Severstal reports Q2 & H1 2014 financial results

OAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world’s leading steel and steel-related mining companies, today announces its Q2 and H1 2014 financial results.

Consolidated financial results for the quater ended 30 June 2014

$ million, unless otherwise stated

Q2 2014

Q1 2014

Change, %

H1 2014

H1 2013

Change, %

Revenue

3,253

3,007

8.2%

6,260

6,736

(7.1%)

EBITDA1

606

534

13.5%

1,140

909

25.4%

EBITDA margin, %

18.6%

17.8%

0.8 ppts

18.2%

13.5%

4.7 ppts

Profit from operations

404

336

20.2%

740

500

48.0%

Operating margin, %

12.4%

11.2%

1.2 ppts

11.8%

7.4%

4.4 ppts

Free cash flow

486

236

105.9%

722

133

n/a

Net loss 2

(661)

(100)

n/a

(761)

-

n/a

Basic EPS3, $

(0.82)

(0.12)

n/a

(0.94)

-

n/a

 

Notes:

  1. EBITDA represents profit/(loss) from operations plus depreciation and amortization of productive assets (including the Group’s share in depreciation and amortization of associates and joint ventures) adjusted for gain/(loss) on disposals of PPE and intangible assets and for share in associates’ and joint ventures’ non-operating income/(expenses).
  2. Net (loss)/ profit attributable to shareholders of OAO Severstal.
  3. Basic EPS is calculated based on the following basic weighted average number of shares outstanding during the period: 810.6 million shares for Q2 2014, Q1 2014, H1 2014 and H1 2013.

Q2 2014 vs. Q1 2014 analysis:

  • Group revenue increased 8.2% q/q to $3,253 million (Q1 2014: $3,007 million) driven by a strong seasonal rebound in steel product sales volumes as well as a moderate recovery in steel prices;
  • Group EBITDA increased 13.5% q/q to $606 million (Q1 2014: $534 million) and Group EBITDA margin grew 0.8 ppts q/q to 18.6% (Q1 2014: 17.8%). This margin represents the highest level since Q3 2011 and primarily reflects a combination of ongoing operational enhancements, a recovery in domestic steel prices and lower raw materials input costs at our steel operations;
  • Net loss2 of $661 million (Q1 2014 loss of $100 million) includes expected non-cash losses preliminary estimated at $1,066 million on the disposals5 of Severstal Dearborn LLC, Severstal Columbus LLC, PBS Coals Ltd. and a positive FX gain of $199 million. Excluding these non-cash items, Severstal would have posted a net profit of $206 million (Q1 2014: net profit of $221 million excluding non-cash items);
  • Excellent progress against strategic focus of enhancing free cash flow which increased a substantial 105.9% q/q to $486 million (Q1 2014: $236 million);
  • Capex of $211 million1, 20.1% lower q/q (Q1 2014: $264 million) reflecting our flexible approach to investments as well as the completion of the Balakovo Mini-Mill project;
  • Recommended dividend payment of 2.14 roubles per share (approximately $0.06) for the 6 months ended 30 June 2014.

H1 2014 vs. H1 2013 analysis:

  • H1 2014 revenue was 7.1% lower y/y at $6,260 million (H1 2013: $6,736 million) as Russian Steel and Resources divisions experienced lower realized prices and sales volumes;
  • EBITDA increased 25.4% y/y to $1,140 million (H1 2013: $909 million) driven by an ongoing focus on operational enhancements, improved performance at Severstal International and lower raw materials input costs at our steel operations;
  • H1 2014 net loss2 was $761 million (H1 2013: Breakeven) includes expected non-cash losses preliminary estimated at $1,066 million on the disposals5 of Severstal Dearborn LLC, Severstal Columbus LLC, PBS Coals Ltd. and a negative FX loss of $121 million (H1 2013: FX loss of $241 million). Excluding these non-cash items, Severstal would have posted a net profit of $426 million (H1 2013: $241 million);
  • Strong improvement in free cash flow to $722 million (H1 2013: $133 million), in line with strategic focus;
  • Capex3 of $475 million, 15.5% lower y/y (H1 2013: $562 million), representing 48.7% share of 2014 target capex of $976 million.

Full version of the press release