The steel industry has been severely impacted by the coronavirus crisis, nevertheless, like other producers using electric arc furnace (EAF) technology, Cognor has the ability to adjust production more flexibly than BOF steelmakers, and its long steel products, used mostly in construction, remain in demand. Cognor generated better-than-expected results in H1 2020, and it is expected to keep the net debt/EBITDA ratio at 2.2x for the year, a level which would allow it to resume shareholder distributions in 2021, offering dividend yield as high as 10% (adjusted for dilution). Cognor expects to reverse downward earnings trends in Q3 2020, and in Q2 positive surprises included lower-than-expected net debt and solid operating cash flow achieved under tough circumstances. After small upward revisions to our 2020 earnings estimates to reflect the first-half beat, we raise our 9-month target price for COG from PLN 1.98 to PLN 2.03 per share, and we maintain a buy rating for the stock.
Cognor Holding SA, formerly Cognor SA, is a Poland-based company that operates in the steel industry. The Company's activities are divided into four business segments: Scrap, Production, Distribution and Other. The Scrap division focuses on buying, processing, refining and selling of scrap metal and nonferrous scrap. The Production division is responsible for processing scrap metal into steel billets, as well as converting steel billets and nonferrous scrap into finished products. The Distribution division sells various commodities, such as steel products, steel and nonferrous scrap and steel billets. The Other division includes materials recycling, among others. The Company's products range comprises metal bars, steel sheet, plates, pipes and rods, as well as sheet zinc and tin plates, among others. It operates through a number of subsidiaries, such as Cognor Blachy Dachowe SA, Zlomrex Metal Sp z o o and Huta Stali Jakosciowych SA. The Company is controlled by PS Holdco Sp z o o.
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