(Adds CFO comments)
By Jack Stubbs
MOSCOW, April 20 Severstal, one of
Russia's biggest steelmakers, said on Thursday its core earnings
more than doubled in the first quarter as it benefited from a
rebound in metals prices, although the result lagged market
Earnings before interest, taxation, depreciation and
amortisation (EBITDA) totalled $578 million, up from $273
million in the first quarter of last year, but below a Reuters
poll forecast of $591 million.
Chief Executive Alexander Shevelev said Russian steel demand
was likely to increase by 1.5-2 percent this year due to the
improving domestic economy.
Russian steelmakers such as Severstal and market leader NLMK
struggled over the last two years as world steel
prices plumbed 11-year lows and Russia's economic crisis sapped
domestic demand, but their prospects have improved as metals
prices picked up. They are seen brightening further this year as
the Russian economy is expected to return to growth.
"Severstal entered into 2017 delivering a robust financial
performance supported by high raw material and steel prices,"
Shevelev said in a statement. "Overall, we expect 2017 to be a
better year for the steel industry globally."
Severstal, controlled by billionaire Alexei Mordashov,
reported revenues of $1.77 billion for the first quarter, up 61
Net profit totalled $359 million, up 33 percent from the
same period last year, the company said, but including a forex
gain of $19 million.
"Adjusting for this non-cash item, Severstal would have
posted an underlying net profit of $340 million," it said in the
Severstal's crude steel production fell 2 percent
quarter-on-quarter in the first three months of the year to 2.86
million tonnes, due to planned maintenance at its major
Cherepovets Steel Mill in northwest Russia.
The company's overall output could fall by 1-2 percent in
2017, from last year's 11.6 million tonnes, due to further
planned maintenance, Chief Financial Officer Alexei Kulichenko
told Reuters last week.
Speaking on a conference call with investors on Thursday,
Kulichenko said steel prices on the Russian domestic market
would come under increased pressure from falling global prices
later in the year.
"I don't think that the current level of pricing is
sustainable, so we expect a moderate decline in prices in the
second half of the year," he said.
Severstal said on Wednesday its board had recommended a
dividend payment of 24.44 roubles ($0.4323) per share for the
"Results are weaker than expected and huge dividends ($350
million, 3 percent yield) does not look nice in this situation,"
BCS analysts said in a note.
(Reporting by Jack Stubbs; Editing by Susan Fenton, Greg