Russian steel maker Evraz (EVR) posted an interim net profit of $1m (£0.6m), against a loss of $146m for the first half of 2013. But the group’s road to recovery is overshadowed by the political crisis on Europe's eastern border. Evraz, which is part-owned by Chelsea FC patron Roman Abramovich, said its operations have yet to be affected by trade sanctions, but management is drawing up "contingency plans" to cover a change in circumstances - whatever that entails.
Profits were held back by $147m in impairment charges, while the contribution of Evraz's coking coal business was constricted by technical issues at the Uskovskaya mine and a temporary shutdown at the Yesaulskaya pit. But the main drag on profits remains the problem of excess steel making capacity. Many plants in Europe and the US are struggling with the combination of low utilisation rates and inherently high fixed costs - hardly a recipe for margin expansion.
But these external pressures shouldn’t detract from the progress that management has made in turning the business around - a point highlighted by the 17 per cent rise in underlying cash profits to $1.08bn. Capital commitments have been pared back by a quarter since last year. Together with the disposal of EVRAZ Vitkovice Steel, that enabled the group to reduce net debt by 7 per cent or $439m.
JPMorgan Cazenove predicts cash profits of around $1.61bn for this year and next, although net earnings will remain in the red.
| EVRAZ (EVR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 115p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 114-115p | 12-MONTH HIGH: | 138p | LOW: 50p |
| DIVIDEND YIELD: | 3.2% † | PE RATIO: | na | |
| NET ASSET VALUE: | 312¢* | NET DEBT: | 120% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2013 (restated) | 7.1 | -139 | -9 | nil |
| 2014 | 6.6 | 85 | 3 | nil |
| % change | -7 | - | - | - |
Ex-div:- Payment:- £1 = $1.66 *Includes intangible assets of $2.5bn, or 167¢ a share †Including 6¢ special dividend paid in July 2014 from the sale of EVRAZ Vitkovice Steel. | ||||
