Shares in Russia's largest vertically integrated steelmaking group, Evraz (EVR), part-owned by Chelsea football club owner Roman Abramovich, jumped 8 per cent on the back of these full-year results. Although the headline numbers weren't pretty – skewed by $704m (£422m) of impairment charges and foreign exchange losses – the company performed well enough in the face of challenging headwinds.
Evraz held operating costs in check while increasing steel sales in volume terms by 1 per cent and raising coking coal output by 22 per cent. Commodity prices continued to drift lower, however, and look set to remain depressed this year. This led to a 10 per cent decline in cash profits to $1.8bn in 2013, while free cash flow fell to $458m from $780m last year.
Nevertheless, investors can cautiously cheer a preliminary statement concerning Evraz's operations in Ukraine. Evraz's Ukrainian business generated 7 per cent of the firm's total revenues last year. A company statement admitted "geopolitical developments around Ukraine could have an impact on our operations" but to date they "have not been adversely affected". The company is expected to provide further guidance on this when it reports first-quarter operational results next week.
Evraz completed the disposal of its Vitkovice steel subsidiary for a total enterprise value of $287m, comprising a small cash consideration and the assumption of relevant debt. Evraz reiterated that it will not pay regular dividends until its net debt to cash profits ratio falls below three; net debt increased slightly year on year to $6.5bn as a result of an acquisition, taking the current ratio to around 3.6. However, the Russian miner said it will distribute the cash proceeds of the sale to shareholders in a special dividend amounting to 6¢ a share.
Looking ahead, chief executive Alexander Frolov notes "2014 has started mildly positively in most regional steel markets", with steel prices stable or softly rising.
EVRAZ (EVR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 85p | MARKET VALUE: | £1.3bn | |
| TOUCH: | 84-85p | 12-MONTH HIGH: | 213p | LOW: 51p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | NA | |
| NET ASSET VALUE: | 332¢* | NET DEBT: | 120% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2009 | 9.5 | -338 | -24 | nil |
| 2010 | 13.1 | 633 | 39 | nil |
| 2011 (restated) | 16.1 | 877 | 36 | 17 |
| 2012 (restated) | 14.7 | -196 | -30 | 11† |
| 2013 | 14.1 | -613 | -35 | 6†† |
| % change | -4 | - | - | -45 |
Ex-div:tba Payment:tba *Includes intangible assets of $2.5bn, or 167¢ a share †Half-year dividend only ††Special dividend resulting from asset sale £1=$1.67 | ||||
