Bloomberg News

Evraz Rises in London on Plan to Pay First Dividends in 3 Years

October 12, 2011

Oct. 12 (Bloomberg) -- Evraz Group SA, the Russian steelmaker part-owned by billionaire Roman Abramovich, rose the most in three weeks in London trading after saying it will pay its first dividends in three years.

The largest Russian steelmaker’s depositary receipts climbed as much as 6.9 percent to $16.74, the highest level since Sept. 28, and were 6.4 percent higher at 10:08 a.m.

Evraz today posted first-half profit that missed analyst estimates as one-time payments to cut debt reduced earnings. Net income rose 48 percent from a year earlier to $258 million, it said in a statement. Without the charges, profit would have been $494 million, below the average estimate of $597 million by 12 analysts in a Bloomberg News survey. Revenue climbed 31 percent to $8.38 billion.

Evraz cut net debt by 15 percent to $6 billion by June 30 from levels at the end of last year. The company will make an interim payment of $89 million and give out special dividends totalling $402 million, Evraz said. The distributions, the first since 2008, account for 99.4 percent of profit excluding one- time items.

The steelmaker has struggled to reduce $9 billion in debt, the result of making foreign aquisitions before steel demand plunged in late 2008 in the wake of the global financial crisis. Evraz reduced the ratio of debt to earnings before interest, tax, depreciation and amortization to below 3 in the first half, enabling it to make distributions to shareholders.

Evraz plans to invest as much as $1.2 billion next year, matching 2011 spending, Chief Executive Officer Alexander Frolov told reporters on a conference call today. The company is betting on faster expansion at its mines than in its steel business, he said.

Timir Ore

Evraz is in final talks with OAO Alrosa on entering the Timir iron ore project in east Siberia, Frolov said. The steelmaker also plans to start developing a new iron ore deposit at its Kachkanar unit to help expand the Nizhny Tagil mill’s capacity by 1 million tons to 1.5 million tons of steel a year, according to today’s statement.

Expansion has started at its Yerunakovskaya VIII coal mine in Kuzbass, Evraz said.

The company will decide on the future of its 40 percent stake in OAO Raspadskaya in late 2012 or early 2013, once the coal producer restores output after blasts at its flagship mine in May 2010 and subsequent underground fires, Frolov said.

Evraz’s plans for a primary listing in London are “at an advanced stage,” while alternatives including the U.S. are under consideration, Chief Financial Officer Giacomo Baizini said on the call.

Evraz is seeing strong global steel demand, and its order book is full through the end of 2011, Frolov said.

--Editors: John Viljoen, Alex Devine

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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