OAO Severstal (SVST) - Q3 & 9M 2012 Financial Results RNS Number : 1904R OAO Severstal 15 November 2012 Severstal reports Q3 & 9M 2012 financial results Moscow, Russia - November 15, 2012- OAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrated steel and steel-related mining companies, today announces its Q3 & 9M 2012 financial results. CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER ENDED 30 September 2012 $ million, unless Q3 2012 Q2 2012 Change, % 9M 2012 9M 2011^1 Change, % otherwise stated Revenue 3,591 3,718 (3.4%) 10,988 12,085 (9.1%) EBITDA^2 546 664 (17.8%) 1,772 2,817 (37.1%) EBITDA margin, % 15.2% 17.9% (2.7 ppts) 16.1% 23.3% (7.2 ppts) Profit from operations 369 481 (23.3%) 1,235 2,319 (46.7%) Operating margin, % 10.3% 12.9% (2.6 ppts) 11.2% 19.2% (8.0 ppts) Net profit^3 329 155 112.3% 912 1,572 (42.0%) EPS^4, $ 0.41 0.19 115.8% 1.07 1.56 (31.4%) Notes: 1) These amounts reflect adjustments made in connection with the presentation of discontinued operations and the early adoption of the revised IAS 19 "Employee benefits". 2) EBITDA represents profit/(loss) from operations plus depreciation and amortization of productive assets adjusted for gain / (loss) on disposals of property, plant and equipment and intangible assets. 3) Attributable to shareholders of OAO Severstal. 4) EPS is calculated based on the following weighted average number of shares outstanding during the period: 849.7 million shares for 9M 2012, 810.6 million shares for Q3 2012, 812.3 million shares for Q2 2012 and for 1,005.2 million shares for 9M 2011. Q3 2012 vs. Q2 2012 ANALYSIS: § Higher sales volumes at Severstal Resources and Severstal Russian Steel divisions, but lower realized prices across divisions impact Group revenue and EBITDA lines; § Severstal Russian Steel division delivered increased revenue, but Group revenue decreased 3.4% to $3,591 million (Q2 2012: $3,718 million) due to softer sales at Severstal Resources and Severstal International; § EBITDA declined by 17.8% to $546 million (Q2 2012: $664 million) and EBITDA margin decreased to 15.2% (Q2 2012: 17.9%), primarily due to lower EBITDA at Severstal Resources and Severstal International; § Q3 net profit broadly doubled q/q to $329 million (Q2 2012: $155 million). The company registered FX gains of $152million in Q3, as compared to FX losses of $143 million in Q2; § Recommended dividend payment of 3.18 roubles per share (approximately $0.10) for the 9 months ended 30 September 2012. 9M 2012 vs. 9M 2011 ANALYSIS: § Revenue down by 9.1% to $10,988 million (9M 2011: $12,085 million) due to lower steel and bulks prices; § EBITDA down 37.1% to $1,772 million (9M 2011: $2,817 million) and EBITDA margin down to 16.1% (9M 2011: 23.3%), due to lower earnings at Severstal Russian Steel and Severstal Resources divisions. FINANCIAL POSITION HIGHLIGHTS: § Liquidity position strengthened further: $2,121 million in cash and cash equivalents, comfortably covering short-term debt of $1,877 million; § Net Debt/EBITDA increased slightly to 1.4x at end of Q3 2012 due to drop in EBITDA for the last twelve months, but remains below target level of 1.5x; § In September, Severstal successfully placed $475 million of Senior Unsecured Convertible Bonds due 2017; § In October, Severstal successfully placed $750 million of 10-year Eurobonds with a coupon rate of 5.9%. Alexey Mordashov, CEO of Severstal, commented: "Severstal delivered a solid financial and operational performance in Q3 2012; a quarter that, across the steel and steel-related mining markets, was characterized by contracting prices. Until the year end we anticipate coking coal and iron ore prices to remain stable, while steel prices have some downside risk, therefore we expect Q4 2012 to be more challenging for us, as compared to Q3 2012. Nevertheless, Severstal remains one of the global industry leaders by profitability and we remain confident that the strengths of our business model, high-quality asset portfolio and product mix will enable us to continue to hold this position." CHIEF EXECUTIVE'S REVIEW OF THE THREE MONTHS ENDED 30 SEPTEMBER 2012 Severstal Russian Steel delivered the strongest q/q EBITDA performance for the Group as a result of strong sales to the domestic market, an increased share of high-value-added products in the sales portfolio and higher sales volumes. The q/q EBITDA decline at the Severstal Resources and Severstal International divisions was largely due to lower realized prices, coupled with weaker sales volumes at Severstal North America. Our cash capital expenditure in Q3 was $330 million, down 11% from the previous quarter. We continue to focus our capex on steel and mining assets in Russia. Our major 2012 projects include the Balakovo Mini-mill, the reconstruction of Coke Battery #7 at Cherepovets and a coalmine methane power station at Vorkuta. SEVERSTAL RUSSIAN STEEL Severstal Russian Steel's revenue in Q3 increased 2.0% q/q to $2,254 million (Q2 2012: $2,209 million), with 6% higher q/q sales volumes offsetting lower realized selling prices. EBITDA increased by 5.6% q/q to $284 million (Q2 2012: $269 million) with EBITDA margin up to 12.6% (Q2 2012: 12.2%). Benefiting from favorable end demand factors, the share of high-value-added products in the sales portfolio rose to 46% on stronger sales of all value-added products except for large-diameter pipes and intentionally lower volumes of slab sales. The share of sales to the domestic market further increased to 61%, representing the highest level in the latest quarters. In September the new Coke Battery #7 was fired up at Cherepovets. The new unit, with installed capacity of 700 ktpa, is expected to start coke production in Q1 2013. SEVERSTAL RESOURCES Severstal Resources' revenue decreased by 6.5% in Q3 to $735 million (Q2 2012: $786 million), owing to lower realized coking coal and iron ore prices. The lower prices were partly offset by higher sales volumes at all business units except for PBS where we temporarily idled 5 of our 12 mines in July. Lower revenue and flat costs lead to lower q/q EBITDA of $244 million (Q2 2012: $293 million). In Q3 we completed the pre-feasibility study for our Putu iron ore project in Liberia, which confirmed extensive resources of approximately 4.4bn tonnes of iron ore at the deposit. Cost dynamics at Severstal Resources units was mixed in Q3. Coking coal concentrate costs at Vorkuta decreased by 17% q/q to $87/t due to a production ramp-up in Q3 following a dip in production in Q2 and the completion of planned maintenance. Production costs at PBS were up to $113/t due to impairment of part of coal inventories, but we expect cost decreases at PBS in Q4. Iron ore production costs remained largely flat q/q at $57/t at Karelskiy Okatysh and $45/t at Olkon. SEVERSTAL INTERNATIONAL Severstal International posted revenue of $910 million (Q2 2012: $1,063 million). The drop was due to lower realized prices coupled with weaker selling volumes. Division's EBITDA declined to $17 million (Q2 2012: $77 million). EBITDA margin reduced 5.3 ppts q/q to 1.9%, while EBITDA per tonne decreased q/q to $16 from $64 in Q2. Value-added products (cold rolled carbon and galvanized steel) remained more resilient to the downturn in demand and their share in the product mix increased slightly from 42% in Q2 to 43% in Q3. In the first 9 months of 2012 shipments rose 26% over the same period of 2011 and revenue increased 21%. In the first 9 months of 2012 Division's EBITDA was $160 million or $46 per tonne (9M 2011: $163 million or $58 per tonne). Weekly steel production in the US in Q3 continued to fall y/y while imports of finished steel products to the US increased on average 18% y/y and in some product categories by 40%. The industry's capacity utilization is now below 70%. However, most market segments remain healthy led by demand from the automotive, pipe and tube industry. There are some signs of recovery in the residential and non-residential construction segments. DIVIDEND The Board is recommending a dividend of 3.18 roubles per share (approximately $0.10) for the nine months ended 30 September 2012. Approval of the dividend is expected at the Company's Extraordinary General Meeting which will take place on 20 December 2012. The record date is 9 November 2012. OUTLOOK In Russia, we expect Q4 to be weaker than Q3 due to traditionally lower levels of construction activity. Further decreases in export prices are unlikely as they have reached the level of production costs of marginal producers. Global steelmaking utilization reached 78% in September and is expected to remain broadly flat in Q4. The Chinese economy shows signs of recovery in investments and construction sectors on the back of government measures to ramp up spending. Nevertheless, we anticipate coking coal and iron ore prices to remain stable until the year end, while steel prices have some downside risk, therefore we expect Q4 2012 to be more challenging for us, as compared to Q3 2012. http://www.rns-pdf.londonstockexchange.com/rns/1904R_-2012-11-15.pdf http://www.rns-pdf.londonstockexchange.com/rns/1904R_1-2012-11-15.pdf For further information, please contact: Severstal Investor Relations Vladimir Zaluzhsky T: +7 (495) 926-77-66 firstname.lastname@example.org Severstal Public Relations Elena Kovaleva T: +7 (495) 926-77-66 email@example.com Severstal's financial communications agent - Hudson Sandler Andrew Hayes / Andrew Leach / Maria Ignatova / Alex Brennan T: +44 (0) 20 7796 4133 A conference call on Q3 2012 results for investors and analysts hosted by Alexey Kulichenko, Chief Financial Officer, will be held on November 15, 2012 at 09.30am (GMT London) 13.30 (Moscow). Participant dial in: +44 (0) 1452 555 566 (International) Participant dial in: +08 00 6940 257 (UK FreeCall Dial-In) Participant dial in: +08 44 493 3800 (UK LocalCall Dial-In) Participant dial in: 8108 002 097 2044 (Russian Free Call) Conference ID: 59178650 The call will be recorded and there will be a replay facility available for 7 days as follows: International Dial in: +44 (0) 1452 55 00 00 UK Free Call Dial In: 0871 700 0145 UK Local Dial In: 0845 245 5205 Encore replay access number: 9256860 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 vertically integrated steel and steel related mining companies, with assets in Russia, the USA, Ukraine, Latvia, Poland, Italy, Liberia and Brazil. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE.Severstal reported revenue of $15,812 million and EBITDA of $3,584 million in 2011. Severstal's crude steel production in 2011 reached 15.3 million tonnes. www.severstal.com This information is provided by RNS The company news service from the London Stock Exchange END QRTFFLSMIFESELF -0- Nov/15/2012 07:01 GMT
OAO Severstal SVST Q3 & 9M 2012 Financial Results
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