Novolipetsk Steel Predicts 30% Earnings Boost From Higher Prices

OAO Novolipetsk Steel, Russian billionaire Vladimir Lisin’s steelmaker, forecast second-quarter earnings will climb more than 30 percent on higher metal prices.

Hot-rolled steel coil exported from the Black Sea rose from a low of $577.50 a metric ton in December to as much as $677.50 a ton in March, Metal Bulletin data show.

“The surge in prices seen in February-April will mainly have an impact on Q2 financials, supporting an increase in sales margins,” Chief Financial Officer Galina Aglyamova said. “We expect our Ebitda to increase by over 30 percent quarter-on- quarter,” she said, referring to earnings before interest, taxes, depreciation and amortization.

Profit on this basis dropped 26 percent in the first quarter to $432 million as prices fell from a year earlier, the company known as NLMK said in a statement. This matched the median estimate of 11 analysts surveyed by Bloomberg.

Hot-rolled steel coil averaged $622.50 a ton in the first three months of the year, down from $708.75 in the same period of 2011, according to Metal Bulletin.

A 30 percent increase in second-quarter Ebitda from the first quarter would lift earnings to about $561 million. The Ebitda margin will rise to 17 to 19 percent this quarter from 14 percent in the January-March period, the steelmaker forecast. Revenue may rise 10 percent from $3.1 billion.

NLMK’s Foreign Rolled Products division, which was formed after the company gained control over the Duferco mills in Europe and the U.S. last year, has “almost reached its break- even point,” the company said.

While the steelmaker is seeking to further improve performance, the broader industry’s prospects are “still uncertain” due to the European sovereign debt crisis, NLMK said. This has led it to predict that prices will be flat in the third quarter compared with the first.

Net debt rose 5 percent from the previous quarter to $3.54 billion, and the company said its ratio to Ebitda was “comfortable” at 1.69.

It reiterated plans for capital spending of $1.7 billion this year.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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