27th Aug 2015 06:47
LONDON (Alliance News) - Steel maker Evraz PLC Thursday reported a rise in pretax profit despite revenue falling in the first half, as the company slashed costs across the board to battle the downturn in commodities markets.
The company warned that it will continue to face difficult conditions in the second half of the year and vowed to continue to cut costs.
The FTSE 250-listed company reported a rise in pretax profit in the first half to June 30 to USD120.0 million from USD99.0 million a year earlier, despite revenue dropping to USD4.78 billion from USD6.62 billion.
The company said it has made USD149.0 million in annual cost savings through its ongoing programme. Evraz also slashed capital expenditure in the period by around a third to USD251.0 million compared to USD365.0 million a year earlier.
Evraz reported reductions in selling costs to USD425.0 million from USD543.0 million and said administrative costs dropped to USD252.0 million from USD390.0 million. Impairments totalled USD20.0 million, significantly down from USD147.0 million a year before, whilst it booked a smaller foreign exchange loss of USD99.0 million, compared with a USD180.0 million loss a year earlier.
Earnings before interest, tax, depreciation and amortisation fell by over 14% to USD922.0 million from USD1.08 billion a year earlier. The company's steel divisions, particularly in North America, experienced a fall in earnings with coal reporting a 10% lift in Ebitda in the first half.
To battle the downturn in commodities markets, partially caused by the slowdown in China, Evraz reported large falls in cash costs in steel, iron ore and coal.
Net debt experienced a slight drop to USD5.70 billion from USD5.80 billion, and Evraz said it has a cash balance of USD996.0 million at the end of the half, declining from USD1.08 billion at the end of December.
In terms of geographies, revenue fell across the board from Russia, Americas, Asia and Africa, with Europe being the only segment to report a rise in revenue of 2%.
Going forward, Evraz said it will continue to be hit by weak steel and raw material markets and currency volatility in the second half of the year and forecasts a moderate decline in demand for its steel products due to instability on the Russian market, driven by a decrease in investment activity. The outlook for North America remains stable, it said.
"If current market conditions persist into the second half of 2015, steel prices will continue to decline, as input costs slide and key currencies decline against US dollar," Evraz said in a statement. "In contrast, the Russian rouble devaluation will have a positive effect on operating expenses, helping Evraz to maintain healthy profitability."
"Importantly, Evraz continues to expect positive free cash flow and progress towards reducing net debt in absolute terms, while optimising working capital with a particular focus on quality of receivables. Commitment to customers and cost-cutting initiatives remain the company's top priorities," it added.
By Joshua Warner; [email protected]; @JoshAlliance
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