The situation on steel product markets in 2019 was rather challenging. H2 2019 saw prices fall below the cycle average.
“The dive was so deep, we estimate that 80% of global HRC production was loss-making. The margins in the sector were further pressured by increasing prices for raw materials”, NLMK Group CFO Shamil Kurmashov commented.
Amid the low phase of the market NLMK carried out major overhauls at its blast furnace and BOF operations, resulting in a 3% YoY reduction in steel sales in 2019.
NLMK Group revenue in 2019 decreased by 12%. EBITDA was $2.6 billion, down by 29%. The major factor to drive down financial performance was the decline in prices for steel products. EBITDA margin decreased by 6%, to 24%.
“In 2019, we saw the first gains from Strategy 2022. The total structural effect on EBITDA from operational efficiency programs and investment program projects exceeded $200 million per annum (relative to the 2018 cost base)”, he noted.
Net debt/EBITDA ratio reached 0.7х. The growth was associated with the active implementation phase of the investment program as part of Strategy 2022, and a higher dividend payout in line with NLMK’s new Dividend Policy adopted in March 2019.
Free cash flow totaled $1.5 billion. A positive free cash flow and maintaining the net debt/EBITDA ratio below 1.0x enabled NLMK management to recommend the company’s Board of Directors to pay out Q4 2019 dividends in the amount of $500 million. (NLMK/Ukrainian metal)