Severstal reported Q2&H1 financial results

H1 2014 revenue was 7.1% lower y/y at $6,260 million (H1 2013: $6,736 million) as Russian Steel and Resources divisions experienced lower realized prices and sales volumes;

EBITDA increased 25.4% y/y to $1,140 million (H1 2013: $909 million) driven by an ongoing focus on operational enhancements, improved performance at Severstal International and lower raw materials input costs at our steel operations;

H1 2014 net loss2 was $761 million (H1 2013: Breakeven) includes expected non-cash losses preliminary estimated at $1,066 million on the disposals5 of Severstal Dearborn LLC, Severstal Columbus LLC, PBS Coals Ltd. and a negative FX loss of $121 million (H1 2013: FX loss of $241 million). Excluding these non-cash items, Severstal would have posted a net profit of $426 million (H1 2013: $241 million);

Strong improvement in free cash flow to $722 million (H1 2013: $133 million), in line with strategic focus;

Capex3 of $475 million, 15.5% lower y/y (H1 2013: $562 million), representing 48.7% share of 2014 target capex of $976 million

Q2 2014 vs. Q1 2014 ANALYSIS

Group revenue increased 8.2% q/q to $3,253 million (Q1 2014: $3,007 million) driven by a strong seasonal rebound in steel product sales volumes as well as a moderate recovery in steel prices;
Group EBITDA increased 13.5% q/q to $606 million (Q1 2014: $534 million) and Group EBITDA margin grew 0.8 ppts q/q to 18.6% (Q1 2014: 17.8%). This margin represents the highest level since Q3 2011 and primarily reflects a combination of ongoing operational enhancements, a recovery in domestic steel prices and lower raw materials input costs at our steel operations;
Net loss2 of $661 million (Q1 2014 loss of $100 million) includes expected non-cash losses preliminary estimated at $1,066 million on the disposals5 of Severstal Dearborn LLC, Severstal Columbus LLC, PBS Coals Ltd. and a positive FX gain of $199 million. Excluding these non-cash items, Severstal would have posted a net profit of $206 million (Q1 2014: net profit of $221 million excluding non-cash items);
Excellent progress against strategic focus of enhancing free cash flow which increased a substantial 105.9% q/q to $486 million (Q1 2014: $236 million);

Capex of $211 million1, 20.1% lower q/q (Q1 2014: $264 million) reflecting our flexible approach to investments as well as the completion of the Balakovo Mini-Mill project;

Recommended dividend payment of 2.14 roubles per share (approximately $0.06) for the 6 months ended 30 June 2014.