27th Aug 2014 15:57
LONDON (Alliance News) - Evraz PLC Wednesday reported higher profits for the first half of the year, as cost cutting more than offset a fall in revenue that was caused partly by falling steel prices, and higher impairment charges.
The steel, coal, iron ore and vanadium miner said it swung to a net profit of USD38.0 million in the six months to June 30, compared with the USD131 million loss it made in the first half of 2013.
Evraz has been restructuring after a fall in steel prices caused its profits to slide. It has been selling its worst-performing assets and cutting costs across the business, while also trying to improve cash flow in an attempt to pay off more debt.
Its revenue continued to fall across its metal units in the first half of the year, dropping to USD6.81 billion, from USD7.32 billion a year earlier. Steel revenue decreased 8% to USD5.9 million, as steel prices continued to fall due to overcapacity in the global steel industry.
?The situation in the steel sector remains challenging, with margins under pressure. We are adopting a cautious outlook towards raw material prices: negative on iron ore and neutral to positive in respect of coking coal,? the company said in a statement.
Steel revenues were also down after the company suspended operations at its Claymont Steel products unit and Palini e Bertoli plate rolling mill, sold the Vitkovice Steel rolled products mill in the Czech Republic, and closed the ZSMK plate rolling mill.
Coal revenue fell 7% to USD665 million, as coal prices fell in the first quarter. The company said prices stabilised in the second quarter, while its own raw coking coal production rose 7% to 9.8 million tonnes.
Iron ore segment revenue was hit hardest, down 27% to USD659 million, as production decreased 4% to 11.3 million tonnes, mainly due to the sale of high cost operation EVRAZ VGOK and the three Evrazruda mines, and iron ore product prices fell sharply.
It booked impairments of USD147 million, up from USD7 million in the first half of 2013, mainly related to the idling of several of its Yuzhkuzbassugol mines and due to a writedown on its Highveld Steel and Vanadium due to the steel price fall and changes in forecast production volumes.
The company said it would continue cutting costs, making selective investments in low-risk, high return projects, and deleveraging.
The company had net debt of USD7.00 billion at the end of June, down from USD6.53 billion at the end of December, after net cash flow improved to USD844 million in the first half, from USD628 million a year earlier. Capital expenditure was down by over a quarter to USD365 million.
? While we cannot control many of the challenges that the global economy and steel sector present, we believe that the benefits derived from asset portfolio optimisation, our efficiency improvement and cost reduction programme, lower capital expenditure and progressive product mix development will put us in a strong position to enhance shareholder value,? said Alexander Frolov, chief executive.
Evraz shares closed down 0.4% at 113.40 pence Wednesday.
By Alice Attwood; [email protected]; @AliceAtAlliance
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