Evraz's Revenue Falls Due To Low Steel Prices And Demand

19 August 2016

Russian steel miner Evraz’s half-year revenue fell due to weak steel prices and low demand but remains “cautiously optimistic” for the second half of the year.

For the six months ended 30 June, revenue decreased by 27.6% to $3,543m, compared to the same period last year. Evraz said it was due to lower revenue from sales of steel products, which declined by 29.5% year-on-year as the average sales price fell 23.7%. Steel revenues account for 60.8% of the company's total revenue.

The London headquartered miner said revenue from coal was largely unchanged year-on-year as increased volumes partly offset lower sales prices.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was down 38.1% year-on-year to $577m, due to a lagged effect of weak steel pricing. EBITDA margin reached 16.3%, compared to 18.8% in 2015. EBITDA for coal increased 25.6% as the margin reached 39.7% due to the rouble devaluation and effects of cost-cutting initiatives.

Russian steel consumption fell by 2% to 16.9m tonnes in the period, due to reduced demand. As domestic consumption waned, Russian export volumes increased slightly to 14.5m tonnes, due to the weak Rouble.

Net cash from operating activities also fell 33.7% to $533m. Free cash flow for the period was $102m. Total debt decreased by $540m to $6.18bn, while net debt decreased by $33m to $5.31bn.

The FTSE 250-listed company saved $138m due to ongoing productivity improvements and cost-cutting initiatives.

Chief executive Alexander Frolov, said: "Evraz remains focused on net debt reduction and refinancing. The group has extended the overall duration of its debt and will comfortably cover maturities in 2016 and 2017 using a combination of currently available liquidity and future free cash flow generation. Given the higher prices and stronger domestic demand in the second quarter, Evraz’s outlook for the rest of the year is cautiously optimistic."

The company also said it does not anticipate significant improvements in Russian steel demand in the second half of 2016 due to moderate investment activity and the current economic environment, but anticipates steel prices will gradually increase to the average seen in 2015.

“In the second half of 2016, the North American segment will likely experience headwinds from large volumes of dumped and subsidized large diameter pipe imports into Canada, which will extend onto 2017-2018 should no trade remedies be put into place against unfairly traded LD pipe from China and Japan this October. In addition, results may be negatively impacted by delays in approvals of key large pipeline projects in the US and Canada and continuing weak demand for rails.

“In the second half of 2016, Evraz expects coking coal concentrate prices to be supported by stable demand on the domestic market and key export destinations, as well as the temporary high-vol grades coal deficit.”

Shares in Evraz were down 5.91% to 162.67p at 0935 BST.


Source : digitallook.com