trending Market Intelligence /marketintelligence/en/news-insights/trending/UNs7ZpFcDKcpDEUG22lxzQ2 content esgSubNav
In This List

Weakening demand hits top Russian steelmaker NLMK's Q3'19 profit


Insight Weekly: Unease roils markets; US likely to slip into recession; firms' cash ratios fall


Insight Weekly: Bank boards lag on gender parity; future of office in doubt; US LNG exports leap


Insight Weekly: Job growth faces hurdles; shale firms sit on cash pile; Africa's lithium future


Insight Weekly: Loan growth picks up; US-China PE deals fall; France faces winter energy crunch

Weakening demand hits top Russian steelmaker NLMK's Q3'19 profit

Furnace renovations hurt Russian steelmaker PJSC Novolipetsk Steel's profit for the third quarter as demand and prices weakened amid a global economic slowdown, the company, known as NLMK, said Oct. 24.

Profit for the period plunged 47% year over year to US$343 million as revenue fell 18% to US$2.58 billion while cost of sales declined to US$1.75 billion from US$1.93 billion. EBITDA was down 36% year over year to US$654 million.

Net debt more than doubled year over year to US$1.74 billion, driven by cash outflows toward dividend payments and higher capital expenditure, which grew to US$316 million from US$183 million.

Sales fell 9% by volume year over year due to blast furnace repairs at NLMK's Lipetsk operations.

Overhauling the blast furnace and basic oxygen furnace operations reduced steel product sales by 6% compared to the previous quarter, according to CFO Shamil Kurmashov. However, the work should enable an additional 1 million tonnes of steel to be produced by 2021.

In North America, which accounted for 17% of revenue in the quarter, U.S. steel consumption fell 2% year over year as demand from the machine-building, automobile and energy sectors ebbed. European demand was flat year over year but fell 0.5% from the previous quarter due to weak automobile and machine-building consumption.

Market prices for flat products dropped between 26% and 35% year over year in the U.S. and 16% to 21% in Europe.

In Russia, steel product prices rose 2% year over year in dollar terms due to seasonal demand and limited supply. The ruble also weakened over the past year.

NLMK's fourth-quarter financials will be materially lower than the third quarter, according to BCS Global Markets. An expected output rise of 5% will not be enough to offset an estimated fall of 20% in average realized prices, the Russian stockbroker said in an Oct. 24 note. BCS has a SELL rating on NLMK with a price target of US$15 per global depositary receipt.

The company's board recommended a dividend of 3.22 rubles per share for the period, equivalent to 50 U.S. cents per global depositary receipt, according to BCS. The previous year's third-quarter dividend amounted to 6.04 rubles per share following a jump in net profit. However, NLMK cut its second-quarter 2019 dividend to 3.68 rubles per share after profit tumbled 29% year over year.

Kurmashov was appointed to the company's management board Oct. 24, NLMK said in a separate release.

As of Oct. 23, US$1 was equivalent to 63.89 Russian rubles.