of pellet sales to thirdparties and concentrate
within Severstal.
-- Revenue from the Resources Division reached USD1,016 mln (+2%
qoq). EBITDA increased by 4% qoq to USD761 mln.EBITDA margin
increased to 75%.
-- At Vorkutaugol, the cash cost of coal concentrate per tonne
amounted to USD102/t (+13% qoq). The cash costof iron ore pellets
per tonne at Karelsky Okatysh increased to USD34/t (+3% qoq). At
Olcon, the cash cost per tonneof iron ore concentrate grew to
USD28/t (+4% 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
externalauditor, 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 thebest of their
knowledge: that the consolidated interim condensed financial
statements has been prepared inaccordance with IAS34; that the
consolidated interim condensed financial statements give a true and
fair view ofSeverstal's assets, liabilities, financial position and
profit or loss; and that this document contains a fairreview of
important events that have occurred during the first nine months of
the year and their impact on theconsolidated interim condensed
financial statements; and of the principal risks and uncertainties
for the remainingthree months of the year; and that the report
contains a fair review of related party transactions.
A conference call on Q3 2021 and 9m 2021 results for investors
and analysts hosted by Alexey Kulichenko, Chief Financial Officer,
will be held on 18 October 2021 at 12.00 (London)/ 14.00
(Moscow).
To join the webcast (with registration form) please follow the
link:
https://mm.closir.com/slides?id=314887
*We recommend that participants start dialling in 10 minutes
prior to ensure a timely start of the conference call.
To join the conference call, please dial:
United Kingdom Number: +44 203 984 9844 (local access) +44 800
011 9129 (toll free)
US Number: +1 718 866 4614 (local access) +1 888 686 3653 (toll
free)
Russian Dial: +7 495 283 98 58 (local access)
Participant code: 314887
ANNEX
1. Consolidates sales by product
Sales volumes
Q3 2021 Q2 2021 qoq 9m 2021 9m 20201 yoy
Kt
Coal: 127 282 (55%) 754 1,101 (32%)
Coking coal concentrate 39 38 3% 112 215 (48%)
Steam coal 88 244 (64%) 642 886 (28%)
Iron ore: 1,092 1,310 (17%) 3,426 4,530 (24%)
Iron ore pellets 1,061 1,309 (19%) 3,348 4,343 (23%)
Iron ore concentrate 31 1 n/a 78 187 (58%)
Steel: 2,694 2,678 1% 8,002 8,059 (1%)
Semi-finished products 489 317 54% 1,065 260 310%
Hot-rolled steel: 1,115 1,102 1% 3,408 4,251 (20%)
incl. Hot-rolled high value added 227 211 8% 638 531 20%
Cold-rolled steel 248 280 (11%) 785 661 19%
Galvanized steel 216 255 (15%) 746 690 8%
Colour coated coil 86 119 (28%) 288 373 (23%)
Long steel 171 162 6% 491 544 (10%)
Metalware 139 175 (21%) 456 426 7%
Large diameter pipes 90 75 20% 225 129 74%
Other tubes, pipes, formed shapes 135 193 (30%) 533 725 (26%)
Steel solutions 5 - n/a 5 - n/a
2. Russian Steel Division sales by product
Sales volumes
Q3 2021 Q2 2021 qoq 9m 2021 9m 20201 Yoy
Kt
Total steel products 2,704 2,691 0% 8,037 8,093 (1%)
Semi-finished products 489 317 54% 1,065 261 308%
Hot-rolled steel: 1,115 1,101 1% 3,408 4,252 (20%)
incl. Hot-rolled high value added 229 209 10% 638 531 20%
Cold-rolled coil 248 280 (11%) 785 661 19%
Galvanized and metallic coated coil 216 255 (15%) 746 690 8%
Colour coated coil 86 119 (28%) 288 373 (23%)
Long products 181 174 4% 524 573 (9%)
Metalware products 139 176 (21%) 458 429 7%
Large diameter pipes 90 75 20% 225 129 74%
Other tubes, pipes, formed shapes 135 194 (30%) 533 725 (26%)
Steel solutions 5 - n/a 5 - n/a
3. Russian Steel Division sales by destination
Sales volumes
Q3 2021 Q2 2021 qoq 9m 2021 9m 20201 Yoy
Kt
Total steel products 2,704 2,691 0% 8,037 8,093 (1%)
Russia 1,313 1,482 (11%) 4,051 4,837 (16%)
Export 1,391 1,209 15% 3,986 3,256 22% 1. These data include adjustments made in connection with the change in presentation described inSeverstal's quarterly financial statements
4. Russian Steel Division average prices
Sales price, USD/tonne Q3 2021 Q2 2021 qoq 9m 2021 9m 20201 Yoy
Semi-finished products 646 624 4% 611 373 64%
Hot-rolled steel 1,009 846 19% 823 446 85%
incl. Hot-rolled high value added 1,035 789 31% 828 574 44%
Cold-rolled coil 1,155 1,001 15% 968 536 81%
Galvanized and metallic coated coil 1,449 1,213 19% 1,148 639 80%
Colour coated coil 1,599 1,427 12% 1,389 789 76%
Long products 754 673 12% 664 419 58%
Metalware products 1,491 1,097 36% 1,205 852 41%
Large diameter pipes 822 752 9% 770 811 (5%)
Other tubes, pipes, formed shapes 986 941 5% 867 492 76%
Steel solutions 1,517 n/a n/a 1,517 n/a n/a
Weighted average selling price 1,012 906 12% 873 513 70% 1. These data include adjustments made in connection with the change in presentation described inSeverstal's quarterly financial statements
5. Resource Division sales
Kt Q3 2021 Q2 2021 qoq 9m 2021 9m 2020 yoy
Coal 810 1,149 (30%) 3,257 4,331 (25%)
Coking coal concentrate 722 905 (20%) 2,615 3,445 (24%)
Steam coal 88 244 (64%) 642 886 (28%)
Iron ore 4,560 4,659 (2%) 13,361 13,445 (1%)
Iron ore pellets 2,847 3,001 (5%) 8,493 8,112 5%
Iron ore concentrate 1,713 1,658 3% 4,868 5,333 (9%)
6. Vorkutaugol operating highlights
Kt Q3 2021 Q2 2021 qoq 9m 2021 9m 2020 yoy
Run of mine: coal production, 1,696 2,047 (17%) 6,037 7,806 (23%)
Coking coal concentrate sales 722 905 (20%) 2,615 3,445 (24%)
Internal consumption 683 867 (21%) 2,503 3,229 (22%)
Third party 39 38 3% 112 216 (48%)
7. Karelsky Okatysh iron ore pellets production and sales
volumes
Kt Q3 2021 Q2 2021 qoq 9m 2021 9m 2020 yoy
Production 2,849 2,916 (2%) 8,616 8,022 7%
Pellets sales 2,847 3,001 (5%) 8,493 8,112 5%
Internal consumption 2,328 2,238 4% 6,859 8,078 (15%)
Third party 519 763 (32%) 1,634 34 n/a
8. Iron ore concentrate sales volumes
Kt Q3 2021 Q2 2021 qoq 9m 2021 9m 2020 yoy
Olcon 1,073 1,088 (1%) 3,157 3,287 (4%)
Yakovlevskiy 627 570 10% 1,698 1,315 29%
Karelsky Okatysh 13 0 n/a 13 731 (98%)
Total 1,713 1,658 3% 4,868 5,333 (9%)
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
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ISIN: US8181503025
Category Code: QRT
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.: 124519
EQS News ID: 1241309
End of Announcement EQS News Service
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