Severstal

Severstal is one of the world's largest vertically integrated steel and mining companies with assets in Russia, Latvia, Ukraine, Poland, Italy and Liberia. The company employs about 61 thousand people. The company's shares are listed on the Russian MICEX-RTS trading platform, global depositary receipts are presented on the London Stock Exchange.

Illustration: armtorg.ru

Severstal's parent company, Severstal, is the legal successor of Cherepovets Steel Mill, which was founded in 1955. On September 24, 1993, in accordance with the decree of the President of the Russian Federation, the state-owned enterprise Cherepovets Metallurgical Plant was transformed into an open-type joint-stock company Severstal in the process of privatization.

Severstal includes a steel division (steel production in Russia, the USA, Italy, France, Great Britain), a resource division (mining enterprises managed by Severstal Resources), as well as service and sales units.

Information Technology at Severstal

Main article: Information Technology in Severstal

Competitors

In the domestic market, Severstal traditionally competes with NLMK, MMK and Ural Steel (part of JSC HC Metalloinvest) in the automotive, pipe, mechanical engineering and sheet metal sectors.

In the construction, metalware and mechanical engineering segments, the company competes with MMK, ZSMK, Mechel and NSMMZ (NLMK-grade) in long-range distribution.

At export, Severstal's main competitors are the same enterprises, as well as enterprises in Ukraine.

History and Performance Indicators

2024

Severstal will pay 8.73 billion rubles for antimonopoly activities in the metal rental market

In January 2024, the Moscow Arbitration Court recognized the imposition of a fine of 8.73 billion rubles against Severstal for violating antimonopoly laws.

In February 2022, the FAS Russia recognized Severstal as violating antitrust laws. According to the regulator, the company, which occupies a dominant position together with PJSC NLMK and PJSC MMK, set and maintained a monopolistically high price for hot-rolled flat steel in the domestic market. The increase in prices for hot-rolled steel was faster than the increase in cost. Sales in the domestic market did not increase, while profit tripled compared to 2019-2020.

Severstal will pay 8.73 billion rubles for violation of antitrust laws

Severstal has also issued an order aimed at ensuring competition. And as part of the administrative proceedings of the company, a fine of 8,725,448,647,5 rubles was imposed. Severstal did not agree with the acts of service and tried to appeal them in court, but the Moscow Arbitration Court supported the position of the department.

In June 2022, the FAS promised "not to plug another nail" in the form of fines and take into account the difficulties that metallurgists faced due to Western sanctions. But according to the law, if a case on monopoly high prices was initiated, the FAS is obliged to impose a fine, said the head of the department Maxim Shaskolsky.

Severstal called the FAS decision "unfair, contrary to the legislation and principles of the free market."

The dangerous precedent created by the FAS actually jeopardizes the functioning of normal mechanisms of the market economy in Russia and discriminates against domestic producers who are global players in relation to international competitors, the company said (quoted by Interfax).[1]

Severstal bought Ventall Steel Solutions

On January 10, 2024, Severstal announced the purchase of two assets of the Ventall holding in the Kaluga and Tula regions. We are talking about the acquisition of Ventall Steel Solutions. Read more here.

2023

Revenue growth by 7% to RUB 728.31 bln

In 2023, Severstal earned 728.31 billion rubles of revenue (according to international financial reporting standards, IFRS), which is 7% more than a year earlier. Net profit in comparison with the same periods rose by 79% and reached 193.87 billion rubles. The Russian steel manufacturer published such data on February 2, 2024.

The company's cash and equivalents grew by the end of 2023 to 373.57 billion rubles from 186.22 billion rubles a year earlier, which, as noted in Severstal's message, was the result of the introduction of anti-crisis measures in the form of a temporary refusal to pay dividends to form a sufficient liquidity cushion in response to sanctions pressure on the company. The total debt of Severstal increased to RUB 163.1 billion (+ 61% in annual terms) due to the currency revaluation of the dollar part of the debt and partial restructuring of the portfolio from public to bank debt.

source = Severstal

Strong financial results are underpinned by a very low debt burden. Sustainable financial position allows us to continue all planned development programs, including environmental and social investments. In addition, financial results allow us to return to dividend payments again, - said the general director of the company Alexander Shevelev.

According to the results of 2023, Severstal's free cash flow decreased by 23%, to 119.97 billion rubles. The outflow of funds for replenishment of working capital amounted to 9.08 billion rubles, which is mainly due to an increase in reserves against the background of the formation of a reserve of slabs before the shutdown of blast furnace No. 5 for major repairs. Capital expenditures of Severstal in 2023 amounted to 72.63 billion rubles, which is 7% more than investments a year ago.^[2]

Sale of European assets to Italian steel manufacturer

On April 5, 2023, it became known that the Main Competition Directorate of the European Commission (EC) approved a deal to buy Severstal assets in Latvia and Poland by the manufacturer of steel products Marcegaglia from Italy.

On March 10, 2023, the European Commission received a notice that Marcegaglia Carbon Steel plans to acquire SIA Severstal Distribution (SSD, Latvia) from Severstal together with its two subsidiaries Severstal Distribution Sp. and Severstal Distribution LLC.

Severstal sold its assets in Latvia and Poland to the Italian Marcegaglia

The European Commission decided not to object to the declared operation, the EC said in a statement.

It is specified that Marcegaglia buys the structures of the Severstal mining and metallurgical company in Latvia SIA Severstal Distribution together with its two subsidiaries - Severstal Distribution Sp. (Poland) and Severstal Distribution LLC (Ukraine). The financial terms of the agreement are not disclosed.

SIA Severstal Distribution was founded in 1992 (until the end of 2014 it was called AS "Seversta lat"). The company, located in Latvia, supplies steel products to the countries of Northern, Central and Eastern Europe. The company owns the largest service metal center in the region for the processing of flat rolled steel and a factory for the production of welded pipes.

Marcegaglia is an Italian industrial group working in the steel sector. The company specializes in steel trading and processing - mainly producing products from carbon steel, as well as to a lesser extent flat and long steel products made of stainless steel.

Marcegaglia produces 6.2 million tons of finished steel products per year from steel semi-finished products supplied from third parties (i.e. is a rolling unit). The company has 29 factories and 60 sales offices worldwide. According to its own data, it is the world's largest independent steel rolling machine, the largest manufacturer of stainless steel welded pipes in the world and the leader in the production of welded pipes in Europe.^[3]

2022

Reduction in steel production by 8% to 10.97 million tons

In early February 2023, Severstal published its operating results for the previous year. According to the results of this 12-month period of steel production, the company decreased by 8% compared to the volume of one year ago and amounted to 10.69 million tons. The production of cast iron during this time remained practically unchanged and reached 10.97 million tons.

Steel production decreased mainly due to the repair of the converter in the second quarter of 2022 and a decrease in the load of electric arc furnaces due to an increase in scrap prices in the third quarter of 2022. Steel sales decreased by 2%, to 10.92 million tons, and sales of semi-finished products increased to 1.57 million tons (+ 11% on an annualized basis). Sales of commercial rolled products remained unchanged and amounted to 4.59 million tons due to the reorientation of sales to the Russian market and the relatively high demand for steel in Russia. Sales of high value-added products (HVA) decreased to 4.76 million tonnes (-6%) mainly due to lower sales of high value-added hot-rolled products, galvanized steel and metalware. The total share of GVA products in the group's portfolio was 44% (-2 pp by 2021).

Iron ore sales to third parties decreased by 46% year-on-year to 2.34 million tonnes due to the redistribution of sales to Cherepovets Steel Mill.

2022 was a major test for our company. The ban on the export of steel and raw materials to European markets, disruption of supply chains, growing competition in local markets, a slowdown in the global economy and a decrease in steel prices and the volatility of the ruble exchange rate required quick and proactive decision-making, willingness to take risks and act in difficult-to-predict conditions and cost cuts, - said Alexander Shevelev, CEO of Severstal Management JSC.[4]

Stocks and balances of $400 million seized in Europe

By November 2022, Severstal had $400 million in Europe - inventory and account balances were seized during a special operation by Russia in Ukraine.

Withdrawal from the capital of Sintez-PKZ

At the end of March 2022, it became known about the withdrawal of Severstal from the capital of the Synthesis group. According to the Unified State Register of Legal Entities, the new owner of Sintez-PKZ LLC was registered Cherepovets with LLC. Consulting Investment, "owned by Alexei Kirp. here More.

Stopping exports to Europe

In early March 2022, it became known that Severstal was banned from exporting to Europe due to sanctions against the main shareholder of the company, Alexei Mordashov, during a special operation by Russia in Ukraine.

"Due to some problems in cooperation with European clients, Severstal redirects commodity flows to alternative global markets. Taking into account that Severstal has the lowest production costs in the world, we are confident that this will preserve capacity utilization. The financial position of the company is strong, and the level of debt is low, - said in a statement to Severstal.

Severstal banned exports to Europe due to sanctions against Mordashov

As Natalya Kasatkina, a lawyer for S&K Vertical, explained to Kommersant, EU sanctions provide for a ban on any economic interaction both with a person subject to restrictions and with companies under his control

The news about the refusal of European customers from purchases is negative for Severstal, analysts at BCS Express say. In their opinion, the company will be forced to reorient supplies to Russia and Asia, but this may put pressure on profitability. In addition, due to the longer supply cycle, reorientation to Asia may cause additional outflows into working capital, which is negative for the FCF indicator and dividends, according to BCS Express.

One of Kommersant's interlocutors suggested that, most likely, Alexei Mordashov would transfer control in his assets to other persons: for example, before he had already transferred shares in Nordgold and TUI to his sons, but in December 2021 he returned the packages back.

However, Pavel Ganin, partner of the law firm a.t.Legal, in a conversation with the publication, expressed doubts that the transfer of the company to his sons would save it from sanctions, since due to family ties, payments to Severstal can also be determined as being used in the interests of a sanctioned person.^[5]

2021

Revenue growth by 69%, to $11.64 billion, profit - $4.08 billion

At the end of 2021, Severstal raised $11.64 billion, which is 69% more than a year earlier. The company's net profit grew even more - by 301%, to $4.08 billion. Such data were released by the Russian steel and mining group in February 2022.

At the end of 2021, Severstal produced 11.6 million tons of steel, which is 3% more than a year earlier. According to the company, the positive dynamics is associated with the launch of the EDP-1 in April 2021 and the end of modernization in converter production. Iron production increased by 15%, to 10.96 million tons. Consolidated sales of steel products decreased by 6%, to 11.1 million tons. According to Severstal and Worldsteel analysts, demand for steel in the world and in Russia increased by 4.7% and 4.3%, respectively, in 2021.

Sales of metal products in 2021 at the company increased to 11.1 million tons (+ 6%). Sales of semi-finished products tripled to 1.41 million. Sales of hot-rolled steel (including thick sheet) decreased by 9% to 4.8 million tons, mainly due to the modernization of heating furnaces.

In 2021, coal sales decreased by 44% compared to 2020 (to 0.83 million tons) due to a decrease in the sale of thermal coal against the background of the decision to completely stop the production of such brands, starting from the first quarter of 2022. Sales of iron ore raw materials decreased by 28% to 4.33 million tons due to the redirection of sales to own assets after the launch of the DP-3 at the end of 2020. Sales of pellets to third parties decreased by 27% on an annualized basis, to 4.25 million tons.

Severstal's total debt by the end of 2021 amounted to $1.82 billion (a decrease of 30% compared to the end of 2020), and net debt - almost $1.4 billion. The company's accounts accumulated cash and cash equivalents in the amount of $418 million.^[6]

Sale of Vorkutaugol for 15 billion rubles

On December 2, 2021, Severstal announced the sale of Vorkutaugol JSC to Russian Energy (co-owners - billionaire Roman Trotsenko (70%) and company CEO Andrei Tyasto (30%)) for 15 billion rubles. It is planned to close the transaction in the first quarter of 2022 after obtaining appropriate permits from the Federal Antimonopoly Service of the Russian Federation, as well as fulfilling a number of other conditions. The buyer plans to finance the transaction at the expense of own and borrowed funds. Read more here.

Redemption of 24.5% of the shares of the VRS Towers project from Rusnano

On September 13, 2021, Rusnano JSC announced the sale of its share in the enterprise Towers VRS LLC, which implies the exit from the project for the production of towers for wind power plants (WEU) in Taganrog upon reaching the planned economic indicators. 24.5% of the shares were bought by PAO Severstal. Read more here.

2019: Investment plans

In accordance with previous statements, in 2019 the company's investment program Severstal"" will amount to 95.7 billion rubles and will focus on the key areas of the company's updated strategy, which was announced at Investor Day in November 2018: excellent client experience, cost leadership and new opportunities. All these aspects will be aimed at further growth of the company's financial results, as well as creating maximum value and return on investment to shareholders.

Investments in Severstal Russian Steel in 2019 will amount to about 64.8 billion rubles, of which 48.6 billion rubles will be allocated for development projects. The largest investment projects of the division are the construction of blast furnace No. 3 (the expected launch date is 2021), coke battery No. 11 (to replace coke batteries No. 8 and No. 9, the launch is scheduled for 2022) and the development of flat steel production in order to improve the range. The new high-tech technical solution will allow Severstal to increase the share of high-value-added products, innovative goods and solutions, as well as improve service and reduce the burden on the environment.

In 2019, Severstal Russian Steel will invest 16.2 billion rubles to maintain its existing facilities, improve its industrial safety, occupational safety and environmental projects.

Resource enterprises. Investments in the company's resource enterprises in 2019 will amount to about 30.9 billion rubles, of which 18.9 billion rubles are investments in production development. One of the most important areas for the company's investments in 2019 will be the development of production at the Yakovlevsky mine, where about 8.3 billion rubles will be allocated. This will increase the company's production volumes to 5 million tons of ore.

Among other significant projects of resource enterprises are the construction of a conveyor for transporting rock in the Central quarry, the reconstruction of the boiler house for the subsequent transition to peat at Karelsky Okatysh JSC, as well as improving the quality of pellets through the use of slaked news. The company will also continue to invest projects aimed at restoring production volumes at Vorkutaugol.

In 2019, Severstal will continue to pay close attention to safety and the environment and will increase investment in these areas. About 1.1 billion rubles will be allocated for measures to improve labor safety (almost half of these funds will be invested in the corresponding projects at Vorkutaugol), and 827 million rubles in environmental projects.

Another topic relevant to Severstal is information technology. To continue the implementation of initiatives in the field of digital and IT, which are aimed at improving business processes and client services, the company will allocate 5.7 billion rubles.

Alexey Kulichenko, Deputy General Director for Finance and Economics, Severstal Management JSC noted that Severstal, as a global leader in efficiency, is committed to further growth and sees opportunities for this. Most of our investment program (about 75%) is focused on financing development projects in order to achieve a significant advantage in the cost of basic products, improving the range and services, as well as increasing the volume of steel smelting. At the same time, Severstal will continue to adhere to the "smart capex" (at least 20% of IRR for all our projects). In order to maximize value creation for investors, during the intensive stage of the investment program, Severstal, which will stabilize to historical levels by 2022, will use the "normalized free cash flow" indicator to calculate dividends. This means that investments exceeding the "base" level of previous years of $800 million will be excluded from the calculation of the dividend base. "

The announced investment amounts are indicative and can be adjusted as a result of a change in the ruble exchange rate. At the same time, most of the company's investment program is denominated in rubles.

2018

In 2018, the company's revenue amounted to $8.580 million, EBITDA reached $3.142 million. In 2018, 12.0 million tons of steel were produced.

2013

According to Severstal's annual report, in 2013 Severstal fulfilled its current target for the production of marketable steel products and sold 9.9 million tonnes of steel products to consumers, which is 1% higher than in 2012.

For all types of recycled products, there was an increase in production volumes compared to last year: for coke by 10.5%, agglomerate by 1.7%, cast iron by 4.2% and steel by 0.8%, which is due to an increase in demand for metal products. The increase in coke production is due to the commissioning of coke battery No. 7 after reconstruction.

Revenue from sales of marketable products decreased by RUB 10.7 billion or 5% in 2013 compared to 2012 due to lower prices both in the domestic market and in the external market. The company's total revenue for 2013 amounted to $13.3 billion. The net profit of the company (according to RAS) in 2013 decreased by 6.6 billion rubles compared to the indicator for 2012 against the background of a general deterioration in the market situation, as well as due to a decrease in income from participation in other organizations.

Distribution of domestic sales revenue by consumer industry in 2012 and 2013

Источник-nversia.ru

2010: Revenue $13.5 billion, EBITDA - $3.2 billion

In 2010, the company's revenue amounted to $13.573 million, EBITDA reached $3.263 million, 14.7 million tons of steel were produced.

2008: Revenue of $22.4 billion EBITDA - $5.4 billion

In 2008, Severstal produced 19.2 million tonnes of steel and recorded revenues of $22.4 billion. The company's EBITDA in 2008 amounted to $5.4 billion, revenue per share is equal to $2.2.

Notes