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Severstal Beats Profit Estimates, Expects ‘Firm’ Steel Price

OAO Severstal, Russian billionaire Alexey Mordashov’s steelmaker, said fourth-quarter profit rose almost 8 percent from the prior three months, beating analysts’ estimates, and forecast “firm” steel prices until the summer.

Net income climbed to $463 million from $429 million in the third quarter, it said today in a statement. That compares with the average estimate of $390 million of eight analysts surveyed by Bloomberg. Sales fell 18 percent to $3.73 billion.

The company confirmed its “profitability leadership in the Russian steel sector” with a fourth-quarter margin on earnings before interest, taxes, depreciation and amortization of 21 percent, said Dmitry Smolin, an analyst at Uralsib Capital.

Severstal rose 3 percent to 392 rubles by 11:26 a.m. in Moscow trading. Among competitors, OAO Novolipetsk Steel had a 13 percent Ebitda margin in the quarter and MMK 9 percent.

The company swung to profit last year after selling three plants in the U.S. Full-year net income was $2.03 billion after a $575 million loss in 2010, while sales advanced 23 percent to $15.8 billion. Ebitda in North American doubled to $181 million.

“Despite sustained macroeconomic uncertainty, the first quarter has seen some recovery in steel demand and pricing,” Severstal said in the statement.

“We expect global steel prices to remain firm until the summer period, when some price correction may occur due to a steel production ramp-up and real demand deceleration.”

Demand in Russia will “slightly exceed” the pace of gross domestic product growth, and demand in the U.S. “remains steady with the strong automotive sector continuing to perform well and construction starting to show modest signs of recovery.”

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