EVRAZ plc (LON:EVR) today announced its unaudited interim results for the six months ended 30 June 2019.
H1 2019 HIGHLIGHTS
• Free cash flow generation remained strong at US$692m (H1 2018: US$661m).
• Consolidated EBITDA totalled US$1,482m, down 22.2% from US$1,906m in H1 2018, driving the EBITDA margin down to 24.1% from 30.0% due to lower vanadium, coal and steel product prices.
• EBITDA effect from cost-cutting and customer focus initiatives amounted to US$150m.
• Total debt dropped by US$112m to US$4,526m (FY2018: US$4,638m), while net debt increased by US$79m to US$3,650m (FY2018: US$3,571m) due to the recognition under the new IFRS 16 Leases standard on the balance sheet of operating leases that were not recognised as a liability under the previous standard.
• Net profit was US$344m, compared with US$1,145m in H1 2018.
• The cash cost of steel and raw materials in Russia was mostly lower:
o The cash cost of slabs decreased to US$230/t from US$248/t in H1 2018
o The cash cost of washed coking coal fell to US$34/t from US$47/t in H1 2018
o The cash cost of iron ore products was nearly flat at US$38/t (H1 2018: US$37/t)
• In Q2 2019 the US lifted the 25% Section 232 tariffs on steel imports from Canada and Canada removed its retaliatory tariffs. The US anti-dumping duty for imports of line pipe (16″ or greater) produced in Canada was reduced from 24% to 12%.
• An interim dividend for 2019 of US$508.17m (US$0.35 per share) has been declared, reflecting the Board’s confidence in the Group’s financial position and outlook.
FINANCIAL HIGHLIGHTS
| (US$m) | H1 2019 | H1 2018 | Change, % |
| Consolidated revenues | 6,140 | 6,343 | (3.2) |
| Profit from operations | 913 | 1,731 | (47.3) |
| Consolidated EBITDA1 | 1,482 | 1,906 | (22.2) |
| Net profit | 344 | 1,145 | (70.0) |
| Earnings per share, basic (US$) | 0.22 | 0.77 | (71.4) |
| Net cash flows from operating activities | 1,175 | 932 | 26.1 |
| CAPEX1 | 309 | 232 | 33.2 |
| 30 June 2019 | 31 December 2018 | ||
| Net debt1 | 3,650 | 3,571 | 2.2 |
| Total assets | 9,826 | 9,373 | 4.8 |
1 For the definition, see “Definitions of selected alternative performance measures”.
Commenting on the results, EVRAZ’ Chief Executive Officer, Alexander Frolov, said:
“We have finished the first half of the year with a set of rather healthy results, supported by positive trends in our key product markets. In Russia, we saw a recovery of the construction activity and, as a result, an increase in the consumption of most of our products.
Our EBITDA reached almost US$1.5 billion, a 22% decline in year-on-year terms, amid depressed vanadium prices and lower average coking coal prices. This resulted in a slight increase of the net debt to LTM EBITDA ratio to 1.1x times as at 30 June 2019, compared with 0.9 times as at 31 December 2018.
The efficiency programme generated US$111 million of additional EBITDA during the period, mostly through productivity growth, yield improvements and numerous savings projects. Together with customer focus initiatives, these amounted to $150 million in total.
Our total CAPEX reached US$309 million. Major investment projects are currently in the equipment supplier selection stage or the engineering phase. Overall, the Group invested US$79 million in development CAPEX in the first half of 2019.
Given the solid results, the Board of Directors are recommending an interim dividend for 2019 of US$0.35 per share, totalling roughly US$508 million, which is in line with the previously announced payout policy.
In the second half of 2019, EVRAZ expects the markets to be volatile. Our financial performance will be supported by the high level of vertical integration, the strength of the Russian steel market and our continuing efforts in efficiency improvements.”
