Lower steel sales volumes and unfavourable raw materials price dynamics decreased Severstal’s revenue in the first half of 2020, the company says. The Russian steelmaker foresees domestic steel demand partially recovering in the second half.
Second-quarter revenue slid -10.5% on-quarter to $1.59 billion, resulting in H1 revenue falling -20% on-year to $3.367 billion. Q2 net profit increased 5.4% on-quarter to $391 million, meaning H1 profit fell -1.95% to $463m.
Ebitda in Q2 decreased by -25.4% on-year to $1.056 billion.
“Severstal’s businesses demonstrated a strong performance despite the market disruptions made by the Covid-19 outbreak,” says chief executive Alexander Shevelev. “We have maintained an almost 100% utilisation rate at our steelmaking facilities. At our mining operations we have increased sales volumes of coking coal by 34% on-quarter, maintained strong sales volumes of iron ore products and achieved significant end-to-end optimisation effects.”
At the same time, weighted average selling prices in Q2 declined by -4% on-quarter as the firm continued developing downstream operations, Kallanish notes. Free Cash Flow increased from $54m in Q1 to $190m, even though the capital investment level remained high.
“In Q2 global steel demand was impacted by the spread of Covid-19 as a result of lockdown restrictions throughout the EU and Russia,” the company says. “According to industry experts, global steel demand is expected to decline by 6% on-year in 2020. Iron ore prices demonstrated strong upward dynamics due to high production rates in China, whereas production contraction elsewhere resulted in lower demand for coking coal.”
Russian domestic steel demand reduced significantly in Q2. However, Severstal expects demand to partially recover in the second half of 2020.
