SVST.L Regulatory News (SVST)

17 Mar 2008 07:00

OAO Severstal17 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% Notes: 1 EBITDA represents profit from operations plus depreciation and amortisationadjusted 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 atthe exchange rate as of the date of declaration by Board of Directors OAO Severstal (LSE: SVST; RTS: CHMF), today reports full year results for theyear ended 31 December, 2007 which show good growth compared with the previousyear. Severstal ended the year with strong earnings momentum. Highlights: • 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 positiveresults show that we are continuing to grow our business well, particularly inRussia. Severstal's vertically-integrated business model is well placed toprosper in today's volatile markets". Alexei Mordashov, CEO of OAO Severstal, said, "I am pleased to announce goodgrowth 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 ourbusinesses posted considerable gains during the year. Based on the strongearnings and cash flows we are increasing the dividend payout to 40.1 % of netprofit, remaining in line with our dividend policy of paying 25% of consolidatednet profit. "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. Theincrease is due to positive price trends, healthy demand in Russia and stabilityin European steel markets. We have also been able to pass cost inflation on toour customers. Russian Steel continued to lead our growth, showing a 26.8% increase in EBITDAyear-over-year to $2,530 million. EBITDA margin in Russian Steel remainedapproximately 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 priceswere higher compared to 2006. Production of coal declined by 2% due togeological problems and an accident in Vorkuta. Iron ore production was up by6%. SNA's results for the year were impacted by weaker market conditions in NorthAmerica and a planned outage related to the rebuild of blast furnace "C". As aresult, EBITDA declined to $21 million. Lucchini, our European business, reported EBITDA of $416 million, up 23.8% onthe previous year due to higher prices and a favourable dollar-euro exchangerate. Revenues were up by 11.9%. EBITDA margin increased by 11.1% in 2007compared to 10.0% in 2006. In Metalware, our new strategy of moving into high value-added products resultedin 2007 EBITDA of $87 million, a 77.6% increase over 2006. Izhora Pipe Mill, our large-diameter pipe manufacturer, demonstrated significantgrowth both in sales volumes - 301 thousand tons in 2007 compared to 12 thousandtons 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 2007compared with $12,449 million in 2006. The growth is attributable to three mainfactors: higher sales prices, volume growth and product mix improvements. Costs were $10,542 million in 2007 compared to $8,601 million for the previousyear. The primary drivers of this change were cost inflation in raw materials,energy and labour. Cost of sales as a percentage of consolidated revenues stayedrelatively flat at 69.2%, compared with 69.1% in 2006, reflecting our ability tocontain cost growth. Gross profit increased by 22.2% to $4,703 million in 2007, compared with $3,848million in 2006. Profit from operations increased by 22.8% to $2,842 million in 2007 due tofavorable 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 strongperformance of Russian Steel, which exploited growth opportunities in theRussian domestic market, and Lucchini, which enjoyed price stability in itslocal currency and benefited from the weaker dollar. Our Mining business, IzhoraPipe Mill and Metalware also contributed to our overall growth during theperiod. Income tax charges were $681 million in 2007 compared with $635 million in 2006. In 2007, Severstal reported consolidated net profit attributable to shareholdersof $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 andweighted average shares outstanding of 1,008 million. Net debt, calculated as the difference between debt and cash and cashequivalents, plus short-term bank deposits, increased from $158 million as of 31December 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 $2,848million as of 31 December 2006 to $2,213 million as of 31 December 2007, mainlyattributable to the company's investment activities. Our modernisation programmeis 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 ResourcesHoldings Plc for a total consideration of $ 264.6 million, other gold-miningassets and purchased several gold licences. In January 2008, Severstal acquiredthe remaining 13.7% stake in Celtic Resources Holdings Plc for $ 44 million. On 3 March, 2008 Severstal announced a change in accounting policy for fixedassets switching from the Revaluation method to the Cost model. The company's2007 results are therefore prepared using Historical Cost accounting which aidsin making a comparison between steel companies like for like and avoids thevolatility caused by repeated valuations. A presentation to analysts explainingthe changes was made on 3 March and can be viewed at www.severstal.com Dividend At Severstal's Board meeting on 11-12 March 2008, the Directors recommended adividend of 4.00 rubles per share and per global depositary receipt ("GDR") forQ4 2007 with a record date of 15 May 2008. Each GDR represents one share in theCompany. This recommendation is based on the company's strong financial resultsfor 2007. Approval of the dividend is expected at the AGM which will take place on 27 June2008. Outlook Wider economic markets are currently showing signs of some volatility. However,given the current favourable pricing environment in Russia and the USA, a robustEuropean market and Severstal's vertically integrated business model, the Boardis confident that 2008 will be another year of progress. For further information: Severstal Dmitry Druzhinin, Investor RelationsOlga Antonova, Public Relations+7 495 540 7766 Tulchan Communications Dominic Fry/Tom Murray+44 207 353 4200 Severstal would like to invite you to participate in a conference call withAlexei Mordashov, Chief Executive Officer of Severstal, and Mikhail Noskov,Chief Financial Officer of Severstal. The call will be held on Monday, March 172008 at 6.00 pm (Moscow) / 3.00 pm (London) / 11.00 am (New York) Russia dial-in: 8108 0020 972 044UK dial-in: 0800 6940 257US dial-in: 1866 966 9439International dial-in for other countries: +44 (0) 1452 555 566Participant code: 38352483The call will be recorded and there will be a replay facility available asfollows:Tel: +44 (0) 1452 55 0000Replay access number: 38352483# Further information on Severstal can be found on its website atwww.severstal.com This information is provided by RNS The company news service from the London Stock Exchange