Evraz to Consider Sale of Czech Steel Unit After Weak Demand

Evraz Plc (EVR), Russia’s largest steelmaker by output, will study the potential sale of its lossmaking Czech unit where some operations were idled earlier this month because of weak demand.

“We are considering different options regarding the plant,” Chief Executive Officer Alexander Frolov said today on a conference call with reporters. The company could put a permanent halt to crude steel production at the Ostrava-based plant and only keep steel-rolling facilities operating, or sell the unit, he said.

Evraz is reviewing the future of the plant after recording a $308 million net loss for 2012 and scrapping the final dividend. It bought a stake in Vitkovice for $285 million in 2005 after beating out rivals including Mittal Steel.

Full-year revenue dropped 10 percent to $14.7 billion, while earnings before interest, tax, depreciation and amortization plunged 31 percent to $2 billion on weaker demand and lower prices, the company said in a statement. The steelmaker canceled its second-half dividend.

The stock slumped by a record 16 percent in London trading and was 9 percent lower at 190.90 pence as of 10:40 a.m. local time. The shares have slumped 46 percent in the past year.

“Evraz plunged on investors’ groundless anticipation of dividends, while the results are in line with the consensus,” Dmitry Kolomytsyn, an analyst at Morgan Stanley, said by phone.

The steelmaker recognized a $83 million loss on the reclassification of its “underperforming” Evraz Vitkovice Steel SA and South African Highveld Steel (EHS) & Vanadium Ltd. units as assets for sale. The company agreed to sell 85 percent of Highveld to Nemascore (Pty) Ltd., a black-owned South African company, for $320 million last month.

Evraz will decide on the first-half dividend later this year depending on the situation in the steel market, Frolov said. “It’s too early to speak about special dividends after the sale of Highveld, as the deal is in the early stage,” he said.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

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

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