TIDMEVR
RNS Number : 0230Q
Evraz Group S.A.
12 October 2011
FOR IMMEDIATE RELEASE
EVRAZ ANNOUNCES AUDITED FINANCIAL RESULTS FOR 1H 2011
12 October 2011 - EVRAZ Group S.A. (LSE: EVR) today announces
its audited interim results for the six months ended 30 June
2011.
1H 2011 Highlights:
Financials:
-- Consolidated revenue US$8,380 million (+31% vs. 1H 2010)
-- Consolidated adjusted EBITDA US$1,629 million (+41%)
-- Net profit of US$263 million (+49%). Without the effects of
one-off transactions net profit would have been US$494 million*
-- Operating cash flow US$1,594 million (+114%)
-- Net debt US$6,042 million (-15% vs. 31 December 2010)
-- Short-term debt US$604 million (-15% vs. 31 December
2010)
-- Interim dividend of US$89 million and special dividend of
US$402 million announced
* One-off losses of US$231 million in 1H 2011 were caused by the
conversion and early repurchase of debts
Steel segment:
-- Crude steel production 8.6 million tonnes (+4%)
-- Total external steel sales volumes 7.9 million tonnes
(+3%)
-- Steel segment revenue US$7,492 million (+29%)
Mining segment:
-- Iron ore production 10.4 million tonnes (+8%)
-- Raw coking coal production 3.6 million tonnes (-2%)
-- Raw steam coal production 1.5 million tonnes (-37%)
-- Mining segment revenue US$2,040 million (+82%)
Vanadium segment:
-- Primary vanadium production 10,158 tonnes (-3%)
-- External vanadium product sales volumes 11,088 tonnes
(+6%)
-- Vanadium segment revenue US$320 million (+10%)
Corporate developments:
-- Launch of Yerunakovskaya-VIII coking coal mine
development
-- Capacity and product mix expansion in the North American
tubular sector
-- Improvement of Broad-Based Black Economic Empowerment
(B-BBEE) contributor rating in South Africa from Level 8 to Level
5
Financial management:
-- Issuance of US$850 million eurobonds at a coupon rate of
6.75% due 2018
-- Early redemption of US$622 million of 2013 eurobonds
-- Issuance of RUB20 billion (approx. US$710 million) 5-year
Rouble bonds
-- Conversion of US$650 million convertible bonds originally due
in 2014
-- Rating upgrades by Standard & Poor's and Fitch to "B+"
and "BB-" respectively
CAPEX:
-- CAPEX for 1H 2011 of US$462 million compared with US$397
million for 1H 2010
-- CAPEX guidance for FY2011 is maintained at approximately
US$1.2 billion
Dividends:
-- Dividend policy amended to pay not less than 25% of the
adjusted consolidated net income
-- EVRAZ declares for the first time since 2008 an interim
dividend of US$0.60 per share/US$0.20 per GDR (a total of US$89
million) and a special dividend of US$2.70 per share/US$0.90 per
GDR (a total of US$402 million)
-- Dividends record date - 28 October 2011; payment - no later
than 30 days after the record date
Alexander Frolov,Chief Executive of EVRAZ Group, commented:
"EVRAZ has delivered a strong performance in the first half of
2011 on the back of the continuation of a measured recovery in the
global steel markets. The prices for steelmaking raw materials grew
faster than the steel prices, allowing EVRAZ to benefit from its
high level of vertical integration. We maintained full utilisation
of our steelmaking capacity in Russia and high levels of
utilisation of our major international plants in North America,
Europe and South Africa.
"Demand in Russia was driven by the continued increase in
private sector construction activity as well as Russian
government-financed infrastructure projects. In 1H 2011 steel sales
to the CIS increased to a record high 68% of EVRAZ's Russian and
Ukrainian mills' steel sales compared to 53% in 1H 2010, reflecting
improving demand on this market and the increase in share of value
added products in the product mix.
"In the current pricing environment, our mining business
generates over half of the Group's EBITDA. Consequently our
priority is to grow our steelmaking raw material base.
"With this in mind we have launched the construction of the new
mine, Yerunakovskaya VIII, which is expected to provide an
additional 2 million tonnes of coking coal per annum from 2014.
"We are also about to commence the development of a new iron ore
deposit at our existing iron ore mine Kachkanar (Ural region) in
order to support the potential increase of steelmaking capacity in
Nizhny Tagil by 1-1.5 million tonnes per annum.
"We are currently in negotiation with JSC ALROSA, Russian
diamond producer, regarding a potential joint development of a
greenfield iron ore project in Timir (Yakutia). This project would
allow us to increase significantly our iron ore mining volumes
through open pit mining and would not require extensive CAPEX
before 2013.
"Another objective of our growth strategy is to increase the
share of greater added value finished products. Currently our
construction mills are fully utilised, creating the need for
rolling capacity expansion. We are building two new rolling mills
for construction products in Russia and Kazakhstan of 450,000
tonnes per annum each. This project will allow us to increase the
share of value added products in the product mix, as well as to
improve transportation logistics.
"We continue the major reconstruction of the rail mills and
wheel shop, allowing us to produce state-of-the-art railway
products, including 100-metre head-hardened rails, more suitable
for high-speed rail transportation.
"The introduction of a pulverised coal injection project,
scheduled for completion in 2012 at EVRAZ NTMK plant and in 2013 at
EVRAZ ZSMK plant, will increase our energy efficiency, partially
eliminate the need for natural gas and reduce our coking coal
consumption by almost 20%.
"Having said all of this, I would like to particularly stress
that it remains critical for us to ensure that health and safety
policies and procedures are our top priority and have the due
attention of management and employees. We are committed to provide
necessary level of investment to maintain and improve health and
safety environment in the Group".
Giacomo Baizini, EVRAZ Group's Chief Financial Officer,
commented:
"Our financial performance, benefiting from the market recovery
and growth of raw material prices, showed a significant improvement
during the first half of 2011. This was reflected in a 31% increase
in revenue, 41% increase in EBITDA and 49% increase in net income
compared to the first half of 2010.
"Net profit in 1H 2011 was negatively affected by one-off items.
Without one-off losses of US$231 million relating to the conversion
and early repurchase of debts our 1H 2011 net profit would have
been US$494 million
"Refinancing of short-term debt using debt instruments with
longer-term maturities remains our financial management strategy.
In April of this year we repurchased US$622 million of the 2013
eurobonds and issued a new US$850 million 7-year eurobond at an
interest rate of 6.75%. We also continued to take advantage of the
rouble bond market with a further RUB 20 billion issue, which was
then swapped into US dollars at very attractive rates.
"We also converted US$650 million convertible bonds originally
due in 2014 thereby reducing our debt level by US$551 million. Over
the first half of 2011 our net debt level has decreased by
approximately US$1.1 billion and our short term debt decreased by
15% and now stands at US$604 million - less than 10% of our total
debt. Consequently, our leverage has now decreased to 2.2x net debt
to LTM EBITDA and we have no material maturities until 2013.
"We intend to continue the policy of prudent financial
management and are targeting a net debt to EBITDA ratio below
2.5.
"Our improved financial position was reflected in credit rating
upgrades by the rating agencies.
"We have in excess of US$1 billion of cash on our balance as at
the end of 1H 2011 and have significant liquidity available in
committed and uncommitted credit lines. The Company also continues
to be free cash flow generative (US$751 million in 1H 2011).
"As a result of the 1H 2011 performance and the strength of our
balance sheet the Directors have decided to resume the payment of
dividends to shareholders. We are declaring an interim dividend of
US$89 million or 34% of our net income in 1H 2011. We are also
declaring the payment of a special dividend of US$402 million".
Outlook
Commenting on the outlook for the remainder of 2011 and beyond
Mr. Frolov added:
"The wider global economy and, in turn, the steel industry,
continue to face challenges and remain very volatile.
"However, we have substantial experience of managing the
business in a tough 2008-2009 environment and enter this period of
uncertainty with a considerably improved financial position.
Currently the volumes of export sales are booked for the next 2.5
months through to December. Inventories at traders and at our mills
and ports are very low and we do not ship without pre-payment,
which minimises our credit risk.
"That said, the Group's recent trading has been impacted by
scheduled repairs, lower production volumes, a weak market
environment in the Czech Republic and a change in product mix in
South Africa."
In addition, in recent weeks, there have been some decreases in
export prices.
"Going forward, Russian Railroads remain a very strong buyer and
we expect it to maintain purchased volumes over the next several
years. In addition we expect to improve our product mix and
generate additional revenue through our rail mill and wheel shop
modernisation.
"We continuously assess the market environment and have
significant flexibility in our CAPEX plans.
"We strongly believe that the quality of EVRAZ Group's asset
base, the competitive advantages derived from vertical integration,
its low cost position, geographic breadth and highly experienced
management team, leave the Company well positioned to continue to
implement its growth strategy."
Six months to 30 June
(US$ million) 2011 2010 Change
------------------------ ------ ------ -------
Revenue 8,380 6,379 31.4%
Adjusted EBITDA (1) 1,629 1,154 41.2%
Profit from operations 859 691 24.3%
Net profit 263 176 49.4 %
Basic earnings per GDR
(2) , (US$) 0.62 0.42 47.6 %
------------------------ ------ ------ -------
1 Refer to Attachment 1 for reconciliation to profit from
operations
2 One share is represented by three GDRs
1H 2011 Results Summary:
EVRAZ's consolidated revenues for the first six months of 2011
increased by 31.4% to US$8,380 million compared with US$6,379
million for the first six months of 2010. Steel segment sales
accounted for the majority of the increase in revenues, reflecting
the growth in sales volumes and average prices of steel products.
EVRAZ's external sales volumes of steel products grew from 7.7
million tonnes in 1H 2010 to 7.9 million tonnes in 1H 2011.
The increase in steel sales volumes primarily reflects the
growth in demand for construction products in Russia with overall
sales in the Russian market advancing by 0.8 million tonnes
compared with 1H 2010. Sales volumes in Ukraine remained flat.
Export sales volumes from the Russian and Ukrainian operations
showed a total decrease of 0.8 million tonnes as a result of higher
domestic sales in Russia. Sales volumes of the European and North
American operations increased by 0.1 million tonnes each, while
steel sales volumes of the South African operations remained
flat.
Geographic breakdown of consolidated revenues (based on location
of customer)
Six months ended 30 June
-----------------------------------------------------------------
2011 v
2011 2010 2010
------------------------- ------------------------- -----------
US$ million % of total US$ million % of total % change
----------- ------------ ----------- ------------ ----------- -----------
Russia 3,346 39.9% 2,115 33.1% 58.2%
Americas 1,858 22.2% 1,522 23.9% 22.1%
Asia 1,178 14.1% 1,369 21.4% (14.0)%
Europe 1,081 12.9% 630 9.9% 71.6%
CIS 624 7.4% 490 7.7% 27.3%
Africa 290 3.5% 252 4.0% 15.1%
Rest of
the
world 3 0.0% 1 0.0% 200%
------------ ----------- ------------ ----------- -----------
Total 8,380 100% 6,379 100% 31.4%
----------- ------------ ----------- ------------ ----------- -----------
Revenues from sales in Russia increased as a proportion of total
revenues from 33.1% to 39.9%, driven by the growing demand for
construction products in the Russian market.
In 1H 2011, revenues from non-Russian sales grew by 18.1% to
US$5,034 million compared with US$4,264 million in 1H 2010 but
decreased as a percentage of total revenues to 60.1%, compared with
66.8% in 1H 2010.
In the first six months of 2011, the consolidated cost of
revenues improved to 73.8% of consolidated revenues, or US$6,183
million compared with 77.1% of consolidated revenues, or US$4,919
million in the first six months of 2010.
Gross profit increased by 50.5% from US$1,460 million in 1H 2010
to US$2,197 million in 1H 2011. This increase in gross profit
primarily resulted from the better performance of the mining
segment and higher steel prices in the steel segment. Significant
growth in the prices of coking coal and iron ore in 1H 2011 was
mitigated by own supplies of raw materials from EVRAZ's mining
segment.
Selling, general and administrative (SG&A) expenses as a
percentage of consolidated revenues were almost unchanged (11.6% in
1H 2010 and 11.9% in 1H 2011).
Total loss on the disposal of property, plant and equipment in
the first six months of 2011 amounted to US$17 million compared
with US$11 million in the first six months of 2010.
Profit from operations increased from US$691 million, or 10.8%
of consolidated revenues, for 1H 2010, to US$859 million, or 10.3%
of consolidated revenues, for 1H 2011. The change in profit from
operations is attributable to the growth of gross profit while high
foreign exchange losses in the six months ended 30 June 2011
resulted in a lower operating margin compared to the same period in
2010.
Consolidated adjusted EBITDA increased by 41.2% to US$1,629
million in the first half of 2011 compared to US$1,154 million in
the first half of 2010, with adjusted EBITDA margins of 19.4% and
18.1% respectively.
Interest expense rose 5.2% to US$387 million in the six months
to 30 June 2011 compared with US$368 million in the six months to
30 June 2010 and is attributable to the issuance of bonds in
November 2010, April 2011 and June 2011 and related costs.
In 1H 2011, income tax expense amounted to US$210 million
compared with an income tax expense of US$131 million, in 1H 2010.
EVRAZ's effective tax rate, defined as income tax expense as a
percentage of profit before tax, increased from 42.7% in the six
months of 2010 to 44.4% in the first six months of 2011.
The net profit attributable to equity holders of EVRAZ Group in
the six months ended 30 June 2011 was US$258 million compared with
US$174 million in the six months ended 30 June 2010.
Review of Operations
Steel Segment Results
Six months to 30 June
(US$ million) 2011 2010 Change
------------------------------- ------ ------ --------
Revenues* 7,492 5,796 29.3%
Profit/(loss) from operations 376 502 (25.1)%
Adjusted EBITDA 744 803 (7.3)%
Adjusted EBITDA margin 9.9% 13.9% (28.8)%
------------------------------- ------ ------ --------
*Segment revenues include intersegment sales
Steel Segment Sales*
Six months ended 30 June
-------------------------------------------------------------
2011 v
2011 2010 2010
----------------------- ----------------------- -----------
% of % of
US$ million total US$ million total % change
--------------- ------------ --------- ------------ --------- -----------
Steel products
Construction
products (1) 2,129 28.4 % 1,558 26.9% 36.6%
Railway
products (2) 999 13.3% 723 12.5% 38.2%
Flat-rolled
products (3) 1,499 20.0% 969 16.7% 54.7%
Tubular
products (4) 607 8.1% 601 10.4% 1.0%
Semi-finished
products (5) 1,204 16.1% 1,113 19.2% 8.2%
Other steel
products (6) 294 3.9% 192 3.3% 53.1%
Other revenues
(7) 760 10.2% 640 11.0% 18.8%
------------ --------- ------------ --------- -----------
Total 7,492 100% 5,796 100.0% 29.3%
--------------- ------------ --------- ------------ --------- -----------
(1) Includes rebars, wire rods, wire, H-beams, channels and
angles.
(2) Includes rail and wheels.
(3) Includes plates and coils.
(4) Includes large diameter, ERW, seamless pipes and casing.
(5) Includes billets, slabs, pig iron, pipe blanks and
blooms.
(6) Includes rounds, grinding balls, mine uprights and
strips.
(7) Includes coke and coking products, refractory products,
ferroalloys and resale of coking coal.
Steel Products Sales Volumes*
Six months to 30 June
('000 tonnes) 2011 2010 Change
------------------------ ------ ------ --------
Steel products
Construction products 2,714 2,475 9.7%
Railway products 1,072 976 9.8%
Flat-rolled products 1,534 1,306 17.5%
Tubular products 422 436 (3.2)%
Semi-finished products 1,904 2,262 (15.8)%
Other steel products 333 288 15.6%
------ ------ --------
Total 7,979 7,743 3.0%
------------------------ ------ ------ --------
* Including intersegment sales
Steel segment revenues increased by 29.3% to US$7,492 million in
the first six months of 2011 compared with US$5,796 million in the
first six months of 2010, a reflection of positive price dynamics
for steel products and higher sales volumes.
The proportion of revenues attributable to sales of construction
products increased as a result of the growth in the sales volumes
and prices of construction products in Russia.
The proportion of revenues attributable to sales of railway
products slightly increased as a result of the higher than average
growth in sales volumes of railway products in Russia and North
America compared to other steel products as compared to 1H
2010.
The proportion of revenues attributable to sales of flat-rolled
products (primarily plates) increased in response to a higher than
average hike in prices and sales volumes compared to other steel
product groups, with main contribution coming from sales in Europe
and Russia.
The proportion of revenues attributable to sales of tubular
products decreased primarily due to a significant decline in sales
volumes of large diameter pipes and casing and tubing goods and
also due to lower prices for large diameter and seamless pipes in
North America.
The proportion of revenues attributable to sales of
semi-finished products decreased due to a significant reduction in
export sales volumes of billets used in production of construction
products sold in Russia.
Steel segment sales to the mining segment amounted to US$89
million in the first half of 2011 compared with US$57 million a
year earlier. The increase is attributable to higher sales prices
and volumes.
Revenues from sales in Russia amounted to approximately 41% of
steel segment revenues in the first six months of 2011, compared
with 33% in the first six months of 2010. The increased share of
revenues from sales in Russia resulted from the reallocation of
steel volumes from Asian export markets to the Russian market.
Steel segment cost of revenues increased to 83.2% of steel
segment revenues in the first six months of 2011, or US$6,237
million, compared with 81.2% of steel segment revenues, or US$4,704
million, in the first six months of 2010. The increase in cost of
revenue in monetary terms is attributable to a growth of 41.8% in
raw material costs due to significant increase in the prices of all
key raw materials (particularly coking coal and iron ore); the
increase in costs of semi-finished products of 54.2% due to
increased production volumes of flat products at EVRAZ's North
American operations, higher share of external purchases of
semi-finished products and higher average cost of slabs; growing
staff costs (+23.1%); increase in energy costs by 25.7% due to the
growth in prices of energy resources, higher production volumes at
most EVRAZ operations and the appreciation of local currencies
against the US dollar; and an increase in other costs by 25.7%
primarily due to a significant increase in purchases of goods from
the market for subsequent resale after the acquisition of Inprom
Group in December 2010. The other factors that contributed to the
increase were higher costs of auxiliary materials for repairs and
maintenance, higher volume and costs of industrial services due to
increased production volumes and the appreciation of local
currencies against the US dollar. At the same time transportation
costs decreased by 10.7% due to lower export sales volumes from the
Russian operations to Asia.
In 1H 2011, the steel segment recorded an operating profit of
US$376 million (5.0% of steel segment revenues), compared with
US$502 million (8.7% of steel segment revenues) in the same period
of 2010.
Mining Segment Results
Six months to 30 June
(US$ million) 2011 2010 Change
------------------------------- ------ ------ -------
Revenues 2,040 1,120 82.1%
Profit/(loss) from operations 715 238 200.4%
Adjusted EBITDA 962 390 146.7%
Adjusted EBITDA margin 47.2% 34.8% 35.6%
------------------------------- ------ ------ -------
Mining Segment Sales*
Six months ended 30 June
---------------------------------------------------------------
2011 v
2011 2010 2010
------------------------ ------------------------ -----------
% of % of
US$ million total US$ million total % change
------------- ------------ ---------- ------------ ---------- -----------
Iron ore
products 1,292 63.4% 581 51.9% 122.4%
Iron ore
concentrate 377 18.5% 176 15.7% 114.2%
Sinter 306 15.0% 162 14.5% 88.9%
Pellets 453 22.2% 210 18.8% 115.7%
Other 156 7.7% 33 2.9% 372.7%
Coal
products 703 34.4% 428 38.2% 64.3%
Raw coking
coal 121 5.9% 96 8.6% 26.0%
Coking coal
concentrate 551 27% 260 23.2% 111.9%
Raw steam
coal 25 1.2% 66 5.9% (62.1)%
Steam coal
concentrate 6 0.3% 6 0.5% 0.0%
Other
revenues 45 2.2% 111 9.9% (59.5)%
------------ ---------- ------------ ---------- -----------
Total 2,040 100.0% 1,120 100.0% 82.1%
------------- ------------ ---------- ------------ ---------- -----------
Six months to 30 June
('000 tonnes) 2011 2010 Change
------------------------- ------- ------ --------
Iron ore products 10,101 7,353 37.4%
Iron ore concentrate 3,145 1,987 58.3%
Sinter 2,227 2,073 7.4%
Pellets 3,090 2,716 13.8%
Other 1,639 577 184.1%
Coal products 4,942 5,105 (3.2)%
Raw coking coal 1,190 1,610 (26.1)%
Coking coal concentrate 3,002 2,061 45.7%
Steam coal 681 1,359 (49.9)%
Steam coal concentrate 69 75 (8.0)%
------------------------- ------- ------ --------
* Including intersegment sales
Mining segment revenues rose 82.1% to US$2,040 million in 1H
2011, compared with US$1,120 million in 1H 2010, primarily
reflecting significant increases in the market prices of iron ore
and coking coal during the first six months of 2011.
Sales volumes of iron ore products increased by 37.4% in 1H 2011
compared with 1H 2010. Sales volumes of saleable coking coal
products increased by 14.2% in the six months ended 30 June 2011
compared with the six months ended 30 June 2010 while sales volumes
of saleable steam coal products decreased by 47.7% in the same
period respectively. Total sales volumes of coal products decreased
by 3.2%.
In the first six months of 2011 mining segment sales to the
steel segment amounted to US$1,433 million, or 70% of mining
segment sales, compared with US$812 million, or 73% of mining
segment sales, in the first six months of 2010.
In 1H 2011, EVRAZ's iron ore requirements were self-covered by
approximately 74% compared with 69% in 1H 2010. Approximately 54%
of the EVRAZ Group's coking coal requirements were satisfied by
internal purchases and supplies from Raspadskaya and JSC
Yuzhkuzbassugol in the six months ended 30 June 2011, as against
52% in the same period of 2010.
Approximately 47% of the mining segment's third party sales in
1H 2011 were to customers in Russia compared with 54% in 1H 2010.
The increase in the share of third party sales outside Russia is
largely attributable to the growth in export sales of iron ore from
Sukha Balka to Europe.
Vanadium Segment Results
Six months to 30 June
(US$ million) 2011 2010 Change
------------------------------- ------- ------ -------
Revenues 320 290 10.3%
(Loss)/profit from operations (19) 19 N/A
Adjusted EBITDA (3) 55 N/A
Adjusted EBITDA margin (0.9)% 19.0% N/A
------------------------------- ------- ------ -------
Vanadium Segment Sales*
Six months ended 30 June
-----------------------------------------------------------------
2011 v
2011 2010 2010
------------------------- ------------------------- -----------
US$ million % of total US$ million % of total % change
----------- ------------ ----------- ------------ ----------- -----------
Vanadium
in slag 17 5.3% 17 5.9% 0.0%
Vanadium
in alloys
and
chemicals 297 92.8% 268 92.4% 10.8%
Other
revenues 6 1.9% 5 1.7% 20.0%
------------ ----------- ------------ ----------- -----------
Total 320 100% 290 100.0% 10.3%
----------- ------------ ----------- ------------ ----------- -----------
Six months to 30 June
('000 tonnes of pure Vanadium) 2011 2010 Change
--------------------------------- ----- ----- -------
Vanadium products 11.5 10.9 5.5%
Vanadium in slag 1.5 1.4 7.1%
Vanadium in alloys and
chemicals 10.0 9.5 5.3%
--------------------------------- ----- ----- -------
* Including intersegment sales
Vanadium segment revenues increased by 10.3% to US$320 million
in the first six months of 2011, compared with US$290 million in
the first six months of 2010, reflecting increased sales volumes
and prices of vanadium products. Sales volumes of the vanadium
segment increased from 10.9 thousand tonnes of pure vanadium in the
six months ended 30 June 2010 to 11.5 thousand tonnes of pure
vanadium in the six months ended 30 June 2011.
Vanadium segment cost of revenuesincreased to 95.0% of vanadium
segment revenues, or US$304 million, in the first six months of
2011 from 76.6% of vanadium segment revenues, or US$222 million, in
the first six months of 2010. The increase in vanadium segment cost
of revenues was primarily attributable to an increase in production
volumes of ferrovanadium and Nitrovan(R) and higher costs allocated
to vanadium slag, which is a by-product of steel production and the
main feedstock for the downstream vanadium operations, reflecting a
significant growth in the cost of raw materials for the steel
segment. The additional factors that contributed to the increase in
the vanadium segment cost of revenues were higher resale volumes of
vanadium products and the appreciation of local currencies against
the US dollar.
Other operations segment results
Six months to 30 June
(US$ million) 2011 2010 Change
------------------------ ------ ------ -------
Revenues 482 414 16.4%
Profit from operations 74 45 64.4%
Adjusted EBITDA 83 62 33.9%
Adjusted EBITDA margin 17.2% 15.0% 14.7%
------------------------ ------ ------ -------
EVRAZ's other operations include logistics, port services, power
and heat generation and supporting activities.
Group Consolidated Financial Position and Cash Flows
Cash flow
Cash flow from operating activitiesincreased from US$744 million
in the first six months of 2010 to US$1,594 million in the first
six months of 2011. Cash provided by operating activities before
working capital adjustments increased from US$959 million in the
six months ended 30 June 2010 to US$1,447 million in the six months
ended 30 June 2011.The decrease in working capital in the first six
months of 2011 was largely driven by higher trade and other
accounts payable, including US$158 million of payables related to
conversion premium to bondholders.
Net cash used in investing activitiestotalled US$457 million in
1H 2011 compared with net cash used in investing activities of
US$385 million in 1H 2010.
In 1H 2011, EVRAZ's capital expenditure totalled US$462 million,
including US$252 million invested in steel segment and US$182
million - in mining segment.
Financial position
As of 30 June 2010 total debt amounted to US$7,198 million
compared to US$7,811 million as of 31 December 2010. Cash and cash
equivalents amounted to US$1,155 million, against US$683 million as
of 31 December 2010.
Liquidity, defined as cash and cash equivalents, amounts
available under credit facilities and short-term bank deposits with
original maturity of more than three months, totalled approximately
US$2,514 million as of 30 June 2011 compared with approximately
US$1,694 million as of 31 December 2010. (Please refer to
Attachment 2 for calculation of liquidity)
As of 30 June 2011, EVRAZ had unutilised borrowing facilities of
US$1,358 million, including US$788 million of committed facilities.
Committed facilities consisted of credit facilities available for
Russian, North American and European operations in the amounts of
US$641 million, US$138 million and US$9 million, respectively.
Uncommitted facilities consisted of revolving credit lines of
US$388 million with international banks for export trade financing
at East Metals S.A. and credit facilities available for South
African, European and North American operations in the amounts of
US$66 million, US$101 million and US$15 million, respectively.
Net debt decreased to US$6,042 million as of 30 June 2011
compared with US$7,127 million as of 31 December 2010. (Please
refer to Attachment 3 for calculation of net debt)
# # #
For further information: Media contact: Oleg Kuzmin VP,
Corporate Communications +7 495 937 6871 media@evraz.com Investor
contact: Alexander Boreyko Director, Investor Relations +7 495 232
1370 ir@evraz.com
Appendix 1
Adjusted EBITDA
Adjusted EBITDA represents profit from operations plus
depreciation, depletion and amortisation, impairment of assets,
loss (gain) on disposal of property, plant and equipment, foreign
exchange loss (gain). EVRAZ presents an Adjusted EBITDA because it
considers Adjusted EBITDA to be an important supplemental measure
of its operating performance and believes Adjusted EBITDA is
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in the same
industry. Adjusted EBITDA is not a measure of financial performance
under IFRS and it should not be considered as an alternative to net
profit as a measure of operating performance or to cash flows from
operating activities as a measure of liquidity. EVRAZ's calculation
of Adjusted EBITDA may be different from the calculation used by
other companies and therefore comparability may be limited.
Adjusted EBITDA has limitations as an analytical tool and potential
investors should not consider it in isolation, or as a substitute
for an analysis of our operating results as reported under IFRS.
Some of these limitations include:
-- Adjusted EBITDA does not reflect the impact of financing or
financing costs on EVRAZ's operating performance, which can be
significant and could further increase if EVRAZ were to incur more
debt.
-- Adjusted EBITDA does not reflect the impact of income taxes
on EVRAZ's operating performance.
-- Adjusted EBITDA does not reflect the impact of depreciation
and amortisation on EVRAZ's operating performance. The assets of
EVRAZ's businesses which are being depreciated and/or amortised
will have to be replaced in the future and such depreciation and
amortisation expense may approximate the cost to replace these
assets in the future. Adjusted EBITDA, due to the exclusion of this
expense, does not reflect EVRAZ's future cash requirements for
these replacements. Adjusted EBITDA also does not reflect the
impact of a loss on disposal of property, plant and equipment.
Reconciliation of profit (loss) from operations to adjusted
EBITDA is as follows:
Six months ended 30
June
----------------------
2011 2010
---------- ----------
(US$ million)
------------------------------------------------- ----------------------
Consolidated Adjusted EBITDA reconciliation
Profit from operations 859 691
Add:
Depreciation, depletion and amortisation 501 472
Impairment of assets 32 54
Loss on disposal of property, plant &
equipment 17 11
Foreign exchange loss (gain) 220 (74)
---------- ----------
Consolidated Adjusted EBITDA 1,629 1,154
========== ==========
Steel segment Adjusted EBITDA reconciliation
Profit from operations 376 502
Add:
Depreciation,depletion and amortisation 288 306
Impairment of assets 7 14
Loss on disposal of property, plant &
equipment 13 6
Foreign exchange loss (gain) 60 (25)
---------- ----------
Steel segment Adjusted EBITDA 744 803
========== ==========
Mining segment Adjusted EBITDA reconciliation
Profit from operations 715 238
Add:
Depreciation, depletion and amortisation 175 134
Impairment of assets 33 16
Loss on disposal of property, plant &
equipment 4 5
Foreign exchange gain (loss) 35 (3)
---------- ----------
Mining segment Adjusted EBITDA 962 390
========== ==========
Vanadium segment Adjusted EBITDA reconciliation
Loss (profit) from operations (19) 19
Add:
Depreciation, depletion and amortisation 17 12
Impairment of assets - 24
Foreign exchange loss (1) -
---------- ----------
Vanadium segment Adjusted EBITDA (3) 55
========== ==========
Other operations Adjusted EBITDA reconciliation
Profit from operations 74 45
Add:
Depreciation, depletion and amortisation 20 19
Impairment of assets (8) -
Foreign exchange loss (3) (2)
---------- ----------
Other operations Adjusted EBITDA 83 62
========== ==========
Appendix 2
Liquidity
Liquidity is not a measure under IFRS and it should not be
considered as an alternative to other measures of financial
position. EVRAZ's calculation of Liquidity may be different from
the calculation used by other companies and therefore comparability
may be limited.
30 June 31 December
2011 2010
-------- ------------
(US$ million)
------------------------------------------- ----------------------
Liquidity Calculation
Cash and cash equivalents 1,155 683
Amounts available under credit facilities 1,358 1,010
Short-term bank deposits 1 1
-------- ------------
Total estimated liquidity 2,514 1,694
======== ============
Appendix 3
Net Debt
Net Debt represents long-term loans, net of current portion,
plus short-term loans and current portion of long--term loans less
cash and cash equivalents (excluding restricted deposits). Net Debt
is not a measure under IFRS and it should not be considered as an
alternative to other measures of financial position. EVRAZ's
calculation of Net Debt may be different from the calculation used
by other companies and therefore comparability may be limited.
Net Debt has been calculated as follows:
30 June 31 December
2011 2010
-------- ------------
(US$ million)
----------------------------------------- ----------------------
Net Debt Calculation
Add:
Long-term loans, net of current portion 6,594 7,097
Short-term loans and current portion of
long-term loans 604 714
Less:
Short-term bank deposits (1) (1)
Cash and cash equivalents (1,155) (683)
-------- ------------
Net Debt 6,042 7,127
======== ============
Interim Consolidated Statement of Operations
(In millions of US dollars, except for per share
information)
Six-month period ended 30
June
2010*
2011 (unaudited)
---------- ----------------
Revenue
Sale of goods 8,221 6,256
Rendering of services 159 123
---------- ----------------
8,380 6,379
Cost of revenue (6,183) (4,919)
Gross profit 2,197 1,460
Selling and distribution costs (553) (375)
General and administrative expenses (443) (363)
Social and social infrastructure
maintenance expenses (26) (33)
Loss on disposal of property, plant
and equipment (17) (11)
Impairment of assets (32) (54)
Foreign exchange gains/(losses),
net (220) 74
Other operating income 18 19
Other operating expenses (65) (26)
---------- ----------------
Profit from operations 859 691
Interest income 7 5
Interest expense (387) (368)
Share of profits/(losses) of joint
ventures and associates 39 31
Gain/(loss) on financial assets and
liabilities, net (48) (37)
Gain/ (loss) on disposal groups classified
as held for sale, net 1 (14)
Other non-operating gains/(losses),
net 2 (1)
Profit before tax 473 307
Income tax benefit/(expense) (210) (131)
---------- ----------------
Net profit 263 176
========== ================
Attributable to:
Equity holders of the parent entity 258 174
Non-controlling interests 5 2
---------- ----------------
263 176
========== ================
Earnings per share:
basic, for profit attributable to
equity holders of the parent entity,
US dollars 1.86 1.26
diluted, for profit attributable
to equity holders of the parent entity,
US dollars 1.85 1.26
* The amounts shown here do not correspond to the 2010 unaudited
interim condensed consolidated financial statements and reflect
adjustments made in connection with the changes in accounting
policies and the completion of initial accounting.
Interim Consolidated Statement of Comprehensive Income (In
millions of US dollars)
Six-month period ended 30
June
2011 2010* (unaudited)
Net profit 263 176
Other comprehensive income
Effect of translation to presentation
currency 706 (294)
Net gains/(losses) on available-for-sale
financial assets (13) (22)
Net (gains)/losses on available-for-sale
financial assets reclassified to
profit or loss 13 18
Income tax effect - -
------- -------------------
- (4)
Decrease in revaluation surplus in
connection with the impairment of
property, plant and equipment (1) -
Income tax effect - -
------- -------------------
(1) -
Effect of translation to presentation
currency of the Group's joint ventures
and associates 60 (22)
Share of other comprehensive income
of joint ventures and associates
accounted for using the equity method 60 (22)
Total other comprehensive income/(loss) 765 (320)
------- -------------------
Total comprehensive income/(loss),
net of tax 1,028 (144)
======= ===================
Attributable to:
Equity holders of the parent entity 987 (144)
Non-controlling interests 41 -
------- -------------------
1,028 (144)
======= ===================
*The amounts shown here do not correspond to the 2010 unaudited
interim condensed consolidated financial statements and reflect
adjustments made in connection with the changes in accounting
policies and the completion of initial accounting.
Interim Consolidated Statement of Financial Position
(In millions of US dollars)
30 June 31 December
2011 2010*
-------- ------------
Assets
Non-current assets
Property, plant and equipment 9,128 8,607
Intangible assets other than goodwill 958 1,004
Goodwill 2,257 2,219
Investments in joint ventures and
associates 795 688
Deferred income tax assets 104 100
Other non-current financial assets 198 118
Other non-current assets 90 103
-------- ------------
13,530 12,839
Current assets
Inventories 2,506 2,070
Trade and other receivables 1,171 1,213
Prepayments 198 192
Loans receivable 39 1
Receivables from related parties 101 80
Income tax receivable 48 54
Other taxes recoverable 406 353
Other current financial assets 46 52
Cash and cash equivalents 1,155 683
-------- ------------
5,670 4,698
Assets of disposal groups classified
as held for sale 2 2
5,672 4,700
-------- ------------
Total assets 19,202 17,539
======== ============
Equity and liabilities
Equity
Equity attributable to equity holders
of the parent entity
Issued capital 375 375
Treasury shares (1) -
Additional paid-in capital 2,308 1,742
Revaluation surplus 174 180
Legal reserve 36 36
Accumulated profits 4,804 4,570
Translation difference (484) (1,214)
-------- ------------
7,212 5,689
Non-controlling interests 254 247
-------- ------------
7,466 5,936
Non-current liabilities
Long-term loans 6,594 7,097
Deferred income tax liabilities 1,104 1,072
Finance lease liabilities 32 38
Employee benefits 324 315
Provisions 338 279
Other long-term liabilities 103 143
-------- ------------
8,495 8,944
Current liabilities
Trade and other payables 1,760 1,173
Advances from customers 187 205
Short-term loans and current portion
of long-term loans 604 714
Payables to related parties 228 217
30 June 31 December
2011 2010*
-------- ------------
Income tax payable 92 78
Other taxes payable 266 180
Current portion of finance lease
liabilities 19 19
Provisions 62 54
Amounts payable under put options
for shares of subsidiaries 9 6
Dividends payable by the Group's
subsidiaries to non-controlling shareholders 14 13
3,241 2,659
Total equity and liabilities 19,202 17,539
======== ============
* The amounts shown here do not correspond to the 2010
consolidated financial statements and reflect adjustments made in
connection with the completion of initial accounting.
Interim Consolidated Statement of Cash Flows
(In millions of US dollars)
Six-month period ended 30
June
2010*
2011 (unaudited)
---------- ----------------
Cash flows from operating activities
Net profit 263 176
Adjustments to reconcile net profit/(loss)
to net cash flows from operating
activities:
Deferred income tax (benefit)/expense (12) (13)
Depreciation, depletion and
amortisation 501 472
Loss on disposal of property, plant
and equipment 17 11
Impairment of assets 32 54
Foreign exchange (gains)/losses, net 220 (74)
Interest income (7) (5)
Interest expense 387 368
Share of (profits)/losses of
associates and joint ventures (39) (31)
(Gain)/loss on financial assets and
liabilities, net 48 37
(Gain)/loss on disposal groups
classified as held for sale, net (1) 14
Other non-operating (gains)/losses,
net (2) 1
Bad debt expense 29 19
Changes in provisions, employee
benefits and other long-term assets
and liabilities (3) (67)
Expense arising from the equity-settled awards
15 -
Share-based payments under cash-settled awards
(1) (3)
1,447 959
Changes in working capital:
Inventories (343) (220)
Trade and other receivables 67 (289)
Prepayments 2 (2)
Receivables from/payables to related
parties 25 -
Taxes recoverable (23) 18
Other assets 2 38
Trade and other payables 373 205
Advances from customers (27) (39)
Taxes payable 81 76
Other liabilities (10) (2)
Net cash flows from operating activities 1,594 744
Cash flows from investing activities
Issuance of loans receivable to related
parties - (46)
Proceeds from repayment of loans issued
to related parties, including interest - 5
Issuance of loans receivable (1) -
Proceeds from repayment of loans receivable,
including interest 3 1
Purchases of subsidiaries, net of
cash acquired (6) (17)
Restricted deposits at banks in respect
of investing activities - 16
Short-term deposits at banks, including
interest 4 4
Purchases of property, plant and equipment
and intangible assets (462) (397)
Proceeds from disposal of property,
plant and equipment 2 7
Proceeds from sale of disposal groups
classified as held for sale, net of
transaction costs 1 41
Dividends received 2 -
Other investing activities, net - 1
Net cash flows used in investing activities (457) (385)
Cash flows from financing activities
Purchase of treasury shares (15) -
Sale of treasury shares 3 -
Purchase of non-controlling interests (51) -
Proceeds from bank loans and notes 1,995 1,930
Repayment of bank loans and notes,
including interest (2,630) (2,344)
Net proceeds from/(repayment of) bank
overdrafts and credit lines, including
interest (24) 126
Payments under covenants reset - (15)
Gain on derivatives not designated
as hedging instruments 26 11
Collateral under swap contracts 4 -
Payments under finance leases, including
interest (10) (12)
Net cash flows from/(used in) financing
activities (702) (304)
Effect of foreign exchange rate changes
on cash and cash equivalents 37 (55)
---------- ----------------
Net increase/(decrease) in cash and
cash equivalents 472 -
Cash of disposal groups classified
as held for sale - (21)
Cash and cash equivalents at beginning
of year 683 671
---------- ----------------
Cash and cash equivalents at end of
year 1,155 650
========== ================
Supplementary cash flow information:
Cash flows during the year:
Interest paid (315) (293)
Interest received 4 5
Income taxes paid by the Group (210) (101)
* The amounts shown here do not correspond to the 2010 unaudited
interim condensed consolidated financial statements and reflect
adjustments made in connection with the changes in accounting
policies and the completion of initial accounting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMMMGKZVGMZG
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