25.10.2016, 10:57
Severstal Reports Q3 2016 Results
OREANDA-NEWS. PAO Severstal today announces its Q3 and 9M 2016 financial results for the period ended 30 September 2016.
Q3 2016 vs. Q2 2016 ANALYSIS:
Group revenue remained almost flat, increasing 0.5% q/q to $1,588 million (Q2 2016: $1,580 million). This reflects a substantial rise in average selling prices for steel products and raw materials which was partly offset by lower sales volumes at both the Russian Steel and Resources divisions due to demand softening in the domestic market and planned stock replenishment;
Group EBITDA increased 11.0% q/q to $584 million (Q2 2016: $526 million) driven by lower operating costs and stable topline. Group EBITDA margin increased by a significant 3.5 ppts q/q to 36.8% (Q2 2016: 33.3%) and continues to be one of the highest in the industry;
Net profit of $429 million (Q2 2016: net profit of $608 million) includes a FX gain of $31 million, non-current assets impairment of $16 million and a loss on disposal of property, plant and equipment of $35 million in relation to fixed assets of Severnaya mine. Adjusting for these non-cash items, Severstal would have posted an underlying net profit of $449 million (Q2 2016: net profit of $427 million excluding FX gain);
Global steel prices started to rise in Q2, and this, alongside an increase in net working capital (on the back of a build-up of steel inventories) enabled the Company to continue generating positive free cash flow. Free cash flow decreased marginally 5.6% q/q to $323 million (Q2 2016: $342 million). Free cash flow remains one of the key strategic priorities for the Company;
Cash capex of $122 million increased 4.3% q/q (Q2 2016: $117 million). Severstal’s FY 2016 capex target is RUB 43 billion, subject to FX fluctuations;
Recommended dividend payment of 24.96 RUB per share for the three months ended 30 September 2016.
9M 2016 vs. 9M 2015 ANALYSIS:
Group revenue decreased 14.7% y/y to $4,265 million (9M 2015: $5,000 million) primarily reflecting a substantial decline in average steel selling prices in the first quarter of 2016, as a result of the net decline in global benchmarks;
Group EBITDA decreased 18.4% y/y to $1,383 million (9M 2015: $1,695 million) as the top line compression was only partially mitigated by a decline in input operating costs;
Capex of $358 million was 12.9% higher y/y (9M 2015: $317 million).
FINANCIAL POSITION HIGHLIGHTS:
At the end of Q3 2016, cash and cash equivalents were $1,141 million (Q2 2016: $2,066 million) which reflects the redemption of Eurobonds 2016 of $255 million alongside other scheduled loan repayments during Q3. The Company also paid annual and interim dividends for the year 2015, Q1 2016 and H1 2016 in July and September respectively.
Reflecting the above, Severstal’s gross debt in USD-terms decreased 19.1% as at the end of Q3 2016 to $2,084 million (Q2 2016: $2,577 million). In the meantime, S&P Global Ratings upgraded Severstal to 'BBB-' from 'BB+' in August 2016 and changed outlook from ‘Negative’ to ‘Stable’ in September 2016.
Net debt increased 84.5% to $943 million by the end of Q3 2016 (Q2 2016: $511 million) reflecting the considerable reduction of cash balances which offsets the decrease in gross debt. The Net Debt/EBITDA ratio increased to 0.5x at the end of Q3 2016 (Q2 2016: 0.3x) primarily affected by net debt growth q/q in parallel with relatively flat y/y earnings. Severstal’s Net Debt/EBITDA indicator remains one of the lowest ratios amongst steel companies globally;
Liquidity position remains strong with $1,141 million in cash and cash equivalents and unused committed credit lines of $625 million, more than covering short-term principal debt of $106 million.
Q3 2016 vs. Q2 2016 ANALYSIS:
Group revenue remained almost flat, increasing 0.5% q/q to $1,588 million (Q2 2016: $1,580 million). This reflects a substantial rise in average selling prices for steel products and raw materials which was partly offset by lower sales volumes at both the Russian Steel and Resources divisions due to demand softening in the domestic market and planned stock replenishment;
Group EBITDA increased 11.0% q/q to $584 million (Q2 2016: $526 million) driven by lower operating costs and stable topline. Group EBITDA margin increased by a significant 3.5 ppts q/q to 36.8% (Q2 2016: 33.3%) and continues to be one of the highest in the industry;
Net profit of $429 million (Q2 2016: net profit of $608 million) includes a FX gain of $31 million, non-current assets impairment of $16 million and a loss on disposal of property, plant and equipment of $35 million in relation to fixed assets of Severnaya mine. Adjusting for these non-cash items, Severstal would have posted an underlying net profit of $449 million (Q2 2016: net profit of $427 million excluding FX gain);
Global steel prices started to rise in Q2, and this, alongside an increase in net working capital (on the back of a build-up of steel inventories) enabled the Company to continue generating positive free cash flow. Free cash flow decreased marginally 5.6% q/q to $323 million (Q2 2016: $342 million). Free cash flow remains one of the key strategic priorities for the Company;
Cash capex of $122 million increased 4.3% q/q (Q2 2016: $117 million). Severstal’s FY 2016 capex target is RUB 43 billion, subject to FX fluctuations;
Recommended dividend payment of 24.96 RUB per share for the three months ended 30 September 2016.
9M 2016 vs. 9M 2015 ANALYSIS:
Group revenue decreased 14.7% y/y to $4,265 million (9M 2015: $5,000 million) primarily reflecting a substantial decline in average steel selling prices in the first quarter of 2016, as a result of the net decline in global benchmarks;
Group EBITDA decreased 18.4% y/y to $1,383 million (9M 2015: $1,695 million) as the top line compression was only partially mitigated by a decline in input operating costs;
Capex of $358 million was 12.9% higher y/y (9M 2015: $317 million).
FINANCIAL POSITION HIGHLIGHTS:
At the end of Q3 2016, cash and cash equivalents were $1,141 million (Q2 2016: $2,066 million) which reflects the redemption of Eurobonds 2016 of $255 million alongside other scheduled loan repayments during Q3. The Company also paid annual and interim dividends for the year 2015, Q1 2016 and H1 2016 in July and September respectively.
Reflecting the above, Severstal’s gross debt in USD-terms decreased 19.1% as at the end of Q3 2016 to $2,084 million (Q2 2016: $2,577 million). In the meantime, S&P Global Ratings upgraded Severstal to 'BBB-' from 'BB+' in August 2016 and changed outlook from ‘Negative’ to ‘Stable’ in September 2016.
Net debt increased 84.5% to $943 million by the end of Q3 2016 (Q2 2016: $511 million) reflecting the considerable reduction of cash balances which offsets the decrease in gross debt. The Net Debt/EBITDA ratio increased to 0.5x at the end of Q3 2016 (Q2 2016: 0.3x) primarily affected by net debt growth q/q in parallel with relatively flat y/y earnings. Severstal’s Net Debt/EBITDA indicator remains one of the lowest ratios amongst steel companies globally;
Liquidity position remains strong with $1,141 million in cash and cash equivalents and unused committed credit lines of $625 million, more than covering short-term principal debt of $106 million.
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