17th Jun 2015 10:29
LONDON (Alliance News) - Evraz PLC Wednesday said its earnings are set to benefit from several cost-cutting initiatives in 2015, as its operations in North America are set to grow on the back of natural gas exploration projects and from companies trying to optimise their oil logistic costs.
The steel, mining and vanadium company is holding an investor day in London on Wednesday, and said it will provide updates on key programmes and projects, as well as its near-term strategic goals.
Evraz will spend about USD215 million in development capital expenditure in 2015 and about USD335 million in maintenance capital expenditure, as it predicted strong growth in production of large-diameter gas pipelines in North America this year.
The combined USD550 million in capital expenditure planned in 2015 compares to the USD654 million spent in total expenditure in 2014, which in turn fell from USD902 million in 2013.
In Russia, Evraz said it will focus on expanding its rail product portfolio and client base, maintaining its market share in the construction of steel, reducing mining costs at its iron ore operations, and maximising domestic shipments secured by long-term contracts for its coking coal.
Around 75% of the company's rail division's sales in Russia are secured by long-term contracts with Russian Railways, and Evraz is expecting sales to Russian Railways to total around 530,000 tonnes in 2015, which would be down from 650,000 tonnes in 2014.
Its Russian construction steel business has experienced a 20% fall in shipments to the Russian market in the first half of 2015 to 1.5 million tonnes compared to 1.9 million tonnes a year earlier, but said its market share "remains stable" at about 23%.
The Russian iron ore operations are expected to report an increase in saleable iron ore production in 2015 of 13.6 million tonnes, compared to the 13.0 million tonnes produced in 2014. Evraz said its iron ore cash cost is also expected to reach USD30 per tonne, "well below the current market price". The company also plans to make a further USD28 million of cost-cutting initiatives in 2015.
Production of Russian raw coal is set to rise to 21.7 million tonnes in 2015 from 21.1 million tonnes in 2014, and Evraz aims to make USD73 million of cost cuts in 2015. The number of coking coal customers is expected to increase to 50 in 2015 from only 35 in 2013.
In North America, Evraz will expand its capabilities to meet growing demand in the construction of large diameter pipes and ensure it is running its rail division at full capacity to support the upgrade of rail infrastructure in the region.
The company said production of large diameter pipes for gas pipelines in North America is expected to be 465,000 tonnes in 2015, up 28% from 364,000 tonnes in 2014. Large diameter pipeline demand is growing on the back of natural gas exploration projects and oil logistics cost optimisation, said Evraz.
Overall, Evraz said it is expecting earnings before interest, tax, depreciation and amortisation in 2015 to benefit from the incremental effect of "customer focus initiatives" of around USD75 million. Starting from 2015, further cost-cutting initiatives will benefit annual Ebitda by around USD280 million.
It added that its total debt was USD6.8 million at the end of May, compared to total debt of USD8.16 billion at the end of 2014.
Evraz shares were down 1.1% at 147.50 pence on Wednesday morning.
By Josh Warner; [email protected]; @JoshAlliance
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