We study the key results of Severstal for 2021 year

Изучаем ключевые результаты «Северстали» за 2021 год

We study the key results of Severstal for 2021 year

Severstal (MCX: CHMF) one of the five leading Russian steel producers with a full production cycle - from the extraction and processing of mining raw materials to the production and sale of high-quality steel products in the domestic and foreign markets.

18 Severstal issued a press release in February, посвященный основным операционным и финансовым результатам в 2021 year. The company showed strong momentum, increased revenue by 69%, and net profit - four times due to the growth in sales volumes of steel products against the background of high average selling prices. В результате совет директоров рекомендовал рекордные квартальные дивиденды по итогам четвертого квартала 2021 of the year, that exceeded free cash flow.

I propose to evaluate the dynamics of key indicators, to understand, how improving market conditions and rising average selling prices affected the business and whether the company was able to recover from the effects of the pandemic.

Disclaimer: if we write, that something has risen or fallen by X% or X times, then by default we mean a comparison with the report data for the same period last year, unless otherwise stated.

Position in the industry

Severstal derives its main income from the sale of steel products and semi-finished products in Russia and abroad. At the same time, the largest producer and consumer of steel in the world is China, and the global market is sensitive to that, what is happening with supply and demand in the Middle Kingdom.

IN 2021 году Китай столкнулся с кризисом на рынке недвижимости: the country's largest developer was on the verge of bankruptcy, а общая задолженность строительных компаний во второй половине 2021 года превысила 5 trillion dollars. The construction sector is one of the main consumers of steel, and the crisis hit demand hard, what, in its turn, affected by quotes worldwide.

A decrease in demand for steel was observed last year on the part of automakers due to a shortage of semiconductors., which are necessary in the production of automobiles.

На фоне всех событий со второй половины 2021 года цены на сталь корректируются от пиковых значений, although still remain at high levels.

In the Russian market, the state puts pressure on steel producers due to rising prices and even suspected price collusion between the largest producers.. With 1 августа до конца 2021 года на рынке действовали временные пошлины на экспорт металлов из России. А в феврале 2022 года ФАС признала виновными в нарушении антимонопольного законодательства трех производителей стали: NLMK, MMK and Severstal. Максимальный совокупный штраф для компаний может достичь 60 billion rubles.

Production results

Cast iron. Объемы производства по итогам 2021 years have grown by 15% и достигли рекордных 10,96 млн тонн благодаря запуску доменной печи номер 3 in December 2020 of the year.

Steel. Production grew only by 3% от низкой базы 2020 года и достигло 11,65 million tons. Компания пока не вернулась на рекордные объемы производства 2018 года из-за продажи в 2019 году сортового мини-завода «Балаково» мощностью около 1 млн тонн продукции в год.

Sales of steel products. Total volume increased by 6% от низкой базы 2020 year to 11,1 million tons, of them 5,09 млн тонн пришлись на продукцию с высокой добавленной стоимости.

«Северсталь» увеличила продажи полуфабрикатов в три раза до 1,41 млн тонн по причине снижения продаж готовой продукции в сегменте горячекатаного проката из-за проведения плановых ремонтных работ. Modernization of heating furnaces in the workshop led to a reduction in the sales volume of hot-rolled steel at 9% to 4,8 million tons.

At the same time, sales of raw materials to external buyers decreased., including due to an increase in domestic consumption. Iron ore sales volumes decreased by 28% to 4,33 million tons, pellets - on 27% to 4,25 million tons, coal - on 44% to 0,83 million tons. The decrease in coal sales is explained by the fact, that the company reduces the production of thermal coal as part of a strategy to reduce harmful emissions. Выпуск угля полностью прекратится уже в первом квартале 2022 года после продажи угольного актива «Воркутауголь» за 15 billion rubles.

Operating indicators of Severstal, million tons

Iron productionSteel productionSales of steel products
20179,15811,65110,919
20189,14612,03911,176
20199,48611,84711,154
20209,54111,31410,736
202110,95711,64711,100

Share of products with high added value

201746%
201846%
201945%
202047%
202146%

Financial results

Выручка «Северстали» по итогам 2021 года выросла на 69% to record 11,64 млрд долларов благодаря высоким ценам на сталь. Отчасти это связано с низкой базой кризисного 2020 of the year, when the company's revenues fell to a multi-year low.

The company's revenues increased significantly for all types of products:

  • hot rolled sheet (+70% to 4,06 billion dollars);
  • galvanized sheet (+100% to 1,19 billion dollars);
  • cold rolled sheet (+113% to 1,05 billion dollars);
  • semi-finished products (+368% to 0,86 billion dollars);
  • hardware products (+50% to 0,76 billion dollars).

In Russian, European and CIS markets had to 92% of all proceeds from the company's sales.

Sales revenue structure by region

Russia52,6%
Europe34,2%
CIS4,9%
North America3,0%
Near East2,8%
Other2,5%

Thanks to the vertically integrated business structure and high self-sufficiency in raw materials and materials, the cost of sales increased only by 24% to 4,92 billion dollars, that is, significantly less, How did the company's earnings grow?. Administrative and general business expenses increased by 11% to 0,35 billion dollars. Besides, business has increased tax deductions, not related to income tax, in 11 once before 0,31 млрд долларов США из-за экспортных пошлин с 1 august 2021 of the year.

В результате операционная прибыль «Северстали» выросла почти в три раза до 5,39 billion dollars, which is almost double the company's previous record, поставленный в 2018 year.

Чистые финансовые расходы остались на уровне 2020 года и составили 0,13 billion dollars, а убыток по курсовым разницам сократился с 0,36 billion to 0,06 млрд долларов на фоне стабильного курса российского рубля. При этом на фоне роста доходов от реализации у бизнеса выросли налоговые расходы более чем в три раза до 0,95 billion dollars.

As a result, чистая прибыль «Северстали» достигла исторического максимума по итогам 2021 года и увеличилась в четыре раза до 4,08 billion dollars.

Financial indicators of Severstal, billion dollars

RevenueOperating profitNet profit
20177,852,161,36
20188,582,712,05
20198,162,331,77
20206,871,931,02
202111,645,394,08

Investments

With 2019 года ежегодные капитальные расходы компании превышают 1 млрд долларов и идут на модернизацию и расширение мощностей, automation of production processes, development of e-commerce and projects in the field of industrial safety and ecology.

Based on the results of 2021 года сумма капитальных затрат сократилась на 13% to 1,16 billion dollars. The company brought the blast furnace number to its design capacity 3, continued construction of the second stage of the coke battery No. 11, launched an arc steelmaking furnace number 1, and also completed modernization in the converter production.

В планах «Северстали» на 2022 год увеличить объем инвестиций на 38% год к году до рекордных 1,6 billion dollars. About 0,88 млрд долларов от этой суммы пойдут на инвестиции в проекты развития, and 0,36 млрд долларов — на поддержание действующих мощностей.

Capital expenditures of Severstal, billion dollars

20170,59
20180,69
20191,22
20201,33
20211,16
20221,60

Debts

Net debt for 12 months decreased by 31% to 1,4 млрд долларов из-за сокращения суммы долгосрочных кредитов и займов с 2 to 1,14 billion dollars. При этом благодаря высоким ценам на сталь компания увеличила показатель EBITDA до рекордных 6 billion dollars. As a result, the level of debt burden by the "net debt" ratio / EBITDA" fell to a minimum of recent years and amounted to 0.23 at the end of the year×.

For Severstal investors, the “net debt / EBITDA" is also important because of this, that the rate of dividend payments is tied to it.

Debt load of Severstal, billion dollars

net debtnet debt / EBITDA
20171,060,41×
20181,230,39×
20191,570,56×
20202,030,84×
20211,40.23×

Dividends

According to the dividend policy of Severstal, free cash flow — the basis for calculating dividends, but the share of dividend payments may vary depending on the level of debt burden at the net debt ratio / EBITDA».

The current level of debt burden will allow you to pay at least 100% from free cash flow. IN 2021 году свободный денежный поток холдинга вырос более чем в четыре раза до 3,54 billion dollars, which is due to the successful price situation in the steel market, снижением капитальных затрат и низкой базой 2020 of the year.

In recent years, the company has paid dividends four times a year for each quarter.. Against the background of strong financial results 18 February 2022 года совет директоров объявил рекордные квартальные дивиденды по итогам четвертого квартала 2021 of the year, which will make up 109,81 P per share. Shareholders will be able to approve them at the general meeting., to be held 20 May 2022 of the year.

Free cash flow of Severstal, billion dollars

20171,39
20181,60
20191,10
20200,84
20213,54

The amount of dividends per share at the end of the year

2017110,05 R
2018160,73 R
2019115,88 R
2020116,40 R
2021326,96 R

What's the bottom line?

Объемы производства и продажи стальной продукции выросли относительно тяжелого для отрасли черной металлургии 2020 of the year, however, they did not exceed the pre-crisis levels of 2018-2019. Nevertheless, thanks to high average selling prices, Severstal received record financial results., reflected a multiple increase in profit and cash flow. And the total dividends for the year also updated historical highs..

Despite all the advantages, it will be difficult for the company to repeat last year's success. The energy crisis in Europe and the difficult situation in the real estate market in China put pressure on the ferrous metallurgy market and steel prices, которые скорректировались во второй половине 2021 of the year. At the end of last year and the beginning of this year, prices for hot-rolled steel in the ports of the Black Sea were at the level of 750 $ per ton, however, by February they had recovered to 900 $ per ton.

In the domestic market, the situation is also difficult. In Russia, the industry is strictly regulated by the state, which strives for stability of prices for products. With 1 January 2022 года правительство увеличило минимальную вывозную ставку налоговых пошлин на лом и отходы черных металлов с 70 to 100 € per ton.

Besides, FAS recognized Severstal, NLMK and MMK guilty of violating antitrust laws. Размер штрафа зависит от выручки за 2020 year, but not more 4% of total annual revenue. IN 2020 году выручка «Северстали» на фоне кризиса упала до многолетнего минимума и составила 6,87 billion dollars. То есть в худшем случае штраф не нанесет серьезного ущерба и составит около 274,8 million dollars.