Posted on 26 Oct 2016
Severstal, one of Russia’s largest steelmakers, reported a better than expected 11 percent rise in core profits in the third quarter of the year compared with the previous three months, helped by lower costs.
Russian steelmakers suffered in 2015 as world steel prices plumbed 10-year lows and the country’s deepening economic downturn sapped demand.
But companies including Severstal were expected to make a stronger showing in the third quarter of this year thanks to steady or higher output levels and a recovering global market.
Severstal said earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled $584 million, compared with $526 million in the previous quarter, while revenue edged up 0.5 percent to $1.6 billion.
“This reflects a substantial rise in average selling prices for steel products and raw materials which was partly offset by lower sales volumes at both the Russian Steel and Resources divisions,” the company said in a statement.
Analysts polled by Reuters had predicted core earnings of $574 million, up 9.6 percent year on year.
Steelmakers have also had to contend with higher coking coal prices which have doubled since July to more than $200 per tonne on expectations of lower supply.
Severstal, which produces 80 percent of its coking coal in-house, said disrupted supplies from China and Japan were fuelling the spike in prices.
“Nevertheless, these factors do not justify the current coking coal price and therefore a significant decrease in prices is expected in the forthcoming 1-2 months,” the company said in a statement.
Severstal’s net profit totalled $429 million, down 29 percent quarter-on-quarter, it said. This included a foreign exchange gain of $31 million but also losses incurred following an explosion at one of its mines in February.
More than 30 people were killed after a methane gas leak caused two blasts at Severstal’s Severnaya coalmine in Vorkuta, above the Arctic circle, prompting the company to suspend operations and seal the pit.
Chief Executive Vadim Larin said he expected an operation to extract coal from Severnaya via an adjacent mine to start in 2020.
Commenting on the company’s outlook, he said: “We expect the stabilisation of the global steel and steel-related commodity markets to continue in 2017.”
Chief Financial Officer Alexey Kulichenko told a results conference call with investors that crude steel output was seen falling by 1-2 percent year-on-year in 2017 due to blast furnace repairs.
Severstal said on Monday its board of directors had recommended a third-quarter dividend payment of 24.96 roubles per share. For the same period last year it paid a dividend of 13.17 roubles per share.
