9th Apr 2014 07:03
LONDON (Alliance News) - Russian steel maker Evraz PLC Wednesday reported a wider net loss for 2013, as cost cutting failed to offset a drop in revenues caused by a drop in steel prices.
The company, which has been selling assets in an effort to streamline its portfolio to focus on more profitable assets, was hit hard by the drop in steel prices last year.
The company reported a net loss of USD522 million for the year, compared with a loss of USD398 million in 2012, as revenue fell to USD14.41 billion, from USD14.73 billion. Its earnings before interest, tax, depreciation and amortisation dropped 10% to USD1.82 billion.
"2013 was another challenging year for the global steel and coal mining industries, characterised by strong cyclical headwinds, which EVRAZ was not immune to. Although we managed to increase external steel sales by 1% to 15.5 million tonnes and substantially grew the output of coking coal by 22% to 18.9 million tonnes, our EBITDA was USD1,821 million in 2013, 10% less than in 2012," Chief Executive Alexander Frolov said in a statement.
The company had said it would focus on reducing its debts and increasing free cash flow in 2013. It made total savings of about USD303 million during the year, and free cash flow was USD458 million. However, its net debt increased by 2.5% to USD6.53 billion as it consolidated the debt of Raspadskaya, the underground coal mine it bought in January last year.
Capital expenditure was USD902 million, down from USD1.26 million in 2012, as it scaled back its investment plans.
On a divisional basis, steel revenues fell 7%, while mining revenues rose 18% and vanadium revenues rose 6%.
Evraz said 2014 had started "mildly positively" in most of its regional steel markets, with long steel volumes in Russia picking up thanks to the start of the construction season. It said prices for railway products are stable, while the severe winter weather in the US has pushed prices higher. It has also seen higher prices for semi-finished products in Asia.
"However, certain risks remain, in particular the growth of seaborne supply of steelmaking raw materials over the medium term and geopolitical risks. Management's response to potential continued volatility in markets consists of comprehensive cost cutting programmes, deleveraging and the disciplined development of growth options in order to be well prepared for the next upturn of the cycle," the company said.
Evraz said it will pay a dividend of 6 cents as part of its strategy of returning a bit of the money it makes from disposals. However, its dividend strategy is now only to make a payout when its net debt to Ebitda ratio is below three times. It said it could make special dividend payouts when it makes asset disposals.
By Steve McGrath; [email protected]; @SteveMcGrath1
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