WOOD Flash – Severstal: 3Q19 financial results – 4% beat on EBITDA, FCF in line, offset by disappointing dividend

Severstal announced its 3Q19 financial results this morning (18 October), which were 4% above both our forecast and the consensus at the EBITDA level. The EBITDA was up 5% qoq, but the FCF was in line with our forecast, rising 32% qoq, due to a release in working capital vs. a build-up in 2Q19. This resulted in a quarterly dividend of USD 0.43/GDR, +1% qoq, but 20% lower than we forecast and 14% lower than the consensus expected. The announced dividend is broadly in line with the level of actual FCF generated in the quarter, rather than the FCF adjusted using a lower capex figure (USD 800m annualised) than it actually spends. However, this adjustment to the payout could be made at the year-end. This represents a 3.1% quarterly yield, which is still high, but this should be the last large dividend for a while if steel prices remain at current levels. We see these results as a small positive, offset by the disappointing dividend, so the net results should be neutral for the shares.