17 March 2008
17 March 2008
Strong year-on-year growth
Financial Results for the 12 months ended 31 December, 2007
($ million unless otherwise stated)
2006 2007 % increase y-o-y
--------- --------- ---------
Revenue 12,449 15,245 22.5%
Profit from operations 2,314 2,842 22.8%
EBITDA1 2,957 3,680 24.5%
Net profit2 1,454 1,936 33.1%
EPS, $ $1.57 $1.92 22.3%
DPS3, $ $0.39 $0.77 97.4%
1 EBITDA represents profit from operations plus depreciation and amortisation
adjusted for gain (loss) on disposals of property plant and equipment
2 Net profit attributable to shareholders
3 Dividends announced on the basis of respective period results, translated at
the exchange rate as of the date of declaration by Board of Directors
OAO Severstal (LSE: SVST; RTS: CHMF), today reports full year results for the
year ended 31 December, 2007 which show good growth compared with the previous
year. Severstal ended the year with strong earnings momentum.
• A record $15,245 million in revenues for 2007, up 22.5% year-on-year
• EBITDA of $3,680 million, up 24.5% year-on-year
• Net profit up 33.1% to $1,936 million
• EBITDA margin increased to 24.1% in 2007 from 23.8% a year earlier
• EPS of $1.92, up 22.3% year-on-year
• Final dividend of $0.17 making a total of $0.77 for the full year, an
increase of 97.4% from the previous year
Chris Clark, Non-Executive Chairman of OAO Severstal, commented: 'These positive
results show that we are continuing to grow our business well, particularly in
Russia. Severstal's vertically-integrated business model is well placed to
prosper in today's volatile markets'.
Alexei Mordashov, CEO of OAO Severstal, said, 'I am pleased to announce good
growth for Severstal in 2007 with net profit up 33.1% and EPS up 22.3%
year-on-year. With the exception of North American operations, all our
businesses posted considerable gains during the year. Based on the strong
earnings and cash flows we are increasing the dividend payout to 40.1 % of net
profit, remaining in line with our dividend policy of paying 25% of consolidated
'We expect 2008 to be another year of progress for Severstal'.
Chief Executive's Review
EBITDA for 2007 increased by 24.5% compared with the same period last year. The
increase is due to positive price trends, healthy demand in Russia and stability
in European steel markets. We have also been able to pass cost inflation on to
Russian Steel continued to lead our growth, showing a 26.8% increase in EBITDA
year-over-year to $2,530 million. EBITDA margin in Russian Steel remained
approximately at the same level, 31.7% in 2007 compared to 31.6% in 2006.
EBITDA in our Mining business was up 13.3% in 2007 to $501 million, and prices
were higher compared to 2006. Production of coal declined by 2% due to
geological problems and an accident in Vorkuta. Iron ore production was up by
SNA's results for the year were impacted by weaker market conditions in North
America and a planned outage related to the rebuild of blast furnace 'C'. As a
result, EBITDA declined to $21 million.
Lucchini, our European business, reported EBITDA of $416 million, up 23.8% on
the previous year due to higher prices and a favourable dollar-euro exchange
rate. Revenues were up by 11.9%. EBITDA margin increased by 11.1% in 2007
compared to 10.0% in 2006.
In Metalware, our new strategy of moving into high value-added products resulted
in 2007 EBITDA of $87 million, a 77.6% increase over 2006.
Izhora Pipe Mill, our large-diameter pipe manufacturer, demonstrated significant
growth both in sales volumes - 301 thousand tons in 2007 compared to 12 thousand
tons in 2006 - and financial results - EBITDA of $151 million on revenues of
$551 million. EBITDA margin for this business in 2007 was 27.4%.
Financial Summary for the year ended 31 December, 2007
Severstal's consolidated revenues increased by 22.5% to $15,245 million in 2007
compared with $12,449 million in 2006. The growth is attributable to three main
factors: higher sales prices, volume growth and product mix improvements.
Costs were $10,542 million in 2007 compared to $8,601 million for the previous
year. The primary drivers of this change were cost inflation in raw materials,
energy and labour. Cost of sales as a percentage of consolidated revenues stayed
relatively flat at 69.2%, compared with 69.1% in 2006, reflecting our ability to
contain cost growth.
Gross profit increased by 22.2% to $4,703 million in 2007, compared with $3,848
million in 2006.
Profit from operations increased by 22.8% to $2,842 million in 2007 due to
favorable steel prices and cost control measures.
Group operating margin was unchanged at 18.6%
Consolidated EBITDA increased by 24.5% to $3,680 million in 2007 compared to
$2,957 million in 2006. This growth is largely attributable to the strong
performance of Russian Steel, which exploited growth opportunities in the
Russian domestic market, and Lucchini, which enjoyed price stability in its
local currency and benefited from the weaker dollar. Our Mining business, Izhora
Pipe Mill and Metalware also contributed to our overall growth during the
Income tax charges were $681 million in 2007 compared with $635 million in 2006.
In 2007, Severstal reported consolidated net profit attributable to shareholders
of $1,936 million compared with $1,454 million in 2006, an increase by 33.1%.
EPS were $1.92, 22.3% up on 2006, based on net earnings of $1,936 million and
weighted average shares outstanding of 1,008 million.
Net debt, calculated as the difference between debt and cash and cash
equivalents, plus short-term bank deposits, increased from $158 million as of 31
December 2006 to $1,114 million as of 31 December 2007.
Total indebtedness increased from $3,006 million as of 31 December 2006 to
$3,327 million as of 31 December 2007.
Cash, cash equivalents and short-term bank deposits decreased from $2,848
million as of 31 December 2006 to $2,213 million as of 31 December 2007, mainly
attributable to the company's investment activities. Our modernisation programme
is aimed at expansion of production capacities and the scope of our operations.
In 2007 Severstal acquired 86.3% of the issued share capital of Celtic Resources
Holdings Plc for a total consideration of $ 264.6 million, other gold-mining
assets and purchased several gold licences. In January 2008, Severstal acquired
the remaining 13.7% stake in Celtic Resources Holdings Plc for $ 44 million.
On 3 March, 2008 Severstal announced a change in accounting policy for fixed
assets switching from the Revaluation method to the Cost model. The company's
2007 results are therefore prepared using Historical Cost accounting which aids
in making a comparison between steel companies like for like and avoids the
volatility caused by repeated valuations. A presentation to analysts explaining
the changes was made on 3 March and can be viewed at www.severstal.com
At Severstal's Board meeting on 11-12 March 2008, the Directors recommended a
dividend of 4.00 rubles per share and per global depositary receipt ('GDR') for
Q4 2007 with a record date of 15 May 2008. Each GDR represents one share in the
Company. This recommendation is based on the company's strong financial results
Approval of the dividend is expected at the AGM which will take place on 27 June
Wider economic markets are currently showing signs of some volatility. However,
given the current favourable pricing environment in Russia and the USA, a robust
European market and Severstal's vertically integrated business model, the Board
is confident that 2008 will be another year of progress.
For further information:
Dmitry Druzhinin, Investor Relations
Olga Antonova, Public Relations
+7 495 540 7766
Dominic Fry/Tom Murray
+44 207 353 4200
Severstal would like to invite you to participate in a conference call with
Alexei Mordashov, Chief Executive Officer of Severstal, and Mikhail Noskov,
Chief Financial Officer of Severstal. The call will be held on Monday, March 17
2008 at 6.00 pm (Moscow) / 3.00 pm (London) / 11.00 am (New York)
Russia dial-in: 8108 0020 972 044
UK dial-in: 0800 6940 257
US dial-in: 1866 966 9439
International dial-in for other countries: +44 (0) 1452 555 566
Participant code: 38352483
The call will be recorded and there will be a replay facility available as
Tel: +44 (0) 1452 55 0000
Replay access number: 38352483#
Further information on Severstal can be found on its website at
This information is provided by RNS
The company news service from the London Stock Exchange