Severstal - Trading Update Review and 2Q Earnings Preview
Severstal has reported a good 2Q19 trading update, with flat sales volumes, an uptick in the HVA share and higher realized prices. We expect 2Q19 EBITDA to grow 13% Q-o-Q to $750 mln, for a 34% margin. Capex growth and a working capital buildup may have pressured cash flows, so we expect leveraged FCF of $260 mln, for a 2% yield. Assuming Severstal continues paying more than 100% of FCF, in line with its dividend policy, we see a quarterly dividend of around $350 mln, for a 2.5% yield. The company is to report its 2Q IFRS results next Friday, July 19.
PAO Severstal is an integrated Iron & Steel works company with a range of products: hot and cold rolled steel, roll-formed shapes and pipes, rolled sections, a large group of coke products and by-products. Co. also has various social responsibilities such as the operation and maintenance of sports complexes, holiday and recreational facilities and public housing. Co.'s operations are organized along three principal divisions: Severstal Russian Steel engaged in crude steel production; Severstal Resources engaged in the production of iron ore concentrate, pellets and coking coal; and Severstal International engaged in the production of high-quality flat-rolled products.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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