Earnings Report /
Russia

Severstal: 1Q21 IFRS results: EBITDA 6% above consensus; c.3% quarterly dividend yield

  • Severstal (SVST: LI; E/W; TP $17.3/GDR) reported its financial and operational results for 1Q21

  • The groups’ steel product sales came broadly in-line with our expectations, up by 8% q/q at 2.6 mn t

  • Severstal’s top line growth contributed to robust free cash flow generation

Boris Krasnozhenov
Boris Krasnozhenov

Head of Research (Managing Director)

Yulia Tolstykh
Yulia Tolstykh

Analyst, Metals & Mining

Alfa
16 April 2021
Published by

Severstal (SVST: LI; E/W; TP $17.3/GDR) reported its financial and operational results for 1Q21 which were solid supported by the increase in production and higher exports. The company noted that the negative effect of the pandemic was short-lived for the ferrous and carbon sector. The idling of some steel capacity, low product inventory levels and supply disruptions in other markets contributed to a significant price rally and created a steel product deficit as a result of quickly recovering demand. That came on top of the deficit in the iron ore market. Severstal’s financial position remains solid despite the increased volatility on international steel and mining markets.

Sales: The groups’ steel product sales came broadly in-line with our expectations, up by 8% q/q at 2.6 mn t supported by the increase in hot metal output following the launch of BF#3. The company clearly benefited from high steel demand on the export markets – the share of export sales increased to 52% vs 35% recorded in 4Q21. Severstal’s average selling price was reported at $696/t up by 26% q/q. That drove the revenue line up by 29% q/q to $2.2 bn.

EBITDA: Quarterly EBITDA beat market estimates reaching $1,162 mn. This represents a spectacular 109% increase y/y and 21 pp margin increase. The Group’s share of high value-added products in its sales basket decreased to 46% mainly reflecting increased volumes of hot-rolled coil, long products and semi-finished products. The integrated cash cost per slab was expectedly up at $185/t. Net debt/EBITDA stood at 0.52x as of end-quarter.

Free cash flow and dividends: Severstal’s top line growth contributed to robust free cash flow generation. As expected it was pressured by working capital developments but grew 134% q/q to $497 mn. The company recommended dividends for the quarter of RUB46.77/share (c.$0.62/GDR), which corresponds with a 2.9% yield not annualized (based on the close price 15 April). The DPS recommended relates to c.$516mn of total payout for the quarter which is slightly higher vs FCF. The record date is set for 1 June.

Severstal management will hold a conference call on its financial results on 16 April 2021 at 14:00 pm (Moscow); 12:00 pm (London). To join the conference call, please dial: international number: +44 (0)330 336 9125; Russian Number: +7 495 213 1767/ 8 800 500 9283 (Toll free). Conference ID: 7669050.