The macro environment for global steelmakers remains largely unfavourable despite a modest rally in steel prices during the second quarter. Despite protestations to the contrary, China has been resisting pressure to reduce excess capacity, although there are signs that Beijing may at last be addressing the issue.
Against this backdrop, Evraz (EVR), one of Russia's largest steel producers, reported a 38 per cent fall in half-year cash profits to $577m (£440m). Operating cash flows were down by around a third, restricting the ability of the steelmaker to pay down its huge debt burden. Those debts sucked in $241m in interest payments during the period, and although commitments should ease because of a $540m reduction in total debt from the 2015 year-end, any positive impact on the balance sheet was largely negated by a fall-away in the group's cash resources. Given the wider issues, no one is expecting any miracles, but a net debt reduction of $33m isn’t likely to dispel analyst anxieties over Evraz’s leverage position.
Prior to these figures, JPMorgan Cazenove was predicting adjusted earnings of 0.27¢ a share for the December year-end, along with cash profits of $1.21bn, falling to 0.25¢ and $1.14bn through 2017.
EVRAZ (EVR) | ||||
---|---|---|---|---|
ORD PRICE: | 166p | MARKET VALUE: | £2.36bn | |
TOUCH: | 165p-166p | 12-MONTH HIGH: | 177p | LOW: 54p |
DIVIDEND YIELD: | nil | PE RATIO: | na | |
NET ASSET VALUE: | 36¢* | NET DEBT: | $5.32bn |
Half-year to 30 June | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
---|---|---|---|---|
2015 | 4.79 | 120 | 1.0 | nil |
2016 | 3.44 | 48.0 | 0.5 | nil |
% change | -28 | -60 | -51 | - |
Ex-div:- Payment:- £1 = $1.31. *Includes intangible assets of $1.54bn, or 108¢ a share. |