August 9, 2018 / 11:04 AM / 9 months ago

UPDATE 1-Evraz reports soaring core earnings in first half of 2018

(Adds context, quotes, analyst comment)

By Polina Ivanova

MOSCOW, Aug 9 (Reuters) - Russia’s Evraz, the country’s second-biggest steelmaker, said on Thursday its core earnings rose by nearly two-thirds in the first half of the year due to stronger prices and an efficiency drive.

That helped its shares hit their highest in two months, though analysts said the company remains vulnerable to potential trade disruptions after the United States imposed tariffs on steel earlier this year.

Evraz on Thursday reported earnings before interest, taxation, depreciation and amortisation (EBITDA) of $1.906 billion in the first half of 2018, up 65.5 percent from $1.152 billion a year earlier.

That beat an earnings forecast of $1.79 billion delivered by a Reuters poll of 10 analysts.

Evraz, co-owned by Chelsea football club owner Roman Abramovich, is the latest Russian steelmaker to report booming results this year. Earnings reports from NLMK, MMK and Severstal all beat analysts’ expectations in recent weeks.

Global steel prices have remained buoyant despite a ramp-up in trade restrictions worldwide which has sunk other metals prices.

Off the back of its results, Evraz said its board had recommended a second 2018 interim dividend of $0.40 per share.

“The group delivered a solid financial performance, supported by the ongoing improvement in the global steel market environment,” Evraz chief executive Alexander Frolov said.

Evraz shares were up 0.5 percent on Thursday.

The company’s revenue rose 24.2 percent year-on-year to $6.343 billion, the company said, while net profit rose to $1.145 billion from $86 million.

The steep rise in net profit was due to stronger steel and vanadium prices, and the absence of significant non-cash items which depressed profit in January-June last year, VTB equities analyst Boris Sinitsyn said.

The second half of 2018 could see a decline in market prices, Evraz said.

“However, the group’s overall financial performance should remain solid, driven by its pipeline of internal improvements and supported by a generally strong pricing environment relative to the average levels seen in the last three years,” the company said.

The threat of a new round of U.S. sanctions against Russia sent the rouble to a two-year low on Thursday, while the Russian stock market was hit with a sell-off the previous day.

Speaking on a phone call with journalists, Frolov warned against rushing to conclusions.

“The final documents are very important, because the nuances are crucial,” he said.

Though watching events around sanctioned Russian aluminium producer Rusal, Evraz has not drawn any significant conclusions as a result, he said.

“We are monitoring all events related to this very carefully,” he said.

However, analysts at ATON described Evraz as the most sensitive among its Russian peers to the potential negative effects of a global trade war.

“Evraz has a global business model, with significant assets in the United States and in Canada. Consequently, increasing restrictions on trade could negatively impact their operations,” ATON’s Andrey Lobazov said, adding that the company’s net debt to EBITDA ratio, though low, was also still higher than that of its peers. (Additional reporting by Denis Pinchuk; editing by David Evans)

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