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September 8, 2009

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Russian steel giant's sales pick up slightly

RUSSIA'S largest steel maker, Severstal, yesterday posted a US$290 million loss in the second quarter, a sharp fall from profits last year but better than the previous quarter, as the slump in global demand seemed to bottom out and showed some signs of picking up.

The second-quarter loss compared with a US$1.5 billion profit a year earlier but was far less than the US$654 million loss in the January-March period. Sales in April-June were US$2.8 billion, a marginal improvement against the previous quarter.

In the second quarter, Severstal recorded a loss before interest, taxation, depreciation and amortisation of US$5 million - better than the US$156 million a quarter earlier.

The London-listed steel maker said in a statement that it does not propose a dividend payment for the quarter or expect one for the full year.

Severstal's results reflect how hard the global steel market has been hit by the global downturn. Russia's largest steel makers have suffered from a slump in construction and car production in the wake of the financial crisis.

The company's main shareholder and chief executive, Alexei Mordashov, described the second quarter as a "turning point for steel market" as prices hit their lowest levels in May.

Severstal said in the statement that production volumes and prices started to improve in early July "indicating tentative improvements in market conditions."

Mordashov warned that growth remains fragile.

"A sustained recovery will depend on renewed global economic growth and discipline in production and pricing across the industry," he said.

Alexei Morozov, a metals analyst with the UBS investment bank in Moscow, said investors will be looking to the second half of year for clearer signs of a recovery in markets.


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