Russia's Evraz meets forecasts with 7 pct rise in 2016 core earnings

2 March 2017

Russia's No.2 steelmaker Evraz said on Wednesday its core earnings rose 7 percent in 2016, benefiting from a rebound in steel prices and an improving domestic economy.

The company's earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled $1.54 billion, up from $1.44 billion the previous year, it said in a statement.

Analysts in a Reuters poll had forecast that Evraz, part-owned by Chelsea soccer club owner Roman Abramovich, would report full-year 2016 EBITDA of $1.5 billion.

Russian steelmakers have suffered over the past two years as world steel prices plumbed 11-year lows and the country's economic crisis sapped domestic demand.But they expect a stronger 2017 as Russia's economy improves, buoyed by higher oil prices, and by loftier steel prices supporting profits.

"Overall, thanks to favourable market conditions and numerous improvement initiatives, we delivered fairly strong financial results," Chief Executive Alexander Frolov said.Evraz narrowed its net loss to $188 million, versus a loss of $719 million in 2015, it said. Revenue slipped 12 percent to $7.7 billion.

The company's net debt to EBITDA ratio fell to 3.1, it said in a presentation for investors. Analysts at VTB Capital have said Evraz could reduce the ratio to below two in the first half of 2017, its lowest since 2008, creating room for dividend payments.

"We are confident enough that the (net) debt/EBITDA ratio will be less than three, but nevertheless, I think it is too early to speak about dividends right now," Frolov told a conference call with reporters.

Frolov said the company was "cautiously optimistic" about market conditions in 2017 and hoped efficiency measures would help it boost free cash flow and reduce its debt burden. Evraz's 2017 steel production was seen flat, he added.Efforts to raise money by some of Evraz's competitors further point to increased confidence in the sector.

Russia's biggest steel producer, NLMK, said in December it could issue Eurobonds this year and TMK, the country's largest maker of steel pipes for the oil and gas industry, sold a 13 percent stake through a secondary public offering in February.Banking sources have previously told Reuters Evraz is also considering a convertible bond issue this year.

"At the moment, we are flexible enough and considering all possible options for debt refinancing," Chief Financial Officer Nikolai Ivanov said.

"The market is currently extremely good, the recent issues we have seen ... were quite impressive. The market is very good and we have our finger on the pulse."