Severstal reports Q3 & 9M 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 Q3 and 9M 2014 financial results for the period ended 30 September 2014.

CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER ENDED 30 SEPTEMBER 2014

$ million, unless otherwise stated

Q3 2014

Q2 20141

Change, %

9M 2014

9M 20131

Change, %

Revenue

2,240

2,187

2.4%

6,418

7,052

(9.0%)

EBITDA2

636

506

25.7%

1,601

1,300

23.2%

EBITDA margin, %

28.4%

23.1%

5.3 ppts

24.9%

18.4%

6.5 ppts

Profit from operations

479

353

35.7%

1,141

839

36.0%

Operating margin, %

21.4%

16.1%

5.3 ppts

17.8%

11.9%

5.9 ppts

Free cash flow 3

218

333

(34.5%)

807

115

n/a

Net loss 4

(45)

(661)

(93.2%)

(807)

157

n/a

Basic EPS5, $

(0.06)

(0.82)

(92.7%)

(1.00)

0.19

n/a

Notes:

  1. These amounts reflect adjustments made in connection with the presentation of the discontinued operation.
  2. 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).
  3. Free cash flow excludes discontinued operation.
  4. Net (loss)/ profit attributable to shareholders of OAO Severstal.
  5. Basic EPS includes both continuing and discontinued operations. Basic EPS is calculated based on the following basic weighted average number of shares outstanding during the period: 810.6 million shares for Q3 2014, Q2 2014, 9M 2014 and 9M 2013.

Q3 2014 vs. Q2 2014 ANALYSIS:

  • Group revenue increased 2.4% q/q to $2,240 million (Q2 2014: $2,187 million) driven by further improvements at Russian Steel on the back of higher share of HVA products sales coupled with marginal price increase;
  • Group EBITDA increased 25.7% q/q to $636 million (Q2 2014: $506 million) and Group EBITDA margin grew 5.3 ppts q/q to 28.4% (Q2 2014: 23.1%), representing the highest level since Q3 2008 and primarily reflecting a combination of ongoing operational enhancements at both Russian Steel and Resources division, a decline in raw materials input costs at our steel operations and further RUB depreciation;
  • Net loss1 of $45m (Q2 2014: net loss1 of $661m),  has been primarily affected by FX losses of continuing operations of $453 million  and a gain on disposal of $85 million of the discontinued operation. Adjusting for those non-cash items, Severstal would have posted a net profit of $323m (Q2 2014: net profit of $206m excluding FX gain in Q2 2014 of $199m and impairment of $1,066m for continuing and discontinued operations);
  • Continuous robust free cash flow generation of $218 million is in line with our key strategic focus (Q2 2014: $333 million);
  • Capex2 of $181 million, 4.7% lower q/q (Q2 2014: $190 million) reflecting our disciplined approach to investments as well as the completion of the vast share of large-scale development projects. The FY2014 capex target has been reduced to $868m, reflecting the disposal of Severstal North America (SNA) and weaker RUB (the currency in which the majority of our capex is nominated);
  • Recommended record high dividend payment of 54.46 RUB (approximately $1.37) per share (including special dividend ) for the nine months ended 30 September 2014, reflecting the previously announced intention to return to shareholders a portion of the SNA sale proceeds via dividends.

9M 2014 vs. 9M 2013 ANALYSIS:

  • 9M 2014 revenue decreased 9.0% y/y to $6,418 million (9M 2013: $7,052 million) as Russian Steel and Resources experienced lower realized prices and sales volumes y/y;
  • EBITDA increased 23.2% y/y to $1,601 million (9M 2013: $1,300 million) driven by strong results from Russian Steel on the back of operational enhancements and lower input costs;
  • 9M 2014 net loss1 was $807 million (9M 2013: net profit1 of $157m) has been impacted by FX losses of continuing operations of $593 million, impairments for continuing and discontinued operations of $1,091 million and a gain on disposal of $85 million of the discontinued operation. Excluding these non-cash items, Severstal would have posted a net profit of $792 million (9M 2013: net profit of $431 million, excluding FX losses and impairment for both continuing and discontinued operations);
  • Strong improvement in free cash flow to $807 million for 9 months 2014 (9M 2013: $115 million), in line with strategic focus;
  • Capex2 of $622 million for the first nine months of 2014 was 20.7% lower y/y (9M 2013: $784 million), representing 71.7% of the updated FY2014 capex target of $868 million.

Full version of the press release