Company Announcements

Half-year Report

Source: RNS
RNS Number : 6271H
Evraz Plc
05 August 2021
 

EVRAZ plc

UNAUDITED INTERIM FINANCIAL RESULTS FOR H1 2021

5 August 2021 - EVRAZ plc ("EVRAZ" or "the Group"; LSE: EVR) today announces its unaudited interim financial results for the six months ended 30 June 2021 ("the Period").

 

H1 2021 HIGHLIGHTS

•     The Group reported solid free cash flow1 of US$836 million, compared with US$315 million in H1 2020.

•     Consolidated EBITDA1 totalled US$2,082 million, up 94.0% YoY from US$1,073 million in H1 2020. The EBITDA margin1 rose to 33.7% from 21.5% in H1 2020. Supporting factors included higher steel, vanadium and coal product sales prices. Cost-cutting and customer focus initiatives also generated an effect of US$256 million in EBITDA.

•     Total debt1 dropped by US$307 million to US$4,676 million, while net debt1 fell by US$95 million to US$3,261 million.

•     Net profit totalled US$1,212 million, compared with US$513 million in H1 2020.

•     The cash cost of steel and raw materials in Russia was the following:

The cash cost of slabs1 increased to US$283/t from US$210/t in H1 2020

The cash cost of washed coking coal1 increased to US$36/t from US$34/t in H1 2020

The cash cost of iron ore products1 increased to US$40/t from US$38/t in H1 2020

•     An interim dividend for 2021 of US$802.3 million (US$0.55 per share) has been declared, reflecting the Board's confidence in the Group's financial position and outlook.

Financial Highlights

(US$ million)

H1 2021

H1 2020

Change, %

Consolidated revenues

6,178

4,983

24.0

Profit from operations

1,749

891

96.3

Consolidated EBITDA1

2,082

1,073

94.0

Net profit

1,212

513

n/a

Earnings per share, basic (US$)

0.82

0.35

n/a

Net cash flows from operating activities

1,410

781

80.5

Free cash flow1

836

315

n/a

CAPEX1

430

337

27.6

 

30 June 2021

31 December 2020

Change, %

Net debt1

3,261

3,356

(2.8)

Total assets

9,125

8,710

4.8

1 For the definition, see "Definitions of selected alternative performance measures".

                                                                                                                                                                         

 

Commenting on the results, EVRAZ' Chief Executive Officer, Alexander Frolov, said:

"The recovery on the global steel market observed since the second half of 2020 accelerated in the first half of 2021. Activity in steel-consuming industries continued returning to pre-pandemic levels, driving steel prices and demand.

Amid this rebound, EVRAZ achieved EBITDA of US$2.1 billion, up 94% year-on-year and a half-year record for the last decade. Contributing to this were higher steel, vanadium and coal product sales prices, as well as our cost-cutting and productivity improvement initiatives and customer focus efforts, which generated a total effect of US$256 million in EBITDA.

In the reporting period, we continued to implement our main development initiatives. The upgrade of the rail and beam mill at EVRAZ NTMK and construction of new long rail mill at EVRAZ Pueblo projects continued according to schedule and made good progress. Overall CAPEX stood at US$430 million, including US$258 million for development projects.

In addition, we improved our debt position, reducing net debt by US$95 million to US$3,261 million. This brought our ratio of net debt to last twelve months (LTM) EBITDA to 1.0x.Given the positive results in favourable market conditions, the Board of Directors is recommending an interim dividend for 2021 of US$0.55 per share, totalling around US$802.3 million, which is in line with the dividend policy.

EVRAZ' core values are health and safety of its people. Regretfully, I have to report that there were six fatalities on our premises in the first half of 2021. These are tragedies that should not happen. We are making every possible effort to achieve our strategic goal of zero fatalities. The root causes of these fatalities have been thoroughly investigated and corrective measures introduced to mitigate further risks.

As for the demerger of our coal business - we've made further progress here and confirming our intention to complete transaction by the end of the year, subject to receiving all necessary approvals. The details will be announced later in due course.

In the second half of 2021, we expect global markets to remain fairly healthy, despite a possible correction in steel prices."

 

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements", which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of the Group's shares or GDRs, financial risk management and the impact of general business and global economic conditions. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and each of EVRAZ and the Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in EVRAZ's or the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Neither the Group, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document.

 

 

CONFERENCE CALL

A conference call to discuss the results, hosted by Alexander Frolov, CEO, and Nikolay Ivanov, CFO, will be held on Thursday, 5 August 2021, at:

2 pm (London time)

4 pm (Moscow time)

9 am (New York time)

To join the call, please dial:

+44 (0)330 336 9434 or 0800 279 7209

UK

+7 495 646 9190 or 8 10 8002 8675011

Russia

+1 929-477-0402 or 888-254-3590

US


Conference ID: 6980327

To avoid any technical inconvenience, it is recommended that participants dial in 10 minutes before the start of the call.

An audio webcast will be available at the following link (pre-registration needed): https://www.webcast-eqs.com/evraz20210805

The presentation for the call will be available on the Group's website, www.evraz.com, on Thursday, 5 August 2021, at the following link:

https://www.evraz.com/en/investors/reports-and-results/financial-results/

 

 

 

Table of contents

Strategic UPDATE 2021

HEALTH, SAFETY and ENVIRONMENT

HUMAN CAPITAL

CUSTOMER FOCUS

ASSET DEVELOPMENT

EVRAZ BUSINESS SYSTEM

Update on potential demerger of coal assets

Impact of COVID-19

Impact on key markets

Impact on operations

Impact on liquidity, solvency and access to financing

Measures taken to protect the wellbeing and safety of employees and local communities

Market outlook

Financial review

Statement of operations

CAPEX and key projects

Financing and liquidity

Review of operations by Segment

Steel segment

Steel, North America segment

Coal segment

KEY RISKS AND UNCERTAINTIES

DIVIDENDS

DIRECTOR'S RESPONSIBILITY STATEMENT

Definitions of selected alternative performance measures

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Strategic UPDATE 2021

 

EVRAZ' ultimate strategic objective is to maintain its leadership in infrastructure steel products while keeping costs optimised throughout the business. The strategy focuses on five areas: health, safety and the environment (HSE); human capital; customer focus; asset development; and the EVRAZ Business System.

HEALTH, SAFETY and ENVIRONMENT

In the reporting period, EVRAZ regretfully recorded six fatalities. This situation is unacceptable to the Board and management. The Group will continue to do its utmost to achieve its strategic goal of zero fatalities. EVRAZ will put additional efforts into building a stringent safety culture and improve its safety practices at each facility of the Group.

The lost time injury frequency rate (LTIFR) was 1.16x, which is within the target of 1.36x set by the management.

In H1 2021, EVRAZ entered the final stage of its risk management project. Staff training has been completed and the acquired knowledge and tools are now being rolled out across the Group.

In addition, divisional programmes were established to achieve the third stage of the Bradley Curve safety culture (Independent) in the reporting period. The programmes are now being implemented.

Another important milestone was the introduction of various criteria to motivate safe employee behaviour. They are used to determine the quarterly bonus amount and also affect the annual salary review.

In H1 2021, the active promotion of the Hunt for Risk mobile app, which was launched in the summer of 2020, led to continued growth in the number of users. There are currently around 11,000 users. Overall, since its launch, roughly 50,000 risks have been identified. These numbers indicate a high level of employee engagement. During the reporting period, additional tools were developed and implemented to encourage staff to search for new risks. For example, points earned through the app can now be used to pay for mobile phone service.

During the reporting period, the HSE function entered the active phase of its transformation project. Safety management processes will be reviewed with a view to reducing red tape, digitalising the main HSE processes and introducing automation options.

As part of its efforts to prevent the spread of COVID-19, in H1 2021, EVRAZ carried out a vaccination awareness campaign for employees that is still under way. In a short time, the Group was able to mobilise its staff and accelerate the rate of vaccination at its facilities. For detailed information about the impact of the pandemic and EVRAZ' response, see the "Impact of COVID-19" section.

In February 2021, EVRAZ published its 2020 annual report, which included a new set of environmental targets for the period up to 2030 (with 2019 as the baseline year). They cover four aspects: water, waste, atmospheric emissions and greenhouse gas (GHG) indicators. At the Group's steelmaking assets, the goals include reducing Scope 1 and Scope 2 GHG emissions per tonne of steel produced by 20%, reducing atmospheric emissions from steel production by 33%, closing the water supply cycle, as well as recycling 95% of general and metallurgical waste. At the mining assets, they include recycling 50% of mining waste and utilising 75% of the methane released in the degassing process.

During the reporting period, EVRAZ continued to implement initiatives aimed at reducing its environmental impact. EVRAZ NTMK completed a project to eliminate the discharge of wastewater from its coke production. All excess water and storm runoff is now collected in a 15,000 cubic metre retention pond and returned to the production cycle. This project represents an important step towards achieving the goal of creating a fully closed water supply cycle by 2030.

In H1 2021, the Coal segment put into operation four flare units as part of the project to utilise methane that is released during degassing. Two were installed at the Alardinskaya mine and two at the Yerunakovskaya-8 mine.

The Raspadskaya mine launched two new stormwater treatment facilities. Rainwater and snowmelt runoff are now treated and used to reduce dust on haul roads. The existing water treatment facility was upgraded and the new modern module also began operating at the Alardinskaya mine in June 2021.

In addition, the Group signed a cooperation agreement with Gazprom Neft to develop technologies to produce, transport, store and use hydrogen, as well as to reduce carbon dioxide (CO2) emissions.

As part of its efforts to improve biodiversity within its operational footprint, EVRAZ implemented several large tree and shrub planting projects.

HUMAN CAPITAL

EVRAZ understands that its people are the driving force behind its operational improvement efforts. During H1 2021, it continued to implement its existing programmes focused on employee skill sets and engagement and launched several new initiatives in this area.

The Group has started to test its Learning Management System (LMS), which encompasses all types of training and development courses. The aim is to make the learning and development process transparent and accessible for all personnel, from managers to employees. Future plans include switching the 360-degree assessment to the new LMS platform.

During the reporting period, EVRAZ introduced the "Top 3,000" programme, which cascades the existing "Top 1,000" corporate management programme down to the level of shop heads. The "Top 3,000" programme is currently being piloted in the Siberia division with an initial wave of 75 people. One difference in this project is that it uses internal trainers selected from among the Group's employees.

EVRAZ also launched a system for preparing and certifying internal trainers to teach such topics as human capital management and the EVRAZ Business System.

In H1 2021, the third "Top 300" group and the Urals division's first "Top 100" group completed their training.

The Group also continued to work with the educational institutions that are preparing professionals to work in the industry. During the reporting period, employees, schoolchildren and university students took part in the EVRAZ WorldSkills corporate championship.

In addition, the Group continued to roll out its programme to promote healthy lifestyles and healthcare in the Urals division. As part of these efforts, during the reporting period, the initial results of the "Health Management: Top 300" programme were reviewed. The first stage of the "Workshop Doctor" employee health programme was also completed. Preparations are under way to launch similar programmes in the Siberia division.

EVRAZ completed the first step of forming its new five-year social investment and charity strategy, which involved conducting research in local communities. The interviews covered such topics as the environment and urban development. The second step is to finalise the strategy.

EVRAZ is also supporting the ongoing construction of a cardiology centre in Kachkanar and an infectious disease hospital in Novokuznetsk.

In early 2021, as part of the recruitment function's transformation process, the Urals recruitment centre was established. Its primary focus is to find staff for investment projects and to support the operations of the division. In addition, the recruitment function was enhanced at the IT subsidiaries to support the Digital transformation projects. The automation of the recruitment process is under way, including refining specific tasks in the HuntFlow system. In addition, the roll-out of the Candidate Personal Account project to the divisions continues.

In H1 2021, a target remuneration system was rolled-out at the Urals and Siberia divisions. In addition, the performance assessment approach, criteria and procedures were developed for the regular individual salary review for workers and line managers. The stage of automating the assessment was also completed. In addition, the Coal division continued to introduce the grading system.

CUSTOMER FOCUS

In H1 2021, EVRAZ worked to further improve customer service and develop new products as part of its strategic objective to remain the leading manufacturer of infrastructural steel.

The Group continued to develop its programme aimed at promoting demand for beams and structural products in construction and improving the availability of products to clients. This included a project to sell pre-engineered sets of buildings (car parks, logistical centres, industrial facilities and so on). The metal service centre in Noginsk, which launched in 2020, continued to serve customers. They include small metal fabrication facilities that do not have their own automated CNC line and large plants that need to increase production without investing in the purchase of expensive equipment. The metal service centre in Noginsk fully meets customer needs and processes orders faster and with greater precision than most fabrication facilities.

The hub in Nizhny Tagil, which launched in 2020 to improve availability of beams for customers, continued to work at full capacity in H1 2021. The hub places a priority on orders for rare profiles that are hard to find on the market.

In the reporting period, EVRAZ continued its initiatives to digitalise sales channels. For example, it worked to improve the Steel Radar project (an online resource that shows beam inventories in traders' warehouses and enables purchase orders to be placed). The website saw a significant increase in traffic and received its first live orders. The Group also continued to implement the EVRAZ Webshop project, which offers a single e‑commerce platform for all types of customers.

In H1 2021, EVRAZ maintained healthy market shares for key products in Russia: 69% for beams, 40% for structural products, 32% for railway wheels and 96% for rails. The Group sold 404 thousand tonnes of beams (up 24.7% YoY), 376 thousand tonnes of structural products (up 4.6% YoY), more than 111 thousand tonnes of railway wheels and wheel blanks (up 25.1%) and 356 thousand tonnes of rails from its Russian facilities (down 30.1% YoY, mainly because of lower demand in Russia and CIS).

In addition, in June 2021, EVRAZ and Russian Railways agreed to join efforts in reducing GHG emissions through manufacturing and operating rails made of steel with a low carbon footprint. Together, the two companies will partner to manufacture 'green rails' in Russia from steel that has a 75% lower carbon emission footprint than the traditional blast furnace/converter technology. To deliver on that target, EVRAZ ZSMK will overhaul the resource base of its steel production facilities, adjusting the technologies and processes that it uses.

In the Coal segment, EVRAZ sold 5.2 million tonnes of coal concentrate to third parties in the reporting period, which was 5.5% higher than in H1 2020 following greater mining volumes and better logistics efforts. In addition, stable demand for coal from the Group's steelmaking operations and an increase in consumption on export markets also supported sales. However, overall sales volumes of coal products decreased by 0.7 million tonnes YoY as additional efforts to sell out raw coal stockpiles in anticipation of a further drop in prices resulted in higher than usual sales of raw coal in H1 2020. In addition, a longwall move at the Alardinskaya mine in H1 2021 lowered raw coal availability compared with the previous year.

In North America, sales of OCTG and small-diameter products in H1 2021 were 26% lower YoY than in H1 2020, as the Calgary mills and Pueblo seamless operation were idle for most of the reporting period. However, amid higher drilling volumes, the upturn in oil prices, and active customer re-stocking in North America, both mills have restarted in late H1 2021, ahead of schedule. In the construction segment, demand for steel products improved in H1 2021, driving EVRAZ' rod and bar production up by 9% YoY. In the rail segment, while market demand remained relatively stable overall, EVRAZ' rail output fell by 16% YoY, primarily because of the impact of unplanned downtime driven by the steam explosion at EVRAZ Pueblo's steelmaking operations at the end of May. The lost rail volumes are expected to be recovered in H2 2021.

In the vanadium business, EVRAZ maintained its position as a key and reliable supplier, covering increased demand from the steel industry in Europe, the Americas and Asia. These regions experienced a swift recovery after a period of extremely low activity in Q2‑Q3 2020 due to pandemic-related restrictions. Following its strategy, the Group is expanding the customer base and actively participating in spot trading, while selling roughly 55% of its total volumes under long-term contracts. In addition, EVRAZ continued its efforts to promote and develop micro-alloyed, higher strength steel usage in various applications to significantly reduce the carbon footprint of steel-consuming industries via its R&D centre.

Overall, customer-focus initiatives generated additional EBITDA of US$174 million in the reporting period. This was mainly because of the sales efforts in beams as well as improvements in the efficiency of the logistics and supply functions.

ASSET DEVELOPMENT

In H1 2021, EVRAZ continued to implement its main investment projects. In the Steel segment, EVRAZ NTMK continued the design work for the upgrade of its rail and beam mill and started initial construction. In June, EVRAZ and the government of the Kemerovo region signed a cooperation agreement as part of the construction of the integrated flat casting and rolling facility at EVRAZ ZSMK. The Group is currently reviewing the options for this project and will make a final decision on resuming its implementation later. Meanwhile, EVRAZ KGOK continued to implement the project to develop the Sobstvenno-Kachkanarskoye deposit, which is due to partly replace the output from the Gusevogorskoye deposit. The first mining operations started in January 2021.

In addition, in the Sverdlovsk region's Titanium Valley special economic zone, Allegro - a joint venture of EVRAZ and the Rail Service industrial group - launched construction of a new railway wheel mill.

In Coal segment, a programme was launched to purchase mining equipment with the aim to replace contractors at the Raspadskaya-Koksovaya open pit to improve productivity

In the Steel, North America segment, EVRAZ Pueblo's new long rail mill project continued according to schedule. The general contractor for the construction and installation work has been selected. Capital investments to modernise equipment and expand production capacity also progressed at EVRAZ Regina in Saskatchewan and EVRAZ Red Deer in Alberta.

In H1 2021, EVRAZ continued to focus on developing its assets through its efficiency improvement programme. This generated US$82 million of additional EBITDA during the period, mostly through greater productivity, improved yields and numerous savings projects.

Also, in the reporting period, EVRAZ invested US$258 million in development CAPEX.

EVRAZ BUSINESS SYSTEM 

The EVRAZ Business System (EBS) guides the Group in setting targets, developing employees, supporting the management, promoting corporate culture and improving processes and infrastructure. It also coordinates 'transformations': initiatives to drive continuous improvement across the business.

The digital transformation initiative is the most significant one that the EBS team is currently involved in at the Group. As of H1 2021, the coverage perimeter included 180 projects capable of generating a total annual effect of around US$150 million in EBITDA.

In the Steel, North America segment, EVRAZ Pueblo continued the EBS deployment at its steelmaking and rail facilities. At the steel mill, each employee contributed more than three ideas on average to generate an overall expected effect of US$34 million in EBITDA. There has been a high level of employee engagement in the EBS roll-out.

In the Steel segment, the main business units in the Urals division have completed their EBS transformation projects. By the end of H2 2021, the Coal segment also expects to complete its EBS transformation projects.

Other important ongoing work included a major project to eliminate red tape in internal processes. In H1 2021, a total of 267 areas were selected for reducing internal bureaucracy to improve productivity. The plan is to resolve 165 of these this year. The executive team and vice presidents are overseeing 108 of these initiatives. Since the start of the year, 39 cases have been resolved and 56 are under way. The remaining cases are in the area of responsibility of the divisions.

 

Update on potential demerger of coal assets

 

Further to the updates on 26 January and 15 April 2021, management continues to work on the structure for the potential demerger of the Company's coal assets (the "Potential Demerger") which, following completion of the previously announced consolidation, essentially all now sit under PJSC Raspadskaya ("Raspadskaya").

 

The Board of EVRAZ believes the Potential Demerger of Raspadskaya could create significant long-term value by allowing each business to pursue dedicated strategic, capital allocation and ESG objectives

 

On completion of the Potential Demerger, EVRAZ plans to continue to satisfy the majority of its coal supply requirements, through purchases of coal on arm's length terms from Raspadskaya.

 

It is currently envisaged that the Potential Demerger will be completed by December 2021, subject to receiving all necessary approvals; the precise timing will be communicated to shareholders in due course. There can be no assurance that the Potential Demerger will be undertaken and the Board will keep shareholders updated through further announcements as appropriate. Regardless of whether the Potential Demerger is undertaken, it is intended that Raspadskaya will continue to be listed on the Moscow Exchange and EVRAZ will continue to be listed on the Premium Segment of the London Stock Exchange.

 

Impact of COVID-19

 

EVRAZ is closely monitoring the pandemic and its impact on employees, operations and the broader stakeholder base. The Group is committed to doing everything possible to protect the lives and health of its employees, as well as to minimise the effect on its enterprises and the communities in which it operates.

Impact on key markets

The recovery in the global steel market observed since H2 2020 has accelerated in 2021. Activity levels in steel-consuming industries have continued to bounce back. This resulted in an improvement in steel prices and higher demand.

For more details about the performance of key markets in H1 2021, please see the "Market outlook" section.

Impact on operations

The Group remains keenly focused on its operations, including logistics, supply and technological processes. Despite having around 350 active COVID-19 cases among employees as of 30 June 2021, EVRAZ has faced no significant issues with the production or supply of raw materials and other goods. Shipments have continued and raw material deliveries to enterprises have remained stable.

Impact on liquidity, solvency and access to financing

In H1 2021, the pandemic had little effect on EVRAZ' liquidity situation. Amid positive market trends, operations and sales generated robust operating cash flow. The Group has proactively addressed its upcoming obligations and maintained a strong liquidity position. As of 30 June 2021, cash and cash equivalents stood at around US$1.4 billion, supported by operating cash flow and financing initiatives. For more details, please see the "Financing and liquidity" section.

Measures taken to protect the wellbeing and safety of employees and local communities

After a general improvement in the epidemiological situation in Q1 2021, global COVID‑19 infection rates have been rising since May, including in the regions where EVRAZ operates.

To prevent the spread of the disease, the Group is implementing a vaccination campaign. This has helped to achieve a decent level of collective immunity in Russia of above 60%. To support medical professionals, EVRAZ has arranged regular donations of oxygen, medical supplies and personal protective equipment to regional hospitals.

In addition, the Group continues to implement the measures that it introduced in 2020 to prevent the spread of COVID-19. These include:

•             Reducing domestic business travel and overseas trips.

•             Remote working, as well as providing additional personal protective equipment for employees who must come to work, including eye protectors, respirators and gloves.

•             Using thermal imaging devices and pyrometers at facility entrances to monitor people's temperatures.

•             Using different approaches to all major corporate, sporting and entertainment events (online or offline), depending on the particular situation and imposed restrictions.

•             Increasing supplies of antiseptic and disinfectant products in communal areas, as well as regularly sanitising facilities and transport.

•             Holding campaigns to raise awareness among employees and contractors about behavioural guidelines, social distancing and personal protection.

In addition to caring for the physical health of employees and their families, EVRAZ is carefully assessing the possible mental impact of the preventative measures being undertaken amid the pandemic. As of 30 June 2021, more than 1,700 employees of the Group were working remotely.

In H1 2021, EVRAZ has allocated more than US$7 million to ensure safe working conditions for employees, as well as to support medical and pre-school institutions in local communities.

 

 

Market outlook

 

GLOBAL MARKETS

In H1 2021, the ongoing influx of monetary and fiscal stimulus helped the global economy to continue recovering from the pandemic. Steel mills increased production in expectation of more robust demand from the construction and manufacturing sectors. At the same time, steel demand outstripped supply. Against this backdrop, steel prices continued to skyrocket to multi-year highs despite relatively high raw material prices. Based on hot-rolled coil (HRC) China FOB contracts, steel prices averaged US$830/t in the reporting period, up 81% from US$459/t in H1 2020. Following the Chinese market, steel prices rose in North America, Europe and the CIS.

Overall, in H1 2021, world crude steel production climbed by 14% YoY and is back to pre-pandemic levels. This was driven mainly by countries outside China, where steel output rose by 18% YoY. In China, steel production increased by 12% YoY.

For the rest of the year, the steel market may face the effect of the Chinese government's initiatives to reduce carbon emissions, its fight against "unreasonably" high commodity prices, as well as an expected decline in domestic demand from China. The country's stated goals of achieving peak carbon emissions by 2025 for the steel industry will further affect production.

Steel prices look unsustainable at current levels and there is a possibility of a gradual price decline in the coming months.

In late H1 2021, coking coal prices reached new highs due to  solid demand amid the global economic recovery. Hard coking coal (HCC) prices rose to US$200/t (FOB Australia), compared with an average of US$141/t in H1 2020. China's ban on coal imports from Australia disrupted its import demand and reshuffled trade flows, increasing price volatility. Unable to fill the gap, buyers in China have had to offer much greater prices to incentivise supply from non-Australian markets and high-cost domestic producers. In addition, the news of a suspension of coal mining operations in some regions and mine audits drove domestic coking coal prices higher. This expanded the CFR China/FOB Australia premium to unsustainably wide US$100/t. By the end of June, the HCC CFR China price was already above US$300/t. In H1 2021, Chinese coking coal imports fell by 42% YoY.

Australian production and exports have remained volatile. India has become a critical market; Australia's exports to the country doubled in H1 2021. There has been solid growth in other Asian markets, as well. Overall, coking coal prices are expected to remain high in 2021 amid tight supply and healthy demand. Because of China's ongoing import ban, its domestic coal prices might stay well above the Australian benchmark.

Iron ore prices averaged nearly US$200/t in the reporting period and set a new record in early May. Solid demand from China, weak supply and a favourable macroeconomic environment drove the upward trend. The supply side has been unable to respond to the high prices. Rio Tinto has experienced production problems, resulting in a lower supply of medium-grade fines. In H1 2021, Australia's iron ore exports declined by 6% YoY. While exports from Brazil have been rising steadily in 2021, Vale still cannot reach its 2019 levels. From the demand side, Chinese crude steel production reached a new record in Q2 2021, which supported raw material prices. In the meantime, China signalled more efforts to fight commodity price inflation and keep on track with environmental issues, which is intensifying the price volatility. Iron ore prices might remain elevated through the end of 2021.

In H1 2021, the MB FeV benchmark averaged US$33.4/kgV, an increase of 29% YoY. In June, prices returned to the highest levels seen since May 2019 because of tightening supply in Europe and improving demand. The availability of alloys in Europe has been limited since Q4 2020 because China has been importing large volumes of material amid a better demand outlook. Additional factors include shipping delays, especially from Asia, and surging freight rates.

Global vanadium demand reached an estimated 61 thousand mtV, up 16% YoY. A strong recovery of steel output was seen in most regions outside China, as demand from the automotive and construction segments almost reached pre-pandemic levels. Demand in China alone increased by 20%, driven by higher rebar production and growing demand for vanadium-based energy storage. Stronger demand globally, together with shipping delays and lower output caused by equipment maintenance at several major producers, caused ferrovanadium prices to rise to around US$39/kgV in Europe in June. Overall, the market is expected to be fairly balanced in the medium term, subject to a continued demand recovery in key industries.

RUSSIAN STEEL

In H1 2021, Russian steel consumption totalled 21.3 million tonnes, up 7% YoY, because of improving economic activity.

In some sectors, domestic steel consumption climbed by 15-25%. Demand for structural products increased by 5% YoY, which leads to higher sales from EVRAZ. In addition, the size of beam market grew by 18% YoY and 15% above the same period in 2019. Demand for wheels remained steadily high, but the rail market lost its steam due to slowing demand in Russia and CIS.

In the reporting period, domestic crude steel production equalled 38.2 million tonnes, up 9% YoY

Prices surged by 70‑100% from the levels seen at the end of 2020. The most significant increase was in the prices for sheets, which in turn supported higher prices for beams. The export premium for slabs over squares climbed by US$200/t, while the prices for rebar and structural steel rose by 70-80%. The difference in the prices for slabs and billets was caused by the more rapid recovery among consumers of flat-rolled products.

In H1 2021, the Moscow CPT benchmark rebar price averaged US$803/t, up 63% YoY, while the average HRC price was US$889/t, up 108%. In the first half of June, export prices for Russian metal products began to decline after having been on the rise since February. The stabilisation of retail prices is associated with uncertainty in the primary market, which only intensified amid the news that Russia was introducing export duties on ferrous metals effective from 1 August 2021. The duties will be in effect through the end of December 2021. These duties consist of a 15% base rate and also a metal-specific rate per tonne of steelmaking raw materials, semi-finished and rolled-steel products, which are exported outside the Eurasian Economic Union.

 

COAL

In the reporting period, Russian coking coal concentrate consumption totalled 19.5 million tonnes, up 3% YoY, as coke production increased amid recovery after pandemic. Coking coal exports amounted to 12.3 million tonnes, up 6% YoY, amid increase in demand across all regions. Mining volumes increased to 50.4 million tonnes, up 14% YoY.

Russian prices of metallurgical coal followed international benchmarks during the reporting period. Prices started to rise more rapidly in Q2 2021. In H1 2021, the FCA Kuzbass benchmark price for premium Zh-grade coking coal averaged US$101/t, up 3% YoY. The average price for the semi-hard GZh-grade was US$83/t, up 6% YoY. Market participants expect a significant increase in domestic prices in Q3 2021.

Overall, after a challenging year in 2020, EVRAZ saw improvements in domestic coal demand in H1 2021, which was supported by a recovery in companies' mining volumes. In terms of demand, the most active recovery on the Group's premium markets was seen in Q2 2021. Customers in Europe did not reduce their purchases. While demand from India remains significant, there have been problems with logistics. During the reporting period, EVRAZ also faced challenging geological conditions, which slightly affected production volumes. The Company tried to maximize spot sales to China, but the priority was to fulfil contractual obligations with long-term clients.

NORTH AMERICA

In H1 2021, North American steel markets continued to recover from the impact of COVID-19, driven by strength in the automotive, non-residential construction and industrial sectors. Domestic steel production rose to 45.1 million tonnes, up 15% YoY, while US steel product imports amounted to 14.7 million tonnes, up 19% YoY. Capacity utilisation rates at US steel mills rose to 83% at the end of June 2021, a two-year high. Tight domestic mill supply and low service centre inventories contributed to strong price increases: in the reporting period, on average, prices of carbon plate and hot-rolled coil soared by 108% and 154% YoY, respectively, to US$1,125/t and US$1,349/t.

The market for long products saw some recovery during H1 2021. Total apparent demand for all long products rose by 10% YoY. Estimated demand on the rail market was 522 thousand tonnes, unchanged from H1 2020, as growth in domestic production offset lower import volumes. Estimated total demand in the rod and bar market was approximately 1.6 million tonnes, roughly flat YoY. Although total rod and bar demand remained flat, strength in the construction sector as well as supply-side constraints created a favourable environment for EVRAZ North American operations. Wire rod prices averaged US$990/t, up 30% YoY, and rebar prices averaged US$904/t, up 35% YoY.

Regarding energy end markets, the WTI crude benchmark neared five-year highs in June, as oil demand recovered and OPEC managed output tightly. While total drilling activity remained below pre-pandemic levels, upstream oil and gas operators continued to deploy more rigs, driving demand for OCTG and line pipe. Total monthly OCTG consumption reached 280 thousand tonnes in June, up 99% from June 2020. In H1 2021, ERW OCTG and line pipe prices increased alongside substrate prices, averaging US$1,475/t and US$1,895/t, up 26% and 59% YoY, respectively. Average seamless OCTG prices rose by 16% YoY to US$1,654/t. Continued improvement in North American energy tubular products is expected through H2 2021, as oil prices are forecast to remain elevated and crude oil supply tight.

 

Financial review

Statement of operations

In H1 2021, EVRAZ' consolidated revenues climbed by 24.0% YoY to US$6,178 million, compared with US$4,983 million in H1 2020. The increase was caused primarily by higher sales prices for construction and semi-finished products, as well as greater prices and volumes for vanadium products.

EVRAZ' consolidated EBITDA amounted to US$2,082 million during the period, compared with US$1,073 million in H1 2020, boosting the EBITDA margin from 21.5% to 33.7%. The increase in EBITDA was primarily attributable to higher steel, vanadium and coal product sales prices.

Free cash flow surged by 165% YoY to US$836 million. This includes the effects of working capital outflow amid rising prices, as well as increase in capital expenditures in H1 2021 compared to H1 2020​ and foreign exchange losses amounted to US$30 million.

In H1 2021, the Steel segment's revenues (including intersegment sales) rose by 34.3% YoY to US$$4,612 million, or 69.3% of the Group's total before elimination. The increase was mainly attributable to higher revenues from steel and vanadium products, which climbed by 33.2% and 39.4% YoY respectively. This was primarily because average sales prices advanced by 28.9% for steel products and by 28.6% for vanadium. The Group's higher revenues from sales of steel products were partly offset by lower sales volumes, which edged down from 6.0 million tonnes in H1 2020 to 5.8 million tonnes in H1 2021 following a decrease in production volumes at Russian mills.

In H1 2021, revenues from the Steel, North America segment decreased by 5.4% YoY to US$972 million. Steel product revenues retreated by 6.5% YoY, driven by a 19% reduction in sales volumes primarily in the tubular and other steel products category, mostly offset by a 12.5% increase in sales prices. 

The Coal segment's revenues increased by 6.4% YoY to US$831 million, mainly driven by an increase of 14.1% in coal product sales prices and a decrease of 7.7% in coal product sales volumes. Coal prices followed the upward trend set by global benchmarks during the period.

In H1 2021, higher prices for construction, semi-finished products and vanadium almost doubled the Steel segment's EBITDA, despite increasing cost of sales.

The Steel, North America segment's EBITDA increased driven by a significant reduction of cost of sales YoY, which more than offset a marginal decrease in revenues.

The Coal segment's EBITDA rose YoY, as sales prices followed higher global benchmarks.

 

Revenues

(US$ million)

 

Segment

H1 2021

H1 2020

Change

Change, %

Steel

              4,612

3,433

              1,179

34.3

Steel, North America

               972

1,028

                 (56)

(5.4)

Coal

                 831

781

                  50

6.4

Other operations

                 238

206

                  32

15.5

Eliminations

                (475)

(465)

                 (10)

(2.2)

Total

              6,178

4,983

              1,195

24.0

 

Revenues by region

(US$ million)

 

Region

H1 2021

H1 2020

Change

Change, %

Russia

        2,468

1,848

620

33.5

Asia

        1,589

1,504

85

5.7

Americas

        1,206

1,053

153

14.5

Europe

           455

212

243

n/a

CIS (excl. Russia)

           404

309

95

30.7

Africa and rest of the world

           56

57

(1)

(1.8)

Total

      6,178

4,983

1,195

24.0

 

 

EBITDA*

(US$ million)

 

Segment

H1 2021

H1 2020

Change

Change, %

Steel

1,763

916

847

92

Steel, North America

53

(21)

74

n/a

Coal

342

218

124

57

Other operations

6

8

(2)

(25)

Unallocated

(69)

(65)

(4)

6

Eliminations

(13)

17

(30)

n/a

Total

2,082

1,073

1,009

94

* For the definition of EBITDA, please refer to "Definitions of selected alternative performance measures".

 

The following table details the effect of the Group's cost-cutting initiatives:

Effect of Group's cost-cutting initiatives in H1 2021
(US$ million)

 

Increasing productivity and cost effectiveness

79

Improving auxiliary materials and service costs

3

Total

82

 

Revenues, cost of sales and gross profit by segment

(US$ million)

 

H1 2021

 

H1 2020

 

Change

Change, %

Steel segment

 

 

 

 

 

 

Revenues

4,612

 

3,433

 

1,179

34.3

Cost of sales

(2,594)

 

(2,292)

 

(302)

13.2

Gross profit

             2,018

 

1,141

 

877

76.9

Steel, North America segment

 

 

 

 

 

 

Revenues

972

 

1,028

 

(56)

(5.4)

Cost of sales

(821)

 

(936)

 

115

(12.3)

Gross profit

151

 

92

 

59

64.1

Coal segment

 

 

 

 

 

 

Revenues

831

 

781

 

50

6.4

Cost of sales

(443)

 

(537)

 

94

(17.5)

Gross profit

388

 

244

 

144

59.0

Other operations - gross profit

81

 

56

 

25

44.6

Unallocated - gross profit

(5)

 

(4)

 

(1)

25.0

Eliminations - gross profit

(88)

 

(34)

 

(54)

n/a

Total

2,545

 

1,495

 

1,050

70.2

 

 

Gross profit, expenses and results

(US$ million)

Item

H1 2021

H1 2020

Change

Change, %

Gross profit

2,545

1,495

1,050

70.2

Selling and distribution costs

(414)

(421)

7

(1.7)

General and administrative expenses

(288)

(278)

(10)

3.6

Impairment of non-financial assets

(4)

(108)

104

(96.3)

Foreign-exchange gains/(losses), net

(30)

242

(272)

n/a

Social and social infrastructure maintenance expenses

(16)

(17)

1

(5.9)

Gains/(losses) on disposal of property, plant and equipment, net

(1)

1

(2)

n/a

Other operating income and expenses, net

(43)

(23)

(20)

87.0

Profit from operations

1,749

891

858

96.3

Interest expense, net

(121)

(164)

43

(26.2)

Share of losses of joint ventures and associates

5

3

2

66.7

Loss on financial assets and liabilities, net

(4)

(40)

36

(90.0)

Loss on disposal groups classified as held for sale, net

2

1

1

100.0

Other non-operating losses, net

-

9

(9)

(100.0)

Profit before tax

1,631

700

931

n/a

Income tax expense

(419)

(187)

(232)

n/a

Net profit

1,212

513

699

n/a

 

In H1 2021, EVRAZ recognised a US$4 million impairment loss. There were no indicators of impairment at the level of the Group's cash-generating units. EVRAZ recognised losses in relation to impairment of certain functionally obsolete items of property, plant and equipment.

Foreign exchange losses amounted to US$30 million. They were mainly related to intra‑group loans denominated in rubles and payable by Evraz Group S.A., whose functional currency is the US dollar, to the Russian subsidiaries, which have the ruble as their functional currency. The appreciation of the Russian ruble against the US dollar in H1 2021 led to foreign exchange losses being recognised on the income statements of non‑Russian subsidiaries that were not offset by the foreign exchange gains recognised in the equity of the Russian subsidiaries

Net interest expense decreased to US$121 million in H1 2021, compared with US$164 million in H1 2020. This was mainly because of the management's efforts to refinance existing indebtedness on more favourable terms. In H1 2021, the 8.25% notes denominated in US dollars with a carrying value of US$765 million and 12.6% ruble-denominated bonds with a carrying value of US$214 million were repaid and replaced with long-term bank loans taken at lower rates.

In the reporting period, the Group had an income tax expense of US$419 million, compared with US$187 million in H1 2020. The change reflects mostly the significant improvement in operating results.

Cash flow

(US$ million)

Item

H1 2021

H1 2020

Change

Change, %

Cash flows from operating activities before changes in working capital

1,664

749

915

n/a

Changes in working capital

(254)

32

(286)

n/a

Net cash flows from operating activities

1,410

781

629

80.5

Short-term deposits at banks, including interest

2

3

(1)

(33.3)

Purchases of property, plant and equipment and intangible assets

(428)

(330)

(98)

29.7

Proceeds from sale of disposal groups classified as held for sale, net of transaction costs

2

3

(1)

(33.3)

Other investing activities

(3)

5

(8)

n/a

Net cash flows used in investing activities

(427)

(319)

(108)

33.9

Net cash flows used in financing activities

(1,189)

(513)

(676)

n/a

Effect of foreign-exchange rate changes on cash and cash equivalents

(6)

(8)

2

(25.0)

Net increase/(decrease) in cash and cash equivalents

(212)

(59)

(153)

n/a

 

Calculation of free cash flow*

(US$ million)

Item

H1 2021

H1 2020

Change

Change, %

EBITDA

2,082

1,073

1,009

94.0

EBITDA excluding non-cash items

2,102

1,071

1,031

96.3

Changes in working capital

(254)

32

(286)

n/a

Income tax accrued

(422)

(306)

(116)

37.9

Social and social infrastructure maintenance expenses

(16)

(17)

1

(5.9)

Net cash flows from operating activities

1,410

781

629

80.5

Interest and similar payments

(143)

(137)

(6)

4.4

Capital expenditures, including recorded in financing activities and non-cash transactions

(430)

(337)

(93)

27.6

Proceeds from sale of disposal groups classified as held for sale, net of transaction costs

2

3

(1)

(33.3)

Other cash flows from investing activities

(3)

5

(8)

n/a

Free cash flow

836

315

521

n/a

* For the definition of free cash flow, please refer to "Definitions of selected alternative performance measures".

 

CAPEX and key projects

During the reporting period, EVRAZ' capital expenditures rose to US$430 million, compared with US$337 million in H1 2020, driven by higher development expenses. Capital expenditure projects during H1 2021, indicated in millions of US dollars, can be summarised as follows.

 

(US$ million)

 

DEVELOPMENT PROJECTS

 

Steel segment

 

Sobstvenno-Kachkanarsky deposit greenfield project

The project aim is to maintain production of raw iron ore

20

Tashtagol iron ore mine upgrade at EVRAZ ZSMK mining site

The project aim is to increase the annual iron ore production of the Tashtagolsky deposit with a partial switch to sublevel caving using mobile equipment

18

Rail and beam mill modernisation at EVRAZ NTMK

The project aim is to increase production of beams and sheet piles

7

Transfer of direct coke oven gas for cleaning in capture shop no. 3 at EVRAZ NTMK
The project aim is to decrease air emissions

6

Integrated flat casting and rolling facility at EVRAZ ZSMK

The project aim is to improve the profitability of EVRAZ' product portfolio by replacing semi-finished products with hot-rolled sheets and coils

2

Construction of uncompressed gas recovery turbines for blast furnace no. 7 at EVRAZ NTMK
The project aim is to increase own electricity generation

1

Steel, North America segment

 

Long rail mill at EVRAZ Pueblo

The project aim is to replace the existing rail facility and meet the needs of customers for long rail products

107

Electric arc furnace (EAF) repowering at EVRAZ Regina

The project aim is to increase EVRAZ Regina's prime coil and plate production and reduce electrode consumption

5

Coal segment

 

Access and development of reserves in the Uskovskaya mine's seam no. 48

The project aim is to prepare the reserves in seam no. 48 for mining

 

28

Acquisition of equipment at Alardinskaya mine

The project aim is to reduce the time required for transition from longwall to longwall and to increase annual production volumes to 3.2mt.

 

16

Acquisition of equipment at Osinnikovskaya mine

The project aim is to acquire equipment that fully complies with the mining and geological conditions to provide the projected monthly longwall load

 

2

Other development projects

46

MAINTENANCE CAPEX

172

TOTAL

430

 

 

Financing and liquidity

EVRAZ began 2021 with total debt of US$4,983 million.

In January, the Group repaid at maturity US$735 million in outstanding principal of its Eurobonds due in 2021. In March, to compensate for the reduction in liquidity, EVRAZ drew US$750 million under the committed syndicated facility that it signed with a group of international banks in early 2020.

In February, EVRAZ ZSMK signed a new US$200 million credit facility with SberBank. In March, it used US$67 million of the available funds.

In March, the Group repaid at maturity RUB15,000 million (roughly US$201 million) in outstanding principal of its ruble-denominated bonds due in 2021.

EVRAZ NTMK and EVRAZ ZSMK repaid a total of around US$517 million of their outstanding bank debt of varying maturities.

In June, the Group repurchased US$40 million in outstanding principal of its Eurobonds due in 2022.

During H1 2021, EVRAZ successfully continued preparation for the potential demerger of its Coal assets. The Group rebalanced its debt between the Steel and Coal divisions and obtained necessary creditor approvals, including Eurobond consent solicitation from the majority of holders of its Eurobonds due in 2022, 2023 and 2024.

Raspadskaya took a US$200 million long-term loan with Alfa Bank and a US$200 million long-term loan with SberBank with the interest rate linked to certain ESG metrics.

As a result of these actions, as well as scheduled repayments of bank loans and leases in H1 2021, total debt fell by US$307 million to US$4,676 million as at 30 June 2021.

In H1 2021, EVRAZ paid two interim dividends to its shareholders: US$437 million (US$0.30 per share) in April and US$292 million (US$0.20 per share) in June.

Net debt dropped by US$95 million to US$3,261 million, compared with US$3,356 million as at 31 December 2020.

Interest expense accrued on loans, bonds and notes amounted to US$108 million during the period, compared with US$147 million in H1 2020. The repayment of the Eurobonds due in 2021 and ruble bonds due in 2021, which had high coupon rates, together with the management's efforts to reduce total debt and refinance indebtedness on favourable terms, led to the significant reduction of interest expense compared with H1 2020.

The higher EBITDA amid a strong market recovery and lower net debt resulted in a significant reduction in the Group's major leverage metric, the ratio of net debt to last twelve months (LTM) EBITDA, to 1.0 as of 30 June 2021, compared with 1.5 as of 31 December 2020.

As at 30 June 2021, various bilateral facilities with a total outstanding principal of around US$1,746 million contained financial maintenance covenants tested at the level of EVRAZ plc, including a maximum net leverage and a minimum EBITDA interest cover.

New debt facilities of Raspadskaya contain financial maintenance covenants tested on consolidated financials of Raspadskaya, including a maximum net leverage and a minimum EBITDA interest cover.

As at 30 June 2021, EVRAZ and its subsidiaries were in full compliance with the financial covenants.

As at 30 June 2021, cash and cash equivalents amounted to US$1,415 million, while short-term loans and the current portion of long-term loans amounted to US$536 million. Cash balances and committed credit facilities (US$264 million) available to the Group comfortably cover upcoming maturities.

 

 

Review of operations by Segment

 

 

 

 

 

 

 

 

 

 

 

(US$ million)

Steel

Steel, NA

Coal

Other

 


H1

2021


H1

2020


H1

2021


H1

2020


H1

2021


H1

2020


H1 2021


H1 2020

 

Revenues

4,612

3,433

972

1028

831

781

238

206

 

EBITDA

1,763

916

53

(21)

342

218

6

8

 

EBITDA margin

38.2%

26.7%

5.5%

(2.0%)

41.2%

27.9%

2.5%

3.9%

 

CAPEX

213

196

102*

53

112

83

3

5

 

*Including effects from grants

 

Steel segment

Sales review

Steel segment revenues by product

 

H1 2021

H1 2020

 

 

US$ million

% of total segment revenues

US$ million

% of total segment revenues

Change, %

Steel products, external sales

4,001

86.7

3,003

87.5

33.2

Semi-finished products1

1,693

36.7

1,233

35.9

37.3

Construction products2

1,460

31.6

939

27.3

55.5

Railway products3

482

10.5

593

17.3

(18.7)

Flat-rolled products4

105

2.3

68

2.0

54.4

Other steel products5

261

5.7

170

5.0

53.5

Steel products, intersegment sales

13

0.3

25

0.7

(48.0)

Including sales to Steel, North America

4

0.1

20

0.6

(80.0)

Iron ore products

101

2.2

63

1.8

60.3

Vanadium products

230

5.0

165

4.8

39.4

Other revenues

267

5.8

178

5.2

49.4

Total

4,612

100.0

3,433

100.0

34.3

             

1 Includes billets, slabs, pig iron, pipe blanks and other semi-finished products

2 Includes rebars, wire rods, wire, beams, channels and angles

3 Includes rails, wheels, tyres and other railway products

4 Includes commodity plate and other flat-rolled products

5 Includes rounds, grinding balls, mine uprights and strips, and tubular products

 

 

Sales volumes of Steel segment

 

 

 

(thousand tonnes)

 

 

 

H1 2021

H1 2020

Change, %

Steel products, external sales

5,795

5,975

      (3.0)

Semi-finished products

2,845

3,023

      (5.9)

Construction products

1,914

1,848

       3.6

Railway products

564

669

    (15.7)

Flat-rolled products

113

121

      (6.6)

Other steel products

359

315

     14.0

Steel products, intersegment sales

15

51

    (70.6)

Total steel products

5,810

6,026

      (3.6)

 

Vanadium products (tonnes of pure vanadium)

9,374

8,371

12.0

Vanadium in slag

2,759

2,761

(0.1)

Vanadium in alloys and chemicals

6,615

5,610

17.9

 

Iron ore products (pellets)

648

801

(19.1)

 

Geographic breakdown of external steel product sales

(US$ million)

 

 

H1 2021

H1 2020

Change, %

Russia

           1,915

1,451

        32.0

Asia

          1,224

1,122

          9.1

CIS

              307

267

          15.0

Europe

                301

101

        n/a

Africa, Americas and rest of the world

              254

63

n/a

Total

           4,001

3,003

          33.2

 

In H1 2021, the Steel segment's revenues climbed by 34.3% YoY to US$4,612 million, compared with US$3,433 million in H1 2020. This was the result of higher sales prices, primarily for construction products and semi-finished products, as well as greater vanadium product prices and volumes.

Revenues from external sales of semi-finished products rose by 37.3% YoY. This was driven by a 43.2% increase in average prices, which was partly offset by a 5.9% decrease in sales volumes. The primary factor was a surge of 62.4% in the average prices of slabs.

Revenues from sales of construction products to third parties jumped by 55.4% YoY amid an increase of 51.8% in average prices. This was caused mainly by higher sales prices for rebars on the Russian and CIS markets, greater beam sales prices and volumes, as well as higher sales prices for channels, primarily on the CIS markets.

Revenues from external sales of railway products decreased because of reductions of 15.7% in sales volumes and 3.1% in sales prices. The drop in sales volumes was caused mostly by lower sales of rails amid reduced demand in Russia and CIS.

External revenues from flat-rolled products surged by 54.4% YoY, driven by a 54.5% upswing in sales prices.

Revenues from external steel product sales in Russia climbed by 32.0% YoY, primarily because of higher prices and greater demand. The share of the Russian market in total external steel product sales decreased from 48.3% in H1 2020 to 47.9% in H1 2021. Asia's share of sales fell from 37.4% to 30.6% because of lower sales volumes for billets.

Steel segment revenues from sales of iron ore products, including intersegment sales, surged by 60.3%, driven by an 79.4% jump in sales prices and a 19.1% decline in sales volumes. The main decrease in sales volumes was caused by a deficit of iron ore, unplanned equipment downtimes and logistics restrictions.

During the reporting period, around 66.9% of EVRAZ' iron ore consumed in steelmaking came from its own operations, compared with 65.4% in H1 2020.

Steel segment revenues from sales of vanadium products, including intersegment sales, climbed by 39.4%, due primarily to a 27.8% increase in sales prices. Vanadium product prices followed market trends higher, including the London Metal Bulletin and Ryan's Notes benchmarks.

 

Steel segment cost of revenues

Steel segment cost of revenues

 

 

 

H1 2021

H1 2020

 

 

US$

million

% of segment revenues

US$

million

% of segment revenues

Change, %

Cost of revenues

2,594

56.2

2,292

44.6

13.2

Raw materials

1,299

28.2

1,107

32.2

17.3

Iron ore

355

7.7

228

6.6

55.7

Coking coal

423

9.2

407

11.9

3.9

Scrap

316

6.8

302

8.8

4.6

Other raw materials

205

4.4

170

5.0

20.6

Auxiliary materials

144

3.1

154

3.9

(6.5)

Services

118

2.5

116

3.4

1.7

Transportation

177

3.8

226

6.6

(21.7)

Staff costs

251

5.4

247

7.2

1.6

Depreciation

125

2.7

113

3.3

10.6

Energy

204

4.4

203

5.9

0.5

Other*

276

6.0

126

3.7

n/a

* Primarily includes goods for resale, intersegment unrealised profit and certain taxes, semi-finished products and allowances for inventories

 

In H1 2021, the Steel segment's cost of revenues increased by 13.1% YoY. The main reasons for the growth in costs were as follows:

·    The cost of raw materials rose by 17.3%, primarily because of the higher cost of iron ore (56.2%), which was driven by global market trends.

·    Costs for auxiliary materials fell by 6.5% amid lower auxiliary material consumption and prices.

·    Transportation costs dropped by 21.7%, primarily due to lower railway tariffs.

·    Depreciation costs increased by 10.6%, mainly because of higher depreciation at EVRAZ ZSMK after fixed assets were upgraded to improve their technical condition.

·    Other costs jumped by 118.3%, largely because of lower cost of goods for resale amid an increase in purchase prices in H1 2021 compared with H1 2020.

Steel segment gross profit

The Steel segment's gross profit surged by 76.9% YoY, driven primarily by higher prices for construction, semi-finished and vanadium products. This was partly offset by the negative effect of higher costs.

 

 

Steel, North America segment

Sales review

Steel, North America segment revenues by product

 

 

 

H1 2021

H1 2020

 

 

US$

million

% of total segment revenues

US$

million

% of total segment revenues

Change, %

Steel products

924

95.0

988

96.1

(6.5)

Semi-finished products1

1

0.1

109

10.6

(99.1)

Construction products2

134

13.8

93

9.0

44.1

Railway products3

185

19.0

173

16.8

6.9

Flat-rolled products4

357

36.7

152

14.8

n/a

Tubular and other steel products5

246

25.3

461

44.8

(46.6)

Other revenues6

49

5.0

40

3.9

22.5

Total

972

100.0

1,028

100.0

(5.4)

1 Includes slabs

2 Includes beams and rebars

3 Includes rails and wheels

4 Includes commodity plate, specialty plate and other flat-rolled products

5 Includes large-diameter line pipes, ERW line pipes, seamless and welded OCTG and other steel products

6 Includes scrap and services

 

Sales volumes of Steel, North America segment

(thousand tonnes)

 

 

H1 2021

H1 2020

Change, %

Steel products

 

 

 

Semi-finished products

-

144

(100.0)

Construction products

148

133

11.3

Railway products

191

213

(10.3)

Flat-rolled products

311

169

84.0

Tubular and other steel products

165

348

(52.6)

Total

815

1,007

(19.1)

 

The Steel, North America segment's revenues from the sale of steel products declined by 5.4% YoY amid a 19.0% decrease in sales volumes, mostly offset by a  12.5% increase in sales prices. The reduction in volumes was mainly attributable to sales of tubular and semi-finished products, which was partially compensated by increased sales of flat-rolled and construction products.

Revenues from semi-finished product sales dropped to almost zero following the fulfilment of a contract with a key customer in 2020.

Revenues from construction product sales rose by 44.1% YoY due to growth an 11.3% increase in volumes accompanied by a 32.8% improvement in selling prices. The upward trend was driven by greater market demand amid economic recovery and government stimulus for infrastructure projects.

Railway product revenues increased by 6.9%, driven by a growth in sales prices of 17.2%, partly offset by a decrease in sales volumes of 10.3%.

Revenues from flat-rolled products soared by 134.9% amid a 84.0% increase in volumes supported by rapid market improvement and a 50.9%increase in sales prices.

Revenues from tubular and other steel product sales fell by 46.6% YoY due to a 52.6% drop in sales volumes, partially offset by a 6.0% uptick in sales prices. The reduction in volumes was caused by the idling of the spiral mills following completion of 2020 orders.

Steel, North America segment cost of revenues

Steel, North America segment cost of revenues

 

 

 

H1 2021

H1 2020

 

 

US$ million

% of segment revenues

US$

million

% of segment revenues

Change, %

Cost of revenues

821 

84.5

936 

91.0

(12.3)

Raw materials

395 

40.6

247

24.0

59.9

Semi-finished products

19 

2.0

194

18.8

(90.2)

Auxiliary materials

86 

8.8

94

9.1

(8.5)

Services

66 

6.8

80

7.7

(17.5)

Staff costs

105 

10.8

142

13.8

(26.1)

Depreciation

42 

4.3

50

4.8

(16.0)

Energy

54 

5.6

46

4.5

17.4

Other*

54 

5.6

83

8.1

(34.9)

* Primarily includes transportation, goods for resale, certain taxes, changes in work in progress and fixed goods and allowances for inventories

 

In H1 2021, the Steel, North America segment's cost of revenues declined by 12.3% YoY. The main drivers were as follows:

·    Raw material costs surged by 59.9%, which was primarily attributable to the higher cost of scrap metal. The increase in scrap prices was offset by reduced consumption amid lower production volumes.

·    The cost of semi-finished products dropped by 90.2% driven by a completion of a key customer contract in 2020 and by replacement of externally purchased semi-finished products with internally produced material.

·    Auxiliary material costs fell by 8.5% amid lower production levels of tubular products.

·    Service costs dropped by 17.5%, driven primarily by lower production volumes.

·    Staff costs declined by 26.1%, mostly driven by the idling of the OCTG mills in Canada, Portland tubular mill and Pueblo seamless mill at the end of Q2 2020. In the beginning of Q2 2021, Pueblo seamless mill was restarted, followed by a restart of the Calgary mill in the end of the quarter amid improving market conditions and the filing of the OCTG trade case in Canada.

·    Energy costs rose by 17.4%, primarily because of higher natural gas prices driven by the inclement weather in the US in Q1 2021.

·    Other costs decreased in the reporting period, driven primarily by the idling of mills. This factor was partly offset by higher utility rates in 2021.

 

Steel, North America segment gross profit

The Steel, North America segment's gross profit totalled US$151 million in the reporting period, up from US$92 million in H1 2020. The increase was driven primarily by a significant reduction in costs of sales, which more than offset a marginal decline in revenues.

 

Coal segment

Sales review

Coal segment revenues by product

 

 

 

H1 2021

H1 2020

 

 

US$

million

% of total segment revenues

US$

million

% of total segment revenues

Change, %

External sales

 

 

 

 

 

Coal products

545

65.6

483

61.8

12.8

Coking coal

32

3.9

37

4.7

(13.5)

Coal concentrate

513

61.7

446

57.1

15.0

Intersegment sales

 

 

 

 

 

Coal products

275

33.1

281

36.0

(2.1)

Coking coal

60

7.2

56

7.2

7.1

Coal concentrate

215

25.9

225

28.8

(4.4)

Other revenues

11

1.3

17

2.2

(35.3)

Total

831

100

781

100.0

6.4

 

 

Sales volumes of Coal segment

 

 

 

(thousand tonnes)

 

 

H1 2021

H1 2020

Change, %

External sales

 

 

 

Coal products

5,585

6,078

(8.1)

Coking coal

438

1,198

(63.4)

Coal concentrate and other products

5,147

4,880

5.5

Intersegment sales

 

 

 

Coal products

3,222

3,466

(7.0)

Coking coal

1,144

1,166

(1.9)

Coal concentrate

2,078

2,300

(9.7)

Total, coal products

8,807

9,544

(7.7)

 

Revenues from external sales of coal products increased amid a 20.9% upswing in prices. This was partly offset by an 8.1% decrease in sales volumes. Coking coal revenues fell by 13.5% and coking coal concentrate revenues increased by 15.0%, amid higher pricing. This was supported in part by higher sales volumes of coking coal concentrate amid strong demand for coal on the Russian market, as well as growth in demand for coal from China.

Revenues from internal sales of coal products edged down 2.1%, mainly because of a 7.0% reduction in sales volumes, which was partly offset by a 4.9% growth in sales prices. Coking coal volumes dropped by 1.9% amid decreased sales of the K grade.

In H1 2021, the Coal segment's sales to the Steel segment amounted to US$275 million (33.0% of total sales), compared with US$281 million (36.0%) in H1 2020.

During the reporting period, roughly 73.1% of EVRAZ' coking coal consumption in steelmaking came from the Group's own operations, compared with 82.1% in H1 2020.

 

 

Coal segment cost of revenues

Coal segment cost of revenues

 

 

 

H1 2021

H1 2020

 

 

US$

million

% of segment revenues

US$

million

% of segment revenues

Change, %

Cost of revenues

443 

53.3

537 

68.8

(17.5)

Auxiliary materials

73 

8.8

54

6.9

35.1

Services

29 

3.5

24

3.1

20.8

Transportation

134 

16.1

155

19.8

(13.5)

Staff costs

111 

13.4

106

13.5

4.7

Depreciation

84 

10.1

82

10.5

2.4

Energy

24 

2.9

23

2.9

4.3

Other*

(12) 

(1.4)

93

11.9

n/a

* Primarily includes goods for resale, certain taxes, changes in work in progress and finished goods, allowance for inventory, raw materials and intersegment unrealised profit 

The main drivers of the slight YoY decline in the Coal segment's cost of revenues were as follows:

·    The consumption of auxiliary materials rose by 35.1% amid higher longwall move costs at the Raspadskaya mine.

·    Costs for services climbed by 20.8% because of higher costs for gas drainage at the Raspadskaya mine.

·    Transportation costs fell by 13.5% during the reporting period, primarily because of lower tariffs for the supply of railway wagons.

·    Staff costs were up because of higher mining volumes.

·    Other costs decreased in the reporting period, mainly because of an increase in raw materials of own production.

Coal segment gross profit

In H1 2021, the Coal segment's gross profit amounted to US$388 million, up from US$244 million a year earlier, primarily because of the surge in sales prices.

 

 

KEY RISKS AND UNCERTAINTIES

 

EVRAZ is exposed to numerous risks and uncertainties in its business. These may affect its ability to execute its strategy effectively in the remaining six months of the financial year and could cause the actual results to differ materially from expected and historical results.

The directors consider that the principal risks and uncertainties as summarised below and detailed on pages 92-95 of the EVRAZ plc 2020 annual report, copies of which are available at www.evraz.com, remain relevant in 2021 and the mitigating actions described continue to be appropriate.

Risks:

·    Global economic factors, industry conditions and cyclicality

·    Product competition

·    Cost effectiveness

·    Potential regulatory actions by governments, including trade, anti-monopoly and anti-dumping regulations, sanctions regimes, and other laws and regulations

·    Functional currency devaluation

·    HSE: environmental

·    HSE: health and safety

·    Business interruption

·    Digital effectiveness, as well as effective, efficient and continuous IT service

·    Capital projects and expenditures

The management continues to monitor emerging and developing risks and to implement preventative measures to mitigate any potential adverse effect on the Group's business.

In H1 2021, EVRAZ experienced a few safety incidents, including a steam explosion at the EVRAZ Pueblo steelmaking facility in May that injured eight employees. The management is committed to transforming and enhancing the focus of the Group's health and safety programmes. Improvements include stronger measures to identify risk areas and prevent further incidents. For more details, see the "Health, Safety and Environment" section.

Despite favourable market conditions, the pandemic has still affected the global economy significantly. In 2020, EVRAZ established a crisis management centre. The senior management continue to monitor the situation daily. The Board of Directors receives regular updates about the impact on the Group's operational, commercial and financial situation. EVRAZ has numerous safety measures in place to protect its people and ensure continued operations. Throughout H1 2021, the Group worked to prevent the spread of COVID-19 at its assets. EVRAZ is taking all necessary efforts to vaccinate employees and identify infections promptly. A significant part of the office staff is still working remotely. Most of the Group's businesses were relatively unaffected by the pandemic. For more details, see the "Impact of COVID-19" section.

Given the heightened attention to the environmental aspects of its operations around the world, EVRAZ increased the weighting of the HSE: environmental risk factor in 2020. The Group is developing and implementing numerous programmes to reduce harmful emissions and mitigate the negative environmental impacts of production. The decision-making process in place at EVRAZ considers the goals set in the Group's Environmental Strategy 2030.

The Environmental Strategy 2030 serves as a roadmap for improving environmental performance by assessing climate risks, applying best environmental practices and working to meet stakeholder expectations. In February 2021, the environmental impact mitigation goals of this strategy were published in the 2020 annual report.

During H1 2021 there was a very significant increase in demand for and prices of almost all of the Group's products leading to the Group's strong financial performance. The management of EVRAZ plc has considered the Group's cash flow forecasts for the period to 31 December 2022 being its going concern assessment period, forecasting both liquidity and covenant compliance. It has evaluated various financial performance scenarios, including a base case, a pessimistic case reflecting a reduction in forecast prices below current market expectations and additional scenarios reflecting the possible demerger of the coal business. All these scenarios included the scheduled repayment of debt and the effect of the new export duties imposed by the government of the Russian Federation from 1 August to 31 December 2021. None of these scenarios take advantage of actions at management's disposal to further strengthen forecast liquidity, including the deferral of uncommitted capital expenditure.

EVRAZ also continues to monitor and assess other risks and uncertainties that were not recognised as principal, including employee, taxation, compliance, social and community, human-rights and other risks. While impact and probability analysis suggest that such risks could affect the Group's operations to some extent, the management believes that they are being managed adequately and does not consider them capable of seriously affecting the performance, future prospects or reputation of EVRAZ.

 

DIVIDENDS

 

Given the performance throughout 2021, EVRAZ has announced an interim dividend.

On 4 August 2021, the Board of Directors voted to disburse a total of US$802.3 million, or US$0.55 per share.

The record date is 13 August 2021 and payment date is 10 September 2021.

The interim dividend will be paid in US dollars, unless a shareholder elects to receive dividends in UK pounds sterling or euros. The last date for submitting a currency election will be 16 August 2021. All conversions will take place on or around 18 August 2021.

 

DIRECTOR'S RESPONSIBILITY STATEMENT

 

The directors confirm that, to the best of their knowledge, these interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 as adopted by the UK and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

An indication of important events that have occurred during the first six months and their impact on the consolidated interim financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

 

By order of the Board

Alexander Frolov

Chief Executive Officer

EVRAZ plc

 

4 August 2021

 

Definitions of selected alternative performance measures

The Group uses alternative performance measures (APMs) to improve comparability of information between reporting periods and business units, either by adjusting for uncontrollable or one-off factors which impact upon IFRS measures or, by aggregating measures, to aid the user of this report in understanding the activity taking place across the Group's portfolio.

EBITDA

EBITDA is determined as a segment's profit/(loss) from operations adjusted for social and social infrastructure maintenance expenses, impairment of assets, profit/(loss) on disposal of property, plant and equipment and intangible assets, foreign exchange gains/(losses) and depreciation, depletion and amortisation expense.

 

The EBITDA margin is calculated by dividing EBITDA by revenue.

EBITDA is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ' calculation of EBITDA may be different from the calculation used by other companies and therefore comparability may be limited.

See Note 3 of the consolidated financial statement for additional information and reconciliation with IFRS financial statements.

 

Free cash flow

Free cash flow represents EBITDA, net of non-cash items, less changes in working capital, income tax paid, interest paid and covenant reset charges, conversion premiums, premiums on early repurchase of bonds and realised gains/(losses) on interest payments under swap contracts, interest income and debt issue costs, less capital expenditure, including recorded in financing activities, purchases of subsidiaries, net of cash acquired, proceeds from sale of disposals classified as held for sale, net of transaction costs, less purchases of treasury shares for participants of the incentive plans, plus other cash flows from investing activities.

Free cash flow is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ' calculation of free cash flow may be different from the calculation used by other companies and therefore comparability may be limited.

See Calculation of free cash flow table in the Financial review section for additional information reconciliation with IFRS financial statements.

Cash and short-term bank deposits

Cash and short-term bank deposits is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ' calculation of cash and short‑term bank deposits may be different from the calculation used by other companies and therefore comparability may be limited.

Cash and short-term bank deposits calculation

(US$ million)

30 June

2021

31 December 2020

Change

 

Change, %

 

 

 

 

Cash and cash equivalents

1,415

1,627

(212)

(13.0)

Cash and short-term bank deposits

1,415

1,627

(212)

(13.0)

           

 

Total debt

Total debt represents the nominal value of loans and borrowings plus unpaid interest, finance lease liabilities, loans of assets classified as held for sale, and the nominal effect of cross-currency swaps on principal of ruble-denominated notes. Total debt is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ' calculation of total debt may be different from the calculation used by other companies and therefore comparability may be limited. The current calculation is different from that used for covenant compliance calculations.

Total debt has been calculated as follows:

(US$ million)

30 June

2021

31 December 2020

Change

 

Change, %

 

 

 

 

Long-term loans, net of current portion

4,002

3,759

243

6.5

Short-term loans and current portion of long-term loans

536

1,078

(542)

(50.3)

Add back: Unamortised debt issue costs and fair value adjustment to liabilities assumed in business combination

22

16

6

37.5

Nominal effect of cross-currency swaps on principal of ruble-denominated notes

35

43

(8)

(18.6)

Finance lease liabilities, including non-current portion

50

57

(7)

(12.3)

Finance lease liabilities, including current portion

31

30

1

3.3

Total debt

4,676

4,983

(307)

(6.2)

 

 

 

Net debt

Net debt represents total debt less cash and liquid short-term financial assets, including those related to disposals classified as held for sale. Net debt is not a measure under IFRS and should not be considered as an alternative to other measures of financial position. EVRAZ' calculation of net debt may be different from the calculation used by other companies and therefore comparability may be limited. The current calculation is different from that used for covenant compliance calculations.

Net debt has been calculated as follows:

(US$ million)

30 June

2021

31 December 2020

Change

 

Change, %

 

 

 

 

Total debt

4,676

4,983

(307)

(6.2)

Cash and cash equivalents

(1,415)

(1,627)

212

(13.0)

Net debt

3,261

3,356

(95)

(2.8)

 

CAPEX

Capital expenditure (CAPEX) is cash expenditure on property, plant and equipment. For internal reporting and analysis, CAPEX includes non-cash transactions related to CAPEX.

CAPEX has been calculated as follows:

(US$ million)

H1 2021

H1 2020

Change

 

Change, %

 

 

 

 

Purchases of property, plant and equipment and intangible assets

428

330

98

29.7

Purchases of property, plant and equipment on deferred terms

2

7

(5)

(71.4)

CAPEX

430

337

93

27.6

 

 

Labour productivity, US$/t

P=S/V

S - Labour Costs (asset and A-category subsidiaries), exclusive of tax, local currency (on Division consolidation sites with different currencies, US$)

V - production volume, tonnes (for steel assets: V - metal products shipped

 

Lost time injury frequency rate (LTIFR)

The KPI is calculated on a year-to-date basis for the company employees only.

LTIFR = X•1000000/Y

X is the total number of occupational injuries resulted in lost time among the Group's employees in the reporting period. Fatalities are not included.

Y is the actual total number of man-hours worked by all Group employees in the reporting period.

Semi-finished products cash costs, US$/t

Cash cost of semi-finished products is defined as the production cost less depreciation. The result is divided by production volumes of semi-finished steel products. Raw materials from EVRAZ coal and iron ore producers are accounted for on at-cost-basis. Costs of semi-finished steel products of EVRAZ NTMK and EVRAZ ZSMK are then weighted averaged by the total production volume of saleable semi-finished products.

Coking coal concentrate cash cost, US$/t

Cash cost of coking coal concentrate is defined as cost of revenues less depreciation and SG&A. The result is divided by sales volumes.

Iron ore products cash cost, US$/t

Cash cost of iron ore products is defined as cost of revenues less depreciation and SG&A. The result is divided by sales volumes.

 

Number of EBS transformations

Number of EBS transformations implemented at the key assets during the reporting year.

Customer focus and cost-cutting effects

Each project effect is calculated as an absolute deviation of targeted metric year to year multiplied by relevant price or volume depending on project's focus.

 

 

 

 

 

 

 

 

EVRAZ plc

 

 

Unaudited Interim Condensed

Consolidated Financial Statements

 

 

Six-month period ended 30 June 2021
 

 

 

 

 

 

 

EVRAZ plc

 

Unaudited Interim Condensed Consolidated Financial Statements

 

Six-month period ended 30 June 2021

 

 

 

 

 

Contents

 

 

 

Report on Review of Interim Condensed Consolidated Financial Statements

 

Unaudited Interim Condensed Consolidated Financial Statements

 

Unaudited Interim Condensed Consolidated Statement of Operations ...............................................

Unaudited Interim Condensed Consolidated Statement of Comprehensive Income .............................

Unaudited Interim Condensed Consolidated Statement of Financial Position .....................................

Unaudited Interim Condensed Consolidated Statement of Cash Flows ..............................................

Unaudited Interim Condensed Consolidated Statement of Changes in Equity .....................................

Selected Notes to the Unaudited Interim Condensed Consolidated Financial Statements ....................

 

 

 

 

INDEPENDENT REVIEW REPORT TO EVRAZ PLC

 

Conclusion

 

We have been engaged by EVRAZ plc (the Company) to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the Interim Condensed Consolidated Statement of Operations, Interim Condensed Consolidated Statement of Comprehensive Income, Interim Condensed Consolidated Statement of Financial Position, Interim Condensed Consolidated Statement of Cash Flows, Interim Condensed Consolidated Statement of Changes in Equity and related notes 1 to 15. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Basis for Conclusion

 

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

As disclosed in note 2, the annual financial statements of the Group will be prepared in accordance with UK adopted IFRSs. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

 

 

Responsibilities of the directors

 

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

Auditor's Responsibilities for the review of the financial information

 

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

 

 

Use of our report

 

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

 

 

 

 

 

Ernst & Young LLP

London

4 August 2021

 

Unaudited Interim Condensed Consolidated Statement of Operations

 

(In millions of US dollars, except for per share information)

 

 

 

 

Six-month period

ended 30 June

 

Notes

2021

2020

Revenue

 

 

 

Sale of goods

3

$       6,055

$       4,854

Rendering of services

3

123

129

 

 

6,178

4,983

Cost of revenue

 

(3,633)

(3,488)

Gross profit

 

2,545

1,495

 

 

 

 

Selling and distribution costs

 

(414)

(421)

General and administrative expenses

 

(288)

(278)

Social and social infrastructure maintenance expenses

 

(16)

(17)

Gains/(losses) on disposal of property, plant and equipment, net

 

(1)

1

Impairment of non-financial assets

5

(4)

(108)

Foreign exchange gains/(losses), net

 

(30)

242

Other operating income

 

6

11

Other operating expenses

 

(49)

(34)

Profit from operations

 

1,749

891

 

 

 

 

Interest income

 

3

4

Interest expense

 

(124)

(168)

Share of profits/(losses) of joint ventures and associates

8

5

3

Gains/(losses) on financial assets and liabilities, net

 

(4)

(40)

Gains/(losses) on disposal groups classified as held for sale, net

 

2

1

Other non-operating gains/(losses), net

 

-

9

Profit before tax

 

1,631

700

 

 

 

 

Income tax expense

6

(419)

(187)

Net profit

 

$       1,212

$          513

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Equity holders of the parent entity

 

$       1,198

$          506

Non-controlling interests

 

14

7

 

 

$       1,212

$          513

Earnings per share:

 

 

 

for profit attributable to equity holders of the parent entity, basic, US dollars

11

$         0.82

$         0.35

for profit attributable to equity holders of the parent entity, diluted, US dollars

11

$         0.82

$         0.35

 

 

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

 

 

 

 

Unaudited Interim Condensed Consolidated Statement of Comprehensive Income

 

(In millions of US dollars)

 

 

 

Six-month period

ended 30 June

 

Notes

2021

2020

 

 

 

 

Net profit

 

$       1,212

$          513

 

 

 

 

Other comprehensive income/(loss)

 

 

 

 

 

 

 

Other comprehensive income to be reclassified to profit or loss in subsequent periods

 

 

 

 

 

 

 

Exchange differences on translation of foreign operations into presentation currency

 

119

(664)

 

 

 

 

Effect of translation to presentation currency of the Group's joint ventures and associates

8

2

(10)

 

 

121

(674)

Items not to be reclassified to profit or loss in subsequent periods

 

 

 

 

 

 

 

Gains/(losses) on re-measurement of net defined benefit liability

 

44

(40)

Income tax effect

 

(11)

7

 

 

33

(33)

 

 

 

 

Total other comprehensive income/(loss),  net of tax

 

154

(707)

Total comprehensive income/(loss), net of tax

 

$       1,366

$         (194)

 

 

 

 

Attributable to:

 

 

 

Equity holders of the parent entity

 

$       1,348

$         (185)

Non-controlling interests

 

18

(9)

 

 

$       1,366

$         (194)

 

 

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

 

 

Unaudited Interim Condensed Consolidated Statement of Financial Position

 

(In millions of US dollars)

 

 

Notes

30 June

2021

31 December

2020

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

7

     $        4,485

     $        4,314

Intangible assets other than goodwill

 

140

138

Goodwill

 

460

457

Investments in joint ventures and associates

8

91

79

Deferred income tax assets

 

239

245

Other non-current financial assets

 

23

26

Other non-current assets

 

51

45

 

 

5,489

5,304

Current assets

 

 

 

Inventories

 

1,363

1,085

Trade and other receivables

 

529

378

Prepayments

 

76

80

Receivables from related parties

9

11

10

Income tax receivable

 

34

46

Other taxes recoverable

 

196

178

Other current financial assets

 

12

2

Cash and cash equivalents

10

1,415

1,627

 

 

3,636

3,406

 

 

 

 

Total assets

 

     $        9,125

     $        8,710

 

 

 

 

Equity and liabilities

 

 

 

Equity

 

 

 

Equity attributable to equity holders of the parent entity

 

 

 

Issued capital

11

     $             75

     $             75

Treasury shares

11

(148)

(154)

Additional paid-in capital

 

2,516

2,510

Revaluation surplus

 

109

109

Accumulated profits

 

2,699

2,187

Translation difference

 

(3,819)

(3,936)

 

 

1,432

791

Non-controlling interests

 

154

129

 

 

1,586

920

Non-current liabilities

 

 

 

Long-term loans

12

4,002

3,759

Deferred income tax liabilities

 

256

253

Employee benefits

 

212

240

Provisions

 

278

272

Lease liabilities

 

50

57

Other long-term liabilities

 

104

102

 

 

4,902

4,683

Current liabilities

 

 

 

Trade and other payables

 

1,429

1,264

Contract liabilities

 

251

314

Payables to related parties

9

36

38

Short-term loans and current portion of long-term loans

12

536

1,078

Lease liabilities

 

31

30

Income tax payable

 

96

108

Other taxes payable

 

201

169

Provisions

 

57

41

Amounts payable under put options for shares in subsidiaries

4

-

65

 

 

2,637

3,107

 

 

 

 

Total liabilities

 

7,539

7,790

 

 

 

 

Total equity and liabilities

 

     $        9,125

     $        8,710

 

 

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

 

 

These Unaudited Interim Condensed Consolidated Financial Statements were approved by the Board of Directors on 4 August 2021 and signed on its behalf by:

                                  

 

 

                                       Alexander Frolov, Director

 

Unaudited Interim Condensed Consolidated Statement of Cash Flows

 

(In millions of US dollars)

 

 

Six-month period ended

30 June

 

2021

2020

Cash flows from operating activities

 

 

Net profit

  $     1,212

  $       513

Adjustments to reconcile net profit/(loss) to net cash flows from operating activities:

 

 

Deferred income tax (benefit)/expense

(3)

(119)

Depreciation, depletion and amortisation

282

300

(Gain)/loss on disposal of property, plant and equipment

1

(1)

Impairment of non-financial assets

4

108

Foreign exchange (gains)/losses, net

30

(242)

Interest income

(3)

(4)

Interest expense

124

168

Share of (profits)/losses of associates and joint ventures

(5)

(3)

(Gain)/loss on financial assets and liabilities, net

4

40

(Gain)/loss on disposal groups classified as held for sale, net

(2)

(1)

Other non-operating (gains)/losses, net

-

(9)

Changes in provisions, employee benefits and other long-term assets and liabilities

14

(6)

Expense arising from equity-settled awards  

6

5

 

1,664

749

Changes in working capital:

 

 

Inventories

(241)

59

Trade and other receivables

(145)

5

Prepayments

6

(3)

Receivables from/payables to related parties

(1)

33

Taxes recoverable

-

(30)

Other assets

(10)

-

Trade and other payables

192

(49)

Contract liabilities

(69)

(11)

Taxes payable

15

34

Other liabilities

(1)

(6)

Net cash flows from operating activities

1,410

781

 

Cash flows from investing activities

 

 

Issuance of loans receivable

-

(1)

Short-term deposits at banks, including interest

2

3

Purchases of property, plant and equipment and intangible assets

(428)

(330)

Proceeds from disposal of property, plant and equipment

2

4

Contributions to associates/joint ventures

(5)

-

Proceeds from sale of disposal groups classified as held for sale, net of cash disposed and transaction costs

2

3

Dividends received

-

1

Other investing activities, net

-

1

Net cash flows used in investing activities

(427)

(319)

 

 

 

 

 

 

 

Continued on the next page

 

Unaudited Interim Condensed Consolidated Statement of Cash Flows
(continued)

 

(In millions of US dollars)

 

 

 

Six-month period ended

30 June

 

2021

2020

Cash flows from financing activities

 

 

Payments for the purchase of non-controlling interests (Note 4)

     $        (38)

     $        (22)

Proceeds from bank loans and notes (Note 12)

1,698

921

Repayment of bank loans and notes, including interest (Note 12)

(2,097)

(778)

Net proceeds from/(repayment of) bank overdrafts and credit lines, including interest (Note 12)

2

(26)

Payments under covenants reset (Note 12)

(10)

-

Gain/(loss) on derivatives not designated as hedging instruments

6

-

Purchases of property, plant and equipment on deferred terms

(2)

(7)

Lease payments, including interest

(15)

(17)

Dividends paid by the parent entity to its shareholders (Note 11)

(729)

(581)

Dividends paid by the Group's subsidiaries to non-controlling shareholders

(4)

(3)

Net cash flows used in financing activities

(1,189)

(513)

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

(6)

(8)

 

 

 

Net decrease in cash and cash equivalents

(212)

(59)

Cash and cash equivalents at beginning of year

1,627

1,423

Cash and cash equivalents at end of period

     $     1,415

     $     1,364

Supplementary cash flow information:

 

 

  Cash flows during the period:

 

 

Interest paid

     $      (139)

     $      (143)

Interest received

2

3

Income taxes paid (included in operating activities)

(424)

(291)

 

 

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

 

 

Unaudited Interim Condensed Consolidated Statement of Changes in Equity 

 

(In millions of US dollars)

 

 

 

 

Attributable to equity holders of the parent entity

 

 

 

Issued
capital

Treasury shares

Additional

paid-in

capital

Revaluation surplus

Unrealised gains and losses

Accumulated profits

Translation difference

Total

Non-controlling interests

Total

Equity

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2020

                 $          75

                 $       (154)

                 $        2,510

                 $            109

$               -

                     $           2,187

                 $       (3,936)

                 $          791

                 $          129

                 $          920

Net profit

-

-

-

-

-

1,198

-

1,198

14

1,212

Other comprehensive income/(loss)

-

-

-

-

-

33

117

150

4

154

Total comprehensive income/(loss) for the period

-

-

-

-

-

1,231

117

1,348

18

1,366

Acquisition of non-controlling interests in subsidiaries (Note 4)

-

-

-

-

-

(19)

-

(19)

(19)

(38)

Reversal of derecognition of non-controlling interest in subsidiaries (Note 4)

-

-

-

-

-

35

-

35

30

65

Transfer of treasury shares to participants of the Incentive Plans

-

6

-

-

-

(6)

-

-

-

-

Share-based payments

-

-

6

-

-

-

-

6

-

6

Dividends declared by the parent entity to its shareholders (Note 11)

-

-

-

-

-

(729)

-

(729)

-

(729)

Dividends declared by the Group's subsidiaries to non-controlling shareholders

-

-

-

-

-

-

-

-

(4)

(4)

At 30 June 2021

                 $          75

                 $       (148)

                 $        2,516

                 $            109

$               -

                     $           2,699

                 $       (3,819)

                 $       1,432

                 $          154

                 $       1,586

                       

 

  

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

 

 

 

Unaudited Interim Condensed Consolidated Statement of Changes in Equity (continued)

 

(In millions of US dollars)

 

 

 

 

 

 

Attributable to equity holders of the parent entity

 

 

 

Issued
capital

Treasury shares

Additional

paid-in

capital

Revaluation surplus

Unrealised gains and losses

Accumulated profits

Translation difference

Total

Non-controlling interests

Total

Equity

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2019

                 $          75

                 $       (169)

                 $        2,492

                 $            109

$               -

                     $           2,217

                 $      (3,048)

                 $       1,676

                 $          252

                 $       1,928

Net profit

-

-

-

-

-

506

-

506

7

513

Other comprehensive income/(loss)

-

-

-

-

-

(33)

(658)

(691)

(16)

(707)

Total comprehensive income/(loss) for the period

-

-

-

-

-

473

(658)

(185)

(9)

(194)

Acquisition of non-controlling interests in subsidiaries (Note 4)

-

-

6

-

-

-

-

6

(28)

(22)

Transfer of treasury shares to participants of the Incentive Plans

-

15

-

-

-

(15)

-

-

-

-

Share-based payments

-

-

5

-

-

-

-

5

-

5

Dividends declared by the parent entity to its shareholders

-

-

-

-

-

(581)

-

(581)

-

(581)

Dividends declared by the Group's subsidiaries to non-controlling shareholders

-

-

-

-

-

-

-

-

(3)

(3)

At 30 June 2020

                 $          75

                 $       (154)

                 $        2,503

                 $            109

$               -

                     $           2,094

                 $       (3,706)

                 $          921

                 $          212

                 $       1,133

                       

 

 

The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.

 

Selected Notes

 

to the Unaudited Interim Condensed Consolidated Financial Statements

 

Six-month period ended 30 June 2021

 

1.       Corporate Information

 

These interim condensed consolidated financial statements were authorised for issue by the Board of Directors of EVRAZ plc on 4 August 2021.

 

EVRAZ plc ("EVRAZ plc" or "the Company") was incorporated on 23 September 2011 as a public company under the laws of the United Kingdom with the registered number 7784342. The Company's registered address is 2 Portman street, London, W1H 6DU, United Kingdom.

 

The Company, together with its subsidiaries (the "Group"), is involved in the production and distribution of steel and related products and coal and iron ore mining. In addition, the Group produces vanadium products. The Group is one of the largest steel producers globally.

 

In the six-month period ended 30 June 2021 EVRAZ plc was jointly controlled by a group of 3 shareholders: Greenleas International Holdings Limited (BVI), Abiglaze Limited (Cyprus) and Crosland Global Limited (Cyprus).

 

 

2.       Significant Accounting Policies

 

Basis of Preparation

 

The annual financial statements of EVRAZ plc will be prepared in accordance with United Kingdom adopted international accounting standards ("UK adopted IFRSs"). These interim condensed consolidated financial statements have been prepared in accordance with UK adopted International Accounting Standard ("IAS") 34 "Interim Financial Reporting". Accordingly, these interim condensed consolidated financial statements do not include all the information and disclosures required for a complete set of financial statements, and should be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2020.

 

The interim condensed consolidated financial statements do not constitute statutory accounts as defined by Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2020 have been filed with the Registrar of Companies. The auditor's report under section 495 of the Companies Act 2006 in relation to those accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

Operating results for the six-month period ended 30 June 2021 are not necessarily indicative of the results that may be expected for the year ending 31 December 2021.

 

Going Concern

 

These interim condensed consolidated financial statements have been prepared on a going concern basis.

 

As disclosed in Note 13, macroeconomic uncertainty and instability have arisen due to the COVID‑19 pandemic. However, the majority of the Group's businesses continue to be relatively unaffected with no significant issues for production, supply or shipments.

 

Moreover, during the first half of 2021 there was a very significant increase in demand for and prices of almost all of the Group's products leading to the Group's strong financial performance.

 

 

 

2.       Significant Accounting Policies (continued)

 

Basis of Preparation (continued)

 

Going Concern (continued)

 

The management of EVRAZ plc has considered the Group's cash flow forecasts for the period to 31 December 2022 being its going concern assessment period, forecasting both liquidity and covenant compliance. It has evaluated various financial performance scenarios, including a base case, a pessimistic case reflecting a reduction in forecast prices below current market expectations and additional scenarios reflecting the possible demerger of the coal business (Note 2). All these scenarios included the scheduled repayment of debt (Note 12) and the effect of the new export duties imposed by the government of the Russian Federation from 1 August to 31 December 2021 (Note 15). None of these scenarios take advantage of actions at management's disposal to further strengthen forecast liquidity, including the deferral of uncommitted capital expenditure.

 

Based on this analysis and other currently available facts and circumstances directors and management have a reasonable expectation that the Company and the Group have adequate resources to continue as a going concern.

 

Possible Demerger of the Coal Business

 

In January 2021, the Board of directors agreed to proceed with the possible demerger of the coal business headed by Raspadskaya. However, at 30 June 2021 it was still uncertain whether this transaction would be finally approved by shareholders and executed.

 

The coal segment meets the criteria of a major business line, consequently, if executed, this demerger shall be treated as discontinued operations. Management believes that at 30 June 2021 and at the date of authorisation of these consolidated financial statements for issue the coal segment did not represent a discontinued operation as certain procedures requiring the approval of 75%+1 of EVRAZ plc's shareholders have not been executed, thus the demerger is not yet considered as highly probable within 1 year.

 

As such, the classification, measurement and presentation requirements of IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" should not be applied in the consolidated financial statements for the 6-month period ended 30 June 2021.

 

Changes in Accounting Policies

 

In the preparation of the interim condensed consolidated financial statements, the Group followed the same accounting policies and methods of computation as compared with those applied in the complete consolidated financial statements for year ended 31 December 2020, except for the adoption of new standards and interpretations and revisions of existing IAS as of 1 January 2021.

 

New/Revised Standards and Interpretations Adopted in 2021

 

§ Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16: Interest Rate Benchmark Reform, phase 2

 

Over the past few years global financial regulators developed a reform aimed at replacement of benchmark interbank offered rates ("IBORs"), such as LIBOR and EURIBOR, with new "official" benchmark rates, known as alternative risk-free rates. This reform caused changes to financial reporting requirements under IFRS. The International Accounting Standards Board tackled the changes in two phases.

 

2.       Significant Accounting Policies (continued)

 

Changes in Accounting Policies (continued)

 

New/Revised Standards and Interpretations Adopted in 2021 (continued)

 

§ Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16: Interest Rate Benchmark Reform, phase 2 (continued)

 

►        Phase 1 amended specific hedge accounting requirements where uncertainty could arise in the run-up to transition;

►        Phase 2 addressed potential financial reporting issues that may arise when IBORs are either reformed or replaced.

 

In 2017 it was announced that LIBOR, one of the most widely used benchmarks, will be discontinued after December 2021 (subsequently amended to June 2023), as panel banks will no longer be required to submit the quotes used to construct it.

The Group has a number of short-term and long-term borrowings with variable interest rates.  It is expected that IBORs will be replaced by Secured Overnight Financing Rate ("SOFR"). All new loan agreements contain appropriate fallback language.

 

3.       Segment Information

 

The following tables present measures of segment profit or loss based on management accounts.

 

Six-month period ended 30 June 2021

 

US$ million

Steel

Steel,

North America

Coal

Other operations

Eliminations

Total

Revenue

 

 

 

 

 

 

Sales to external customers

   $      4,581

   $          972

   $          556

   $            69

   $              -

   $      6,178

Inter-segment sales

31

-

275

169

(475)

-

Total revenue

4,612

972

831

238

(475)

6,178

 

 

 

 

 

 

 

Segment result - EBITDA

 

Six-month period ended 30 June 2020

 

US$ million

Steel

Steel,

North America

Coal

Other operations

Eliminations

Total

Revenue

 

 

 

 

 

 

Sales to external customers

   $      3,392

   $      1,028

   $          498

   $            65

   $              -

   $      4,983

Inter-segment sales

41

-

283

141

(465)

-

Total revenue

3,433

1,028

781

206

(465)

4,983

 

 

 

 

 

 

 

Segment result - EBITDA

 

 

 

3.       Segment Information (continued)

 

The following table shows a reconciliation of revenue and EBITDA used by management for decision making and revenue and profit or loss before tax per the consolidated financial statements prepared under IFRS.

 

Six-month period ended 30 June 2021

 

US$ million

Steel

Steel,

North America

Coal

Other operations

Eliminations

Total

Revenue per IFRS financial statements

   $     4,612

   $       972

   $         831

   $        238

   $      (475)

   $     6,178

 

 

 

 

 

 

 

EBITDA

   $     1,811

   $          64

   $         346

   $            5

   $      (12)

   $     2,214

Unrealised profits adjustment

(4)

-

4

-

(1)

(1)

Reclassifications and other adjustments

(44)

(11)

(8)

1

-

(62)

 

(48)

(11)

(4)

1

(1)

(63)

EBITDA based on IFRS financial statements

   $     1,763

   $         53

   $         342

   $            6

   $        (13)

   $    2,151

Unallocated subsidiaries

 

 

 

 

 

             (69)

 

 

 

 

 

 

   $    2,082

 

 

 

 

 

 

 

Social and social infrastructure maintenance expenses

(12)

-

(2)

-

-

(14)

Depreciation, depletion and amortisation expense

(134)

(61)

(83)

(2)

-

(280)

Impairment of non-financial assets

(2)

-

(2)

-

-

(4)

Loss on disposal of property, plant and equipment and intangible assets

-

-

(1)

-

-

(1)

Foreign exchange gains/(losses), net

(27)

15

26

-

-

14

 

1,588

7

280

4

(13)

1,797

Unallocated income/(expenses), net

 

 

 

 

 

(48)

Profit/(loss) from operations

 

 

 

 

 

   $    1,749

 

 

 

 

 

 

 

Interest income/(expense), net

 

 

 

 

 

(121)

Share of profits/(losses) of joint ventures and associates

 

 

 

 

 

5

Gain/(loss) on financial assets and liabilities

 

 

 

 

 

(4)

Gain/(loss) on disposal groups classified as held for sale, net

 

 

 

 

 

2

Profit/(loss) before tax

 

 

 

 

 

   $    1,631

 

 

 

 

3. Segment Information (continued)

 

Six-month period ended 30 June 2020

 

US$ million

Steel

Steel,

North America

Coal

Other operations

Eliminations

Total

Revenue per IFRS financial statements

   $     3,433

   $    1,028

   $         781

   $        206

   $      (465)

   $     4,983

 

 

 

 

 

 

 

EBITDA

   $        919

   $         (19)

   $        206

   $            9

 $        17

   $     1,132

Unrealised profits adjustment

(26)

-

2

-

-

(24)

Reclassifications and other adjustments

23

(2)

10

(1)

-

30

 

(3)

(2)

12

(1)

-

6

EBITDA based on IFRS financial statements

   $        916

   $        (21)

   $         218

   $            8

   $          17

   $    1,138

Unallocated subsidiaries

 

 

 

 

 

             (65)

 

 

 

 

 

 

   $    1,073

 

 

 

 

 

 

 

Social and social infrastructure maintenance expenses

(12)

-

(1)

-

-

(13)

Depreciation, depletion and amortisation expense

(123)

(72)

(100)

(3)

-

(298)

Impairment of non-financial assets

(3)

(105)

-

-

-

(108)

Loss on disposal of property, plant and equipment and intangible assets

2

(1)

-

-

-

1

Foreign exchange gains/(losses), net

28

(39)

73

-

-

62

 

808

(238)

190

5

17

717

Unallocated income/(expenses), net

 

 

 

 

 

174

Profit/(loss) from operations

 

 

 

 

 

   $       891

 

 

 

 

 

 

 

Interest income/(expense), net

 

 

 

 

 

(164)

Share of profits/(losses) of joint ventures and associates

 

 

 

 

 

3

Gain/(loss) on financial assets and liabilities

 

 

 

 

 

(40)

Gain/(loss) on disposal groups classified as held for sale, net

 

 

 

 

 

1

Other non-operating gains/(losses), net

 

 

 

 

 

9

Profit/(loss) before tax

 

 

 

 

 

   $       700

 

In the six-month period ended 30 June 2021 and 2020, the Group reversed an allowance for net realisable value of inventory of $1 million and $Nil, respectively.

The material changes in property, plant and equipment during the six-month period ended 30 June 2021 other than those disclosed above are presented below:

 

US$ million

Steel

Steel,

North America

Coal

Other operations

Unallocated

Total

Additions

   $          181

   $          141

   $            71

   $              -

   $              -

   $         393

 

The material changes in property, plant and equipment during the six-month period ended 30 June 2020 were as follows:

 

US$ million

Steel

Steel,

North America

Coal

Other operations

Unallocated

Total

Additions

   $          187

   $            46

   $          110

   $              -

   $              1

   $         344

 

 

3.       Segment Information (continued)

 

The revenues from contracts with external customers for each group of similar products and services and rental income are presented in the following table:

 

 

Six-month period ended 30 June

US$ million

2021

2020

 

 

 

Steel

 

 

Construction products

$            1,460

$              939

Flat-rolled products

105

68

Railway products

482

593

Semi-finished products

1,693

1,233

Other steel products

261

170

Other products

208

125

Iron ore

101

63

Vanadium in slag

37

31

Vanadium in alloys and chemicals

193

133

Rendering of services

41

37

 

4,581

3,392

Steel, North America

 

 

Construction products

134

93

Flat-rolled products

357

152

Railway products

185

173

Tubular products

236

452

Other products

49

141

Rendering of services

11

17

 

972

1,028

Coal

 

 

Coal

545

483

Other products

9

5

Rendering of services

2

10

 

556

498

Other operations

 

 

Rendering of services

69

65

 

 

 

 

$            6,178

$            4,983

 

 

In the six-month periods ended 30 June 2021 and 2020 revenue from rendering of services included rental income of $12 million and $13 million, respectively.

 

 

3.       Segment Information (continued)

 

Distribution of the Group's revenues by geographical area based on the location of customers was as follows:

 

 

Six-month period ended 30 June

US$ million

2021

2020

 

 

 

CIS

 

 

Russia

$            2,468

$            1,848

Kazakhstan

231

151

Ukraine

92

31

Others

81

127

 

2,872

2,157

America

 

 

USA

609

638

Canada

385

391

Mexico

159

15

Others

53

9

 

1,206

1,053

Asia

 

 

Taiwan

548

242

China

250

524

Philippines

199

191

Indonesia

152

137

Republic of Korea

119

133

Thailand

114

29

Japan

66

47

Vietnam

54

26

Others

87

175

 

1,589

1,504

Europe

 

 

European Union

247

150

Turkey

193

57

Others

15

5

 

455

212

Africa

 

 

Kenya

46

34

Egypt

10

5

Others

-

17

 

56

56

Other countries

-

1

 

$            6,178

$            4,983

 

 

4.       Changes in Composition of the Group

 

Purchase of Non-controlling Interests

 

In 2020, in the course of the Group's business and ownership structure reorganisation by way of purchase of Yuzhkuzbassugol by Raspadskaya from NTMK, the Group recognised liabilities of Raspadskaya amounting to $65 million to non-controlling shareholders who voted against or did not vote for this decision. Also the Group derecognised the non-controlling interests relating to the shareholders, which have a put option over their holding (4.25% of the total shares of Raspadskaya), with the carrying value of $30 million. The difference between the amount of the recognised liability and the carrying value of the derecognised non-controlling interests was charged to accumulated profits.

 

On 1 February 2021, Raspadskaya completed the collection of the share repurchase requests from eligible non-controlling shareholders. The actual number of shares to be repurchased amounted to 2.51% of Raspadskaya's share capital, which is equal to a $38 million liability.  On expiry of the put option in February 2021 the related amounts recognised in 2020 were reversed and the purchase of non-controlling interests ($19 million) was recorded. The excess of consideration over the carrying values of non-controlling interests acquired amounting to $19 million was charged to the consolidated accumulated profits.

 

In the six-month period ended 30 June 2020, the Group acquired an additional 2.3% ownership interest in Raspadskaya for cash consideration of $22 million. The excess of the carrying values of non-controlling interests acquired over consideration amounting to $6 million was credited to additional paid-in capital.

 

Exercise of Put Option by Non-controlling Shareholders

 

In June 2020, the non-controlling shareholder, which had a 39.98% ownership interest in Mezhegeyugol, a  coal subsidiary of the Group, sold its interest to the Group. In March 2017, when the Group received the rights to the beneficial interests relating to this non-controlling interest following the signing of a put option agreement, this interest was derecognised and the put option liability of $60 million was accrued by the Group. From March 2017 and until the put option exercise the Group accrued $9 million interest on this liability. The consideration for the purchased non-controlling interest comprised of a non-cash settlement of a  loan owed to the Group with a carrying value of $30 million, which approximated the fair value, and $39 million of cash consideration, which was paid in the second half of 2020.

 

5.       Impairment of Non-current Assets

 

The Group performs impairment testing when indicators of impairment are identified. In the six-month period ended 30 June 2021, there were no indicators of impairment identified at the Group's cash-generating units level, even after taking into consideration new export duties introduced by the government of the Russian Federation (Note 15). However, the Group analysed its property, plant and equipment for functional obsolescence and, as a result, recognised $4 million of impairment loss.

                                                                                                  

In the comparative period (6 months ended 30 June 2020) as a result of impairment testing the Group recognised a $99 million impairment loss with respect to the Large diameter pipes cash-generating unit, which was allocated to goodwill ($65 million), intangible assets ($3 million) and property, plant and equipment ($31 million). The impairment was caused by the reassessment of demand on the steel, oil and commodities markets. In addition, the Group recognised and reversed losses in relation to impairment of certain functionally obsolete items of property, plant and equipment.

 

 

 

 

 

6.       Income Taxes

 

Major components of income tax expense were as follows:

 

 

 

Six-month period

ended 30 June

US$ million

2021

2020

Current income tax expense

$            (421)

$            (300)

Adjustment in respect of income tax of previous years

(1)

(6)

Deferred income tax benefit/(expense) relating to origination and reversal of temporary differences

3

119

 

 

 

Income tax expense reported in the consolidated statement of operations

$            (419)

$            (187)

 

In the six-month period ended 30 June 2021 and 2020, deferred tax benefit/(expense) relating to the undistributed earnings of the Group's subsidiaries amounted to $(43) million and $22 million, respectively.

 

 

7.       Property, Plant and Equipment

 

The movement in property, plant and equipment (including right-of-use assets) for the six-month period ended 30 June 2021 was as follows:

 

US$ million

Land

Buildings

and constructions

Machinery and equipment

Transport and motor vehicles

Mining assets

Other assets

Assets under construction

Total

At 31 December 2020, cost, net of accumulated depreciation

  $       97

  $          883

  $      1,544

  $        126

$         974

  $        10

  $          680

   $     4,314

Reclassifications between categories

-

(45)

45

-

-

-

-

-

Additions

-

-

-

10

-

-

383

393

Assets put into operation

-

36

174

15

22

-

(247)

-

Disposals

-

(1)

(1)

-

-

-

(1)

(3)

Depreciation and depletion charge

-

(39)

(178)

(20)

(38)

(2)

-

(277)

Impairment losses recognised in statement of operations

-

-

(2)

-

(1)

-

(1)

(4)

Change in site restoration and decommissioning provision

-

-

-

-

1

-

-

1

Government grants

-

-

-

-

-

-

(22)

(22)

Translation difference

1

18

28

1

22

-

13

83

At 30 June 2021, cost, net of accumulated depreciation

  $       98

  $          852

  $      1,610

  $        132

$         980

  $          8

  $          805

   $     4,485

 

 

In the six-month periods ended 30 June 2021 and 2020, the depreciation expense relating to the right-of-use assets amounted to $13 million and $15 million, respectively, and interest expense and payments relating to the lease liabilities amounted to $2 million and $3 million, respectively. At 30 June 2021 and 31 December 2020, the carrying value of the right-of-use assets amounted to $81 million and $82 million, respectively. They were mostly represented by Transport and motor vehicles and Machinery and equipment.

 

 

8.       Investments in Joint Ventures and Associates

 

The movement in investments in joint ventures and associates during the six-month period ended 30 June 2021 was as follows:

 

US$ million

Timir

Streamcore

Other associates

Total

At 31 December 2020

    $           14

    $           54

    $            11

    $             79

Additions

-

-

5

5

Share of profit/(loss)

-

3

2

5

Translation difference

-

1

1

2

At 30 June 2021

    $           14

    $           58

    $            19

    $             91

 

9.       Related Party Disclosures

 

For the Group related parties include associates and joint venture partners, key management personnel and other entities that are under control or significant influence of the key management personnel or the Group's principal shareholders. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Transactions with related parties were as follows for the six-month periods ended 30 June:

 

 

Sales to
related parties

Purchases from

related parties

US$ million

2021

2020

2021

2020

 

 

 

 

 

Genalta Recycling Inc.

$                 -

$                 -

$                 4

$                 7

Nakhodka Trade Sea Port

-

-

37

37

Vtorresource-Pererabotka

2

2

320

154

Yuzhny GOK

5

3

-

-

Other entities

-

1

-

-

 

 

 

 

 

 

$                 7

$                 6

$             361

$             198

 

Amounts owed by/to related parties were as follows:

 

 

Amounts due from
related parties

Amounts due to
related parties

US$ million

30 June 
2021

31 December

2020

30 June
2021

31 December

2020

 

 

 

 

 

Loans

 

 

 

 

Timir

$                 9

$                 9

$                 -

$                  -

 

 

 

 

 

Trade balances

 

 

 

 

Nakhodka Trade Sea Port

-

-

6

10

Vtorresource-Pererabotka

-

-

28

28

Other entities

2

1

2

-

 

11

10

36

38

Less: allowance for expected credit losses

-

-

-

-

 

$               11

$                10

$               36

$                38

 

Compensation to Key Management Personnel

 

In the six-month periods ended 30 June 2021 and 2020, key management personnel totalled 27 and 28 persons, respectively. Total compensation to key management personnel was included in general and administrative expenses and consisted of the following in the six-month periods ended 30 June:

 

US$ million

2021

2020

 

 

 

Salary

$                6

$                7

Performance bonuses

7

4

Social security taxes

2

2

Share-based payments

3

5

 

$              18

$              18

 

10.     Cash and Cash Equivalents

 

Cash and cash equivalents were denominated in the following currencies:

 

 

US$ million

30 June

2021

31 December 2020

 

 

 

US dollar

   $        1,226

   $        1,461

Euro

50

34

Russian rouble

124

124

Others

15

8

 

   $        1,415

   $        1,627

 

The above cash and cash equivalents mainly consist of cash at banks.

 

 

11.     Equity

 

Share Capital

 

Number of shares

30 June

2021

31 December 2020

 

 

 

Issued and fully paid

 

 

Ordinary shares of $0.05 each

1,506,527,294

1,506,527,294

 

Treasury Shares

 

Number of shares

30 June

2021

31 December 2020

 

 

 

Number of treasury shares

47,837,582

49,654,691

 

In the six-month period ended 30 June 2021, 1,817,109 shares with an associated cost of $6 million were transferred to participants of Incentive Plans.

 

Earnings per Share

 

Earnings per share are calculated by dividing the net income attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the potential dilutive ordinary shares into ordinary shares.

 

The following reflects the profit and share data used in the basic and diluted earnings per share computations:

 

 

Six-month period
ended 30 June

 

2021

2020

Weighted average number of ordinary shares outstanding during the period

1,457,354,488

1,453,216,654

Effect of dilution: shares under Incentive plans

       7,351,094

         8,770,537

Weighted average number of ordinary shares adjusted for the effect of dilution

1,464,705,582

1,461,987,191

 

 

 

Profit for the period attributable to equity holders of the parent entity, US$ million

$            1,198

$              506

Basic earnings per share

$             0.82

$             0.35

Diluted earnings per share

$             0.82

$             0.35

 

11.     Equity (continued)

 

Earnings per Share (continued)

 

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these interim condensed consolidated financial statements.

 

Dividends

 

Dividends declared by EVRAZ plc during the six-month period ended 30 June 2021 were as follows:

 

Date of declaration

To holders registered at

Dividends declared, US$ million

US$ per share

 

 

 

 

24/02/2021

12/03/2021

437

0.30

15/04/2021

28/05/2021

292

0.20

 

 

12.     Loans and Borrowings

 

Short-term and long-term loans and borrowings were as follows:

 

US$ million

30 June 2021

Non-current

Current

31 December 2020

Non-current

Current

 

 

 

 

 

 

Bank loans

$ 2,324

$ 2,298

$ 26

$ 1,608

$ 1,554

$ 54

 

 

 

 

 

 

 

US dollar-denominated

 

 

 

 

 

 

8.25% notes due 2021

-

-

-

735

-

735

6.75% notes due 2022

460

-

460

500

500

-

5.375% notes due 2023

750

750

-

750

750

-

5.25% notes due 2024

700

700

-

700

700

-

 

 

 

 

 

 

 

Rouble-denominated

 

 

 

 

 

 

12.60% rouble bonds due 2021

-

-

-

203

-

203

7.95% rouble bonds due 2024

276

276

-

271

271

-

 

 

 

 

 

 

 

Unamortised debt issue costs

(22)

(22)

-

(16)

(16)

-

Interest payable

50

-

50

86

-

86

 

$ 4,538

$ 4,002

$ 536

$ 4,837

$ 3,759

$ 1,078

 

Some of the loan agreements and terms and conditions of notes provide for certain covenants in respect of EVRAZ plc and its subsidiaries. The covenants impose restrictions in respect of certain transactions and financial ratios, including restrictions in respect of indebtedness and profitability. During the 1st half of 2021 the Group was in compliance with all financial and non-financial covenants. In the reporting period the Group paid $10 million in connection with the covenants reset relating to the potential demerger of the coal assets (Note  2). These charges will be amortised during the term of the respective notes and bank loans.

 

 

 

12.     Loans and Borrowings (continued)

 

The movement in loans and borrowings were as follows:

 

US$ million

2021

2020

 

 

 

1 January

   $         4,837

   $         4,739

 

 

 

Cash changes:

 

 

Cash proceeds from bank loans and notes, net of debt issues costs

1,698

921

Repayment of bank loans and notes, including interest

(2,097)

(778)

Net proceeds from/(repayment of) bank overdrafts and credit lines, including interest

2

(26)

Covenants reset charges

(10)

-

 

 

 

Non-cash changes:

 

 

Interest and other charges expensed

109

147

Effect of exchange rate changes

(1)

(49)

 

 

 

30 June

$            4,538

$            4,954

 

Repurchase of Notes and Bonds

 

In the six-month period ended 30 June 2021, the Group fully settled its 8.25% notes and 12.6% rouble-denominated bonds, which were due in 2021. There was no gain or loss on these transactions. In addition, the Group settled $40 million of 6.75% notes due 2022, which resulted in a $1 million loss included in the Gain/(loss) on financial assets and liabilities caption of the consolidated income statement.

 

Pledged Assets

 

The Group's pledged assets at carrying value included the following:

 

US$ million

30 June

2021

31 December 2020

 

 

 

Property, plant and equipment

   $              57

   $              47

Inventory

466

414

 

 

Unutilised Borrowing Facilities

 

As of 30 June 2021, the Group had unutilised bank loans in the amount of $1,333 million, including $264 million of committed facilities.

 

 

13.     Commitments and Contingencies

 

Operating Environment of the Group

 

The Group is one of the largest vertically integrated steel producers globally and the largest steel producer in Russia. The Group's major subsidiaries are located in Russia, the USA and Canada. Russia is considered to be a developing market with higher economic and political risks.

 

The unrest in the Southeastern region of Ukraine and the economic sanctions imposed by the USA and the European Union on Russia in 2014 and later on caused economic slowdown in Russia and reduced access to international capital markets. Further sanctions imposed on Russia could have an adverse impact on the Group's business.

 

Steel consumption is affected by the cyclical nature of demand for steel products and the sensitivity of that demand to worldwide general economic conditions.

 

The coronavirus (COVID‑19) pandemic outbreak has significantly affected the world economy, including steel production, oil and gas, and construction industry. The increased market volatility may have an impact on the Group's financial position, earnings and cash flows in 2021 and beyond. Management closely monitors the development of the economic situation and undertakes all necessary measures to maintain the sustainability of the Group's business in the current circumstances.

 

The global economic climate continues to be unstable and this may negatively affect the Group's results and financial position in a manner not currently determinable.

 

Taxation

 

Russian tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities. 

 

Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, the Group has accrued tax liabilities based on management's best estimate of the probable outflow of resources embodying economic benefits, which will be required to settle these liabilities. Possible liabilities which were identified by management at the end of the reporting period as those that can be subject to different interpretations of the tax laws and other regulations and are not accrued in these financial statements could be up to approximately $35 million.

 

Contractual Commitments

 

At 30 June 2021, the Group had contractual commitments for the purchase of production equipment and construction works for an approximate amount of $858 million (31 December 2020: $462 million). These commitments include $438 million (31 December 2020: $202 million) relating to the Palmer project - a construction of a new rail mill in Pueblo (Colorado, USA) with an expected completion date in the 2nd quarter of 2023.

 

In 2010, the Group concluded a contract with PraxAir for the construction of an air separation plant and for the supply of oxygen and other gases produced by PraxAir at this plant for a period of 20 years (extended to 25 years in 2015, when the construction was completed). This supply contract does not fall within the scope of IFRS 16 "Leases". At 30 June 2021, the Group has committed expenditure of $501 million over the life of the contract.

 

 

13.     Commitments and Contingencies (continued)

 

Contractual Commitments (continued)

 

In 2018, the Group concluded a contract with Air Liquide for the construction of an air separation plant and for the supply of oxygen and other gases produced by Air Liquide at this plant for a period of 20 years. The contractual price comprises a fixed component and a variable component. The total amount of the fixed component approximates $492 million, which is payable within 20 years starting upon commencement of production in 2021 in proportion to the amounts of the variable component. The variable component is determined based on the actual purchase of gases and is estimated at $382 million during the life of the contract. Based on management's assessment this supply contract does not fall within the scope of IFRS 16 "Leases" as the Group has no access to the equipment and has no rights either to operate the assets, or to design them in order to predetermine the way of their usage. Also it is expected that more than an insignificant amount of the assets' output will be sold to the parties unrelated to the Group. In 2021, the construction was completed and the supply of oxygen and other gases will start from August 2021. In addition, Air Liquide constructed the system of trunk and auxiliary pipelines, distribution stations and other equipment for products delivery, which will be leased by the Group from 1 July 2021 for a period of 20 years and accounted for under IFRS 16. The discounted lease payments are estimated at $8 million.

 

In 2019, the Group concluded a contract with Xcel Energy Inc. for the supply of electricity for a period of 22 years. The Group is committed to purchase from 1 January 2022 at least 500,000 MWh annually on a take-or-pay basis at rates ranging from 3.90 to 4.90 cents/kWh. The rates can be adjusted for gas prices. The total amount of this commitment at the unadjusted rates approximates $440 million.

 

Social Commitments

 

The Group is involved in a number of social programmes aimed to support education, healthcare and social infrastructure development in towns where the Group's assets are located. The Group budgeted to spend approximately $4 million under these programmes in the second half of 2021.

 

Environmental Protection

 

In the course of the Group's operations, the Group may be subject to environmental claims and legal proceedings. The quantification of environmental exposures requires an assessment of many factors, including changing laws and regulations, improvements in environmental technologies, the quality of information available related to specific sites, the assessment stage of each site investigation, preliminary findings and the length of time involved in remediation or settlement.

 

The Group has a number of environmental claims and proceedings which are at an early stage of investigation. Environmental provisions in relation to these proceedings that were recognised at 30 June 2021 amounted to $25 million. Preliminary estimates of the incremental costs indicate that such costs could be up to $148 million. The Group has insurance agreements, which would be expected to provide reimbursement of the costs to be actually incurred up to $228 million, of which $25 million relates to the accrued environmental provision and has been recognised in non-current financial assets and current receivables at 30 June 2021. Management believes that, as of now, an economic outflow of the additional costs is not probable and any pending environmental claims or proceedings will not have a material adverse effect on its financial position and results of operations.

 

In addition, the Group has committed to various environmental protection programmes covering periods from 2021 to 2026, under which it will perform works aimed at reductions in environmental pollution and contamination. As of 30 June 2021, the costs of implementing these programmes are estimated at $224 million.

 

 

 

13.     Commitments and Contingencies (continued)

 

Legal Proceedings

 

The Group has been and continues to be the subject of legal proceedings, none of which has had, individually or in aggregate, a significant effect on the Group's operations or financial position. At 30 June 2021, the unrecognised possible liabilities were estimated at $15 million.

 

Issued Guarantees

 

In June 2018, EVRAZ plc and EVRAZ West-Siberian Metallurgical Plant issued a joint guarantee in the amount of up to 30 billion roubles ($415 million at the exchange rate as of 30 June 2021) to 9 companies owned by Sibuglemet in respect of management services provided by one the Group's subsidiaries to these entities. Sibuglemet is a producer of coking coal and operator of coal refineries in the Kemerovo region of Russia. The management company committed to perform all management functions including, inter alia, all the decisions required to carry out the day-to-day operations of these coal companies, their investment and procurement activities. The maturity of the guarantee was set for 31 December 2030.

 

On 15 November  2020, the management services contract was terminated. The guarantee will continue to be effective 3 years after the date of termination.

 

14.     Fair Value of Financial Instruments

 

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

 

§ Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

 

§ Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

 

§ Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data (unobservable inputs).

 

The carrying amounts of financial instruments, such as cash, short-term and long-term investments, short-term and long-term accounts receivable, short-term accounts payable, short-term loans receivable and payable and floating-rate bank loans, approximate their fair value.

 

The Group held the following financial instruments measured at fair value:

 

 

30 June 2021

31 December 2020

US$ million

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

 

 

 

 

 

 

 

Assets measured at fair value

 

 

 

 

 

 

Derivatives not designated as hedging instruments

-

3

-

-

2

-

 

 

 

 

 

 

 

Liabilities measured at fair value

 

 

 

 

 

 

Derivatives not designated as hedging instruments

-

55

-

-

49

-

 

 

 

14.     Fair Value of Financial Instruments (continued)

 

The following table shows fair values of the Group's bonds and notes.

 

US$ million

30 June 2021

31 December 2020

 

Carrying amount

Fair

value

Carrying amount

Fair

value

 

 

 

 

 

USD-denominated

 

 

 

 

8.25% notes due 2021

$        -

$        -

$          762

$        767

6.75% notes due 2022

473

489

514

543

5.375% notes due 2023

758

806

761

818

5.25% notes due 2024

703

766

707

778

 

 

 

 

 

Rouble-denominated

 

 

 

 

12.60% rouble bonds due 2021

-

-

210

213

7.95% rouble bonds due 2024

285

292

279

297

 

 

 

 

 

 

$      2,219

$     2,353

$      3,233

$     3,416

 

The fair value of the non-convertible bonds and notes was determined based on market quotations (Level 1).

 

 

15.     Subsequent Events

 

Export Duties

 

Effective from 1 August 2021 export duties on ferrous metals were introduced by the government of the Russian Federation. The duties will be in effect through the end of December 2021. These duties consist of a 15% base rate and also a metal-specific rate per tonne of steelmaking raw materials, semi-finished and rolled-steel products, which are exported outside the Eurasian Economic Union.

 

The Group expects that the new duties system will negatively impact  its financial results in the 2nd half of 2021 but is not expected to impact the recoverability of the Group's non-current assets. The magnitude of these effects will be dependent on prices realised in the period in which these duties are in effect, as well as the balance of domestic and export sales.

 

Dividends

 

On 4 August 2021, the Board of directors of EVRAZ plc declared dividends in the amount of $802 million, which represents $0.55 per share.

 

 

 

 

 

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