6th Sep 2010 07:03
Severstal reports H1 and Q2 2010 financial results
- Strong second quarter of 2010 -
Moscow, Russia - September 6, 2010 - OAO Severstal (LSE: SVST), one of the world's leading integrated steel and mining companies, today announces its H1 and Q2 2010 financial results.
CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010
|
H1 2010 |
H1 2009 |
Change % |
Q2 2010 |
Q1 2010 |
Change % |
|
|
Revenue |
7,387 |
4,810 |
53.6% |
4,245 |
3,142 |
35.1% |
|
EBITDA |
1,447 |
(30) |
n/a |
955 |
492 |
94.1% |
|
EBITDA margin, % |
19.6% |
(0.6%) |
|
22.5% |
15.7% |
|
|
Profit /(loss) from operations |
1,026 |
(426) |
n/a |
728 |
298 |
144.3% |
|
Operating margin, % |
13.9% |
(8.9%) |
|
17.1% |
9.5% |
|
|
Net (loss4)/profit |
(593) |
(946) |
(37.3%) |
192 |
(785) |
n/a |
|
Profit/(loss) from continuing operations (i.e. excl. Lucchini) |
470 |
(803) |
n/a |
393 |
77 |
n/a |
|
EPS, $ |
(0.59) |
(0.94) |
n/a |
0.19 |
(0.78) |
n/a |
Notes:
1) The net loss for H1 2010 includes a loss from the discontinued operation of the Lucchini segment of $1,037 million. The Lucchini segment was classified as held for sale as at 30 June 2010, and a loss on remeasurement of the Lucchini segment to fair value less costs to sell of $1,010 million was recognized in H1 2010, which includes a further impairment loss of $207.9 million accrued in Q2 2010. For further detail, please refer to the Severstal consolidated interim condensed financial statements for H1 2010 at www.severstal.com .
2) 2009 figures do not include Lucchini.
3) EBITDA represents profit from operations plus depreciation and amortization of productive assets adjusted for gain / (loss) on disposals of property, plant and equipment and intangible assets.
4) Attributable to shareholders of OAO Severstal.
Q2 2010 HIGHLIGHTS:
Strong increase in revenue over the previous quarter with EBITDA nearly doubling to $955 million.
§ Net Profit of $192 million;
§ Profit/(loss) from continuing operations (i.e. excl. Lucchini): $393 million (Q1 2010: $77 million);
§ Revenue increased by 35.1% to $4,245 million (Q1 2010: $3,142 million);
§ EBITDA increased by 94.1% to $955 million (Q1 2010: $492 million);
§ EBITDA margin was 22.5% (Q1 2010: 15.7%);
§ Severstal International (North America):
o Positive EBITDA of $59 million in Q2 2010;
o Almost break-even with a $1 million loss from operations (Q1 2010: minus $138 million).
All Divisions benefited from increased production volumes, higher sale prices and enhanced operational efficiency whilst absorbing higher raw material, energy and transportation costs:
§ Severstal Russian Steel: Revenue up 45.1% to $2,415 million (Q1 2010: $1,664 million) with EBITDA up 30.7% to $528 million (Q1 2010: $404 million). Increased output in response to strengthening local steel demand with average selling prices up 9.7%.
§ Severstal Resources: Revenue up 46.5% to $870 million (Q1 2010: $594 million) with EBITDA up 134.6% to $420 million (Q1 2010: $179 million). Increased production to meet growing demand and higher average selling prices.
§ Severstal International (North America): Revenue up 23.7% to $1,447 million (Q1 2010: $1,170 million) with EBITDA of $59 million (Q1 2010: loss of $83 million).
H1 2010 HIGHLIGHTS:
§ Revenue increased by 53.6% to $7,387 million (H1 2009: $4,810 million);
§ EBITDA was $1,447 million (H1 2009: minus $30 million);
§ EBITDA margin of 19.6% (H1 2009: minus 0.6%);
§ Net loss of $593 million (H1 2009: minus $946 million);
§ Profit/(loss) from continuing operations (i.e. excl. Lucchini): $470 million (H1 2009: minus $803 million);
§ Cash and Short-Term Deposits totaled $2,005 million as of the end of June 2010;
§ Severstal International (North America) reduced its loss from operations to $139 million (H1 2009: minus $605 million).
Improved performances across all Divisions:
§ Severstal Russian Steel: Revenue up 63.4% to $4,079 million (H1 2009: $2,497 million) and EBITDA up 182.4% to $932 million (H1 2009: $330 million).
§ Severstal Resources: Revenue up 87.7% to $1,464 million (H1 2009: $780 million) and EBITDA up 364.3% to $599 million (H1 2009: $129 million).
§ Severstal International (North America): Revenue up 38.9% to $2,616 million (H1 2009: $1,884 million) and EBITDA loss reduced to $24 million (H1 2009: loss of $479 million).
FINANCIAL POSITION HIGHLIGHTS:
§ Net debt (excluding Lucchini) was $4.3 billion from $3.6 billion as at December 31, 2009. Net working capital (excluding Lucchini) totaled $2,906 million as at June 30, 2010, up 24.8% from $2,329 million as at December 31, 2009.
§ Solid liquidity position covers future debt repayments over 2010 - 2012:
§ Cash and short-term bank deposits of $2,005 million as at 30 June 2010 ($2,949 million as at 31 December 2009) and unused committed credit lines of $564 million as at 30 June 2010.
§ H1 2010 operating cash flow of $132 million.
§ Leverage reduced to 1.7x net debt to 12 months EBITDA as of Q2 2010.
Alexey Mordashov, CEO of Severstal, commented: "As anticipated, we have been able to build on the underlying progress reported in the first quarter into the second quarter. This reflects the fundamental strengths of our integrated operations and the higher production and prices being achieved, as the economic outlook improves, particularly in Russia. We are well placed to exploit the opportunities in our markets given our competitive cost base, vertically-integrated model and strong financing position. We are confident in future development".
CHIEF EXECUTIVE'S REVIEW OF THE SIX MONTHS ENDED 30 JUNE 2010
The improved underlying performance reported in Q1 continued to build into Q2 enabling the Company to report its quarterly net profit. This reflected increased sales and improved EBITDA performance across all Divisions as we benefited from higher prices and utilization as well as the efficiency initiatives implemented in prior periods.
Severstal Russian Steel performed strongly in H1 2010, despite the impact of severe weather conditions in Q1, supported by stronger local demand and a significant increase in export sales in Q2. Severstal International: in North America we continue to focus on asset restructuring to reduce costs and ensure that our operations are better configured to exploit market opportunities. Severstal Resources benefitted from a general increase in raw material prices and increased production volumes, with third party sales declining as internal consumption increased. The gold segment of Severstal Resources made excellent progress and is now Russia's second largest gold producer.
Capital expenditure was in line with our target for the half year as we continue to invest selectively across our operations to ensure that Severstal takes maximum advantage of the steady improvements in market conditions. Of the total $1.4 billion of planned capital expenditure for 2010, a major part is expected to be invested in Severstal Russian Steel, with the remaining in Severstal Resources and Severstal International (North America).
SEVERSTAL RUSSIAN STEEL
Management actions in recent years have reinforced Severstal Russian Steel's position as one of the most efficient producers on the global cost curve, well positioned to exploit stronger domestic demand and to increase export sales. During H1 2010 we continued to make significant capital investments in the Division to further develop its competitive position including, enhancing product mix.
The Division delivered strong performance in Q2 2010 with revenue and EBITDA improving significantly quarter-on-quarter, even adjusting for unusually severe weather in Q1 2010. Revenue increased by 45.1% in Q2 2010 to $2,415 million (Q1 2010: $1,664 million). Average sales prices were 9.7% higher in Q2 over Q1. EBITDA in Q2 2010 increased by 30.7% to $528 million (Q1 2010: $404 million), with an EBITDA margin of 21.9% (Q1 2010: 24.3%).
The performance for H1 2010 as a whole against H1 2009 showed significant improvements given a much more positive market environment and enhanced operating efficiency. Revenue increased by 63.4% to $4,079 million (H1 2009: $2,497 million) with EBITDA up 182.4% to $932 million (H1 2009: $330 million). EBITDA margin almost doubled from 13.2% in H1 2009 to 22.8% in H1 2010.
Our Izhora Pipe Plant, a major producer of large-diameter pipes, continues to benefit from an increase in oil and gas construction projects. In Q2 2010 we restarted the #2 blast furnace at the Cherepovets Steel Mill, which was idled in Q4 2008. We also started construction works of a mini-mill in Balakovo (Saratov region) in Q1 2010. We are increasing our value-added presence in the automotive market including the launch of stamping operations in the Kaluga Region of Russia in July, with target clients including Volkswagen, PSA and Renault Avtoframos.
SEVERSTAL NORTH AMERICA
In North America, our priority continues to be to ensure that our assets are properly configured for a more flexible and efficient cost base, to exploit attractive opportunities with the right product mix and to better serve our customers in all market segments.
Q2 2010 revenue was up 23.7% to $1,447 million (Q1 2010: $1,170 million). We achieved positive EBITDA in Q2 2010 of $59 million (Q1 2010: loss of $83 million). This reflected a more positive trading environment with sales volumes up 14% quarter-on-quarter and prices up 8.4%, combined with the benefits of the on-going re-structuring of our operations. The Division almost broke even at the operating profit level.
Revenue for H1 2010 was up 38.9% to $2,616 million (H1 2009: $1,884 million) with a much lower EBITDA loss of $24 million (H1 2009: loss of $479 million).
We continue to improve efficiency through modernization at Dearborn and expansion at Columbus to capture growth opportunities in the auto, energy and other major markets.
In Europe, Severstal now has a 49.2% stake in Lucchini. In H1 2010, Lucchini posted revenue of $1,240 million (H1 2009: $841 million). EBITDA was $52 million (H1 2009: minus $129 million). In Q2 2010, Lucchini reported EBITDA of $53 million (Q1 2010: minus $1 million). With sales up 14% in Q2 2010 to $661 million (Q1 2010: $579 million), Lucchini achieved an operating profit of $21 million in Q2 2010.
SEVERSTAL RESOURCES
Severstal Resources is a major international mining business delivering high levels of self sufficiency in iron ore and coking coal to the Company's other divisions. During H1 2010 the priority has been to increase further the efficiency of our operations and enhance the benefits of vertical integration with the Company's steel assets. In addition, we have successfully developed our gold segment into Russia's second largest gold producer.
Q2 2010 revenue grew 46.5% to $870 million (Q1 2010: $594 million) as a result of increased sales volumes and prices. Q2 2010 EBITDA increased by 134.6% to $420 million (Q1 2010: $179 million) representing an EBITDA margin of 48.3% (Q1 2010: 30.1%). Revenue for H1 was up 87.7% to $1,464 million (H1 2009: $780 million), with EBITDA of $599 million (H1 2009: $129 million).
Our average iron ore pellet prices in Q2 were 73% higher against Q1 and sales volumes of coking coal concentrate increased by 12% quarter-on-quarter. Following stronger demand from both Severstal North America and third party customers, PBS Coals increased its sales of coking coal concentrate by 27% over Q1.
Severstal's gold segment continued to successfully develop whilst delivering high margins in H1 2010. Q2 2010 EBITDA margin reached 51.8% (on revenue of $166 million) vs. 49.6% (on revenue of $135 million) in Q1 2010.
In H1 2010, Severstal Gold achieved revenue of $301 million (H1 2009: $213 million); EBITDA of $156 million (H1 2009: $97 million). Severstal Gold benefited from an increase in production volumes, an improvement in selling prices and growth.
In order to increase transparency of the gold segment we will be releasing selected operational data including gold resources and reserves which will be available on the Severstal website in the near future.
DIVIDEND
The Board of Severstal is not recommending payment of a dividend for Q2 2010. The Board anticipates the resumption of dividends payment in the foreseeable future.
OUTLOOK
Global steel prices have softened in the early part of the third quarter, however we expect an improvement in steel markets as we move through the balance of the year, with prices supported by higher raw materials costs. Re-stocking and stronger market demand are expected to drive volumes at Severstal Russian Steel, with the oil and gas, automotive and construction sectors continuing to strengthen as the year progresses. Severstal Resources should continue to benefit from better output pricing, which gives Severstal a competitive advantage as a result of its integrated business model.
In the US, we believe the pace of recovery will continue to be gradual and that steel prices will also be supported by re-stocking and higher raw material prices. We will continue to focus on our cost efficiency initiatives, targeted investment and on increasing sales volumes to improve unit efficiency.
We are well placed to exploit the opportunities in our markets given our competitive cost base, vertically-integrated model and strong financing position.
For further information, please contact:
Severstal
Vladimir Zaluzhsky
T: +7 (495) 926-77-66
M: +7 (925) 006-51-80
Severstal's financial communications agent - Hudson Sandler
Andrew Hayes / Maria Ignatova
T: +44 (0) 20 7796 4133
A conference call for investors and analysts will be held from London on Monday, 6 September 2010 at 14:30 London time, which is 17:30 Moscow time and 9:30 US Eastern Time Zone.
Participant dial in: +44 (0)1452 555 566 (International)
Participant dial in: 0844 493 3800 (UK only)
Conference ID: 97026711
The call will be recorded and there will be a replay facility available for 7 days as follows:International dial in: +44 (0) 1452 550 000UK free call dial in:0800 953 1533USA free call dial in:1866 247 4222 Replay access number: 97026711#
Full financial statements are available at http://www.severstal.com/eng/ir/results_reports/financial_reports/
***
ОАО Severstal is one of the world's leading integrated steel and mining companies. The company's shares are traded on the Russian Trading System (CHMF), MICEX (CHMF, RTS) and LSE (SVST). With assets in Russia, Ukraine, Kazakhstan, Italy, France, the USA and Africa, Severstal reported revenue of over $13 billion and EBITDA of $844 million in 2009*. The Company was also ranked 13th in Metal Bulletin's 2009 global ranking of Top Steelmakers, producing 16.7 million tonnes of crude steel. As of June 30, 2010, Severstal is the 3rd largest steel producer in Russia, the 4th largest steel producer in the US, and the 2nd largest steelmaker in Italy (via Lucchini in which Severstal has a 49% stake). Severstal's mining assets in Russia and the USA mean that the Company has strong self-sufficiency in coking coal and iron ore in Russia, and good self-sufficiency in coking coal in the USA. Severstal's gold business, part of its Resources Division, is Russia's second largest gold producer.
* Figures from Severstal annual report and include Lucchini.
Related Shares:
SVST.L