WOOD Flash – EVRAZ: 2Q18 trading update
EVRAZ has just reported its 2Q18 trading update, which should be taken as neutral by the market, in our view. Steel, coal and vanadium sales all improved qoq, with the steel product mix improving (more finished products, less semis). Steel prices rose marginally, on average, in the core business (in line with the results from peers SVST and MMK), but much more significantly in North America, as expected, following the price spike after the imposition of import tariffs. The offsetting negative, however, was the decline in coal profitability. Lower prices were expected, but we also expected lower cash costs due to the weaker rouble. Rising costs and lower prices mean that 1H18 coal profitability fell USD 7/t yoy, which was worse than we expected, although higher volumes should offset this partly. On the positive side, vanadium prices continued to rise (+150% yoy in 1H18), which should boost the EBITDA significantly for the group this year, in our view.Evraz engages in the production and distribution of steel and related products and coal and iron ore mining. Co. also produces vanadium products. Co. has four segments: Steel, which includes production of steel and related products at all mills except for those in North America, and includes the extraction of vanadium ore and production of vanadium products, iron ore mining and enrichment and certain energy-generating companies; Steel, North America, which includes production of steel and related products in the U.S. and Canada; Coal, which includes coal mining and enrichment; and Other operations, which includes energy-generating companies, shipping and railway transportation companies.
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