Severstal Cash Reserves Mean It Has No Need to Borrow, CFO Says

Severstal PJSC is set to remain one of the least indebted steelmakers as the Russian company uses cash to pay all its debt coming due in the next two years.

The company has sufficient funds to avoid borrowing or refinancing, Chief Financial Officer Alexey Kulichenko told reporters on a conference call on Thursday. Its debt level may fall further as it prepares to buy back as much as $452 million of convertible bonds in September under a put option, according to a statement.

Severstal and Russian peers started to reduce their debt last year as U.S. and European sanctions over the Kremlin’s support for separatists in the Ukraine conflict pushed the economy toward recession and raised borrowing costs. Severstal bought back $220 million of Eurobonds due in 2016 and 2017, less than it had sought, in February of this year, and has brought held net debt to earnings before interest, taxes, depreciation and amortization to 0.6, among the lowest for global peers.

At the end of the second quarter, the company, controlled by billionaire Alexey Mordashov, had as much as $1.55 billion of cash and cash equivalents, while short-term debt stood at $462 million, according to an earnings report published Thursday. Second-quarter revenue rose 18 percent from the previous three-month period to $1.8 billion, while Ebitda advanced 0.9 percent to $588 million.

Even as global steel markets remain under pressure as China’s economy weakens and its metals exports grow, Severstal remains “in good shape and well-positioned for the future,” the company said.

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