Severstal : reports Q3 & 9M 2019 financial results

PAO Severstal (SVST) Severstal reports Q3 & 9M 2019 financial results 18-Oct-2019 / 09:02 MSK Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.   Severstal reports Q3 & 9M2019 financial results - Exceptional margins supported by vertical integration-   Moscow, Russia - 18October2019- PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading steel and steel-related mining companies, today announces its Q3 & 9M 2019financial results for the period ended 30September2019.   CONSOLIDATED FINANCIAL RESULTS FOR THE THIRD QUARTER ENDED 30SEPTEMBER2019   $ million, unlessotherwisestated Q3 2019 Q2 2019 Change, % 9M 2019 9M 2018 Change, % Revenue 2,111 2,177 (3.0%) 6,319 6,495 (2.7%) EBITDA1 787 753 4.5% 2,203 2,348 (6.2%) EBITDA margin, % 37.3% 34.6% 2.7 ppts 34.9% 36.2% (1.3 ppts) Profitfromoperations 670 625 7.2% 1,850 2,022 (8.5%) Operatingmargin, % 31.7% 28.7% 3.0 ppts 29.3% 31.1% (1.8 ppts) Freecash flow2 346 263 31.6% 998 1,368 (27.0%) Profitfortheperiod 490 475 3.2% 1,393 1,473 (5.4%) Basic EPS3, $ 0.59 0.58 1.7% 1.69 1.81 (6.6%)     Notes:   EBITDA represents profit from operations plus depreciation and amortisation of productive assets (including the Group's share in depreciation and amortisation of associates and joint ventures) adjusted for gain/(loss) on disposals of PPE and intangible assets and its share in associates' and joint ventures' non-operating income/(expenses). A reconciliation of EBITDA to profit from operations is presented in Severstal's quarterly financial statements.   Free Cash Flow ("FCF") is determined as the aggregate amount of the following items: Net cash from operating activities, CAPEX, proceeds from disposal of PPE, interest received and dividends received. A reconciliation of free cash flow to net cash from operating activities is presented in Severstal's quarterly financial statements.   Basic EPS is calculated as profit for the period divided by the weighted average number of shares outstanding during the period: 825.4 million shares for Q3 2019, 825.0 million shares for Q2 2019, 824.3 million shares for 9M 2019, 815.7 million shares for 9M 2018.   Q3 2019 vs. Q2 2019 ANALYSIS:   Group revenue declined3.0% q/qto $2,111million (Q2 2019: $2,177 million)due toadverse price dynamics for steel and raw materials.   Group EBITDA increased 4.5%q/q to $787 million (Q2 2019: $753 million), reflecting lower cost of sales. The Group's vertically integrated business model delivered an EBITDA margin of 37.3%, maintaining its position as one of the highest in the industry globally.   Free cash flow totalled $346million (Q2 2019: $263 million), primarily reflectingpositive changes in net working capital q/q.   Profit for the periodtotalled $490million (Q22019: $475 million) and includes a FX loss of $50 million.   Cash CAPEX amounted  to $311 million (Q2 2019: $267million).   Net debtdecreased to $1,300 million at the end of Q3 2019 (Q2 2019: $1,469 million), primarily reflecting cash balances growth as a result ofFCF generation for the period, with the proceeds from the Balakovo mini-mill sale offset by the dividend payout.   Severstal is committed to returning value to its shareholders whilst managing and maintaining a comfortable level of debt. Severstal's financial position remains strong with a Net debt/EBITDA ratio of 0.4 as at the end of Q3 2019. The Board of Directors has therefore recommended a dividend of 27.47 roubles per share for Q3 2019.   9M2019 vs. 9M2018 ANALYSIS:   Group revenue declined2.7% y/y to $6,319 million (9M 2018: $6,495million). Thisdrop in revenue y/y was a result of weaker pricing for steel products, which was offsetby an overall growth insales volumesy/y.   Group EBITDA was 6.2% lower y/y, at $2,203 million (9M 2018: $2,348 million),primarily reflecting lower revenues. The Group's EBITDA margin remained at high levels of 34.9% (9M 2018: 36.2%).   The Company generated $998 million of free cash flow, which represents a decline of 27.0% y/y (9M 2018: $1,368 million) mainly reflecting a decline in EBITDA and CAPEX growth y/y.     FINANCIAL POSITION HIGHLIGHTS:   At the end of Q3 2019, cash and cash equivalents stood at $1,317 million (Q2 2019: $345 million), reflecting cash received following the placement of the Eurobond, FCF generation and the proceeds from the sale ofBalakovo mini-mill, which was partly offset by the dividend payout.   Gross debt increased to $2,617 million (Q2 2019: $1,814million). In September 2019, Severstal completed the placement of loan participation notes due in 2024 of $800 million at 3.15%.   Net debt decreased to $1,300 million by the end of Q3 2019 (Q2 2019: $1,469 million), primarily reflecting growth in cash balances. The Net debt/EBITDA ratio totalled 0.4 at the end of Q3 2019 (Q2 2019: 0.5). Severstal's Net debt/EBITDA remains one of the lowest amongst steel companies globally and enables Severstal to maintain a comfortable level of debt whilst returning value to its shareholders.   The Group's liquidity position remains strong, with $1,317million in cash and cash equivalents and unused committed credit lines and overdraft facilities of $1,249 million, more than covering the short-term principal debt of $259million.   Alexander Shevelev, CEO of Severstal Management, commented:   "We delivered a strong performance in the third quarter of 2019overall in spite of volatility in the global steel and raw material markets. An anticipated deceleration in global steel demandled to falling steel prices, which contributed to negative iron ore and coking coal dynamics of in Q3 2019. In this environment, Severstal's vertically integrated business model and the flexibility of our multiple distribution channels supported our EBITDA, which increased by 4.5% to $787 mln, and our EBITDA margin, which was 37.3% in Q3 2019. This is one of the highest quarterly margins we have achieved for several years. In Q3 2019, we completed the sale of Balakovo mini-mill for $215 million and will now focus on the HVA products within our portfolio. In September, we announced the placement of an $800 mln Eurobond due in 2024 at 3.15%, which is one of the lowest coupon rates amongst Russian companies and steel companies globally. Our ESG performance is a key focus. Severstal is one of the very first companies to pilot the World Steel Association's (WSA) Step Up methodology for reducing greenhouse gas emissions from steel production. At Severstal we have agreed on a methodology for estimating our ??2impactand are now developing a programme of initiatives to support a reduction of emissions. The Board remains confident in the outlook and is recommending a dividend of 27.47 roubles per share for Q3 2019."   SEVERSTAL RUSSIAN STEEL (RSD)     $ million, unlessotherwisestated Q3 2019 Q2 2019 Change, % 9M 2019 9M 2018 Change, % Revenue 2,102 2,151 (2.3%) 6,219 5,958 4.4% EBITDA 433 397 9.1% 1,225 1,718 (28.7%) EBITDA margin, % 20.6% 18.5% 2.1 ppts 19.7% 28.8% (9.1 ppts)   RSD steel product sales remained flat q/q at 2.85 mln tonnes in Q3 2019 (Q2 2019: 2.85 mln tonnes).   The total share of domestic sales declined 3 ppts, to 67%, but remained at historically high levels due to thefavourable domestic pricing environment (Q2 2019: 70%).   The share of high value-added (HVA) products within the sales portfolio remained at 45% (Q2 2019: 46%).   LDP sales volumes declined 6% q/q, reflecting changes in the product mix. Izhora Pipe Mill maintained its 100% utilisation rate in Q3 2019.   The weighted average selling price for the whole range of rolled steel products remained almost flat in Q3 2019, reflecting the flexibility of Severstal's distribution channels as well as thefavourable pricing environment in the domestic market. RSD topline declinedby 2.3% q/q to $2,102 million (Q2 2019: $2,151 million). Decreased raw material expenses resulted in EBITDAgrowth of9.1% q/q to $433 million (Q2 2019: $397 million). The EBITDA margin increased to20.6% (Q2 2019: 18.5%).     The total non-integrated cash cost of slab production at the Cherepovets Steel Mill in Q32019decreased $9/t and totalled$346/t (Q22019: $355/t) as a result of lower raw materialexpenses q/q. The integrated cash cost of slab in Q3 2019 totalled $208/t due to a decline Resources EBITDA.   SEVERSTAL RESOURCES   $ million, unlessotherwisestated Q3 2019 Q2 2019 Change, % 9M 2019 9M 2018 Change, % Revenue 609 647 (5.9%) 1,767 1,345 31.4% EBITDA 382 416 (8.2%) 1,093 673 62.4% EBITDA margin, % 62.7% 64.3% (1.6 ppts) 61.9% 50.0% 11.9 ppts     Coking coal concentrate sales volumes from Vorkutaugol surged 41% q/q reflecting the 42% increase q/q in production of run-of-mine coal.   Iron ore pellet sales declined 15% to 2.46 mln tonnes (Q2 2019: 2.90 mln tonnes) reflecting higher production of iron ore concentrate at Karelsky Okatysh.   Iron ore concentrate sales volumes increased 35% to 1.93 mln tonnes (Q2 2019: 1.43 mln tonnes) driven by production volumes growth at Karelsky Okatysh.   Revenue at the Resources Division decreased5.9% q/q to $609million (Q2 2019: $647 million) mainly affected by weaker price dynamics at the division's iron ore segment. EBITDA was down8.2% q/q to $382 million (Q2 2019: $416 million) due to the revenue decline q/q. The EBITDA margin totalled62.7%.   Sales volumes increase at Vorkutaugol brought Q3 2019 cash costs down to 66$/t (Q2 2019: $87/t). ?ash costs per tonne at Karelsky Okatysh stood at $24/t (Q2 2019: $23/t). Cash costs per tonne at Olcon declined to $26/t (Q2 2019: $28/t).   DIVIDEND   The Board of Directors has therefore recommended a dividend of 27.47 roubles per share for Q3 2019. Approval of the dividend is expected to take place at the Company's EGM on 22 November 2019. The record date for participation in the EGM is 28 October 2019. The recommended record date for the dividend payment is 3 December 2019. The approval of the record date for the dividend payment is also expected to take place at the Company's EGM on 22 November 2019.   OUTLOOK   Growth in global steel demand in 2019 is supported by China, while outside China steel demand was weak, particularly in Europe and in the MENA region. The deficit in the iron ore market is gradually disappearing. The coking coal market is well-supplied, with weak demand having resulted in coal producers margins decline. Global export steel prices are under the pressure of weak economic sentiment and declining raw material prices.   Despite a number of potential headwinds on both the export and domestic markets, our low cost position allows us to stay competitive on the market. The Board remains confident in the resilience of Severstal's business model relative to its local and global peers. NOTES   Full financial statements are available athttp://www.severstal.com/eng/ir/results_and_reports/financial_results/index.phtml The Annual Report 2018is available at http://www.severstal.com/eng/ir/results_and_reports/annual_reports/index.phtml     For further information, please contact:   Severstal Investor Relations Evgeny Belov T: [phone] [e-mail]   Vladimir Zaluzhsky T: [phone] [e-mail]     Severstal Public Relations Anastasia Mishanina T: [phone] [e-mail]   Vladimir Zaluzhsky T: [phone] [e-mail]     Severstal's financialcommunicationsagent - Hudson Sandler Andrew Leach / Emily Dillon T: [phone]       A conference call on Q3 2019 results for investors and analysts hosted by Alexey Kulichenko, Chief Financial Officer, will be held on 18October 2019 at 10.00 (London)/ 12.00 (Moscow).    Conference ID: 9531031 International Dial: [phone] Russian Dial:  [phone] (Local access)  8 800 500 9283 (Toll free)   The call will be recorded and there will be a replay facility available for 7 days as follows:   Replay Passcode: 7829368  International Dial: [phone] (Local access)  Russian Dial: 810 800 2702 1012 (Toll free)               *** P?? Severstal is one of the world's leading verticallyintegrated steel and steel related mining companies, with assets in Russia, Latvia and Poland. Severstalis listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $8,580 million and EBITDA of $3,142million in 2018. Severstal's crude steel production in 2018 reached 12.0 million tonnes. www.severstal.com

ISIN:	US8181503025
Category Code:	QRT
TIDM:	SVST
LEI Code:	213800OKDPTV6K4ONO53
Sequence No.:	23871
EQS News ID:	892303

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