Severstal reports Q1 2019 financial results
by David Fleschen
PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world’s leading steel and steel-related mining companies, today announces its Q1 2019 financial results for the period ended 31 March 2019.
2019 vs. Q4 2018 ANALYSIS:
- Group revenue marginally decreased 2.6% q/q to $2,031 million (Q4 2018: $2,085 million), as growth in steel sales volumes was offset by a decline in steel prices q/q.
- Group EBITDA declined to $663 million (Q4 2018: $794 million), reflecting lower revenues as well as a higher cost base. The Group’s vertically integrated business model delivered an EBITDA margin of 32.6%, remaining one of the highest in the industry globally despite global steel prices softening.
- Free cash flow surged 67.0% to $389 million (Q4 2018: $233 million), which primarily reflects positive changes in net working capital q/q despite lower earnings. Net profit totalled $428 million (Q4 2018: $578 million) and includes a FX gain of $71 million.
- Cash CAPEX was $209 million (Q4 2018: $224 million). Severstal’s investment programme for 2019 is expected to amount to $1.45 bn.
- Net debt declined to $863 million by the end of Q1 2019 (Q4 2018: $1,227 million), primarily reflecting growth of cash balances.
- Severstal is committed to returning value to its shareholders whilst managing and maintaining a low level of debt. Severstal’s financial position remains strong with a Net debt/EBITDA ratio of 0.3 as at the end of Q1 2019. The Board of Directors has therefore recommended a dividend of 35.43 roubles per share for Q1 2019.
Q1 2019 vs. Q1 2018 ANALYSIS:
- Group revenue declined 6.5% y/y to $2,031 million (Q1 2018: $2,173 million). The drop in revenue y/y was a result of weaker pricing for steel and lower steel sales volumes y/y.
- Group EBITDA was 6.1% lower y/y, at $663 million (Q1 2018: $706 million), primarily reflecting the lower revenues which were partially offset by a lower cost of sales. EBITDA margin therefore remained almost flat at 32.6% (Q1 2018: 32.5%).
- The Company generated $389 million of free cash flow, which represents an increase of 34.6% y/y (Q1 2018: $289 million) as a result of positive net working capital changes y/y.
FINANCIAL POSITION HIGHLIGHTS:
- At the end of Q1 2019, cash and cash equivalents stood at $583 million (Q4 2018: $228 million), reflecting FCF generation for the period.
- Gross debt remained broadly unchanged during the period at $1,446 million (Q4 2018: $1,455 million).
- Net debt declined to $863 million by the end of Q1 2019 (Q4 2018: $1,227 million), primarily reflecting growth of cash balances. The Net debt/EBITDA ratio declined to 0.3 at the end of Q1 2019 (Q4 2018: 0.4). Severstal’s Net debt/EBITDA remains one of the lowest amongst steel companies globally and enables Severstal to maintain a low level of debt whilst returning value to its shareholders.
- The Group’s liquidity position remains strong, with $583 million in cash and cash equivalents and unused committed credit lines and overdraft facilities of $1,188 million, more than covering the short-term principal debt of $336 million.
Alexander Shevelev, CEO of Severstal Management, commented:
“I am pleased to highlight that in Q1 2019 Severstal delivered a sustainable financial performance despite the combination of weak pricing for steel products versus rising cost of the raw materials busket. Our strong results once again demonstrated the competitive advantages of our vertically integrated business model, which enables us to maintain high profitability and cash flow generation in any market conditions, to deliver sustainable returns. The Company generated $389 million of free cash flow, which represents an increase of 34.6% y/y as a result of positive net working capital changes.
At our Capital Markets Day in November 2018 we committed to growing our EBITDA by 10-15% annually, and presented investment projects for the coming five years that should ensure this growth. In Q1 2019 our operational efficiency improvements, increased self-sufficiency in raw materials and cost reductions have enabled us to deliver a positive EBITDA effect of $106 mln."
Source: Severstal, Photo: Fotolia