One of Russia's biggest steel producers suffers collapse in profits and demand

Severstal, one of Russia's largest metallurgical companies, which accounts for 14% of the country's total steel output, has continued to report worsening financial results.

Source: The Moscow Times, an independent Amsterdam-based news outlet, citing the company's latest financial report

Details: The company's financial report shows that in the third quarter Severstal, owned by billionaire Alexei Mordashov, earned three times less profit than a year earlier – 12.99 billion roubles (US$160.3 million). Over the first nine months of the year, profits have fallen by 57% to 49.74 billion roubles (US$614.34 million).

Severstal's revenue has dropped by 18% quarter-on-quarter and by 14% over the nine-month period, while EBITDA has fallen by 45% and 40% respectively.

The company's free cash flow – the difference between cash inflows and outflows – has turned negative, reaching minus 21.24 billion roubles (US$262.34 million) between January and September. In other words, Severstal has been losing money at an average rate of 2.3 billion roubles (US$28.4 million) per month.

Its cash reserves have almost halved since the beginning of the year, falling from 128.5 billion roubles (US$1.59 billion) to 72.2 billion (US$891.74 million).

Quote from Severstal CEO Aleksandr Shevelev: "Crisis trends in Russian and global metallurgy have continued to intensify."

More details: Shevelev noted that domestic demand for metal in Russia is falling faster, now down by 15%.

Background: Russian steelmakers have recorded a sharp deterioration in financial performance due to declining demand, high lending rates and sanctions restricting exports.

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