TIDMEVR
RNS Number : 3501R
Evraz Plc
28 February 2019
EVRAZ plc
EVRAZ PUBLISHES 2018 ANNUAL REPORT AND REPORTS FULL YEAR 2018
RESULTS
28 February 2019 - EVRAZ plc ("EVRAZ" or "the Company") (LSE:
EVR) has today:
-- posted its Annual Report for the year ended 31 December 2018
("2018 Annual Report") on its website:
http://www.evraz.com/investors/annual_reports/; and
-- submitted to the UK National Storage Mechanism a copy of its
2018 Annual Report in accordance with LR 9.6.1 R.
The 2018 Annual Report will shortly be available for inspection
on the National Storage Mechanism
http://www.morningstar.co.uk/uk/NSM
The 2018 Annual Report and the Notice of the Company's Annual
General Meeting, which will be held on 18 June 2019 in London, will
be posted to shareholders in mid-May 2019.
The Appendix to this announcement contains additional
information which has been extracted from the 2018 Annual Report
for the purposes of compliance with DTR 6.3.5 only and should be
read in conjunction with this announcement. Together these
constitute the material required by DTR 6.3.5 and DTR 4.2.3 to be
communicated to the media in unedited full text through a
Regulatory Information Service. This announcement should be read in
conjunction with and is not a substitute for reading the full 2018
Annual Report. Page and note references in the text below refer to
page numbers and notes in the 2018 Annual Report.
EVRAZ ANNOUNCES ITS AUDITED RESULTS FOR THE YEARED 31 DECEMBER
2018
The financial information contained in this document does not
constitute statutory accounts as defined by section 435 of the
Companies Act 2006. Financial information for 2017 has been
extracted from the audited statutory accounts for the year ended 31
December 2017 which were prepared in accordance with IFRS as
adopted by the European Union and have been delivered to the
Registrar of Companies. The auditor's report on those financial
statements was unqualified with no reference to matters to which
the auditor drew attention by way of emphasis and no statement
under s498(2) or s498(3) of the Companies Act 2006. The financial
information for the year ended 31 December 2018 will be delivered
to the Registrar of Companies following the Company's annual
general meeting convened for 18 June 2019. The auditor has reported
on the statutory accounts for the year ended 31 December 2018. The
auditor's report was unqualified.
FY 2018 HIGHLIGHTS
-- Robust free cash flow of US$1,940 million (FY2017: US$1,322 million)
-- Continued reduction in net debt: US$3.6 billion (FY2017: US$4.0 billion)
-- Total EBITDA effect from cost-cutting and customer focus
initiatives was US$340 million in 2018
-- Consolidated EBITDA of US$3,777 million, up 43.9% from
US$2,624 million in FY2017, driving the EBITDA margin from 24.2% to
29.4%, due to strong market conditions and numerous improvement
initiatives
-- Net profit surged to US$2,470 million vs. US$759 million in FY2017
-- Cash-costs:
o cash cost of slabs decreased to US$242/t from US$247/t in
FY2017 amid rouble depreciation and higher sales volumes
o cash costs of washed coking coal increased to US$47/t (FY2017:
US$42/t) due to more complex geological conditions, rise in
auxiliary materials prices and higher involvement of
contractors
o cash costs of iron ore products increased slightly to US$37/t
(FY2017: US$36/t) amid lower sales volumes of Evrazruda
-- An interim dividend of US$577.34 million (US$0.40 per share)
has been declared, reflecting the Board's confidence in the Group's
financial position and outlook.
Financial Highlights
(US$ million) FY2018 FY2017 Change,%
------------------------------------------ ----------------- ----------------- ---------
Consolidated revenue 12,836 10,827 18.6
------------------------------------------ ----------------- ----------------- ---------
Profit from operations 3,528 1,986 77.6
------------------------------------------ ----------------- ----------------- ---------
Consolidated EBITDA(1) 3,777 2,624 43.9
------------------------------------------ ----------------- ----------------- ---------
Net profit 2,470 759 n/a
------------------------------------------ ----------------- ----------------- ---------
Earnings per share, basic (US$) 1.67 0.49 n/a
------------------------------------------ ----------------- ----------------- ---------
Net cash flows from operating activities 2,633 1,957 34.5
------------------------------------------ ----------------- ----------------- ---------
CAPEX(2) 527 603 (12.6)
------------------------------------------ ----------------- ----------------- ---------
31 December 2018 31 December 2017
------------------------------------------ ----------------- ----------------- ---------
Net debt(3) 3,571 3,966 (10.0)
------------------------------------------ ----------------- ----------------- ---------
Total assets 9,373 10,380 (9.7)
------------------------------------------ ----------------- ----------------- ---------
(1) See p.261 of EVRAZ plc Annual Report 2018 for the definition
of EBITDA.
(2) Including payments on deferred terms recognised in financing
activities and non-cash transactions.
(3) See p.261 of EVRAZ plc Annual Report 2018 for the
calculation of net debt.
EVRAZ Chief Executive Officer, Alexander Frolov, commented
"In 2018, EVRAZ delivered robust growth due to favourable market
conditions and ongoing efficiency and cost initiatives. The Group
generated EBITDA of US$3,777 million during the reporting period,
its highest level since 2008, which made it possible to pay
dividends of US$1.6 billion.
EVRAZ remained focused on implementing its efficiency
improvement programme in the amount of 3% of the cost base, the
effect from which totalled US$340 million in 2018.
EVRAZ believes that its low net debt and superior cost base will
help to withstand any market downturns, thereby helping the
business to develop sustainably".
CONFERENCE CALL
EVRAZ plc (LSE: EVR) has released its financial results for the
year ended 31 December 2018 on Thursday, 28 February 2019.
A conference call to discuss the results, hosted by Alexander
Frolov, CEO, and Nikolay Ivanov, CFO, will be held on Thursday, 28
February 2019, at:
2 pm (London time)
5 pm (Moscow time)
9 am (New York time)
To join the call, please dial:
+ 44 (0)330 336 UK
9127
+7 495 213 1767 Russia
+1 646 828 8193 US
Conference ID: 9976768
To avoid any technical inconvenience, it is recommended that
participants dial in 10 minutes before the start of the call.
The FY2018 results presentation will be available on the Group's
website, www.evraz.com, on Thursday, 28 February 2019, at the
following link:
http://www.evraz.com/investors/financial_results/presentations/
An MP3 recording will be available on Friday, 1 March 2019, at
the following link:
http://www.evraz.com/investors/financial_results/conference_calls/
FORWARD-LOOKING STATEMENTS
This document contains "forward-looking statements", which
include all statements other than statements of historical facts,
including, without limitation, any statements preceded by, followed
by or that include the words "targets", "believes", "expects",
"aims", "intends", "will", "may", "anticipates", "would", "could"
or similar expressions or the negative thereof. Such
forward-looking statements involve known and unknown risks,
uncertainties and other important factors beyond the Group's
control that could cause the actual results, performance or
achievements of the Group to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking, including, among others, the achievement of
anticipated levels of profitability, growth, cost and synergy of
recent acquisitions, the impact of competitive pricing, the ability
to obtain necessary regulatory approvals and licenses, the impact
of developments in the Russian economic, political and legal
environment, volatility in stock markets or in the price of the
Group's shares or GDRs, financial risk management and the impact of
general business and global economic conditions. Such
forward-looking statements are based on numerous assumptions
regarding the Group's present and future business strategies and
the environment in which the Group will operate in the future. By
their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. These
forward-looking statements speak only as at the date as of which
they are made, and each of EVRAZ and the Group expressly disclaims
any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statements contained herein to
reflect any change in EVRAZ's or the Group's expectations with
regard thereto or any change in events, conditions or circumstances
on which any such statements are based. Neither the Group, nor any
of its agents, employees or advisors intends or has any duty or
obligation to supplement, amend, update or revise any of the
forward-looking statements contained in this document.
Table of contents
Financial review
Statement of operations
CAPEX and key projects
Financing and liquidity
Review of operations by Segment
Steel segment
Steel, North America segment
Coal segment
APPIX
Key RISKS AND UNCERTAINTIES
DIVIDS
DIRECTORS' RESPONSIBILITY STATEMENT
Consolidated Statement of Operations
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Financial review
Statement of operations
In its full-year financial results for 2018, EVRAZ reported an
increase of 18.6% year-on-year in consolidated revenues, which were
US$12,836 million compared with US$10,827 million in 2017. This
performance was driven mostly by an upswing in prices for vanadium
and steel products amid more favourable market trends.
EVRAZ' consolidated EBITDA amounted to US$3,777 million in the
period, compared with US$2,624 million in 2017, boosting the EBITDA
margin from 24.2% to 29.4% and free cash ow to US$1,940 million.
The improvement is primarily attributable to higher vanadium and
steel product prices, lower expenses in US dollar terms because of
the effect that rouble weakening had on costs in 2018 versus 2017,
as well as the impact of cost-cutting initiatives on efficiency.
This was partly offset by an increase in prices for raw and
auxilliary materials, including scrap, electrodes and
ferroalloys.
The Steel segment's revenues (including inter-segment) climbed
by 14.7% year-on-year to US$8,879 million, or 62.2% of the Group's
total before elimination. The growth was mainly attributable to
higher revenues from sales of vanadium products, which rose by
111.4% year-on-year, 124.6% increase was attributed to surges in
average sales prices. Ongoing vanadium production restrictions
together with China's new high-strength rebar standard and strong
global demand from steelmakers have severely affected stockpiles
and pushed up price indices. Sales of steel products also increased
by 5.8% due to higher sales prices, primarily for finished
products.
The Steel, North America segment's revenues increased by 38.6%
year-on-year. Prices and volume went up by 22.6% and 14.4%,
respectively. The key drivers of this growth were improved demand
across product segments, particularly for tubular products driven
by recovery in oil prices and drilling activity and the start of
new major pipelines construction in Canada and the US.
The Coal segment's revenues grew by 5.6% year-on-year, supported
largely by higher sales volumes, which were up 4.8% due to stable
demand and improved productivity at the Raspadskaya-Koksovaya
mine.
In 2018, the Steel segment's EBITDA rose due to an increase in
steel and vanadium prices; lower expenses in US dollar terms due to
the effect that rouble weakening had on costs; and the impact of
cost-cutting initiatives implemented in the period. This was partly
offset by an increase in prices for raw and auxilliary materials,
including scrap, electrodes and ferroalloys.
The increase in volume and metal spreads of the Steel, North
America segment's was more than offset by the effect of tariffs and
duties on Canadian large-diameter and line pipe sales into the US,
as well as due to operational challenges at EVRAZ Regina facility
that resulted in lower EBITDA.
The Coal segment's EBITDA declined slightly year-on-year mainly
due to higher cost per tonne amid more complex geological
conditions, rise in auxiliary materials prices and higher
involvement of contractors. This was partly offset by sales prices
rising in line with global benchmarks; the impact of cost-cutting
initiatives; and lower expenses in US dollar terms as a result of
the effect that rouble weakening had on costs.
Eliminations mostly re ect unrealised profits or losses that
relate to the inventories produced by the Steel segment on the
Steel, North America segment's balance sheet, and coal inventories
produced by the Coal segment on the Steel segment's balance
sheet.
Revenues
(US$ million)
---------------------------------------------------------------
Segment 2018 2017 Change Change, %
---------------------- -------- -------- ------- ----------
Steel 8,879 7,743 1,136 14.7
---------------------- -------- -------- ------- ----------
Steel, North America 2,583 1,864 719 38.6
---------------------- -------- -------- ------- ----------
Coal 2,337 2,214 123 5.6
---------------------- -------- -------- ------- ----------
Other operations 472 462 10 2.2
---------------------- -------- -------- ------- ----------
Eliminations (1,435) (1,456) 21 (1.4)
---------------------- -------- -------- ------- ----------
Total 12,836 10,827 2,009 18.6
---------------------- -------- -------- ------- ----------
Revenue by region
(US$ million)
-------------------------------------------------------------------------
Region 2018 2017 Change Change, %
---------------------------------- ------- ------- ------- ----------
Russia 4,564 4,255 309 7.3
----------------------------------
Americas 3,009 2,201 808 36.7
----------------------------------
Asia 2,716 2,162 554 25.6
----------------------------------
Europe 1,426 1,128 298 26.4
----------------------------------
CIS (excl. Russia) 936 812 124 15.3
----------------------------------
Africa and the rest of the world 185 269 (84) (31.2)
---------------------------------- ------- ------- ------- ----------
Total 12,836 10,827 2,009 18.6
---------------------------------- ------- ------- ------- ----------
EBITDA*
(US$ million)
-----------------------------------------------------------
Segment 2018 2017 Change Change, %
---------------------- ------ ------ ------- ----------
Steel 2,672 1,483 1,189 80.2
---------------------- ------ ------ ------- ----------
Steel, North America 14 58 (44) (75.9)
---------------------- ------ ------ ------- ----------
Coal 1,218 1,226 (8) (0.7)
---------------------- ------ ------ ------- ----------
Other operations 17 21 (4) (19.0)
---------------------- ------ ------ ------- ----------
Unallocated (135) (131) (4) 3.1
---------------------- ------ ------ ------- ----------
Eliminations (9) (33) 24 (72.7)
---------------------- ------ ------ ------- ----------
Total 3,777 2,624 1,153 43.9
---------------------- ------ ------ ------- ----------
* For the definition of EBITDA, please refer to p.261 of the
Annual Report 2018
The following table details the effect of the Group's
cost-cutting initiatives.
Effect of Group's cost-cutting initiatives in
2018,
(US$ million)
------------------------------------------------------------ ---------
Improving yields and raw material costs, including 132
------------------------------------------------------------ ---------
Improving yields and raw material costs of Urals
and Siberia divisions 74
------------------------------------------------------------ ---------
Various improvements at coal washing plants and
mines 15
------------------------------------------------------------ ---------
Improving yields and raw material costs of North
American assets and vanadium operations 43
------------------------------------------------------------ ---------
Increasing productivity and cost effectiveness 132
------------------------------------------------------------ ---------
Others, including 9
------------------------------------------------------------ ---------
Reduction of general and administrative (G&A)
costs and non-G&A headcount 9
------------------------------------------------------------ ---------
Total 273
------------------------------------------------------------ ---------
Revenues, cost of revenue and gross profit of segments
(US$ million)
------------------------------------------------------------ --------
Change,
2018 2017 %
-------------------------------------- --------- --------- --------
Steel segment
-------------------------------------- --------- --------- --------
Revenues 8,879 7,743 14.7
-------------------------------------- --------- --------- --------
Cost of revenue (5,613) (5,795) (3.1)
-------------------------------------- --------- --------- --------
Gross profit 3,266 1,948 67.7
-------------------------------------- --------- --------- --------
Steel, North America segment
-------------------------------------- --------- --------- --------
Revenues 2,583 1,864 38.6
-------------------------------------- --------- --------- --------
Cost of revenue (2,215) (1,656) 33.8
-------------------------------------- --------- --------- --------
Gross profit 368 208 76.9
-------------------------------------- --------- --------- --------
Coal segment
-------------------------------------- --------- --------- --------
Revenues 2,337 2,214 5.6
-------------------------------------- --------- --------- --------
Cost of revenue (1,042) (973) 7.1
-------------------------------------- --------- --------- --------
Gross profit 1,295 1,241 4.4
-------------------------------------- --------- --------- --------
Other operations - gross profit 15 104 (85.6)
-------------------------------------- --------- --------- --------
Unallocated - gross profit (8) (8) 0.0
-------------------------------------- --------- --------- --------
Eliminations - gross profit (111) (151) (26.5)
-------------------------------------- --------- --------- --------
Total 4,825 3,342 44.4
-------------------------------------- --------- --------- --------
Gross profit, expenses and results
(US$ million)
---------------------------------------------------------------------------------------------------
Item 2018 2017 Change Change, %
------------------------------------------------------------ -------- ------ ------- ----------
Gross profit 4,825 3,342 1,483 44.4
------------------------------------------------------------ -------- ------ ------- ----------
Selling and distribution costs (1,013) (717) (296) 41.3
------------------------------------------------------------ -------- ------ ------- ----------
General and administrative expenses (546) (540) (6) 1.1
------------------------------------------------------------ -------- ------ ------- ----------
Impairment of assets (30) 12 (42) n/a
------------------------------------------------------------ -------- ------ ------- ----------
Foreign exchange gains/(losses), net 361 (54) 415 n/a
------------------------------------------------------------ -------- ------ ------- ----------
Other operating income and expenses, net (69) (57) (12) 21.1
------------------------------------------------------------ -------- ------ ------- ----------
Profit from operations 3,528 1,986 1,542 77.6
------------------------------------------------------------ -------- ------ ------- ----------
Interest expense, net (341) (423) 82 (19.4)
------------------------------------------------------------ -------- ------ ------- ----------
Share of profits/(losses) of joint ventures and associates 9 11 (2) (18.2)
------------------------------------------------------------ -------- ------ ------- ----------
Loss on financial assets and liabilities, net 13 (57) 70 n/a
------------------------------------------------------------ -------- ------ ------- ----------
Loss on disposal groups classified as held for sale, net (10) (360) 350 (97.2)
------------------------------------------------------------ -------- ------ ------- ----------
Other non-operating losses, net 2 (2) 4 n/a
------------------------------------------------------------ -------- ------ ------- ----------
Profit before tax 3,201 1,155 2,046 n/a
------------------------------------------------------------ -------- ------ ------- ----------
Income tax benefit/(expense) (731) (396) (335) 84.6
------------------------------------------------------------ -------- ------ ------- ----------
Net profit 2,470 759 1,711 n/a
------------------------------------------------------------ -------- ------ ------- ----------
In 2018, selling and distribution expenses increased by 41.3%,
mostly due to increased freight costs, tariffs imposed on steel
exports to US customers of EVRAZ North America and higher sales
volumes, partly offset by the weakening of the rouble. General and
administrative expenses edged up by 1.1% due to wage indexation,
partly offset by the effect that rouble depreciation had on
costs.
Foreign exchange gains amounted to US$361 million and were
primarily related to intra-group loans denominated in roubles
payable among Russian and non-russian subsidiaries. The
depreciation of the Russian rouble against the US dollar in 2018
led to exchange gains mainly recognized in the income statements of
EVRAZ plc and East Metals A.G., which were not offset by the
exchange losses recognised in the income statements or the equity
of the Russian subsidiaries.
Interest expenses incurred by the Group decreased, mainly due to
the gradual reduction in total debt and the refinancing of existing
indebtedness at more favorable terms during the reporting period.
Gains on financial assets and liabilities amounted to US$13 million
and were mostly related to gains on hedging instruments.
A net loss of US$10 million on disposal groups classified as
held for sale was caused by the disposal in March 2018 of EVRAZ
DMZ, which was sold to a third party for a cash consideration of
US$35 million. The Group recognised a US$10 million loss on the
subsidiary's sale, including US$60 million of cumulative exchange
losses reclassified from other comprehensive income to the
consolidated statement of operations. The result was included as a
loss on disposal groups classified as held for sale on the
consolidated statement of operations.
For the reporting period, the Group had a current income tax
expense of US$679 million, compared with US$484 million a year
earlier. The change re ects the Group's better operating results
and taxes withheld on dividends distributed within the Group.
Cash flow
(US$ million)
----------------------------------------------------------------------------------------------------------------------
Item 2018 2017 Change Change, %
---------------------------------------------------------------------------- -------- -------- -------- ----------
Cash flows from operating activities before changes in working capital 3,063 2,111 952 45.1
---------------------------------------------------------------------------- -------- -------- -------- ----------
Changes in working capital (430) (154) (276) n/a
---------------------------------------------------------------------------- -------- -------- -------- ----------
Net cash flows from operating activities 2,633 1,957 676 34.5
---------------------------------------------------------------------------- -------- -------- -------- ----------
Short-term deposits at banks, including interest 11 7 4 57.1
---------------------------------------------------------------------------- -------- -------- -------- ----------
Purchases of property, plant and equipment and intangible assets (521) (595) 74 (12.4)
---------------------------------------------------------------------------- -------- -------- -------- ----------
Proceeds from sale of disposal groups classified as held for sale, net of
transaction costs 52 412 (360) (87.4)
---------------------------------------------------------------------------- -------- -------- -------- ----------
Other investing activities 80 9 71 n/a
---------------------------------------------------------------------------- -------- -------- -------- ----------
Net cash flows used in investing activities (378) (167) (211) n/a
---------------------------------------------------------------------------- -------- -------- -------- ----------
Net cash flows used in financing activities (2,606) (1,479) (1,127) 76.2
---------------------------------------------------------------------------- -------- -------- -------- ----------
including dividends paid (1,556) (430) (1,126) n/a
---------------------------------------------------------------------------- -------- -------- -------- ----------
Effect of foreign exchange rate changes on cash and cash equivalents (48) (2) (46) n/a
---------------------------------------------------------------------------- -------- -------- -------- ----------
Net increase/(decrease) in cash and cash equivalents (399) 309 (708) n/a
---------------------------------------------------------------------------- -------- -------- -------- ----------
Calculation of free cash flow*
(US$ million)
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Item 2018 2017 Change Change, %
--------------------------------------------------------------------------------- ------ ------ ------- ----------
EBITDA 3,777 2,624 1,153 43.9
--------------------------------------------------------------------------------- ------ ------ ------- ----------
EBITDA excluding non-cash items 3,773 2,627 1,146 43.6
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Changes in working capital (430) (154) (276) n/a
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Income tax accrued (683) (485) (198) 40.8
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Social and social infrastructure maintenance expenses (27) (31) 4 (12.9)
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Net cash flows from operating activities 2,633 1,957 676 34.5
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Interest and similar payments (298) (453) 155 (34.2)
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Capital expenditures, including recorded in financing activities (527) (603) 76 (12.6)
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Proceeds from sale of disposal groups classified as held for sale, net of
transaction costs 52 412 (360) (87.4)
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Other cash flows from investing activities 80 9 71 n/a
--------------------------------------------------------------------------------- ------ ------ ------- ----------
Free cash flow 1,940 1,322 618 46.7
--------------------------------------------------------------------------------- ------ ------ ------- ----------
* For the definition of free cash flow, please refer to p.261 of
the Annual Report 2018.
In 2018, net cash ows from operating activities climbed by 34.5%
year-on-year. Free cash ow for the period was US$1,940 million.
CAPEX and key projects
In 2018, EVRAZ' capital expenditures fell to US$527 million,
compared with US$603 million a year earlier, as EVRAZ NTMK finished
implementing two main projects, the construction of blast furnace
no. 7 (first pig iron was obtained in Q1 2018) and the grinding
ball mill (first ball was produced in Q1 2018), amid the weakening
of the rouble exchange rate against the US dollar. EVRAZ North
America also started to implement two projects to reduce costs that
are scheduled to be completed in 2019. Capital expenditures
(including those recognized in financing activities) for 2018 in
millions of US dollars can be summarised as follows.
Capital expenditures in 2018
(US$ million)
Steel segment
---------------------------------------------------------- ----
Blast furnace no. 7 construction at EVRAZ NTMK
The project aim is to maintain stable pig iron
production volumes during the capital repair of
blast furnace no. 6 in 2018-19. 48
---------------------------------------------------------- ----
Wheel resurfacing capacity expansion at EVRAZ NTMK
The project aim is to expand wheel resurfacing
capacity to balance production capacity in 2019-22
and increase production volumes. 10
---------------------------------------------------------- ----
Grinding ball mill construction at EVRAZ NTMK
The project aim is to construct a new grinding
ball mill that can make the grinding balls of hardness
category five. 5
---------------------------------------------------------- ----
Steel, North America segment
---------------------------------------------------------- ----
EVRAZ Pueblo seamless threading
The project aim is to in-source seamless threading
and coupling process from third-party providers
to improve cost competitiveness. 15
---------------------------------------------------------- ----
EVRAZ Red Deer heat treatment
The project aim is to develop heat treatment capability
to access a higher margin market. 13
---------------------------------------------------------- ----
Coal segment
---------------------------------------------------------- ----
Access and development of reserves in the Uskovskaya
mine's seam no. 48
The project aim is to prepare the reserves in seam
no. 48 for mining. 20
---------------------------------------------------------- ----
Access and development of reserves in the Esaulskaya
mine's seam no. 29a
The project aim is to relocate mining operations
from seam no. 26 to seam no. 29a. 5
---------------------------------------------------------- ----
Other development projects 51
---------------------------------------------------------- ----
Maintenance 360
---------------------------------------------------------- ----
Total 527
---------------------------------------------------------- ----
Financing and liquidity
EVRAZ began 2018 with total debt of US$5,432 million. The Group
used the cash ows it generated during the period to reduce its debt
and completed several transactions to manage its maturity
profile.
In February, EVRAZ repaid US$500 million in loans, comprising
US$200 million from Alfa Bank due in 2019, US$200 million from Alfa
Bank due in 2023 and US$100 million from Sberbank due in 2020. The
Group financed these repayments with a combination of its cash
balances and a new five-year, US$300 million term loan from Alfa
Bank. These transactions helped to improve the repayment schedule
in terms of loan tenures and reduce interest charges.
Between April and June, to reduce its interest charges, the
Group completed an early repayment of its outstanding loans to VTB
with principal amounts of US$495 million using cash accumulated on
the balance sheet.
These actions, together with scheduled bank loan repayments and
changes in credit line balances, reduced total debt by US$794
million to US$4,638 million as at 31 December 2018.
In 2018, EVRAZ made four dividend payments to its shareholders
totaling US$1,556 million.
During the reporting period, net debt decreased by US$395
million to US$3,571 million, compared with US$3,966 million as at
31 December 2017. Interest expense accrued in respect of loans,
bonds and notes amounted to US$322 million in 2018, compared with
US$394 million in 2017. The lower interest expense was mainly due
to a reduction of total debt by early repayments.
The strong market trends seen in 2018 drove significant growth
of EBITDA and free cash ow generation. This helped to substantially
improve the Group's major leverage metric, the ratio of net debt to
EBITDA, which fell to 0.9 times as at 31 December 2018, compared
with 1.5 times as at 31 December 2017.
As at 31 December 2018, debt with financial maintenance
covenants comprised various bilateral facilities with a total
outstanding principal of around US$1,061 million. Maintenance
covenants under these facilities include two key ratios calculated
using EVRAZ plc's consolidated financials: a maximum net leverage
and a minimum EBITDA interest cover. As at 31 December 2018, EVRAZ
was in full compliance with its financial covenants.
As at 31 December 2018, cash amounted to US$1,067 million, while
short-term loans and the current portion of long-term loans stood
at US$377 million. Cash-on-hand and committed credit facilities are
sufficient to cover all of EVRAZ' refinancing requirements for 2019
and 2020.
Review of operations by Segment
(US$ million) Steel Steel, NA Coal Other
--------------- -------------- -------------- -------------- ------------
2018 2017 2018 2017 2018 2017 2018 2017
--------------- ------ ------ ------ ------ ------ ------ ----- -----
Revenues 8,879 7,743 2 583 1,864 2,337 2,214 472 462
--------------- ------ ------ ------ ------ ------ ------ ----- -----
EBITDA 2,672 1,483 14 58 1,218 1,226 17 21
--------------- ------ ------ ------ ------ ------ ------ ----- -----
EBITDA
margin 30.1% 19.2% 0.5% 3.1% 52.1% 55.4% 3.6% 4.5%
--------------- ------ ------ ------ ------ ------ ------ ----- -----
CAPEX 302 358 97 107 119 126 9 7
--------------- ------ ------ ------ ------ ------ ------ ----- -----
Steel segment
Sales review
Steel segment revenues by products
2018 2017
--------- ------------------------------------ -------------------------------------
US$ % of total segment US$ % of total segment
million revenues million revenues Change,%
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Steel products, external
sales 6,580 74.1 6,219 80.3 5.8
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Semi-finished
products(*) 2,521 28.4 2,523 32.6 (0.1)
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Construction
products(**) 2 280 25.7 2,171 28.0 5.0
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Railway products(***) 965 10.9 863 11.1 11.8
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Flat-rolled
products(****) 415 4.7 313 4.0 32.6
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Other steel
products(*****) 399 4.4 349 4.6 14.3
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Steel products,
intersegment sales 334 3.8 284 3.7 17.6
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Including sales to
Steel, North America 321 3.6 270 3.5 18.9
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Iron ore products 254 2.9 192 2.5 32.3
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Vanadium products 1,152 13.0 545 7.0 111.4
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Other revenues 559 6.3 503 6.5 11.1
-------------------------- --------- ------------------------- --------- -------------------------- ---------
Total 8,879 100.0 7,743 100.0 14.7
-------------------------- --------- ------------------------- --------- -------------------------- ---------
* Includes billets, slabs, pig iron, pipe blanks and other
semi-finished products.
** Includes rebar, wire rods, wire, beams, channels and
angles.
*** Includes rails, wheels, tires and other railway
products.
**** Includes commodity plate and other flat-rolled
products.
***** Includes rounds, grinding balls, mine uprights and
strips.
Geographic breakdown of external steel product sales
(US$ million)
-------------------------------------------------------------------
2018 2017 Change, %
--------------------------------------- ------ ------ ----------
Russia 3,258 3,012 8.2
--------------------------------------- ------ ------ ----------
Asia 1,810 1,492 21.3
--------------------------------------- ------ ------ ----------
Europe 653 701 (6.8)
--------------------------------------- ------ ------ ----------
CIS 482 528 (8.7)
--------------------------------------- ------ ------ ----------
Africa, America and rest of the world 377 486 (22.4)
--------------------------------------- ------ ------ ----------
Total 6,580 6,219 5.8
--------------------------------------- ------ ------ ----------
In 2018, revenues from the Steel segment climbed by 14.7% to
US$8,879 million, compared with US$7,743 million a year earlier.
The segment's revenues were affected by rising sales prices for
vanadium products and steel, primarily for finished products, which
was partly offset by lower sales volumes of vanadium products and
steel.
Revenues from sales of construction products to third parties
grew by 5.0%: a 6.4% increase was attributed to surges in average
prices which was partly offset by a 1.4% reduction in sales volumes
amid a slowdown of construction work in Russia.
Revenues from external sales of railway products rose due to a
6.9% increase in prices, which was supported by market upside
growth of 4.9% in sales volumes. Greater sales of railway products
during the reporting period were attributable to higher demand for
wheels as the Russian market entered a new cycle in railcar
production and due to signing a new five-year contract with Russian
Railways.
External revenues from flat-rolled products jumped by 32.6%.
11.9% increase was attributed to surges in average prices and 20.7%
to the increased sales volumes amid an improving market situation.
This was in line with global market trends and the increased
production volumes at EVRAZ Palini e Bertoli.
The share of sales to the Russian market grew from 48.4% in 2017
to 49.5% in 2018, mainly due to a shift from sales to Europe and
the CIS.
Steel segment revenues from sales of iron ore products rose by
32.3%. This was due to a 26.3% increase in sales price, accompanied
by 6.0% rise in sales volumes. In 2018, around 70.2% of EVRAZ' iron
ore consumption in steelmaking came from the Group's own
operations, compared with 66.5% a year earlier.
Steel segment revenues from sales of vanadium products surged by
111.4%. A 124.6% was attributed to an upswing in sales prices,
which was partly offset by a 13.2% decrease in sales volumes.
Reduction in sales volumes was caused by a low-base effect from
higher oxide availability in 2017 due to the conversion of slag
stocks at third parties; production downtime due to the launch of
blast furnace no. 7 at EVRAZ NTMK and maintenance at EVRAZ
Vanady-Tula; and the fact that no Nitrovan sales from EVRAZ Vametco
were being included in the 2018 reporting following its
deconsolidation in May 2017.
Steel segment cost of revenue
Steel segment cost of revenues
2018 2017
----------------------------------- ----------------------------------- ----------
US$ million % of segment revenue US$ million % of segment revenue Change, %
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Cost of revenues 5,613 63.2 5,795 74.8 (3.1)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Raw materials 2,494 28.1 2,756 35.6 (9.5)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Iron ore 369 4.2 485 6.3 (24.0)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Coking coal 1,209 13.6 1,356 17.5 (10.8)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Scrap 514 5.8 466 6.0 10.3
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Other raw materials 402 4.5 449 5.8 (10.4)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Auxiliary materials 343 3.9 334 4.3 2.7
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Services 284 3.2 269 3.5 5.6
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Transportation 409 4.6 449 5.8 (8.9)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Staff costs 491 5.5 530 6.8 (7.4)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Depreciation 222 2.5 241 3.1 (7.9)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Energy 429 4.8 474 6.1 (9.5)
-------------------------- ------------ --------------------- ------------ --------------------- ----------
Other* 941 10.6 742 9.6 26.8
-------------------------- ------------ --------------------- ------------ --------------------- ----------
* Includes goods for resale, changes in work in progress and
finished goods, taxes in cost of revenues, semi-finished products,
allowance for inventory and inter-segment unrealised profit.
In 2018, the Steel segment's cost of revenues decreased by 3.1%
year-on-year. The main reasons for the reduction were:
-- The cost of raw materials fell by 9.5%, mainly due to reduced
costs of iron ore (down 24.0%), coking coal (down 10.8%) and other
raw materials (down 10.5%) following to the disposal of EVRAZ DMZ
in March 2018 and Yuzhkoks in December 2017, as well as the effect
of the weaker rouble. This was partly offset by higher cost of
scrap (up 10.3%) due to higher prices.
-- Transportation costs dropped by 8.9%, primarily due to the
rouble's depreciation and the disposal of EVRAZ Sukha Balka in June
2017.
-- Staff costs were down 7.4%, largely because of the effect
that rouble weakness had on costs and due to the disposal of EVRAZ
DMZ.
-- Depreciation and depletion costs decreased by 7.9%, primarily due to rouble's depreciation.
-- Energy costs were lower due to the weaker rouble and disposal of EVRAZ DMZ.
Other costs increased, primarily due to changes in goods for
resale and semi-finished products.
Steel segment gross profit
The Steel segment's gross profit surged by 67.7% year-on-year,
driven primarily by higher vanadium and steel prices, accompanied
by the effect that rouble weakening had on costs. This was partly
offset by a rise in prices for purchased raw materials
(particularly for scrap).
Steel, North America segment
Sales review
Steel, North America segment revenues by product
2018 2017
-------------------------------------- --------------------------------------- ----------
% of total segment % of total segment
US$ million revenue US$ million revenue Change, %
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Steel products 2,430 94.1 1,774 95.2 37.0
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Semi-finished products 39 1.5 4 0.2 n/a
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Construction
products(*) 247 9.6 159 8.5 55.3
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Railway products(**) 380 14.7 309 16.6 23.0
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Flat-rolled
products(***) 597 23.1 427 22.9 39.8
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Tubular products(****) 1,167 45.2 875 47.0 33.4
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Other revenues(*****) 153 5.9 90 4.8 70.0
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
Total 2,583 100.0 1,864 100.0 38.6
------------------------- ------------ ------------------------ ------------ ------------------------- ----------
* Includes beams, rebar and structural tubing.
** Includes rails and wheels.
*** Includes commodity plate, specialty plate and other
flat-rolled products.
**** Includes large-diameter line pipes, ERW pipes and casing,
seamless pipes, casing and tubing and other products.
***** Includes scrap and services.
The segment's revenues from the sale of steel products grew
significantly due to rises of 22.6% in prices and 14.4% in volumes.
This was mainly attributable to the improved productivity at the
spiral mill and greater demand on the tubular market, mostly for
line pipe and large-diameter pipe, as market demand continued to
develop through 1H 2018 in support of oil price recovery and the
recent approval of new pipelines in Canada and the US
pipelines.
Construction products revenues increased by 55.3% due to an
upswing in prices of 36.2% and sales volumes of 19.1% as a result
of improved demand for concrete reinforcing bar and wire rod
products produced at EVRAZ Pueblo and Section 232 tariffs. End use
demand improved with increased spending in the energy,
infrastructure and non-residential construction markets. The
Section 232 tariffs implemented in mid-2018 led to fewer rebar and
wire rod imports to the US market, further increasing demand for
domestic producers.
Railway product revenues increased by 23.0%, driven by growth in
volumes of 12.0%, 11.0% increase was attributed to surges in
average prices.
Revenues from at-rolled products climbed due to an uptick in
prices of 28.9% and in sales volumes of 10.9% primarily at EVRAZ
Portland. The increase was primarily related to commodity plate
sales in the view of the improved demand for US-produced materials
as a result of Section 232 tariffs introduction, which lowered
imported tonnes, and greater demand from wind tower business.
Revenues from tubular product sales grew by 33.4% year-on-year
due to increases of 9.9% in volumes and 23.5% in prices. This was
driven by stronger sales of line pipe due to favourable market
conditions and large-diameter pipe due to new orders achieved
during 2017-18, as well as improved productivity at the spiral
mill.
Steel, North America segment cost of revenue
Steel North America segment cost of revenues
2018 2017
----------------------------------- ----------------------------------- ----------
US$ million % of segment revenue US$ million % of segment revenue Change, %
------------------------- ------------ --------------------- ------------ --------------------- ----------
Cost of revenues 2,215 85.8 1,656 88.8 33.8
------------------------- ------------ --------------------- ------------ --------------------- ----------
Raw materials 746 28.9 645 34.6 15.7
------------------------- ------------ --------------------- ------------ --------------------- ----------
Semi-finished products 569 22.0 303 16.3 87.8
------------------------- ------------ --------------------- ------------ --------------------- ----------
Auxiliary materials 246 9.5 148 7.9 66.2
------------------------- ------------ --------------------- ------------ --------------------- ----------
Services 195 7.5 124 6.7 57.3
------------------------- ------------ --------------------- ------------ --------------------- ----------
Staff costs 286 11.1 254 13.6 12.6
------------------------- ------------ --------------------- ------------ --------------------- ----------
Depreciation 101 3.9 95 5.1 6.3
------------------------- ------------ --------------------- ------------ --------------------- ----------
Energy 119 4.6 111 6.0 7.2
------------------------- ------------ --------------------- ------------ --------------------- ----------
Other* (47) (1.7) (24) (1.4) 100
------------------------- ------------ --------------------- ------------ --------------------- ----------
* Primarily includes transportation, goods for resale, certain
taxes, changes in work in progress and fixed goods, and allowances
for inventories.
In 2018, the Steel, North America segment's cost of revenues
surged by 33.8% year-on-year. The main drivers were:
-- Cost of semi-finished products was up 87.8% due to higher
prices for purchased materials, steel import duties and increased
sales volumes of steel products.
-- Auxiliary material costs climbed by 66.2%, driven by
increased costs of electrodes and higher production volumes of
crude steel and finished products.
-- Service costs went up 57.3%, driven by greater volumes of
coating, outside repair, finishing and other services, in line with
the year-on-year rise in sales volumes.
-- Raw material costs rose by 15.7%, primarily because of higher
prices of scrap and ferroalloys, accompanied by greater consumption
due to increased sales volumes of tubular products amid the market
recovery seen in the reporting period.
-- Other costs were down for the reporting period, primarily due
to changes in work in progress and finished goods.
Steel, North America segment gross profit
The Steel, North America segment's gross profit totalled US$368
million for 2018, up from US$208 million a year earlier. While the
growth was primarily caused by an increase in revenues due to
improving market conditions, it was partly offset by higher prices
for purchased semi-finished products, auxiliary materials and
scrap.
Coal segment
Sales review
Coal segment revenues by product
2018 2017
---------------------------------------- ----------------------------------------- ----------
% of total segment
US$ million revenue US$ million % of total segment revenue Change, %
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
External sales
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Coal products 1,506 64.4 1,266 57.2 19.0
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Coking coal 145 6.2 174 7.9 (16.7)
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Coal concentrate 1,358 58.1 1,092 49.3 24.4
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Steam coal 3 0.1 - - n/a
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Inter-segment sales
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Coal products 776 33.2 811 36.6 (4.3)
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Coking coal 120 5.1 75 3.4 60.0
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Coal concentrate 656 28.1 736 33.2 (10.9)
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Other revenues 55 2.4 137 6.2 (59.9)
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
Total 2,337 100.0 2,214 100.0 5.6
--------------------- ------------ -------------------------- ------------ --------------------------- ----------
The segment's overall revenues increased amid rising sales
prices as global market trends remained favourable. This was driven
by supply disruptions caused by port restrictions in Australia and
by unfavourable weather conditions in the US.
Revenues from internal sales of coal products were down, mainly
because of an 8.4% decline in prices and partly offset by a 4.1%
increase in sales volumes.
Revenues from external sales of coal products rose due to growth
of 13.8% in prices and 5.2% in sales volumes, which was driven by
higher coal production volumes and stable, positive demand on the
domestic and export markets, including higher shipments to the
Southeast Asia and European countries.
In 2018, the Coal segment's sales to the Steel segment amounted
to US$779 million (33.3% of total sales), compared with US$830
million (37.5%) a year earlier.
During the reporting period, roughly 68.8% of EVRAZ' coking coal
consumption in steelmaking came from the Group's own operations,
compared with 50.0% in 2017.
Coal segment cost of revenue
Coal segment cost of revenue
2018 2017
----------------------------------- ----------------------------------- ----------
US$ million % of segment revenue US$ million % of segment revenue Change, %
------------------------- ------------ --------------------- ------------ --------------------- ----------
Cost of revenue 1,042 44.6 973 43.9 7.1
------------------------- ------------ --------------------- ------------ --------------------- ----------
Auxiliary materials 136 5.8 124 5.6 9.7
------------------------- ------------ --------------------- ------------ --------------------- ----------
Services 129 5.5 114 5.1 13.2
------------------------- ------------ --------------------- ------------ --------------------- ----------
Transportation 319 13.6 259 11.7 23.2
------------------------- ------------ --------------------- ------------ --------------------- ----------
Staff costs 193 8.3 198 8.9 (2.5)
------------------------- ------------ --------------------- ------------ --------------------- ----------
Depreciation/depletion 155 6.6 162 7.3 (4.3)
------------------------- ------------ --------------------- ------------ --------------------- ----------
Energy 49 2.1 49 2.2 -
------------------------- ------------ --------------------- ------------ --------------------- ----------
Other* 61 2.7 67 3.1 (9.0)
------------------------- ------------ --------------------- ------------ --------------------- ----------
* Primarily includes goods for resale, certain taxes, changes in
work in progress and finished goods, allowance for inventory, raw
materials and inter-segment unrealised profit.
The main drivers of the year-on-year increase in the Coal
segment's cost of revenues were as follows:
-- The consumption of auxiliary materials rose by 9.7% due to
larger resale volumes of third-party materials, greater consumption
of spare parts due to wear of the main process equipment and
increased longwall repositioning. This was accompanied by growth in
prices for auxiliary materials (diesel fuel and petrol), partly
offset by the depreciation of the rouble.
-- Costs for services climbed by 13.2% due to greater open-pit
mining works and higher costs for overburden removal at the
Raspadskaya-Koksovaya mine, the growth of service costs for
redevelopment and a longwall move at Yuzhkuzbassugol's mines.
-- Transportation costs grew by 23.2% in the reporting period,
primarily due to the higher share of exports in the sales mix,
which had a negative impact on trading companies, as well as an
increase in tariffs for the supply of wagons.
-- Staff costs were lower, primarily due to the disposal of
EVRAZ Nakhodka Trade Sea Port and rouble weakening. This was partly
offset by wage indexation, forming and using internal drift crews,
and additional contributions to the pension fund for underground
workers from 2018.
-- Depreciation and depletion costs fell, primarily due to the weaker Russian currency.
-- Other costs decreased in the reporting period, mainly due to
changes in work in progress and finished goods, as well as the
effect of the rouble's depreciation. This was partly offset by
higher taxes after the mineral tax rate was increased and due to
greater production volumes.
Coal segment gross profit
The Coal segment's gross profit for 2018 amounted to US$1,295
million, up from US$1,241 million a year earlier, primarily due to
higher sales prices.
APPIX
Key RISKS AND UNCERTAINTIES
EVRAZ is exposed to numerous risks and uncertainties that exist
in its business that may affect its ability to execute its strategy
effectively in 2019 and could cause the actual results to differ
materially from expected and historical results.
The Directors consider that the principal risks and
uncertainties as summarised below and detailed in the EVRAZ plc
2018 Annual Report on pages 34 to 37, copies of which are available
at http://www.evraz.com/investors/annual_reports/, are relevant in
2019 and the mitigating actions described are appropriate.
Principal risks:
Risk Mitigating/ risk management actions
Global economic This is an external risk that is mostly
factors, industry outside the Group's control; however, it
conditions and is partly mitigated by exploring new market
cyclicality opportunities, focusing on expanding the
share of value-added products, further downscaling
inefficient assets, suspending production
in low-growth regions, further reducing
and managing the cost base with the objective
of being among the sector's lowest-cost
producers, and balance sheet/ gearing improvement.
-------------------------------------------------------------
Product competition Expand product portfolio and penetrate new
geographic and product markets.
Develop and improve loyalty and customer
focus programmes and initiatives.
Quality improvement initiatives.
Focus on expanding the share of value-added
products.
-------------------------------------------------------------
Cost effectiveness For both the mining and steelmaking operations,
the Group is implementing cost-reduction
projects to increase asset competitiveness.
Focused investment policy aimed at reducing
and managing the cost base.
Further expansion and control of the Group's
Russian steel distribution network.
Development of high value-added products.
EVRAZ Business System transformation projects
focused on increasing efficiency and effectiveness.
-------------------------------------------------------------
Compliance with Ongoing control over regulatory compliance,
trade regulations monitoring of regulatory changes and development
and of necessary controls.
sanctions regimes Ongoing engagement with governments, coordination
and cooperation with regulatory authorities.
While the Group's internal compliance controls
address the associated risks, the general
uncertainty in the area increases the management's
focus on this risk.
-------------------------------------------------------------
Functional currency EVRAZ works to reduce the amount of intergroup
devaluation loans denominated in Russian roubles to
limit the possible devaluation effect on
its consolidated net income.
-------------------------------------------------------------
HSE: environmental Environmental risks matrix is monitored
on a regular basis. Respective mitigation
activity is developed and performed in response
to the risks.
Implementation of air emissions and water
use reduction programmes at plants.
Waste management improvement programmes.
Most of EVRAZ operations are certified under
ISO 14001 and the Group continues to work
towards bringing the remaining plants to
ISO 14001 requirements. EVRAZ is currently
compliant with REACH requirements.
Participation in development of GHG emissions
regulation in Russia. Reduction in GHG emissions
as a positive side-effect of energy efficiency
projects.
-------------------------------------------------------------
HSE: health, safety Management KPIs place significant emphasis
on safety performance and the standardisation
of critical safety programmes.
Implementing an energy isolation programme.
Further development of a programme of behaviour
safety observations which drives a more
proactive approach to preventing injuries
and incidents.
A series of health and safety initiatives
related to underground mining.
Maintenance and repair modernisation programmes,
downtime management system.
Further development of occupational safety
risk assessment methodology.
Analysis of effectiveness of corrective
measures.
-------------------------------------------------------------
Potential government While these risks are mostly outside the
action Group's control, EVRAZ and its executive
teams are members of various national industry
bodies.
As a result, they contribute to the development
of such bodies and, when appropriate, participate
in relevant discussions with political and
regulatory authorities.
Procedures have been implemented and will
be further developed to ensure that sanction
requirements are complied with across the
Group's operations.
-------------------------------------------------------------
Business interruption The Group has defined and established disaster
recovery procedures that are subject to
regular review.
Business interruptions in mining mainly
relate to production safety. Measures to
mitigate these risks include methane monitoring
and degassing systems, timely mining equipment
maintenance, and employee safety training.
Detailed incident cause analysis is performed
in order to develop and implement preventative
actions.
Records of minor interruptions are reviewed
to identify any more significant underlying
issues.
-------------------------------------------------------------
Cybersecurity and Further development of a cybersecurity protection
IT system, focused on:
infrastructure -- isolation and protection of industrial
failure networks;
-- antivirus software systems update;
-- upgrade and expansion of backup systems;
-- implementation of incident monitoring
systems;
-- and other measures.
-------------------------------------------------------------
EVRAZ monitors these risks and actively pursues strategies to
mitigate them on an ongoing basis.
DIVIDS
Interim dividend
In consideration of EVRAZ robust performance in 2018, EVRAZ
Board of Directors has announced an interim dividend. On 27
February 2019, the Board of Directors voted to disburse a total of
US$577.34 million, or US$0.40 per share. The record date is 8 March
2019 and payment date is 29 March 2019.
The interim dividend will be paid in US Dollars, unless a
shareholder elects to receive dividends in UK pounds sterling or
Euros. The last date for submitting a Currency Election will be 11
March 2019. All conversions will take place on or around 12 March
2019.
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the directors whose names and functions are listed on
pages 100-103 of the Annual report confirm that to the best of
their knowledge:
-- the consolidated financial statements of EVRAZ plc, prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken as
a whole (the 'Group');
-- the management report required by DTR 4.1.8R includes a fair
review of the development and performance of the business and the
position of the Company and the Group, together with a description
of the principal risks and uncertainties that they face.
By order of the Board
Alexander Frolov
Chief Executive Officer
EVRAZ plc
27 February 2019
EVRAZ plc
Consolidated Statement of Operations
(in millions of US dollars, except for per share
information)
Year ended 31 December
Notes 2018 2017 2016
Continuing operations
Revenue
Sale of goods 3 $ 12,525 $ 10,520 $ 7,477
Rendering of services 3 311 307 236
--------- --------- ---------
12,836 10,827 7,713
Cost of revenue 7 (8,011) (7,485) (5,521)
Gross profit 4,825 3,342 2,192
Selling and distribution costs 7 (1,013) (717) (623)
General and administrative expenses 7 (546) (540) (469)
Social and social infrastructure
maintenance expenses (27) (31) (23)
Loss on disposal of property,
plant and equipment (11) (4) (22)
Impairment of assets 6 (30) 12 (465)
Foreign exchange gains/(losses),
net 361 (54) (48)
Other operating income 24 39 22
Other operating expenses 7 (55) (61) (101)
--------- --------- ---------
Profit from operations 3,528 1,986 463
Interest income 7 18 14 10
Interest expense 7 (359) (437) (481)
Share of profits/(losses) of joint
ventures and associates 11 9 11 (23)
Gain/(loss) on financial assets
and liabilities, net 7 13 (57) (9)
Gain/(loss) on disposal groups
classified as held for sale, net 12 (10) (360) -
Other non-operating gains/(losses),
net 7 2 (2) (52)
Profit/(loss) before tax 3,201 1,155 (92)
Income tax benefit/(expense) 8 (731) (396) (96)
--------- --------- ---------
Net profit/(loss) $ 2,470 $ 759 $ (188)
========= ========= =========
Attributable to:
Equity holders of the parent entity $ 2,406 $ 699 $ (215)
Non-controlling interests 64 60 27
--------- --------- ---------
$ 2,470 $ 759 $ (188)
========= ========= =========
Earnings/(losses) per share for
profit/(loss) attributable to
equity holders of the parent entity,
US dollars:
Basic 20 $ 1.67 $ 0.49 $ (0.15)
Diluted 20 $ 1.65 $ 0.48 $ (0.15)
Here and after in the press-release the note numbers refer to
notes in the Annual Report and Accounts.
EVRAZ plc
Consolidated Statement of Comprehensive Income
(in millions of US dollars)
Year ended 31 December
Notes 2018 2017 2016
Net profit/(loss) $ 2,470 $ 759 $ (188)
Other comprehensive income/(loss)
Other comprehensive income to
be reclassified to profit or
loss in subsequent periods
Exchange differences on translation
of foreign operations into presentation
currency (1,120) 266 543
Exchange differences recycled
to profit or loss on disposal
of subsidiaries 4,12 63 747 -
Net gains/(losses) on cash flow
hedges 25 (3) 9 -
(1,060) 1,022 543
Effect of translation to presentation
currency of the Group's joint
ventures and associates 11 (13) 4 13
(13) 4 13
Items not to be reclassified
to profit or loss in subsequent
periods
Net gains/(losses) on equity
instruments at fair value through
other comprehensive income* 13 59 30 -
Gains/(losses) on re-measurement
of net defined benefit liability 23 28 26 11
Income tax effect 8 (6) (15) -
-------- -------- --------
22 11 11
Total other comprehensive income/(loss) (992) 1,067 567
-------- -------- --------
Total comprehensive income/(loss),
net of tax $ 1,478 $ 1,826 $ 379
======== ======== ========
Attributable to:
Equity holders of the parent
entity $ 1,441 $ 1,762 $ 341
Non-controlling interests 37 64 38
-------- -------- --------
$ 1,478 $ 1,826 $ 379
======== ======== ========
*In connection with the adoption of IFRS 9 (Note 2) net
gains/(losses) on available-for-sale financial assets, which were
previously presented as reclassified to profit or loss in
subsequent periods, were transferred to net gains/(losses) on
equity instruments at fair value through other comprehensive income
within Items not to be reclassified to profit or loss in subsequent
periods.
EVRAZ plc
Consolidated Statement of Financial Position
(in millions of US dollars)
31 December
Notes 2018 2017 2016
------------ ------------- ------------
Assets
Non-current assets
Property, plant and equipment 9 $ 4,202 $ 4,933 $ 4,652
Intangible assets other than goodwill 10 206 259 297
Goodwill 5 864 917 880
Investments in joint ventures and
associates 11 74 79 64
Deferred income tax assets 8 92 173 156
Other non-current financial assets 13 91 151 91
Other non-current assets 13 44 39 45
------------ ------------- ------------
5,573 6,551 6,185
Current assets
Inventories 14 1,474 1,198 984
Trade and other receivables 15 835 731 502
Prepayments 113 89 60
Loans receivable 29 11 13
Receivables from related parties 16 11 12 8
Income tax receivable 35 50 43
Other taxes recoverable 17 201 225 192
Other current financial assets 18 35 47 33
Cash and cash equivalents 19 1,067 1,466 1,157
------------ ------------- ------------
3,800 3,829 2,992
Assets of disposal groups classified
as held for sale 12 - - 27
------------ ------------- ------------
3,800 3,829 3,019
------------ ------------- ------------
Total assets $ 9,373 $ 10,380 $ 9,204
============ ============= ============
Equity and liabilities
Equity
Equity attributable to equity holders
of the parent entity
Issued capital 20 $ 75 $ 1,507 $ 1,507
Treasury shares 20 (196) (231) (270)
Additional paid-in capital 2,480 2,500 2,517
Revaluation surplus 110 111 112
Unrealised gains and losses 13,25 6 39 -
Accumulated profits 3,026 635 415
Translation difference (3,820) (2,777) (3,790)
------------ ------------- ------------
1,681 1,784 491
Non-controlling interests 32 257 242 186
------------ ------------- ------------
1,938 2,026 677
Non-current liabilities
Long-term loans 22 4,186 5,243 5,502
Deferred income tax liabilities 8 258 328 348
Employee benefits 23 226 284 317
Provisions 24 222 269 205
Other long-term liabilities 25 38 54 94
Amounts payable under put options
for shares in subsidiaries 4 - 61 -
------------ ------------- ------------
4,930 6,239 6,466
Current liabilities
Trade and other payables 26 1,216 1,128 935
Contract liabilities 320 272 266
Short-term loans and current portion
of long-term loans 22 377 148 392
Payables to related parties 16 122 256 226
Income tax payable 104 67 39
Other taxes payable 27 266 212 169
Provisions 24 35 32 26
Amounts payable under put options
for shares in subsidiaries 4 65 - -
2,505 2,115 2,053
Liabilities directly associated
with disposal groups classified
as held for sale 12 - - 8
------------ ------------- ------------
2,505 2,115 2,061
------------ ------------- ------------
Total equity and liabilities $ 9,373 $ 10,380 $ 9,204
============ ============= ============
.
EVRAZ plc
Consolidated Statement of Cash Flows
(in millions of US dollars)
Year ended 31 December
2018 2017 2016
Cash flows from operating activities
Net profit/(loss) $ 2,470 $ 759 $ (188)
Adjustments to reconcile net profit/(loss)
to net cash flows from operating activities:
Deferred income tax (benefit)/expense
(Note 8) 48 (89) (87)
Depreciation, depletion and amortisation
(Note 7) 542 561 521
Loss on disposal of property, plant
and equipment 11 4 22
Impairment of assets 30 (12) 465
Foreign exchange (gains)/losses, net (361) 54 48
Interest income (18) (14) (10)
Interest expense 359 437 481
Share of (profits)/losses of associates
and joint ventures (9) (11) 23
(Gain)/loss on financial assets and
liabilities, net (13) 57 9
(Gain)/loss on disposal groups classified
as held for sale, net 10 360 -
Other non-operating (gains)/losses,
net (2) 2 52
Allowance for expected credit losses (1) 10 1
Changes in provisions, employee benefits
and other long-term assets and liabilities (16) (26) (7)
Expense arising from equity-settled
awards (Note 21) 15 17 16
Other (2) 2 (3)
--------- ------ --------
3,063 2,111 1,343
Changes in working capital:
Inventories (482) (199) (17)
Trade and other receivables (128) (201) (38)
Prepayments (48) (27) (1)
Receivables from/payables to related
parties (58) 24 136
Taxes recoverable (24) (32) (32)
Other assets - (2) (3)
Trade and other payables 108 150 40
Contract liabilities 63 19 20
Taxes payable 148 123 62
Other liabilities (9) (9) (7)
Net cash flows from operating activities 2,633 1,957 1,503
Cash flows from investing activities
Issuance of loans receivable to related
parties (1) (2) (1)
Issuance of loans receivable (1) (2) -
Proceeds from repayment of loans receivable,
including interest 2 4 2
Purchases of subsidiaries, net of cash
acquired (Note 4) - (5) -
Proceeds from sale of other investments
(Note 13) 92 - -
Restricted deposits at banks in respect
of investing activities - (1) 1
Short-term deposits at banks, including
interest 11 7 4
Purchases of property, plant and equipment
and intangible assets (521) (595) (382)
Proceeds from disposal of property,
plant and equipment 4 15 7
Proceeds from sale of disposal groups
classified as held for sale, net of
transaction costs (Note 12) 52 412 27
Dividends received 6 1 1
Other investing activities, net (22) (1) 1
----- ----- -----
Net cash flows used in investing activities (378) (167) (340)
Continued on the next page
EVRAZ plc
Consolidated Statement of Cash Flows (continued)
(in millions of US dollars)
Year ended 31 December
2018 2017 2016
Cash flows from financing activities
Purchases of non-controlling interests
(Note 4) $ (24) $ - $ -
Contributions of non-controlling shareholders
to the Group's subsidiaries - 2 13
Payments for investments on deferred
terms (Note 11) (11) (11) (8)
Dividends paid by the parent entity
to its shareholders (Note 20) (1,556) (430) -
Dividends paid by the Group's subsidiaries
to non-controlling shareholders (1) - -
Proceeds from bank loans and notes 1,412 2,441 1,301
Repayment of bank loans and notes, including
interest (2,459) (3,344) (2,428)
Net proceeds from/(repayment of) bank
overdrafts and credit lines, including
interest - (139) (5)
Payments under covenants reset - - (4)
Restricted deposits at banks in respect
of financing activities 12 (13) -
Realised gains/(losses) on derivatives
not designated as hedging instruments
(Note 25) 11 2 (250)
Realised gains/(losses) on hedging instruments
(Note 25) 11 14 14
Payments under finance leases, including
interest (1) (2) (1)
Other financing activities, net - 1 (1)
Net cash flows used in financing activities (2,606) (1,479) (1,369)
Effect of foreign exchange rate changes
on cash and cash equivalents (48) (2) (10)
Net increase/(decrease) in cash and
cash equivalents (399) 309 (216)
Cash and cash equivalents at the beginning
of the year 1,466 1,157 1,375
----------- ----------- -----------
Decrease/(increase) in cash of disposal
groups classified as assets held for
sale (Note 12) - - (2)
=========== =========== ===========
Cash and cash equivalents at the end
of the year $ 1,067 $ 1,466 $ 1,157
=========== =========== ===========
Supplementary cash flow information:
Cash flows during the year:
Interest paid $ (320) $ (405) $ (413)
Interest received 9 8 6
Income taxes paid by the Group (623) (427) (149)
EVRAZ plc
Consolidated Statement of Changes in Equity
(in millions of US dollars)
Attributable to equity holders of the parent entity
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Additional Unrealised
Issued Treasury paid-in Revaluation gains Accumulated Translation Non-controlling Total
capital shares capital surplus and losses profits difference Total interests equity
------------------------ ------------------------ ----------------------- -------------------- --------------------- -------------------------- -------------------------- ---------------------- -------------------- ------------------------
At 31 December
2017 $ 1,507 $ (231) $ 2,500 $ 111 $ 39 $ 635 $ (2,777) $ 1,784 $ 242 $ 2,026
Net profit - - - - - 2,406 - 2,406 64 2,470
Other
comprehensive
income/(loss) - - - - 56 22 (1,043) (965) (27) (992)
Transfer of
realised gains
on sold equity
instruments
to accumulated
profits
(Note 13) - - - - (89) 89 - - - -
Reclassification
of revaluation
surplus to
accumulated
profits in
respect of the
disposed items of
property,
plant and
equipment - - - (1) - 1 - - - -
Reclassification
of additional
paid-in capital
in respect
of the disposed
subsidiaries - - (35) - - 35 - - - -
Total
comprehensive
income/(loss)
for the period - - (35) (1) (33) 2,553 (1,043) 1,441 37 1,478
Reduction in par
value
of shares (Note
20) (1,432) - - - - 1,432 - - - -
Acquisition of
non-controlling
interests in
subsidiaries
(Note 4) - - - - - (3) - (3) (21) (24)
Transfer of
treasury shares
to participants
of the
Incentive Plans
(Notes
20 and 21) - 35 - - - (35) - - - -
Share-based
payments (Note
21) - - 15 - - - - 15 - 15
Dividends declared
by the
parent entity to
its shareholders
(Note 20) - - - - - (1,556) - (1,556) - (1,556)
Dividends declared
by the
Group's
subsidiaries to
non-controlling
shareholders - - - - - - - - (1) (1)
At 31 December
2018 $ 75 $ (196) $ 2,480 $ 110 $ 6 $ 3,026 $ (3,820) $ 1,681 $ 257 $ 1,938
======================== ======================== ======================= ==================== ===================== ========================== ========================== ====================== ==================== ========================
EVRAZ plc
Consolidated Statement of Changes in Equity (continued)
(in millions of US dollars)
Attributable to equity holders of the parent entity
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Additional Unrealised
Issued Treasury paid-in Revaluation gains Accumulated Translation Non-controlling Total
capital shares capital surplus and losses profits difference Total interests equity
------------------------ ------------------------ ----------------------- -------------------- --------------------- ------------------------ -------------------------- ---------------------- -------------------- ------------------------
At 31 December
2016 $ 1,507 $ (270) $ 2,517 $ 112 $ - $ 415 $ (3,790) $ 491 $ 186 $ 677
Net profit - - - - - 699 - 699 60 759
Other
comprehensive
income/(loss) - - - - 39 11 1,013 1,063 4 1,067
Reclassification
of revaluation
surplus to
accumulated
profits in
respect of the
disposed items of
property,
plant and
equipment - - - (1) - 1 - - - -
Reclassification
of additional
paid-in capital
in respect
of the disposed
subsidiaries - - (34) - - 34 - - - -
Total
comprehensive
income/(loss)
for the period - - (34) (1) 39 745 1,013 1,762 64 1,826
Derecognition of
non-controlling
interests on sale
of subsidiaries
(Note 12) - - - - - - - - (6) (6)
Derecognition of
non-controlling
interests under
put options
(Note 4) - - - - - (56) - (56) (4) (60)
Contribution of a
non-controlling
shareholder to
share capital
of the Group's
subsidiary - - - - - - - - 2 2
Transfer of
treasury shares
to participants
of the
Incentive Plans
(Notes
20 and 21) - 39 - - - (39) - - - -
Share-based
payments (Note
21) - - 17 - - - - 17 - 17
Dividends declared
by the
parent entity to
its shareholders
(Note 20) - - - - - (430) - (430) - (430)
At 31 December
2017 $ 1,507 $ (231) $ 2,500 $ 111 $ 39 $ 635 $ (2,777) $ 1,784 $ 242 $ 2,026
======================== ======================== ======================= ==================== ===================== ======================== ========================== ====================== ==================== ========================
EVRAZ plc
Consolidated Statement of Changes in Equity (continued)
(in millions of US dollars)
Attributable to equity holders of the parent entity
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Additional Unrealised
Issued Treasury paid-in Revaluation gains Accumulated Translation Non-controlling Total
capital shares capital surplus and losses profits difference Total interests equity
At 31 December
2015 $ 1,507 $ (305) $ 2,501 $ 124 $ - $ 644 $ (4,335) $ 136 $ 133 $ 269
Net loss - - - - - (215) - (215) 27 (188)
Other
comprehensive
income/(loss) - - - - - 11 545 556 11 567
Reclassification
of revaluation
surplus to
accumulated
profits in
respect of the
disposed items
of property,
plant and
equipment - - - (12) - 12 - - - -
Total
comprehensive
income/(loss)
for the period - - - (12) - (192) 545 341 38 379
Acquisition of
non-controlling
interests in
subsidiaries - - - - - (2) - (2) 2 -
Contribution of a
non-controlling
shareholder to
share capital
of the Group's
subsidiary - - - - - - - - 13 13
Transfer of
treasury shares
to participants
of the
Incentive Plans
(Notes
20 and 21) - 35 - - - (35) - - - -
Share-based
payments (Note
21) - - 16 - - - - 16 - 16
At 31 December
2016 $ 1,507 $ (270) $ 2,517 $ 112 $ - $ 415 $ (3,790) $ 491 $ 186 $ 677
======================== ======================== ======================= ==================== ==================== ======================== ========================== ==================== ==================== ======================
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London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
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END
FR SEAESWFUSESE
(END) Dow Jones Newswires
February 28, 2019 02:01 ET (07:01 GMT)
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