MOSCOW, Jan 26 (Reuters) - Russian steelmaker Evraz has no major debt repayments due this year and aims to pay dividends, chief financial officer Nikolay Ivanov said, a show of strength from the company after three years of a downturn and difficult recovery.
Weak steel prices worldwide combined with a sanctions-fuelled economic crisis at home hit Russian steel producers hard, but following a nadir in 2014 a recovery has gradually begun to take root.
Prices have improved ever since China, the world’s leading steel producer, ordered many of its mills and mines to cut excess capacity in a bid to tackle pollution, giving some let-up to a global market weighed down by oversupply.
Evraz, Russia’s second biggest steel producer, part-owned by Chelsea football club owner Roman Abramovich, has seen its market value increase almost six-fold since the first quarter of 2016.
The company, which is listed on the London Stock Exchange, made a surprise dividend payment in August, its first in three years.
CFO Nikolay Ivanov said it was likely dividends payments would be recommended again this year, adding that instituting a policy of regular payouts would be a good move for the company.
“I think Evraz is now perfectly capable of adopting a dividend policy,” Ivanov said.
Global steel prices are widely expected to edge down from current highs, but Ivanov said the company’s budget takes this into account.
“A correction in prices is inevitable, and we’re already seeing it in coal. It will affect both steel and coking coal. Nevertheless, we feel confident,” Ivanov said.
Evraz has almost no planned debt repayments in 2018, and among the company’s priorities, reducing debt is now on an equal footing with dividend payouts, Ivanov said.
This marks a sea-change for the company, which posted a net debt to EBITDA ratio of 3.7 as recently as 2015. Any figure above 3.0 rings the alarm that a company may struggle to make repayments. Evraz has now reached its ratio target of 2.0.
“Whereas in 2015, we were forced to channel almost everything towards debt reduction, there’s no need to be doing so now,” Ivanov said.
The company has no plans to reduce capital expenditure in any significant way, he added, and its main focus is on becoming completely self-sufficient in raw materials.
The steel and coal producer said in October it planned to spend $700 million in 2018, up from $640 million in 2017.
Evraz is also the main rail producer for Russian Railways, and is seeing its deliveries to the state railway operator increasing each year. The company also hopes to become a major global rail exporter, Ivanov said.
Reporting by Andrey Kuzmin; Writing by Polina Ivanova; Editing and Graphic by Jeremy Gaunt