REG - Evraz Plc - Annual Financial Report
25/02/2022 07:16
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RNS Number : 8347C Evraz Plc 25 February 2022
EVRAZ plc
EVRAZ PUBLISHES 2021 ANNUAL REPORT AND REPORTS FULL YEAR 2021 RESULTS
25 February 2022 - EVRAZ plc ("EVRAZ" or "the Company") (LSE: EVR) has
today:
• posted its Annual Report for the year ended 31 December 2021
("2021 Annual Report") on its website:
https://www.evraz.com/en/investors/reports-and-results/annual-reports/
(https://www.evraz.com/en/investors/reports-and-results/annual-reports/) and
• submitted to the UK National Storage Mechanism a copy of its 2021
Annual Report in accordance with LR 9.6.1 R.
The 2021 Annual Report will shortly be available for inspection on the
National Storage
Mechanism https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The 2021 Annual
Report and the Notice of the Company's Annual General Meeting, which will be
held in June 2022, will be posted to shareholders in mid-May 2022.
FY 2021 HIGHLIGHTS
• Total segment revenues grew to US$14,159 million (FY2020: US$9,754
million)
• Total segment EBITDA amounted to US$5,015 million, compared with
US$2,212 million in FY2020, boosting the EBITDA margin from 22.7% to 35.4%
• Free cash flow increased to US$2,257 million (FY2020:
US$1,020 million)
• Net profit increased to US$3,107 million vs. US$858 million in
FY2020
• Net debt significantly reduced: US$2,667 million (FY2020:
US$3,356 million)
• Net debt to last twelve months EBITDA went down to 0.5x as at
31 December 2021 (as at 31 December 2020: 1.5x)
• Total EBITDA effect from cost-cutting and customer focus
initiatives of US$590 million in 2021
• Cash-costs:
o cash cost of slabs increased to US$308/t from US$213/t in FY2020 due to
higher raw material prices (iron ore, coal, ferroalloys), and increased
auxiliary, services and repairs costs
o cash costs of coal concentrate increased to US$41/t (FY2020: US$31/t)
mainly as a result of rise of mining costs
o cash costs of iron ore products increased to US$42/t (FY2020: US$36/t)
mainly by higher fixed costs as inflationary pressure intensified
• An interim dividend of US$729 million (US$0.50 per share) has been
declared, reflecting the Board's confidence in the Group's financial position
and outlook.
• The demerger of EVRAZ' coal business is expected to complete in
late March 2022 and it is anticipated that Raspadskaya will announce a
dividend according to its guidance during the publication of the consolidated
IFRS financial statements for 2021 in the amount of not less than 100% of free
cash flow if net debt/EBITDA is less than 1.0x and not less than 50% of free
cash flow if net debt/EBITDA is above 1.0x.
Financial Highlights(1)
(US$ million) FY2021 FY2020 Change, %
Total segment revenues(2) 14,159 9,754 45.2
Profit from operations 4,413 1,671 n/a
Total segment EBITDA (2,3) 5,015 2,212 n/a
Net profit 3,107 858 n/a
Earnings per share, basic (US$) 2.08 0.58 n/a
Net cash flows from operating activities 3,424 1,928 77.6
Free cash flow(4) 2,257 1,020 n/a
CAPEX(5) 920 657 40.0
31 December 2021 31 December 2020 Change, %
Net debt(6) 2,667 3,356 (20.5)
Total assets 9,854 8,710 13.1
(1 )Raspadskaya met all criteria to be classified as a disposal held for
distribution to owners, as discussed in more detail in Note 2 and Note 13 of
the EVRAZ consolidated financial statements, as of 31 December 2021.
Consequently, in accordance with the requirements of IFRS 5 "Non-current
Assets Held for Sale and Discontinued Operations", it was accounted for as
discontinued operations in the consolidated financial statements.
(2) Total segment revenues and total segment EBITDA include the contribution
of discontinued operations. Revenues and EBITDA from continuing operations are
US$13,486 million (2020: US$9,452 million) and US$3,692million (2020: US$1,830
million) respectively.
(3 )See p.290 of EVRAZ plc Annual Report 2021 for the definition of EBITDA.
(4 )See p.290 of EVRAZ plc Annual Report 2021 for the definition of free cash
flow.
(5 )Including payments on deferred terms recognised in financing activities
and non-cash transactions.
(6 )See p.291 of EVRAZ plc Annual Report 2021 for the calculation of net
debt.
Commenting, EVRAZ Chief Executive Officer Aleksey Ivanov, said:
" In 2021, the steel industry was mostly driven by demand-side fluctuations.
Steelmakers increased output in anticipation of more robust demand from the
construction and manufacturing sectors. Unable to keep up with the accelerated
pace of recovery, steel prices rose to their highest in years.
Amid the upswing on global markets, EVRAZ delivered outstanding financial
results in the year, with total segment EBITDA amounting to US$5,015 million
and the EBITDA margin reaching 35%. In addition, the Group continued to
implement its efficiency improvement programme, which resulted in an EBITDA
effect of US$590 million.
In the reporting period, we announced the demerger of Raspadskaya, our coal
business, a process currently expected to complete in late March 2022. In our
view, the demerger will establish a clear and focused equity story for both
companies and provide greater flexibility to execute dedicated strategy for
each.
In 2022, we will press ahead with further improving our ESG performance and
strengthening our culture of continuous operational improvement. I strongly
believe in our long-term success given the commitment of our employees, who
represent the forefront of the industry.
We are conscious of the current geopolitical circumstances. We continue to
monitor the situation and will keep you updated regarding any material
developments that can influence our business."
EVRAZ ANNOUNCES ITS AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
The Appendix to this announcement contains additional information which has
been extracted from the 2021 Annual Report for the purposes of compliance with
DTR 6.3.5 only and should be read in conjunction with this announcement.
Together these constitute the material required by DTR 6.3.5 and DTR 4.2.3 to
be communicated to the media in unedited full text through a Regulatory
Information Service. This announcement should be read in conjunction with and
is not a substitute for reading the full 2021 Annual Report. Page and note
references in the text below refer to page numbers and notes in the 2021
Annual Report.
The financial information contained in this document does not constitute
statutory accounts as defined by section 435 of the Companies Act 2006.
Financial information for 2020 has been extracted from the audited
statutory accounts for the year ended 31 December 2020 which
were prepared in accordance with in accordance with UK adopted international
accounting standards and the requirements of the Companies Act 2006. The
auditor's report on those financial statements was unqualified with no
reference to matters to which the auditor drew attention by way of emphasis
and no statement under s498(2) or s498(3) of the Companies Act 2006. The
financial information for the year ended 31 December 2021 will be delivered to
the Registrar of Companies following the Company's annual general meeting
convened in June 2022. The auditor has reported on the statutory accounts for
the year ended 31 December 2021. The auditor's report was unqualified.
CONFERENCE CALL
A conference call to discuss the results, hosted by Aleksey Ivanov, CEO,
Nikolay Ivanov, CFO, and Alexander Kuznetsov, Vice President, Corporate
Strategy and Performance Management, will be held on Friday, 25 February 2022,
at:
12:00 (London time)
15:00 (Moscow time)
07:00 (New York time)
To join the call, please dial:
+44 (0)330 336 9601 or 0800 279 6877 (toll free) UK
+7 495 646 5137 or 8 10 8002 8655011 (toll free) Russia
+1 646 828 8073 or 800 289 0720 (toll free) US
Conference ID: 2086600
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 (registration
needed): https://www.webcast-eqs.com/evraz20220225
(https://www.webcast-eqs.com/evraz20220225)
The FY2021 results presentation will be also available on the Group's website,
www.evraz.com (http://www.evraz.com) , on Friday, 25 February 2022, at the
following link:
https://www.evraz.com/en/investors/presentations/financial-results/
(https://www.evraz.com/en/investors/presentations/financial-results/)
An MP3 recording will be available on Monday, 28 February 2022, at the
following link:
https://www.evraz.com/en/investors/reports-and-results/financial-results/
(https://www.evraz.com/en/investors/reports-and-results/financial-results/)
Table of contents
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
APPENDIX
dEMERGER UPDATE
Key RISKS AND UNCERTAINTIES
DIVIDENDS
DIRECTORS' RESPONSIBILITY STATEMENT
Legal disclaimer
Сonsolidated statement of operations
Сonsolidated statement of comprehensive income
Сonsolidated statement of financial position.. (#_Toc96418804)
Сonsolidated statement of cash flows
Сonsolidated statement of cash flows (continued)
Сonsolidated statement of changes in equity.. (#_Toc96418807)
Сonsolidated statement of changes in equity (continued)
Сonsolidated statement of changes in equity (continued)
Financial review
The management have concluded that the demerger of the coal business has
become highly probable within one year and that Raspadskaya Group met all
criteria to be classified as a disposal held for distribution to owners, as
discussed in more detail in Note 2 and Note 13 of the EVRAZ consolidated
financial statements, as of 31 December 2021. Consequently, in accordance with
the requirements of IFRS 5 "Non-current Assets Held for Sale and Discontinued
Operations", it was accounted for as discontinued operations in the
consolidated financial statements.
During 2021 the Coal business was an integral part of the Group and was
managed on this basis. Due to this the analysis presented below is based on
the data disclosed in the Note 3 "Segment information" of the consolidated
financial statements and follow the same logic as in all previous years.
The reconciliation of these results with the amounts presented in the
consolidated statement of operations is provided in Note 13. It is limited to
the presentation of the results of the coal business as discontinued
operations.
Statement of operations
In 2021, EVRAZ' total segment revenues climbed by 45.2% YoY to US$14,159
million, compared with US$9,754 million in 2020. The increase was caused
primarily by higher sales prices for semi-finished and construction products,
as well as greater volumes for vanadium products. This increase was also
attributable to higher average realised prices and third party sales for coal.
The Group's total segment EBITDA amounted to US$5,015 million during the
period, compared with US$2,212 million in 2020, boosting the EBITDA margin
from 22.7% to 35.4%. The increase in EBITDA was primarily attributable to
higher steel, vanadium and coal product sales prices.
Total segment revenues and total segment EBITDA include the contribution of
discontinued operations. Revenues and EBITDA from continuing operations are
US$13,486 million (2020: US$9,452 million) and US$3,692million (2020: US$1,830
million) respectively.
Free cash flow soared by 121.3% YoY to US$2,257 million due to better
operating results.
In 2021, the Steel segment's revenues (including intersegment sales) rose by
46.2% YoY to US$10,188 million, which constitutes 66.3% of the Group's total
before eliminations. The increase was mainly attributable to higher revenues
from steel and vanadium products, which climbed by 45.5% and 47.6% YoY,
respectively. This was primarily because average sales prices advanced by
50.4% for steel products and by 38.8% for vanadium. The effect of higher
prices on the Steel segment revenues were partly offset by lower sales
volumes, which edged down from 12.3 million tonnes in 2020 to 11.6 million
tonnes in 2021 following planned decrease in production volumes at Russian
mills.
In 2021, revenues from the Steel, North America segment rose by 30.6% YoY to
US$2,324 million, driven by a 33.6% increase in sales prices. The latter was
offset by a 3.0% reduction in sales volumes, primarily in the semi-finished
and tubular products, but compensated by improvements in sales of flat-rolled
products.
The Coal segment's revenues increased by 55.8% YoY to US$2,321 million, mainly
driven by an increase of 68.8% in coal product sales prices and a decrease of
13.0% in sales volumes of coking coal products.
In 2021, higher prices for semi-finished, construction and vanadium products
almost doubled the Steel segment's EBITDA, despite an increase in cost of
sales.
The Steel, North America segment's EBITDA increased because of higher revenues
from sales of flat-rolled, construction and railway products.
The Coal segment's EBITDA rose YoY due to higher average realised prices.
Total segment revenues
(US$ million)
Segment 2021 2020 Change Change, %
Steel 10,188 6,969 3,219 46.2
Steel, North America 2,324 1,779 545 30.6
Coal 2,321 1,490 831 55.8
Other operations 535 410 125 30.5
Eliminations (1,209) (894) (315) 35.2
Total 14,159 9,754 4,405 45.2
Total segment revenues by region
(US$ million)
Region 2021 2020 Change Change, %
Russia 5,521 3,722 1,799 48.3
Asia 3,684 2,949 735 24.9
Americas 3,016 1,915 1,101 57.5
Europe 946 461 485 n/a
CIS (excl. Russia) 934 584 350 59.9
Africa and rest of the world 58 123 (65) (52.8)
Total 14,159 9,754 4,405 45.2
Total segment EBITDA(1)
(US$ million)
Segment 2021 2020 Change Change, %
Steel 3,609 1,930 1,679 86.9
Steel, North America 321 (28) 349 n/a
Coal 1,292 400 892 n/a
Other operations 19 15 4 26.6
Unallocated (146) (126) (20) 15.9
Eliminations (80) 21 (101) n/a
Total 5,015 2,212 2,803 n/a
(1) For the definition of EBITDA, please refer to p. 290 of the Annual Report
2021
The following table details the effect of the Group's cost-cutting
initiatives.
Effect of Group's cost-cutting initiatives in 2021,
(US$ million)
Increasing productivity and cost effectiveness 224
Improving auxiliary materials and service costs 71
Procurement efficiency 34
Other 6
Total 335
Revenues, cost of revenues and gross profit of segments
(US$ million)
2021 2020 Change Change, %
Steel segment
Revenues 10,188 6,969 3,219 46.2
Cost of sales (6,070) (4,596) (1,474) 32.1
Gross profit 4,118 2,373 1,745 73.5
Steel, North America segment
Revenues 2,324 1,779 545 30.6
Cost of sales (1,835) (1,604) (231) (14.4)
Gross profit 489 175 314 n/a
Coal segment
Revenues 2,321 1,490 831 55.8
Cost of sales (919) (1,027) 108 (10.5)
Gross profit 1,402 463 939 n/a
Other operations - gross profit 206 115 91 79.1
Unallocated - gross profit (12) (8) (4) 50.0
Eliminations - gross profit (183) (76) (107) n/a
Total 6,020 3,042 2,978 97.9
Total segment gross profit, expenses and results
(US$ million)
2021 2020 Change Change, %
Gross profit 6,020 3,042 2,978 97.9
Selling and distribution costs (907) (840) (67) 8.0
General and administrative expenses (617) (552) (65) 11.8
Impairment of non-financial assets (30) (310) 280 (90.3)
Foreign-exchange gains/(losses), net 34 408 (374) (91.7)
Social and social infrastructure maintenance expenses (35) (31) (4) 12.9
Gains/(losses) on disposal of property, plant and equipment, net (8) (3) (5) n/a
Other operating income and expenses, net (44) (43) (1) 2.3
Profit from operations 4,413 1,671 2,742 n/a
Interest expense, net (227) (322) 95 (29.5)
Share of profit/(losses) of joint ventures and associates 14 2 12 n/a
Gain/(loss) on financial assets and liabilities, net (21) (71) 50 (70.4)
Gain/(loss) on disposal groups classified as held for sale, net 2 1 1 100.0
Other non-operating gains/(losses), net 3 14 (11) (78.6)
Profit before tax 4,184 1,295 2,889 n/a
Income tax expense (1,077) (437) (640) n/a
Net profit 3,107 858 2,249 n/a
In 2021, selling and distribution expenses rose by 8.0% amid increased freight
transportation costs related to higher shipment volumes and freight rates.
General and administrative expenses climbed by 11.8%, mostly because of the
implementation of projects aimed at increasing productivity (EVRAZ Business
System transformation, legal and IT) and consulting services for these
projects. This was partly offset by the effect that depreciation of the
average ruble exchange rate had on costs.
In 2021, EVRAZ recognised a US$30 million impairment loss in relation to
certain functionally obsolete items of property, plant and equipment.
Foreign exchange gains amounted to US$34 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 depreciation of the Russian
ruble against the US dollar in 2021 led to foreign exchange gains being
recognised on the income statements of non-Russian subsidiaries.
Net interest expense decreased to US$227 million in 2021, compared with
US$322 million in 2020. This was mainly due to repayment of expensive debt
and a lower indebtedness level during 2021. In the first quarter of 2021, the
Group settled the 8.25% notes due 2021 (US$735 million principal) and 12.6%
ruble-denominated bonds due 2021 (US$203 million principal at 31 December
2020). Later during 2021, the full amount of the 6.75% notes due 2022 (US$500
million principal) was repurchased early.
In the reporting period, the Group had an income tax expense of US$1,077
million, compared with US$437 million in 2020. The change mostly reflects the
significant improvement in operating results.
Cash flow
(US$ million)
2021 2020 Change Change, %
Cash flows from operating activities before changes in working capital 4,000 1,593 2,407 n/a
Changes in working capital (576) 335 (911) n/a
Net cash flows from operating activities 3,424 1,928 1,496 77.6
Short-term deposits at banks, including interest 4 4 0 0.0
Purchases of property, plant and equipment and intangible assets (910) (647) (263) 40.6
Proceeds from sale of disposal groups classified as held for sale, net of 2 11 (9) (81.8)
transaction costs
Other investing activities (1) 8 (9) n/a
Net cash flows used in investing activities (905) (624) (281) 45.0
Net cash flows used in financing activities (2,707) (1,107) (1,600) n/a
including dividends paid (1,549) (872) (677) 77.6
Effect of foreign exchange rate changes on cash and cash equivalents (12) 7 (19) n/a
Net increase/(decrease) in cash and cash equivalents (200) 204 (404) n/a
Calculation of free cash flow(1)
(US$ million)
2021 2020 Change Change, %
EBITDA 5,015 2,212 2,803 n/a
EBITDA excluding non-cash items 5,042 2,203 2,839 n/a
Changes in working capital (576) 335 (911) n/a
Income tax accrued (1,007) (579) (428) 73.9
Social and social infrastructure maintenance expenses (35) (31) (4) 12.9
Net cash flows from operating activities 3,424 1,928 1,496 77.6
Interest and similar payments (248) (269) 21 (7.8)
Capital expenditures, including recorded in financing activities and non-cash (920) (657) (263) 40.0
transactions
Proceeds from sale of disposal groups classified as held for sale, net of 2 11 (9) (81.8)
transaction costs
Other cash flows from investing activities (1) 7 (8) n/a
Free cash flow 2,257 1,020 1,237 n/a
(1) For the definition of free cash flow, please refer to p. 290 of the
Annual Report 2021.
CAPEX and key projects
During the reporting period, EVRAZ' capital expenditures rose to US$920
million, compared with US$657 million in 2020, driven by higher development
expenses. Capital expenditure projects during 2021, indicated in millions of
US dollars, can be summarised as follows.
Capital expenditures in 2021
DEVELOPMENT PROJECTS, US$ million
Steel segment
Tashtagol iron ore mine upgrade at EVRAZ ZSMK mining site 33
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
Sobstvenno-Kachkanarsky deposit greenfield project 29
The project aim is to maintain production of raw iron ore
Rail and beam mill modernisation at EVRAZ NTMK 14
The project aim is to increase production of beams and sheet piles
Construction of Vanadium processing facility at EVRAZ Uzlovaya 13
The strategic aims of the new unit are to increase cost efficiency in fully
controlled and coordinated at all stages processing chain from slag to final
product.
Transfer of direct coke oven gas for cleaning in capture shop no. 3 at EVRAZ 11
NTMK
The project aim is to decrease air emissions.
Reconstruction of pig-casting machines section for blast furnace at EVRAZ NTMK 9
Technical re-equipment of the bottling section blast furnace machines
Construction of uncompressed gas recovery turbines for blast furnace no. 7 at 6
EVRAZ NTMK
The project aim is to increase own electricity generation
Steel, North America segment
Long rail mill at EVRAZ Pueblo 146
The project aim is to replace the existing rail facility and meet the needs of
customers for long rail products
Electric arc furnace (EAF) repowering at EVRAZ Regina 7
The project aim is to increase EVRAZ Regina's prime coil and plate production
and reduce electrode consumption
Coal segment
Acquisition of equipment at Alardinskaya mine 17
The project aim is to reduce the time required for transition from longwall to
longwall and to increase annual production volumes to 3.2mt.
Acquisition of equipment at Raspadskaya-Koksovaya mine 12
Own equipment for open pit mining
Acquisition of equipment at Osinnikovskaya mine 11
The project aim is to acquire equipment that fully complies with the mining
and geological conditions to provide the projected monthly longwall load
Other development projects 95
MAINTENANCE CAPEX 517
TOTAL 920
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 June and August, the Group
completed several transactions to repurchase, in aggregate, US$65 million in
outstanding principal of its Eurobonds due in 2022 and later in October
completed a make-whole call for the remaining US$435 million in outstanding
principal of these Eurobonds.
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.
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 credit facility with SberBank and
borrowed US$67 million of the available funds.
In June, EVRAZ ZSMK signed an amendment to its existing US$100 million credit
facility with ING DiBa, extending its repayment schedule until 2026 and
increasing its size to US$150 million. In July, EVRAZ ZSMK utilised an
additional US$50 million. In October, the Group agreed an amendment to this
credit facility implementing sustainability-linked provisions, namely a
pricing mechanism that became linked to the management score component of the
Sustainalytics ESG rating.
In November, EVRAZ ZSMK signed a new, committed US$350 million credit facility
with Intesa with an availability period of six months from the signing date.
The facility remained unutilised as at 31 December 2021.
In the process of preparing for a potential demerger of its Coal assets, the
Group obtained necessary creditor approvals, including a Eurobond consent
solicitation from the majority of holders of its Eurobonds due in 2022, 2023
and 2024. It also took steps to rebalance its debt between the Steel and Coal
divisions and refinance certain outstanding loans.
Raspadskaya received a US$200 million long-term loan from Alfa Bank and a
US$200 million long-term loan from SberBank.
Steelmaking subsidiaries of the Group, EVRAZ NTMK and EVRAZ ZSMK, repaid a
total of around US$619 million of their outstanding bank debt of varying
maturities during 2021.
As a result of these actions, as well as scheduled repayments of bank loans
and leases in 2021, total debt fell by US$889 million to US$4,094 million as
at 31 December 2021.
In 2021, EVRAZ paid three interim dividends to its shareholders: US$437
million (US$0.30 per share) in April, US$292 million (US$0.20 per share) in
June, and US$802 million (US$0.55 per share) in September.
On 14 December 2021, EVRAZ announced an interim dividend to its shareholders
of US$292 million (US$0.20 per share), payable in January 2022.
Net debt dropped by US$689 million to US$2,667 million, compared with US$3,356
million as at 31 December 2020.
Interest expense accrued on loans, bonds and notes amounted to US$186 million
during the period, compared with US$291 million in 2020. The repayment of the
Eurobonds due in 2021 and 2022 and rouble bonds due in 2021, all of which had
high coupon rates, together with management's efforts to reduce total debt and
refinance indebtedness on favourable terms, led to the significant reduction
of interest expense compared with the previous year.
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 0.5 as at 31 December 2021,
compared with 1.5 as at 31 December 2020.
As at 31 December 2021, various bilateral facilities with a total outstanding
principal of around US$1,697 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 the consolidated financials of Raspadskaya, including a maximum net
leverage and a minimum EBITDA interest cover.
As at 31 December 2021, EVRAZ and its subsidiaries were in full compliance
with the financial covenants.
As at 31 December 2021, cash and cash equivalents amounted to US$1,427
million, while short-term loans and the current portion of long-term loans
amounted to US$101 million. Cash balances and committed credit facilities
available to the Group (US$623 million) comfortably cover upcoming maturities.
Review of operations by Segment
(US$ million) Steel Steel, North America Coal Other
2021 2020 2021 2020 2021 2020 2021 2020
Revenues 10,188 6,969 2,324 1,779 2,321 1,490 535 410
EBITDA 3,609 1,930 321 (28) 1,292 400 19 15
EBITDA margin 35.4% 27.7% 13.8% (1.6)% 55.7% 26.8% 3.6% 3.7%
CAPEX 468 401 216 92 228 154 8 10
Steel segment
Sales review
Steel segment revenues by product
2021 2020
US$ % of total segment revenues US$ % of total segment revenues Change, %
million
million
Steel products, external sales 8,842 86.8 6,079 87.2 45.5
Semi-finished products(1) 3,779 37.1 2,479 35.6 52.4
Construction products(2) 3,177 31.2 2,013 28.9 57.8
Railway products(3) 1,083 10.6 1,099 15.8 (1.5)
Flat-rolled products(4) 237 2.3 146 2.1 62.3
Other steel products(5) 566 5.6 342 4.9 65.5
Steel products, intersegment sales 28 0.3 37 0.5 (24.3)
Including sales to Steel, North America 8 0.1 26 0.4 (69.2)
Iron ore products 234 2.3 146 2.1 60.3
Vanadium products 515 5.1 349 5.0 47.6
Other revenues 569 5.6 358 5.1 58.9
Total 10,188 100.0 6,969 100.0 46.2
1 Includes billets, slabs, pig iron, pipe blanks and other semi-finished
products.
2 Includes rebar, 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.
Sales volumes of Steel segment
(thousand tonnes)
2021 2020 Change, %
Steel products, external sales 11,597 12,197 (4.9)
Semi-finished products 5,541 6,039 (8.2)
Construction products 3,905 3,944 (1.0)
Railway products 1,192 1,299 (8.2)
Flat-rolled products 245 267 (8.2)
Other steel products 714 647 10.4
Steel products, intersegment sales 29 67 (56.7)
Total steel products 11,626 12,264 (5.2)
Vanadium products (tonnes of pure vanadium) 20,341 18,696 8.8
Vanadium in slag 7,053 6,129 15.1
Vanadium in alloys and chemicals 13,288 12,567 5.7
Iron ore products (pellets) 1,430 1,732 (17.4)
Geographic breakdown of external steel product sales
(US$ million)
2021 2020 Change, %
Russia 4,263 2,962 43.9
Asia 2,627 2,200 19.4
CIS 682 490 39.2
Europe 596 221 n/a
Africa, Americas and rest of the world 674 206 n/a
Total 8,842 6,079 45.5
In 2021, the Steel segment's revenues climbed by 46.2% YoY to
US$10,188 million, compared with US$6,969 million in 2020. This was the
result of higher sales prices, primarily for semi-finished products and
construction products, as well as greater vanadium product volumes.
Revenues from external sales of semi-finished products rose by 52.4% YoY. This
was driven by a 60.6% increase in average prices, which was partly offset by
an 8.2% decline in sales volumes. The decrease was attributable to change in
product mix and a reduction in the output following the introduction of the
export duty in 2021. The primary factor was a surge of 90.0% in the average
prices of slabs.
Revenues from sales of construction products to third parties jumped by 57.8%
YoY amid an increase of 58.8% in average prices. This was caused mainly by
higher sales prices for rebars on the Russian and CIS markets, greater beam
sales prices, as well as higher sales prices for channels, primarily on the
Russian market.
Revenues from external sales of railway products decreased because of
reductions of 8.2% in sales volumes, which was partly offset by a 6.7%
increase in sales prices. The drop in sales volumes was caused mostly by lower
sales of rails amid reduced demand in Russia and the CIS.
External revenues from flat-rolled products surged by 62.3% YoY, driven by a
70.5% upswing in sales prices.
Revenues from external steel product sales in Russia climbed by 43.9% YoY,
primarily because of higher prices and greater demand. The share of the
Russian market in total external steel product sales decreased from 48.7% in
2020 to 48.2% in 2021. Asia's share of sales fell from 36.2% to 29.7% 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 77.7% jump in sales prices and a 17.4%
decline in sales volumes. The main decrease in sales volumes was caused by a
shortage of iron ore, unplanned equipment downtimes and logistics
restrictions.
During the reporting period, around 68.1% of EVRAZ' iron ore consumed in
steelmaking came from its own operations, compared with 63.2% in 2020.
Steel segment revenues from sales of vanadium products, including intersegment
sales, climbed by 47.6%, due primarily to a 38.8% increase in sales prices.
Vanadium product prices followed market trends, including the London Metal
Bulletin and Ryan's Notes benchmarks.
Steel segment cost of revenues
Steel segment cost of revenues
2021 2020
US$ million % of segment revenue US$ million % of segment revenue Change, %
Cost of revenues 6,070 59.7 4,596 65.9 32.1
Raw materials 3,150 30.9 2,025 29.1 55.5
Iron ore 776 7.6 503 7.2 54.3
Coking coal 1,218 12.0 769 11.0 58.4
Scrap 673 6.6 442 6.3 52.3
Other raw materials 483 4.7 311 4.5 55.3
Auxiliary materials 328 3.2 339 4.9 (3.2)
Services 266 2.6 241 3.5 10.4
Transportation 380 3.7 407 5.8 (6.6)
Staff costs 518 5.1 477 6.8 8.6
Depreciation 256 2.5 233 3.3 9.9
Energy 416 4.1 398 5.7 4.5
Other* 756 7.4 476 6.8 58.8
* Primarily includes goods for resale, intersegment unrealised profit and
certain taxes, semi-finished products and allowances for inventories
In 2021, the Steel segment's cost of revenues increased by 32.1% YoY. The main
reasons for the growth in costs were as follows:
· The cost of raw materials rose by 55.5%, primarily because of the
higher cost of coking coal (up 58.4%) and iron ore (54.3%) amid price
increases. Scrap costs climbed by 52.3% because of higher prices for scrap,
which was driven by global market trends.
· Service costs rose by 10.4%, primarily driven by higher costs for
processing costs of vanadium in slag.
· Transportation costs dropped by 6.6%, primarily because of lower
railway tariffs.
· Depreciation costs increased by 9.9%, mainly because of higher
depreciation at EVRAZ NTMK after fixed assets were upgraded to improve their
technical condition.
· Other costs jumped by 58.8%, largely because of increase in taxes due
to export duty on metal products effective from 1 August 2021 and lower cost
of goods for resale amid an increase in purchase prices in 2021 compared with
2020.
Steel segment gross profit
The Steel segment's gross profit surged by 73.5% YoY and amounted to US$4,118
million in the reporting period driven primarily by higher prices for
semi-finished, construction and vanadium products. This was partly offset by
the negative effect of higher cost.
Steel, North America segment
Sales review
Steel, North America segment revenues by product
2021 2020
US$ million % of total segment revenue US$ million % of total segment revenue Change, %
Steel products 2,227 95.8 1,684 94.7 32.2
Semi-finished products(1) 10 0.4 109 6.1 (90.8)
Construction products(2) 268 11.5 183 10.3 46.4
Railway products(3) 392 16.9 326 18.3 20.2
Flat-rolled products(4) 900 38.7 323 18.2 178.6
Tubular and other steel products(5) 657 28.3 743 41.8 (11.6)
Other revenues(6) 97 4.2 95 5.6 2.1
Total 2,324 100.0 1,779 100.0 30.6
(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)
2021 2020 Change, %
Steel products
Semi-finished products - 144 (100.0)
Construction products 268 262 2.3
Railway products 383 404 (5.2)
Flat-rolled products 625 382 63.6
Tubular and other steel products 402 537 (25.1)
Total 1,678 1,729 (2.9)
The Steel, North America segment's revenues from the sale of steel products
climbed by 32.2% YoY amid a 35.3% surge in sales prices, offset by a 2.9%
decrease in sales volumes. The reduction in volumes was mainly attributable to
sales of tubular and semi‑finished products, which was partly 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 46.4% YoY because of a 2.3%
increase in volumes and a 44.1% improvement in prices. The upward trend was
driven by greater market demand amid the economic recovery.
Railway product revenues increased by 20.2%, driven by a growth in sales
prices of 25.4%. This was partly offset by a decrease in sales volumes of
5.2%.
Revenues from flat-rolled products soared by 178.6% amid a 63.6% jump in
volumes. This was supported by rapid market improvement and a 115.0% increase
in sales prices as a result of higher third-party demand in 2021 amid the
rapid market recovery from the pandemic and limited supply.
Revenues from tubular and other steel product sales fell by 11.6% YoY due to a
25.1% drop in sales volumes, which was partly offset by an 13.5% uptick in
sales prices. The reduction in volumes was caused by the idling of the spiral
mills following the completion of 2020 orders.
Steel, North America segment cost of revenues
Steel, North America segment cost of revenues
2021 2020
US$ million % of segment revenue US$ million % of segment revenue Change, %
Cost of revenues 1,835 79.0 1,604 90.1 14.4
Raw materials 888 38.2 454 25.5 95.6
Semi-finished products 137 5.9 238 13.4 (42.4)
Auxiliary materials 202 8.7 172 9.7 17.4
Services 135 5.8 145 8.2 (6.9)
Staff costs 240 10.3 240 13.5 -
Depreciation 89 3.8 100 5.6 (11.0)
Energy 119 5.1 90 5.1 32.2
Other(1) 25 1.1 165 9.3 (84.8)
(1) Primarily includes transportation, goods for resale, certain taxes,
changes in work in progress and fixed goods and allowances for inventories
In 2021, the Steel, North America segment's cost of revenues increased by
14.4% YoY. The main drivers were as follows:
· Raw material costs surged by 95.6%, which was primarily attributable
to the higher cost of scrap metal and increased consumption due to transition
to increased share of internal supply of semi-finished products.
· The cost of semi-finished products dropped by 42.4% driven by a
reduction of externally purchased materials and transition to internal supply.
· Auxiliary material costs rose by 17.4% following a change in
classification (lime and coke to auxiliary materials, which were previously
included in other raw materials).
· Service costs fell by 6.9%, mainly driven by decline in coating
services due to decreased pipe sales volumes.
· Energy costs rose by 32.2%, primarily because of higher natural gas
prices.
· Other costs were down for the reporting period, mainly because of
changes in balances of finished goods and work in progress compared with 2020
amid higher production and prices, which were driven by global market trends.
Steel, North America segment gross profit
The Steel, North America segment's gross profit totalled US$489 million in the
reporting period, up from US$175 million in 2020. The increase was primarily
driven by a significant growth in revenues amid favourable market conditions.
It was partly offset by higher prices for raw materials, auxiliary materials
and energy.
Coal segment
Sales review
Coal segment revenues by product
2021 2020
US$ million % of total segment revenue US$ million % of total segment revenue Change, %
External sales
Coal products 1,531 65.9 929 62.4 64.8
Coking coal 95 4.1 74 4.9 28.4
Coal concentrate 1,436 61.9 853 57.3 68.3
Steam coal - - 2 0.2 (100)
Intersegment sales
Coal products 762 32.8 536 35.9 42.2
Coking coal 184 7.9 101 6.8 82.2
Coal concentrate 578 24.9 435 29.2 32.9
Other segment revenues 28 1.2 25 1.7 12.0
Total 2,321 100 1,490 100.0 55.8
Sales volumes of Coal segment
(thousand tonnes)
2021 2020 Change, %
External sales
Coal products 10,608 12,336 (14.0)
Coking coal 686 2,233 (69.3)
Coal concentrate and other products 9,922 10,066 (1.4)
Steam coal 37 n/a
Intersegment sales
Coal products 6,197 6,986 (11.3)
Coking coal 2,172 2,323 (6.5)
Coal concentrate 4,025 4,663 (13.7)
Total, coal products 16,805 19,322 (13.0)
In 2021, the Coal segment's overall revenues increased as sales prices rose in
line with global market trends. As the global market recovered from the
pandemic-related decline seen in 2020, demand for coal grew. Production
restrictions observed since the second half of 2021 in all global producing
regions also contributed to the strong increase in international prices.
Revenues from external sales of coal products increased amid a 78.8% upswing
in prices. This was partly offset by an 14.0% decrease in sales volumes
because of lower production of the GZh grade and a change in the product mix
in favour of coking coal concentrate to meet customer needs. Revenues from
external sales of coking coal and coking coal concentrate climbed by 28.4% and
68.3%, respectively, amid higher prices.
Revenues from internal sales of coal products surged by 42.2%, mainly because
of a 53.5% jump in sales prices, which was partly offset by an 11.3% drop in
sales volumes amid a shortage of premium K-grade coal.
In 2021, the Coal segment's sales to the Steel segment amounted to US$762
million (32.8% of total sales), compared with US$536 million (35.9%) in 2020.
During the reporting period, roughly 70.7% of EVRAZ' coking coal consumption
in steelmaking came from the Group's own operations, compared with 78.0% in
2020.
Coal segment cost of revenues
Coal segment cost of revenues
2021 2020
US$ million % of segment revenue US$ million % of segment revenue Change, %
Cost of revenues 919 39.6 1,027 68.9 (10.5)
Auxiliary materials 141 6.1 110 7.4 28.2
Services 65 2.8 53 3.5 22.6
Transportation 286 12.3 294 19.7 (2.7)
Staff costs 226 9.7 200 13.4 13.0
Depreciation 164 7.1 163 10.9 0.6
Energy 46 2.0 43 2.9 7.0
Other(1) (9) (0.4) 164 11.0 (105.5)
(1) Primarily includes goods for resale, certain taxes, changes in work in
progress and finished goods, allowance for inventory, raw materials and
inter-segment unrealised profit.
The volume of total coal products sales decreased by 13% and caused decrease
of cost of sales by 10.5% while cost of production increased due to increase
of production as well as the following factors:
· The cost of auxiliary materials rose by 28.2% amid higher longwall
move costs at the Alardinskaya, Osinnikovskaya, Erunakovskaya and Raspadskaya
mines.
· Costs for services climbed by 22.6% because due to the high growth of
the prices of contractors services in Kuzbass region.
· Staff costs were up because of higher mining volumes accompanied with
insourcing new equipment and resumption of work at Razrez Raspadsky.
Coal segment gross profit
In 2021, the Coal segment's gross profit amounted to US$1,402 million, up from
US$463 million a year earlier, primarily because of the surge in sales
prices.
APPENDIX
dEMERGER UPDATE
Further to the Company's announcement on 8 February, the Capital Reduction has
been confirmed by the UK Court and become effective, meaning the Company
expects to have sufficient distributable reserves to effect the Demerger. The
entitlement to receive PJSC Raspadskaya (RASP) Shares has been determined
based on the respective holding of the Company's shares at 6:00pm UK on 15
February 2022 and the window for EVRAZ Shareholders entitled to receive the
Demerger Dividend to submit the RASP Shares Information Form to the Company's
registrar is open.
The Demerger Dividend is expected to occur on 29 March 2022 and eligible EVRAZ
Shareholders will receive their RASP Shares as soon as reasonably practicable
after 29 March 2022. It is currently anticipated that the settlement date for
the transfer of RASP Shares to Eligible Accounts will be 7 April 2022.
Further information on the steps EVRAZ Shareholders are required to take to
receive the RASP Shares to which they are entitled can be found in Section 3
of Part I (Action to be Taken) of the Shareholder Circular published by the
Company on 15 December 2021 (the "Shareholder Circular"). These steps include
opening or otherwise holding an account with a direct or indirect participant
of a clearing institution eligible to receive RASP Shares (such as Euroclear,
Clearstream or the NSD), and providing the details of such account to the
Company's registrar by no later than 6:00pm UK on 15 March 2022 by returning
the RASP Shares Information Form, or to the shareholders' broker or nominee at
the date and by means, defined by such broker or nominee. Any EVRAZ
Shareholder who fails to provide the relevant details by 15 March 2022 will be
deemed to be incapable of holding RASP Shares and the RASP Shares to which
they are entitled will be sold pursuant to the Share Sale Facility.
Shareholders are reminded that neither the sale price nor the sale timeframe
is guaranteed under the Share Sale Facility. It is currently anticipated that
the sale of the RASP Shares pursuant to the Share Sale Facility will be
completed within six months following the Demerger Dividend, however the
precise timeframe, as well as the realized price, will depend on the total
number of RASP Shares to be sold pursuant to the Share Sale Facility and
market conditions during the Sale Period. Therefore, the EVRAZ Board
recommends that EVRAZ Shareholders that are capable of holding RASP Shares
take the necessary action to receive RASP Shares and do not participate in the
Share Sale Facility.
Capitalised terms used but not defined in this paragraph have the meaning
given to such terms in the Shareholder Circular.
Key RISKS AND UNCERTAINTIES
EVRAZ is exposed to numerous risks and uncertainties that exist in its
business that may affect its ability to execute its strategy effectively in
2022 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 in the EVRAZ plc 2021 Annual Report on pages
87 to 92, copies of which are available at
https://www.evraz.com/en/investors/reports-and-results/annual-reports/
(https://www.evraz.com/en/investors/reports-and-results/annual-reports/) , are
relevant in 2022 and the mitigating actions described are appropriate.
Principal risks
Risk Mitigating/ risk management actions
Global economic This is an external risk that is largely beyond the Group's control; however,
it is partly mitigated by exploring new market opportunities, focusing on
factors, industry expanding the share of value- added products, further downscaling inefficient
assets, suspending production in low-growth regions, reducing and managing the
conditions, cost base with the goal of being among the sector's lowest- cost producers,
and improving the balance sheet/ gearing.
industry
cyclicality
Product competition EVRAZ mitigates this risk by expanding its product portfolio and penetrating
new geographic and product markets.
It is continuously developing and improving its loyalty and customer focus
programmes and initiatives.
The Group is also implementing quality improvement initiatives and strives to
increase the share of value-added products.
Cost For both the mining and steelmaking operations, EVRAZ is implementing cost
reduction projects to increase asset competitiveness.
effectiveness:
The Group's focused investment policy aims to reduce and manage the cost base.
cost position
EVRAZ also seeks to mitigate this risk through the control of its Russian
vs competitors steel distribution network, the development of high value-added products and
the implementation of EVRAZ Business System transformation projects that focus
on increasing efficiency and effectiveness.
In addition, the Group's digital projects help to reduce risks associated with
primary equipment and improve effectiveness.
Potential regulatory EVRAZ and its executive teams are members of various national industry bodies.
As a result, they contribute to the development of such bodies and, when
Actions by governments, appropriate, participate in relevant discussions with political and regulatory
authorities.
including trade, antimonopoly, anti-dumping regulation, sanctions and other
laws The Group seeks to monitor potential legislative changes before their
introduction at the point when new laws are being drafted:
and regulations
· identification of key stakeholders among government authorities;
· monitoring of the legislative agenda planned by key stakeholders;
· proactive approach to building regulatory rules (acting as metals
and mining experts).
Further development of control over antimonopoly and anti-dumping regulation:
· issuing and monitoring of the Group's trade policies;
· preventing anti-dumping policies among competitors/customers -
Introduction of an IT tool with a dashboard for antimonopoly risk management.
Ongoing liaison with both US and Canadian governments and the American and
Canadian steel associations and ongoing engagement with the Canadian
government to monitor and implement anti-dumping measures.
Development and enhancement of internal controls in order to introduce
preventive measures to monitor risks associated with duties and other negative
measures against the Group. Pricing on products subject to anti-dumping duties
is tightly monitored and controlled in order to ensure duties are reduced or
eliminated. Taxation control function monitors planned changes to tax laws,
analyses their impact on EVRAZ's operations and reports them to the Company's
management on a quarterly basis. EVRAZ and its executive teams are members of
various national industry bodies and, as a result, contribute to and
participate in relevant discussions with political and tax authorities.
Functional currency This is an external risk which is largely beyond the Group's control, however
management is reducing the risk through proper disclosure and monitoring.
devaluation
HSE: environmental EVRAZ monitors its environmental risk matrix on a regular basis, and it
develops and implements mitigation measures in response to these risks. Risk
assessment is regularly reviewed within the Sustainability Committee's agenda.
Senior management also devotes greater attention to the monthly monitoring of
environmental risk trends and factors.
EVRAZ has developed an environmental strategy until 2030 and updated its list
of projects in accordance with the strategy to achieve its strategic goals
regarding emissions and waste. The strategy is being implemented through
dedicated programmes in each division.
Most of the Group's operations are certified in accordance with ISO 14001, and
work is ongoing to bring the remaining plants into compliance with this
international standard. EVRAZ is currently compliant with REACH requirements.
It is obtaining complex environmental permits for compliance with the new
regulation.
For its North American operations, EVRAZ is formulating a strategic 3-5 year
plan to be competitive in reducing greenhouse gasses and its carbon footprint
through utility and energy utilisation, including through such projects as Big
Horn renewable energy at the Pueblo facility.
EVRAZ is also involved in drafting GHG emissions regulation in Russia.
HSE: health and safety To mitigate these risks, EVRAZ is taking the following actions:
· Review of the Lockout Tagout (LOTO) procedure as the main cause
of fatalities in 2021.
· Further development and implementation of the occupational safety
risk management programme.
· Transformation of the Health & Safety operational model with
the implementation of roles and responsibilities, reviewing training processes
as well as monitoring and continuing improvements.
· Further development/update of health and safety tools (behaviour
safety observations, contractual safety, etc.) based on a regular analysis of
major causes of incidents.
· Introduction and development of safety audits.
· Consideration of the implementation of proactive KPIs and
indicators.
In addition, EVRAZ is utilising the EBS rollout in order to further prompt
employees to identify improvements and/or safety concerns and to increase
visibility and enable the Group to prioritise, execute and communicate safety
improvements and abatement measures. It also driving the utilisation of a risk
matrix in the incident management system through safety initiatives, taking it
down to the front line in order for supervisors to implement higher levels of
safety controls and risk reduction measures and working to change the safety
culture through the Leadership Development Programme.
In the coal segment, EVRAZ is implementing the following programmes with a
focus on the safety of its operations:
· Further execution of the five-year degassing programme.
· Mine collapse prevention programme.
· Prevention of spontaneous coal combustion in working spaces
(performance control).
· Dust and explosion safety of mines.
Business interruption The Group has defined and established disaster recovery procedures that are
subject to regular review. Business interruptions in mining mainly relate to
production safety. Measures to mitigate these risks include methane monitoring
and degassing systems, timely mining equipment maintenance, as well as
employee safety training. Implementation of quick actions that reduce risks on
the main equipment at mines (digital projects).
Creation of the equipment maintenance and repair (TORO) system, including
certain digital projects and its circulation at mines.
EVRAZ performs detailed incident cause analyses to develop and implement
preventive actions. Records of minor interruptions are reviewed to identify
any other significant underlying issues. The repairs and maintenance process
continues to undergo transformation in Siberia and the Urals.
Digital Digital transformation is a part of the Group's IT strategy. EVRAZ
continuously assesses and monitors information security risks, and it takes
effectiveness mitigation measures based on external assessments by an independent advisor.
and effective, The Group conducts regular continuity testing for the most critically
important IT systems. Other mitigating actions includes:
efficient
· Further improvement of IT processes with a focus on fast and
and uninterrupted efficient project implementation.
IT service · Building and improving IT competences in high-demand areas: data
science, back- and front-end programming, design and information security.
· Realisation of the IT security improvement programme.
Capital projects and expenditures EVRAZ reviews all proposed capital projects on a risk return basis. The
current list of projects has been reviewed and updated.
Each project is presented for approval against the Group's risk matrix to
assess its potential downside and any possible mitigating actions. EVRAZ has
created a list of typical project risks and a database of lessons learned.
Project delivery is closely monitored against project plans, which allows for
high-level action to manage project investment for both timely delivery and
planned project expenditures.
New mine development and the definition of feasibility plans are reviewed and
signed off by independent mining engineers.
The Group regularly revisits key assumptions for its main investment projects
and performs scenario analyses, which may result in the suspension and/or
postponement of certain projects.
EVRAZ also uses financial modelling to define the strategy of each individual
asset and the enterprise in general for the purpose of long-term FCF
forecasting, including investment projects.
The project management system's transformation is ongoing.
A pilot project is being conducted at one mine on a long-term detailed
planning of LOM (life of mine) using a 3D model and restrictions on air, gas
and sinking.
Decarbonisation Assessing, verifying, and monitoring Scope 1, 2, and 3 GHG emissions on a
yearly basis.
Reducing GHG emissions.
Setting an internal carbon price for assessment of new investment projects.
Following the decarbonisation initiatives roadmap.
Assessing the financial impacts of decarbonisation on EVRAZ in 2022
EVRAZ monitors these risks and actively pursues strategies to mitigate them on
an ongoing basis.
Whilst there have not been direct impacts on the Group to date, the Board
continues to monitor the situation in Ukraine and the response of
international governments. The Directors have considered additional scenarios
for the purposes of its going concern assessment (see page 189 of Annual
Report 2021) and the viability statement (see page 97 of Annual Report 2021).
Emerging risks
In addition to principal risks, management pays particular attention to
threats that could become significant over a certain time, known as emerging
risks. The Group defines these as events that could meaningfully impact EVRAZ'
activities and results, but have a lower likelihood of materializing in the
next three to five years.
They include:
· Climate-related issues.
· Liabilities incurred due to environmental impairments.
· Geopolitical instability.
· Changes in technology.
· Societal issues.
· Demographic imbalance.
Emerging risks may be transferred to the class of current risks depending on
their circumstances and materialisation. Management works
continuously to monitor and manage emerging risks and devise mitigation
measures.
The major part of the Group is based in the Russian Federation and is
consequently exposed to the economic and political effects of the policies
adopted by the Russian government. Worsening situation related to Ukraine has
further increased the economic uncertainty and the risk of the imposition of
sanctions. These conditions and future policy changes could affect the
operations of the Group and the realisation and settlement of its assets and
liabilities.
Climate change risks
EVRAZ is also exposed to numerous climate change risks and opportunities. The
Directors consider that climate change risks that detailed in the EVRAZ plc
2021 Annual Report on pages 92 to 96, copies of which are available at
https://www.evraz.com/en/investors/reports-and-results/annual-reports/, are
relevant in 2022 and the mitigating actions described are appropriate.
DIVIDENDS
Interim dividend
In consideration of EVRAZ strong performance in 2021, EVRAZ Board of Directors
has announced an interim dividend. On 24 February 2022, the Board of Directors
voted to disburse a total of US$729 million, or US$0.50 per share. The record
date is 11 March 2022 and payment date is 30 March 2022.
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 14 March 2022. All conversions will
take place on or around 16 March 2022.
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the directors whose names and functions are listed on pages 104-108 of
the Annual report confirm that to the best of their knowledge:
• the consolidated financial statements of EVRAZ plc, prepared in
accordance with UK adopted international accounting standards and the
requirements of the Companies Act 2006, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole (the 'Group');
• the management report required by DTR 4.1.8R includes a fair
review of the development and performance of the business and the position of
the Company and the Group, together with a description of the principal risks
and uncertainties that they face.
By order of the Board
Aleksey Ivanov
Chief Executive Officer
EVRAZ plc
24 February 2022
Legal disclaimer
This press-release contains forward-looking statements concerning the
financial condition, operational results, and businesses of EVRAZ plc. All
statements other than statements of historical fact are, or may be deemed to
be, forward-looking statements. Forward-looking statements are statements of
future expectations that are based on management's current plans, goals,
intentions, expectations and assumptions. They involve known and unknown risks
and uncertainties that could cause actual results, performance, or events to
differ materially from those expressed or implied in these statements.
Forward-looking statements typically contain words such as "will", "may",
"should", "believe", "intend", "expect", "anticipate", "target", "estimate,"
and words of similar import.
By their nature, forward-looking statements involve known and unknown risks
and uncertainties, as they relate to events and depend on circumstances that
will or could occur in the future. They are based on numerous assumptions
regarding EVRAZ's present and future business strategies and the environment
in which it will operate. There are a number of factors that could cause
actual results and developments to differ materially from those expressed or
implied by these forward-looking statements, including a number of factors
outside EVRAZ's control.
These include, inter alia, changes in the political, social, and regulatory
framework in which EVRAZ operates; changes to economic and technological
trends or conditions; the success of certain business and operating
initiatives; the actions of regulators; legislative, fiscal, and regulatory
developments, including regulatory measures addressing climate change; the
behavior of other market participants; competitive product and pricing
pressures; changes in consumer habits and preferences; foreign exchange rate
fluctuations and interest rate fluctuations; changes in the level of capital
investment; the impact of any acquisitions, disposals, or similar
transactions; the outcome of any litigation; risk inherent to doing business
in countries subject to international sanctions; environmental and physical
risks; risks associated with the impact of pandemics; and risks of
unforeseeable events and force majeure conditions.
Other unknown or unpredictable factors could also cause actual results and
developments to differ materially from those in forward-looking statements.
Neither EVRAZ nor any of its subsidiaries or directors, officers or advisers,
provides any representation, assurance, or guarantee that the occurrence of
the events expressed or implied in any forward-looking statements in this
press-release will actually occur.
Except as required by applicable regulations or by law, neither EVRAZ nor any
of its subsidiaries undertakes any obligation to publicly update or revise any
forward-looking statement as a result of new information, future events, or
otherwise. Each forward-looking statement pertains only to the date of this
press-release, i.e. 24 February 2022. In light of these risks, results could
differ materially from those stated, implied, or inferred from the
forward-looking statements contained in this press-release. No materials
contained in this press-release constitute an offer, solicitation, or
recommendation to purchase or sell securities or make investments. Readers
should not place undue reliance on forward-looking statements.
Сonsolidated statement of operations
(in millions of US dollars, except for per share information)
Year ended 31 December
Notes 2021 2020* 2019*
Continuing operations
Revenue
Sale of goods 3 $ 13,224 $ 9,222 $ 11,117
Rendering of services 3 262 230 327
13,486 9,452 11,444
Cost of revenue 7 (7,454) (5,992) (7,554)
Gross profit 6,032 3,460 3,890
Selling and distribution costs 7 (827) (788) (867)
General and administrative expenses 7 (545) (493) (536)
Social and social infrastructure maintenance expenses (30) (29) (23)
Gain/(loss) on disposal of property, plant and equipment, net (7) (3) 6
Impairment of non-financial assets 6 (22) (313) (335)
Foreign exchange gains/(losses), net 11 296 (311)
Other operating income 16 19 19
Other operating expenses 7 (45) (43) (42)
Profit from operations 4,583 2,106 1,801
Interest income 7 4 5 7
Interest expense 7 (212) (315) (320)
Share of profits/(losses) of joint ventures and associates 11 14 2 9
Impairment of non-current financial assets 14 - - (56)
Gain/(loss) on financial assets and liabilities, net 7 (20) (71) 17
Gain/(loss) on disposal groups classified as held for sale, net 12 2 1 29
Other non-operating gains/(losses), net - 14 13
Profit before tax from continuing operations 4,371 1,742 1,500
Income tax expense 8 (847) (373) (418)
Net profit from continuing operations 3,524 1,369 1,082
Discontinued operations
Net loss from discontinued operations 13 (417) (511) (717)
Net profit 3,107 $ 858 $ 365
Attributable to:
Equity holders of the parent entity $ 3,034 $ 848 $ 326
Non-controlling interests 73 10 39
$ 3,107 $ 858 $ 365
Earnings per share for profit attributable to equity holders of the parent
entity, US dollars:
Basic 20 $ 2.08 $ 0.58 $ 0.23
Diluted 20 $ 2.07 $ 0.58 $ 0.22
Earnings per share for profit from continuing operations attributable to
equity holders of the parent entity, US dollars:
Basic 20 $ 2.38 $ 0.94 $ 0.74
Diluted 20 $ 2.37 $ 0.94 $ 0.73
*The amounts shown here do not correspond to the 2020 and 2019 financial
statements and reflect adjustments made in connection with the presentation
of discontinued operations (Note 13).
The accompanying notes form an integral part of these consolidated financial
statements.
Сonsolidated statement of comprehensive income
(in millions of US dollars)
Year ended 31 December
Notes 2021 2020 2019
Net profit $ 3,107 $ 858 $ 365
Other comprehensive income/(loss)
Other comprehensive income to be reclassified to profit or loss in subsequent
periods, net of tax
Exchange differences on translation of foreign operations into presentation (36) (894) 757
currency
Accumulated translation (gains)/losses recycled to profit or loss on disposal 4, 12 (3) - 31
of foreign operations
Net gains/(losses) on cash flow hedges 25 - - 27
Net (gains)/losses on cash flow hedges recycled to profit or loss 7, 25 - - (33)
(39) (894) 782
Effect of translation to presentation currency of the Group's joint ventures 11 - (13) 8
and associates
- (13) 8
Items not to be reclassified to profit or loss in subsequent periods, net of
tax
Gains/(losses) on re-measurement of net defined benefit liability 23 85 (3) (15)
Income tax effect 8 (20) 2 (1)
65 (1) (16)
Total other comprehensive income/(loss), net of tax 26 (908) 774
Total comprehensive income/(loss), net of tax $ 3,133 $ (50) $ 1,139
Attributable to:
Equity holders of the parent entity $ 3,058 $ (41) $ 1,078
Non-controlling interests 75 (9) 61
$ 3,133 $ (50) $ 1,139
The accompanying notes form an integral part of these consolidated financial
statements.
Сonsolidated statement of financial position
(in millions of US dollars)
The financial statements of EVRAZ plc (registered number 7784342) on pages
were approved by the Board of Directors on 24 February 2022 and signed on its
behalf by Deborah Gudgeon, director.
31 December
Notes 2021 2020 2019
ASSETS
Non-current assets
Property, plant and equipment 9 $ 3,169 $ 4,314 $ 4,925
Intangible assets other than goodwill 10 126 138 185
Goodwill 5 457 457 594
Investments in joint ventures and associates 11 100 79 92
Deferred income tax assets 8 183 245 152
Receivables from related parties 17 10 - -
Other non-current financial assets 14 18 26 40
Other non-current assets 14 62 45 55
4,125 5,304 6,043
Current assets
Inventories 15 1,565 1,085 1,480
Trade and other receivables 16 626 378 534
Prepayments 96 80 93
Loans receivable - - 32
Receivables from related parties 17 34 10 10
Income tax receivable 29 46 53
Other taxes recoverable 18 171 178 175
Other current financial assets 19 12 2 4
Cash and cash equivalents 19 1,027 1,627 1,423
3,560 3,406 3,804
Assets of disposal groups classified as held for distribution to owners 13 2,169 - -
5,729 3,406 3,804
Total assets $ 9,854 $ 8,710 $ 9,847
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of the parent entity
Issued capital 20 $ 75 $ 75 $ 75
Treasury shares 20 (148) (154) (169)
Additional paid-in capital 2,522 2,510 2,492
Revaluation surplus - 109 109
Accumulated profits 3,472 2,187 2,217
Translation difference (1,928) (3,936) (3,048)
Reserves of disposal group held for distribution to owners (1,939) - -
2,054 791 1,676
Non-controlling interests 32 180 129 252
2,234 920 1,928
Non-current liabilities
Long-term loans 22 3,440 3,759 4,599
Deferred income tax liabilities 8 194 253 352
Employee benefits 23 143 240 271
Provisions 24 182 272 321
Lease liabilities 25 49 57 83
Other long-term liabilities 25 77 102 40
4,085 4,683 5,666
Current liabilities
Trade and other payables 26 1,539 1,264 1,378
Contract liabilities 250 314 348
Short-term loans and current portion of long-term loans 22 101 1,078 140
Lease liabilities 25 22 30 34
Payables to related parties 17 50 38 19
Dividends payable to shareholders 20 292 - -
Income tax payable 67 108 79
Other taxes and duties payable 27 145 169 153
Provisions 24 37 41 33
Amounts payable under put options for shares in subsidiaries 4 - 65 69
2,503 3,107 2,253
Liabilities directly associated with disposal groups classified as held for 13 1,032 - -
distribution to owners
3,535 3,107 2,253
Total liabilities 7,620 7,790 7,919
Total equity and liabilities $ 9,854 $ 8,710 $ 9,847
The accompanying notes form an integral part of these consolidated financial
statements.
Сonsolidated statement of cash flows
(in millions of US dollars)
Year ended 31 December
Notes 2021 2020 2019
Cash flows from operating activities
Net profit $ 3,107 $ 858 $ 365
Adjustments to reconcile net profit to net cash flows from operating
activities:
Deferred income tax (benefit)/expense 8 70 (142) 5
Depreciation, depletion and amortisation 7 563 605 578
(Gain)/loss on disposal of property, plant and equipment, net 8 3 (3)
Impairment of non-financial assets 6 30 310 442
Foreign exchange (gains)/losses, net (34) (408) 341
Interest income 7 (5) (6) (8)
Interest expense 7 232 328 336
Share of (profits)/losses of associates and joint ventures 11 (14) (2) (9)
Impairment of non-current financial assets 14 - - 56
(Gain)/loss on financial assets and liabilities, net 7 21 71 (17)
(Gain)/loss on disposal groups classified as held for sale, net 12 (2) (1) (29)
Other non-operating (gains)/losses, net (3) (14) (14)
Allowance for expected credit losses 28 (1) (2) 3
Changes in provisions, employee benefits and other long-term assets and 17 (17) -
liabilities
Expense arising from equity-settled awards 21 12 11 13
Other (1) (1) (2)
4,000 1,593 2,057
Changes in working capital:
Inventories (567) 250 61
Trade and other receivables (332) 81 304
Prepayments (29) 3 26
Receivables from/payables to related parties (19) 5 (114)
Taxes recoverable (93) (30) 29
Other assets (11) - (1)
Trade and other payables 429 (35) 219
Contract liabilities (68) (13) 13
Taxes payable 121 84 (155)
Other liabilities (7) (10) (9)
Net cash flows from operating activities 3,424 1,928 2,430
Relating to:
Continuing operations 3,663 2,262 2,932
Discontinued operations 13 (239) (334) (502)
Cash flows from investing activities
Issuance of loans receivable to related parties (1) (1) -
Issuance of loans receivable (1) (1) (9)
Proceeds from repayment of loans receivable, including interest - 1 2
Purchases of subsidiaries, net of cash acquired - - (3)
Purchases of disposal groups held for sale 12 - - (22)
Investments in associates and joint ventures 11 (10) - (3)
Sale of associates 17 - - 5
Proceeds from sale of other investments 17 - - 32
Short-term deposits at banks, including interest 4 4 7
Purchases of property, plant and equipment and intangible assets (963) (667) (767)
Proceeds from government grants related to property, plant and equipment 9 53 20 5
Proceeds from disposal of property, plant and equipment 6 6 16
Proceeds from sale of disposal groups classified as held for sale, net of 12 2 11 44
transaction costs
Dividends received 11,17 3 1 9
Other investing activities, net 2 2 19
Net cash flows used in investing activities (905) (624) (665)
Relating to:
Continuing operations (689) (482) (435)
Discontinued operations 13 (216) (142) (230)
Consolidated cash flows include amounts of discontinued operations (Note 13).
Continued on the next page
The accompanying notes form an integral part of these consolidated financial
statements.
Сonsolidated statement of cash flows (continued)
(in millions of US
dollars)
Year ended 31 December
Notes 2021 2020 2019
Cash flows from financing activities
Purchases of non-controlling interests 4 $ (38) $ (66) $ (71)
Payments for property, plant and equipment on deferred terms (10) (10) -
Payments for investments on deferred terms 11 - - (8)
Dividends paid by the parent entity to its shareholders 20 (1,531) (872) (1,086)
Dividends paid by the Group's subsidiaries to non-controlling shareholders (18) (5) (5)
Proceeds from bank loans and notes 22 2,325 1,218 2,805
Repayment of bank loans and notes, including interest 22 (3,403) (1,304) (3,035)
Net proceeds from/(repayment of) bank overdrafts and credit lines, including 22 (1) (25) 22
interest
Payments under covenants reset 22 (10) - -
Restricted deposits at banks in respect of financing activities - 1 -
Realised gains/(losses) on derivatives not designated as hedging instruments 25 12 (11) 22
Realised gains/(losses) on hedging instruments 25 - - (23)
Payments under leases, including interest 25 (33) (33) (37)
Other financing activities, net - - 1
Net cash flows used in financing activities (2,707) (1,107) (1,415)
Relating to:
Continuing operations (3,031) (1,053) (1,366)
Discontinued operations 13 324 (54) (49)
Effect of foreign exchange rate changes on cash and cash equivalents (12) 7 6
Net increase/(decrease) in cash and cash equivalents (200) 204 356
Cash and cash equivalents at the beginning of the year 19 1,627 1,423 1,067
Decrease/(increase) in cash of disposal groups classified as held for 13 (400) - -
distribution to owners
Cash and cash equivalents at the end of the year 19 $ 1,027 $ 1,627 $ 1,423
Supplementary cash flow information:
Cash flows during the year:
Interest paid $ (243) $ (284) $ (283)
Interest received 4 5 7
Income taxes paid (included in operating activities) (999) (536) (581)
Consolidated cash flows include amounts of discontinued operations (Note 13).
The accompanying notes form an integral part of these consolidated financial
statements.
Сonsolidated statement of changes in equity
(in millions of US dollars)
Attributable to equity holders of the parent entity
Issued Treasury shares Additional Revaluation surplus Accumulated profits Translation difference Reserves of disposal group held for distribution to owners Total Non-controlling interests Total
capital
paid-in equity
capital
At 31 December 2020 $ 75 $ (154) $ 2,510 $ 109 $ 2,187 $ (3,936) $ - $ 791 $ 129 $ 920
Net profit - - - - 3,034 - - 3,034 73 3,107
Other comprehensive income/(loss) - - - - 63 (39) - 24 2 26
Reclassification of revaluation surplus to accumulated profits in respect of - - - (1) 1 - - - - -
the disposed items of property, plant and equipment
Total comprehensive income/(loss) for the period - - - (1) 3,098 (39) - 3,058 75 3,133
Reclassification of cumulative income or expense recognised in other - - - (108) - 2,047 (1,939) - - -
comprehensive income relating to discontinued operations
Acquisition of non-controlling interests in subsidiaries (Note 4) - - - - (19) - - (19) (19) (38)
Reversal of derecognition of non-controlling interest in subsidiaries - - - - 35 - - 35 30 65
(Note 4)
Transfer of treasury shares to participants of the Incentive Plans (Notes 20 - 6 - - (6) - - - - -
and 21)
Share-based payments (Note 21) - - 12 - - - - 12 - 12
Dividends declared by the parent entity to its shareholders (Note 20) - - - - (1,823) - - (1,823) - (1,823)
Dividends declared by the Group's subsidiaries to non-controlling shareholders - - - - - - - - (35) (35)
(Note 32)
At 31 December 2021 $ 75 $ (148) $ 2,522 $ - $ 3,472 $ (1,928) $ (1,939) $ 2,054 $ 180 $ 2,234
The accompanying notes form an integral part of these consolidated financial
statements.
Сonsolidated statement of changes in equity (continued)
(in millions of US dollars)
Attributable to equity holders of the parent entity
Issued Treasury shares Additional Revaluation surplus Unrealised gains and losses Accumulated profits Translation difference Total Non-controlling interests Total
capital
paid-in equity
capital
At 31 December 2019 $ 75 $ (169) $ 2,492 $ 109 $ - $ 2,217 $ (3,048) $ 1,676 $ 252 $ 1,928
Net profit - - - - - 848 - 848 10 858
Other comprehensive income/(loss) - - - - - (1) (888) (889) (19) (908)
Total comprehensive income/(loss) for the period - - - - - 847 (888) (41) (9) (50)
Acquisition of non-controlling interests in subsidiaries (Note 4) - - 7 - - - - 7 (34) (27)
Change in non-controlling interests due to reorganisation (Note 4) - - - - - 45 - 45 (45) -
Decrease in non-controlling interests due to put options (Note 4) - - - - - (35) - (35) (30) (65)
Transfer of treasury shares to participants of the Incentive Plans (Notes 20 - 15 - - - (15) - - - -
and 21)
Share-based payments (Note 21) - - 11 - - - - 11 - 11
Dividends declared by the parent entity to its shareholders (Note 20) - - - - - (872) - (872) - (872)
Dividends declared by the Group's subsidiaries to non-controlling shareholders - - - - - - - - (5) (5)
(Note 32)
At 31 December 2020 $ 75 $ (154) $ 2,510 $ 109 $ - $ 2,187 $ (3,936) $ 791 $ 129 $ 920
The accompanying notes form an integral part of these consolidated financial
statements.
Сonsolidated statement of changes in equity (continued)
(in millions of US dollars)
Attributable to equity holders of the parent entity
Issued Treasury shares Additional Revaluation surplus Unrealised gains and losses Accumulated profits Translation difference Total Non-controlling interests Total
capital
paid-in equity
capital
At 31 December 2018 $ 75 $ (196) $ 2,480 $ 110 $ 6 $ 3,026 $ (3,820) $ 1,681 $ 257 $ 1,938
Net profit - - - - - 326 - 326 39 365
Other comprehensive income/(loss) - - - - (6) (14) 772 752 22 774
Reclassification of revaluation surplus to accumulated profits in respect of - - - (1) - 1 - - - -
the disposed items of property, plant and equipment
Reclassification of additional paid-in capital in respect of the disposed - - (1) - - 1 - - - -
subsidiaries
Total comprehensive income/(loss) for the period - - (1) (1) (6) 314 772 1,078 61 1,139
Acquisition of non-controlling interests in subsidiaries (Note 4) - - - - - (10) - (10) (61) (71)
Transfer of treasury shares to participants of the Incentive Plans (Notes 20 - 27 - - - (27) - - - -
and 21)
Share-based payments (Note 21) - - 13 - - - - 13 - 13
Dividends declared by the parent entity to its shareholders (Note 20) - - - - - (1,086) - (1,086) - (1,086)
Dividends declared by the Group's subsidiaries to non-controlling shareholders - - - - - - - - (5) (5)
(Note 32)
At 31 December 2019 $ 75 $ (169) $ 2,492 $ 109 $ - $ 2,217 $ (3,048) $ 1,676 $ 252 $ 1,928
The accompanying notes form an integral part of these consolidated financial
statements.
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See all newsREG-EVRAZ plc DISCONTINUATION OF DISCLOSURE VIA PRIMARY INFORMATION PROVIDER
AnnouncementREG-EVRAZ plc CLARIFICATION ON ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR 2022
AnnouncementREG-EVRAZ plc EVRAZ plc announces that the Appointment and the Amendments adopted as part of the Consent Solicitation for its outstanding U.S.$700,000,000 5.250 per cent. notes due 2024 have become effective
AnnouncementREG-EVRAZ plc EVRAZ plc announces results of the Consent Solicitation for its outstanding U.S.$700,000,000 5.250 per cent. notes due 2024
AnnouncementREG-EVRAZ plc EVRAZ plc announces that the Appointment and the Amendments adopted as part of the Consent Solicitation for its outstanding notes due 2023 have become effective
Announcement