Steelmaker's earnings leap on increased prices

Evraz Group SA, the steelmaker partly owned by Russian billionaire Roman Abramovich, said full-year profit jumped 56 percent on higher prices.

Net income climbed to $2.14 billion, or $6.05 a global depositary receipt, from $1.38 billion, or $3.92, in the previous year, Luxembourg-registered Evraz said yesterday in a statement. That missed the $2.3 billion median of 11 analyst estimates compiled by Bloomberg. Sales grew 54 percent to $12.8 billion.

Prices for steel used in construction were 45 percent higher on average in 2007, while semi-finished products rose 24 percent, Evraz, Russia's second-largest steelmaker, said in January. It compensated for an 8.2 percent drop in Russian output, because of maintenance at a Siberian blast furnace, by expanding operations outside the country.

"Demand for steel products is growing amid capacity constraints and structurally limited supply in some regions," Chief Executive Officer Alexander Frolov said in the statement. "As a consequence steel products prices are strong."

Evraz GDRs rose $1.70, or 2 percent, to $88 in London trading on Tuesday, valuing the company at $31.2 billion. They have gained 14 percent this year.

Earnings in the first half of 2008 before interest, tax depreciation and amortization will rise to about $3 billion, Evraz said. First-half sales will gain as much as 65 percent.

The company also said it will increase crude-steel output 15 percent to 18.9 million metric tons in 2008. OAO Severstal, Russia's biggest steelmaker, produced 17.5 million tons of steel last year. Evraz forecast coal output at 15.1 million tons, including 10.5 million tons of coking coal used to make steel.

Evraz spent $3.7 billion last year expanding outside Russia and agreed in December to pay as much as $2.2 billion in cash and new shares for assets in the Ukraine, including an iron-ore complex and steelworks.

Portland-based Oregon Steel Mills Inc, which Evraz bought for $2.3 billion last year, and South Africa's Highveld Steel & Vanadium Ltd, contributed 1.4 million tons of crude steel to the company's production. Its overall steel output held at 16.4 million tons.

This year, Evraz agreed to pay SSAB Svenskt Staal AB $4.03 billion for Canadian plate and pipe assets and the US tube business of SSAB's Ipsco unit. On Feb. 18, Evraz made its first acquisition in Asia, agreeing to buy 10 percent of Singapore-based steel trader Delong Holdings Ltd. in a deal that may lead to a S$2.1 billion ($1.5 billion) takeover.

Net debt jumped to $6.28 billion at the end of 2007 from $1.73 billion a year earlier. Evraz plans to spend $1.1 billion on capital investments, including maintenance, this year.

Agencies

(China Daily 04/03/2008 page16)