1st Apr 2015 11:19
LONDON (Alliance News) - Evraz PLC shares rose on Wednesday after it said it will return USD375 million to its shareholders even though its pretax loss widened in 2014 on the back of a USD1.0 billion foreign exchange loss caused by the devaluation of the rouble, saying it has "improved business prospects" in 2015.
Evraz shares rose 6.3% to 199.50 pence per share on Wednesday morning, making it the best-performing stock in the FTSE 250.
The steel miner reported a pretax loss of USD1.08 billion in 2014, compared with a USD637 million loss in 2013, on the back of the substantial foreign exchange loss and an impairment charge.
Evraz booked a USD540 million impairment against units at Evraz North America, Evraz Palini e Bertoli and Evraz Highveld Steel and Vanadium, slightly down from the USD563 million in impairments it booked in 2013.
However, the company booked a USD1.0 billion loss on foreign exchange compared with a loss of USD258 million in 2013. The foreign exchange loss was caused by the weakening of the rouble against the dollar.
Still,earnings before interest, tax, depreciation and amortization rose 28% to USD2.32 billion, from USD1.82 billion, as Evraz optimised its assets and cut costs. The figure was also given a lift as expenses in dollar terms fell at its at Russian and Ukrainian subsidiaries due to the drop in the local currencies.
Ebitda rose in all of its business units, with North American steel Ebitda rising 77%, coal by 65% and its steel segment by 15%.
"Our actions to reduce costs and improve operational performance have had a significant positive impact on overall performance during the year," said Evraz.
Revenue fell by 9% to USD13.06 billion from USD14.41 billion, mostly as a result of a decline in the steel segment revenue, which accounts for 72.9% of the company's total revenue. Steel sales for the year fell by 1.9% to 15.2 million tonnes, largely due to a 7.3% decline in prices of steel products and reduced sales of products it describes as non-core, including iron ore, vanadium, coke, chemicals and scrap.
Evraz said it plans to return up to USD375 million to shareholders by way of a tender offer. The company said it will purchase over 120.9 million shares from qualifying shareholders at a tender price of USD3.10 per share. The offer represents a maximum of 8% of the company's issued share capital, it said. The offer is subject to shareholder approval.
"The board noted the positive financial performance of the Evraz group and improved business prospects for 2015. In view of strong positive cash flow and the liquidity to service debt and meet 2015 maturities, as well as the reduced 2016 debt redemption requirement, the board is announcing the tender offer," it said in a statement.
Net debt in 2014 fell by 11% to USD5.81 billion from USD6.53 billion, and it ended the year with a cash balance of USD1.08 billion.
In 2014, the company spent USD654 million in capital expenditure, down 27% from the USD902 million spent in 2013. The majority of 2014 expenditure was directed towards maintenance spending and USD211 million was invested in projects to try and either increase production or reduce costs.
In 2015, the company said it plans to expand its coal sales in Russia whilst maintaining premium export sales, but said Russian coke production is expected to fall by 2% to 3% and said it expects to sell a "significantly larger part" of its steel products to export markets during the year compared with 2014.
"The Russian coal market will retain its key importance for our business, however as we expect the Russian coal consumption to be stable in volume terms, most of the additional coal production will be shipped to export markets," said Evraz.
Its North American steel unit is expected to run at full capacity in 2015, and Evraz said it remains "very positive" about its rail and large-diameter businesses in the region. Oil country tubular goods will face "severe headwinds" in 2015 due to lower oil prices, and therefore it is expecting its utilization of its mills making tubes and pipes for the oil industry to fall.
"Overall steel demand will be driven by the continuous economic recovery in the United States and increasing demand from selected economic sectors such as construction, automotive and energy," said the company.
Its steel segment is expected to experience continued growth. However steel pricing will remain volatile and largely driven by existing underutilization of production capacity in selected markets, and specifically competition from Chinese steel producers as China's economic growth slowdown persists, said Evraz.
The company expects to run its steel-making operations in Russia and Ukraine at full capacity in 2015, and said that although Russia remains its priority steel market, it is closely monitoring the recent changes in the market and Russia's weakening demand caused by the devaluation of the Russian rouble.
"The company expects to sell a significantly larger part of its steel in export markets. The Russian construction steel market is expected to be highly competitive as newly commissioned mini-mills reach their designed capacity. Intensified competition will reduce producers margins and put additional pressure on steel imports into the country," said Evraz.
By Joshua Warner; [email protected]; @JoshAlliance
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