Evraz pays out second interim dividend as cash surges

The FTSE 100 group increased revenue 24.2% to $6.3bn in the first six months of the year. Revenues were up 12% from Russia to $2.3bn, 29% in the Americas to $1.4bn, 35% to $1.3bn from Asia and 32% in Europe to $703m.

Consolidated earnings before interest, tax, depreciation and amortisation jumped 66% to $1.9bn, as the EBITDA margin swelled to 30% from 22.6%.

The EBITDA improvement mainly reflected higher steel product prices, lower expenses in US dollar terms as costs benefited from a weakening of the Russian rouble, as well as the impact of cost-cutting initiatives on efficiency. This was partly offset by an increase in prices for raw materials, including scrap, electrodes and ferroalloys.

Operating profits more than doubled to $1.7bn mostly due to higher revenue and a $147m gain from currency swings, as cash costs of steel and raw materials increased in Russia. Profit before tax soared to $1.5bn from $294m and earnings per share to $0.77 from $0.04.

Free cash flow surged to $661m and, after Evraz paid out dividends of around $617m to shareholders during the first half, a second interim dividend was declared on Thursday of $0.40 per share, or $577.3m in total, which the board said reflected its confidence in the group's financial position and outlook.

Some 62.74% of these dividends will make their way to a trio of owners, led by Chelsea FC owner Abramovic, who owns a 30.5% stake via the Cyrpus listed Lanebrook vehicle that includes a 21% stake for company chairman Alexander Abramov and 10.5% for chief executive Alexander Frolov. Abramov, who set up a metals exporting business that was precursor to Evraz in 1992, just after the dissolution of the USSR, and Frolov sold a 40% stake in Evraz to Abramovich in 2006 for more than $3bn.

Frolov said on Thursday that it was a "solid" financial performance, helped by the ongoing improvement in the global steel market environment, with the strong cash performance allowing the second interim dividend and a reduction in net debt to $3.9bn, which brought the net-debt-to-EBITDA ratio to 1.1x, "well below our target".

He said the recommendation of a second interim dividend was in line with the previously announced payout policy.

"We are proud of our strong ongoing performance and will remain focused on delivering further improvements. In the second half of the year, despite possible price correction, we expect market conditions to remain positive overall."

In the second half Evraz anticipates that market prices could decline, particularly international coal and steel benchmarks. Management's confidence in the overall financial performance remaining "solid" comes from a pipeline of internal improvements and a pricing environment that is still seen as being generally strong relative to the average levels seen in the last three years.

During the half, Russia was hit by economic sanctions by the UK and US, mainly the expulsion of suspected Russian spies as part of a response to the March novichok poisoning in Salisbury against former agent Sergei Skripal and his daughter.

On Wednesday, the US State Department said new sanctions would come into effect later in August and be followed by much sweeping and "more draconian" measures.