Russian steel producer NLMK’s quarterly core earnings fall 43%

Posted on 13 February 2020
 

Source: Reuters

Russian steel producer NLMK NLMK.MM said on Wednesday its fourth-quarter core earnings fell 43% year-on-year as revenues slipped on weak global steel prices as well as major repairs to a key blast furnace at the company’s Lipetsk site.

Fourth-quarter earnings before interest, taxation, depreciation and amortisation (EBITDA) fell to $480 million, down from $847 million during the same period the previous year.

“The situation on steel product markets in 2019 was rather challenging,” Chief Financial Officer Shamil Kurmashov said, adding that the price dive was so deep that the company estimates 80% of global hot rolled coil production was loss-making last year.

“The margins in the sector were further pressured by increasing prices for raw materials,” Kurmashov said.

The year saw U.S. consumption slip 1% and European demand fall 4% compared to the previous year, NLMK said.

Russian consumption grew 8% however to 45 million tonnes, breaking a record set in 2014 on the back of demand from the construction and energy sectors, the company said.

This beat NLMK’s own expectations of 3-5% domestic steel demand growth in 2019.

However, the company expects domestic demand to slow to 1.1% in 2020, its presentation to investors showed on Wednesday.

The effect of the coronavirus outbreak and related restrictions on production in China is a “wild card” that could have an indirect negative effect on steel prices due to subdued economic activity, NLMK said.

“(But) the visibility of the impact on the global steel consumption is currently low,” it added.

NLMK has been conducting major repair works to a blast furnace at its core site in Lipetsk in central Russia, which the company said resulted in a 3% reduction in steel sales in 2019 compared to the previous year.

Steel output at the Lipetsk site is expected to increase in the first quarter of 2020, NLMK said, rising to match levels seen in the first quarter of 2019 as the overhaul comes to a close.

NLMK’s board recommended a fourth-quarter dividend payout of 5.16 roubles per share, equivalent to 148% of its free cash flow, the company said.

Shares in NLMK on the Moscow exchange were up 1.3% at 0828 GMT.

Source: Reuters (Reporting by Andrey Kuzmin and Polina Ivanova; Writing by Polina Ivanova; Editing by Louise Heavens) 



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