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Severstal announces 1Q 2019 financial results

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PJSC Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading steel and mining companies, today announces its financial results for the first quarter of 2019.

CONSOLIDATED FINANCIAL RESULTS FOR THE QUARTER ENDED MARCH 31, 2019

Notes :

1) EBITDA is the sum of operating profit and amortization of production assets (taking into account the Group's share in amortization of associates and joint ventures), adjusted by the amount of profit /(loss) from the sale of property, plant and equipment and intangible assets, as well as the share in non-operating income /(expense) of associates and joint ventures. The formula for recalculating EBITDA in operating profit is given in Severstal's quarterly financial statements.

2) Free cash flow is calculated as the sum of the following components: net cash flows from operating activities, cash flows on capital investments, proceeds from disposal of fixed assets, interest and dividends received. The formula for converting free cash flow to net cash flows from operating activities is provided in Severstal's quarterly financial statements.

3) Net income from continuing operations, including foreign exchange gain /(loss).

4) Basic earnings per share from continuing operations are calculated as follows: net income from continuing operations divided by the weighted average number of shares during the period (822.5 million shares Q1 2019, 821.2 million shares for Q4 2018, 814.1 million shares in Q1 2018).

FIRST QUARTER 2019 RESULTS COMPARED TO FOURTH QUARTER 2018 RESULTS:

  • Group revenues decreased by 2.6% qoq to $ 2,031 million (Q4 2018: $ 2,085 million). Growth in sales of steel products was offset by lower selling prices compared to the previous quarter.
  • Group EBITDA decreased to $ 663m (Q4 2018: $ 794m) due to lower revenues and higher production costs. The integrated model of the Group allowed to ensure the value of EBITDA margin at 32.6%, which is one of the highest in the industry, despite the weakening of world steel prices.
  • Free cash flow increased by 67.0% to $ 389 million (4 2018: $ 233mn), which mainly reflects positive changes in working capital compared to Q4. 2018 despite lower earnings.
  • Net income was $ 428 million (Q4 2018: $ 578 million), which includes an exchange rate gain of $ 71 million.
  • Cash flows for capital investments amounted to $ 209 million (Q4 2018: $ 224 million). Severstal's investment program in 2019 is expected to amount to $ 1.45 billion.
  • Net debt decreased to $ 863 million at the end of Q1. 2019 (Q4 2018: $ 1.227mn), mainly reflecting the growth in cash and cash equivalents.
  • Severstal is committed to increasing its shareholder value while maintaining low debt levels. Severstal's financial position remains robust with a net debt /EBITDA ratio of 0.3x at the end of Q1. 2019. As a result, the recommended dividend for the three months ended March 31, 2019 is RUB 35.43 per share.

FIRST QUARTER 2019 RESULTS COMPARED TO FIRST QUARTER 2018 RESULTS:

  • The Group's revenue for the three months of 2019 decreased by 6.5% yoy to $ 2.031 million (Q1 2018: 2.173 million). The decrease in revenue was due to lower selling prices and lower sales of steel products compared to the same period last year.
  • Group EBITDA decreased by 6.1% yoy to $ 663 million (Q1 2018: $ 706 mln.) due to a decrease in revenue, which was partially offset by a decrease in the Group's cost of sales. Thus, EBITDA margin remained almost unchanged at 32.6% (Q1 2018: 32.5%).
  • The company generated $ 389 million in free cash flow (Q1 2018: $ 289 million), which is an increase of 34.6% over the same period last year. The increase is due to the positive dynamics of working capital compared to 1Q. 2018.

FINANCIAL POSITION OF THE COMPANY, KEY POINTS:

  • Cash and cash equivalents at the end of Q1. 2019 were $ 583 mn (Q4 2018: $ 228 mn), reflecting the generation of free cash flow in Q1 2018. 2019.
  • The Group's total debt changed insignificantly and amounted at the end of Q1. 2019 $ 1,446 million (Q4 2018: $ 1.455 million).
  • The Company's net debt decreased to $ 863 million at the end of Q1 2019 (Q4 2018: $ 1.227M), which primarily reflects
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