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Severstal books Q2 loss of $290 million
2009-09-07
MOSCOW - Russia's largest steelmaker Severstal posted Monday a $290 million loss in the second quarter, a sharp fall from profits last year but better than the previous quarter, as the slump in global demand hit a bottom and showed some signs of picking up. The second-quarter loss compared with a $1.5 billion profit a year earlier but was far less than the $654 million that Severstal incurred in the January-March period. Sales in April-June were $2.8 billion, a marginal improvement against the previous quarter. In the second quarter, Severstal recorded a loss before interest, taxation, depreciation and amortisation of $5 million -- better than $156 million a quarter earlier. The London-listed steelmaker said in a statement that it does not propose a dividend payment for the quarter or expect one for the full year. Severstal's results reflect how hard the global steelmarket has been hit by the global downturn. Russia's largest steelmakers have suffered from a slump in construction and car production in the wake of the financial crisis. The company's main shareholder and chief executive, Alexei Mordashov, described the second quarter as a "turning point for steel market" as prices hit their lowest levels in May. Severstal said in the statement that production volumes and prices started to improve in early July "indicating tentative improvements in market conditions." "A sustained recovery will depend on renewed global economic growth and discipline in production and pricing across the industry," Mordashov said in the statement. He warned, however, that growth remains fragile. Alexei Morozov, a metals analyst with the UBS investment bank in Moscow, said investors will be looking to the second half of year for clearer signs of a recovery in markets. Severstal said it is finalizing a financial strategy for its troubled North American operations, but chief financial officer Alexei Kulichenko declined to say whether it wants to sell off some of its U.S. assets. Two of its five major plants in the United States -- in Warren, Ohio, and Wheeling, West Virginia -- are idle. In 2004, Severstal became the first Russian company to acquire steel assets in the United States. Morozov from UBS said Severstal may want to get rid of those loss-making assets but finding the buyer would be a tough task. "The steel market in the U.S. is visibly getting better in the third quarter, but the prices for those assets are unlikely to have gone up," he said. "I don't think that Severstal will be in a hurry to sell unless there is a good buyer."
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