REG - Evraz Plc - Half Yearly Report <Origin Href="QuoteRef">EVRE.L</Origin> - Part 3
29/10/2014 15:28
- Part 3: For the preceding part double click ID:nRSa0638Qb
discussions with political and regulatory authorities.The Company has diligently taken international legal advice in order to assess the risk of consequences from sanctions against Russian businesses and develop mitigating measures.
TreasuryEVRAZ, as with many other large and multi-national corporates, faces various treasury risks including liquidity, credit access, currency fluctuations, interest rate, and tax compliance risks. In addition, and as mentioned above, potential actions by Governments, including economic sanctions impacting Russian entities, may increase the Company's capital market risk in respect of new funding issues. EVRAZ employs skilled specialists to manage and mitigate such risks and the management of such risks is embedded in internal controls. Oversight of the key risks is reported within the monthly Board reports and compliance with the internal controls is
reviewed by the management independent internal audit function, which reports to the Audit Committee on a monthly basis.EVRAZ continues to undertake certain actions in order to extend the debt maturity profile and lower short-term external funding needs,
as well as proactively managing the remaining portion of debt subject to maintenance covenants. Liquidity risk is managed through revisiting capital expenditure plans, cost optimisation programmes, continued asset portfolio rationalisation, and revision of
the Company's dividend policy. The EVRAZ treasury management team and the directors regularly and pro-actively review all funding requirements and exposures.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of our knowledge this consolidated interim financial information has been prepared
in accordance with lAS 34 as adopted by the European Union 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
26 August 2014
Giacomo Baizini
Chief Financial Officer
26 August 2014
Appendix 1
EBITDA
EBITDA represents profit from operations plus depreciation, depletion and amortisation, impairment of assets, loss (gain)
on disposal of property, plant and equipment, and foreign exchange loss (gain). EVRAZ presents an EBITDA because it
considers EBITDA to be an important supplemental measure of its operating performance and believes that EBITDA is
frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the same
industry. EBITDA is not a measure of financial performance under IFRS and it should not be considered as an alternative to
net profit as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.
EVRAZ's calculation of EBITDA may be different from the calculation used by other companies and therefore comparability may
be limited. EBITDA has limitations as an analytical tool and potential investors should not consider it in isolation, or as
a substitute for an analysis of our operating results as reported under IFRS. Some of these limitations include:
· EBITDA does not reflect the impact of financing or financing costs on EVRAZ's operating performance, which can be
significant and could further increase if EVRAZ were to incur more debt.
· EBITDA does not reflect the impact of income taxes on EVRAZ's operating performance.
· EBITDA does not reflect the impact of depreciation and amortisation on EVRAZ's operating performance. The assets of
EVRAZ's businesses which are being depreciated and/or amortised will have to be replaced in the future and such
depreciation and amortisation expense may approximate the cost of replacement of these assets in the future. EBITDA, due to
the exclusion of these costs, does not reflect EVRAZ's future cash requirements for these replacements. EBITDA also does
not reflect the impact of a loss on disposal of property, plant and equipment.
Reconciliation of profit (loss) from operations to EBITDA is as follows:
Consolidated EBITDA reconciliation
Profit from operations 297 145
Add:
Depreciation, depletion and amortisation 435 580
Impairment of assets 147 7
Loss on disposal of property, plant & equipment 21 14
Foreign exchange loss/(gain) 180 179
Consolidated EBITDA 1,080 925
Steel segment EBITDA reconciliation
Profit from operations 344 339
Add:
Depreciation and amortisation 228 294
Impairment of assets 40 (32)
Loss on disposal of property, plant & equipment 7 8
Foreign exchange loss/(gain) 152 42
Steel segment EBITDA 771 651
Coal segment EBITDA reconciliation
Profit from operations (108) (187)
Add:
Depreciation, depletion and amortisation 136 187
Impairment of assets 77 63
Loss on disposal of property, plant & equipment 13 6
Foreign exchange loss/(gain) 14 40
Coal segment EBITDA 132 109
Iron ore segment EBITDA reconciliation
Profit from operations 220 254
Add:
Depreciation, depletion and amortisation 43 55
Impairment of assets 3 (24)
Foreign exchange loss/(gain) (50) (54)
Iron ore segment EBITDA 216 231
Vanadium segment EBITDA reconciliation
(Loss)/profit from operations (20) 11
Add:
Depreciation and amortisation 15 23
Impairment of assets 25 -
Vanadium segment EBITDA 20 34
Other operations EBITDA reconciliation
Profit from operations 38 45
Add:
Depreciation and amortisation 11 17
Impairment of assets 2 -
Gain on disposal of property, plant & equipment 1 (1)
Other operations EBITDA 52 61
Unallocated EBITDA reconciliation
Loss from operations (181) (256)
Add:
+ depreciation 2 4
+ (gain)/loss from disposal of PPE - 1
+ forex gain/losses 64 151
Other unallocated operations EBITDA (115) (100)
Intersegment eliminations
Eliminations EBITDA 4 (61)
Other unallocated operations EBITDA
(115)
(100)
Intersegment eliminations
Eliminations EBITDA
4
(61)
Appendix 2
Cash and short-term bank deposits
Cash and short-term bank deposits is not a measure under IFRS and it should not be considered as an alternative to other
measures of financial position. EVRAZ's calculation of cash and short-term bank deposits may be different from the
calculation used by other companies and therefore comparability may be limited.
30 June 2014 31 December 2013
(US$ million)
Cash and short-term bank deposits Calculation
Cash and cash equivalents 1,353 1,604
Cash of disposal groups classified as held for sale - 7
Short-term bank deposits - -
Cash and short-term bank deposits 1,353 1,611
Appendix 3
Definition of 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 gain on swaps, 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 disposal groups 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 it should not be considered as an alternative to other measures
of financial position. EVRAZ's calculation of Free Cash Flow may be different from the calculation used by other companies
and therefore comparability may be limited.
Appendix 4
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, the nominal effect of cross-currency swaps on principal of rouble-denominated notes.
Total debt is not a measure under IFRS and it should not be considered as an alternative to other measures of financial
position. EVRAZ's calculation of total debt may be different from the calculation used by other companies and therefore
comparability may be limited. The current calculation shall not be considered for covenant compliance reasons.
Total debt has been calculated as follows:
Total debt calculation 30 June 2014 31 December 2013
(US$ million)
Long-term loans, net of current portion 5,960 6,041
Short-term loans and current portion of long-term loans 1,244 1,816
Add back: Unamortised debt issue costs and fair value adjustment to liabilities assumed in business combination 40 41
Nominal effect of cross-currency swaps on principal of rouble-denominated notes 230 186
Loans of assets classified as held for sale - 76
Finance lease liabilities, including current portion 5 6
Total debt 7,479 8,166
7,479
8,166
Appendix 5
Net debt
Net debt represents total debt less cash and liquid short-term financial assets, including those related to disposal groups
classified as held for sale. Net debt is not a measure under IFRS and it should not be considered as an alternative to
other measures of financial position. EVRAZ's calculation of net debt may be different from the calculation used by other
companies and therefore comparability may be limited. The current calculation shall not be considered for covenant
compliance reasons.
Net debt has been calculated as follows:
Net debt calculation 30 June 2014 31 December 2013
(US$ million)
Total debt 7,479 8,166
Short-term bank deposits - -
Cash and cash equivalents (1,353) (1,604)
Cash of assets classified as held for sale - (7)
Collateral under swaps (31) (21)
Net debt 6,095 6,534
6,534
For further information:
Media Relations:
Vsevolod Sementsov
VP, Corporate Communications
London: +44 207 832 8998 Moscow: +7 495 937 6871
media@evraz.com
Investor Relations:
London: +44 207 832 8990 Moscow: +7 495 232 1370
EVRAZ plc
Unaudited Interim Condensed Consolidated Financial Statements
Six-month period ended 30 June 2014
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
Introduction
We have been engaged by EVRAZ plc (the Company) to review the condensed set of financial statements in the interim report
for the six months ended 30 June 2014 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 Interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial
statements.
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.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are
responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority. As disclosed in note 2, the annual financial statements of the Group are prepared in
accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim
financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting',
as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim
financial report based on our review.
Scope of review
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
for use in the United Kingdom. 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 Ireland)
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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the interim report for the six months ended 30 June 2014 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
26 August 2014
Unaudited Interim Condensed Consolidated Statement of Operations
(In millions of US dollars, except for per share information)
Six-month periodended 30 June
Notes 2014 2013
restated*
Revenue
Sale of goods $ 6,628 $ 7,142
Rendering of services 177 177
6,805 7,319
Cost of revenue (5,192) (5,886)
Gross profit 1,613 1,433
Selling and distribution costs (543) (608)
General and administrative expenses (390) (438)
Social and social infrastructure maintenance expenses (13) (22)
Loss on disposal of property, plant and equipment (21) (14)
Impairment of assets 5 (147) (7)
Foreign exchange gains/(losses), net (180) (179)
Other operating income 18 48
Other operating expenses (40) (68)
Profit from operations 297 145
Interest income 9 16
Interest expense (296) (373)
Share of profits/(losses) of joint ventures and associates 8 5 3
Gain/(loss) on derecognition of equity investments, net - 89
Gain/(loss) on financial assets and liabilities, net (43) (71)
Gain/(loss) on disposal groups classified as held for sale, net 4 113 54
Other non-operating gains/(losses), net - (2)
Profit/(loss) before tax 85 (139)
Income tax expense 6 (84) (7)
Net profit/(loss) $ 1 $ (146)
Attributable to:
Equity holders of the parent entity $ 38 $ (131)
Non-controlling interests (37) (15)
$ 1 $ (146)
Earnings/(losses) per share:
basic, for profit/(loss) attributable to equity holders of the parent entity, US dollars 11 $ 0.03 $ (0.09)
diluted, for profit/(loss) attributable to equity holders of the parent entity, US dollars 11 $ 0.02 $ (0.09)
* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013
and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the
completion of initial accounting (Note 2).
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 periodended 30 June
Notes 2014 2013
restated*
Net profit/(loss) $ 1 $ (146)
Other comprehensive income
Othercomprehensiveincometobereclassifiedtoprofitorlossin subsequentperiods
Exchange differences on translation of foreign operations into presentation currency (197) (409)
Recycling of exchange difference to profit or loss (Note 4) (65) 68
Net gains/(losses) on available-for-sale financial assets (9) 4
(271) (337)
Effect of translation to presentation currency of the Group's joint ventures and associates 8 (5) (10)
Share of other comprehensive income of joint ventures and associates accounted for using the equity method (5) (10)
Items not to be reclassified to profit or loss in subsequent periods
Gains/(losses) on re-measurement of net defined benefit liability (29) -
Income tax effect 9 -
(20) -
Decrease in revaluation surplus in connection with the impairment of property, plant and equipment - (5)
Income tax effect - 1
- (4)
Total other comprehensive loss (296) (351)
Total comprehensive loss, net of tax $ (295) $ (497)
Attributable to:
Equity holders of the parent entity $ (248) $ (449)
Non-controlling interests (47) (48)
$ (295) $ (497)
* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013
and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the
completion of initial accounting (Note 2).
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 2014 31 December 2013
restated*
Assets
Non-current assets
Property, plant and equipment 7 $ 8,772 $ 9,387
Intangible assets other than goodwill 530 588
Goodwill 1,980 1,988
Investments in joint ventures and associates 8 191 191
Deferred income tax assets 80 86
Other non-current financial assets 119 144
Other non-current assets 57 62
11,729 12,446
Current assets
Inventories 1,694 1,744
Trade and other receivables 943 915
Prepayments 87 124
Loans receivable 42 21
Receivables from related parties 9 22 13
Income tax receivable 46 59
Other taxes recoverable 260 283
Other current financial assets 65 71
Cash and cash equivalents 10 1,353 1,604
4,512 4,834
Assets of disposal groups classified as held for sale 92 409
4,604 5,243
Total assets $ 16,333 $ 17,689
Equity and liabilities
Equity
Equity attributable to equity holders of the parent entity
Issued capital 11 $ 1,507 $ 1,473
Treasury shares (1) (1)
Additional paid-in capital 11 2,469 2,326
Revaluation surplus 159 162
Other reserves 11 - 156
Unrealised gains and losses 3 12
Accumulated profits 2,508 2,589
Translation difference (1,943) (1,685)
4,702 5,032
Non-controlling interests 378 431
5,080 5,463
Non-current liabilities
Long-term loans 12 5,960 6,041
Deferred income tax liabilities 751 841
Employee benefits 491 492
Provisions 261 254
Other long-term liabilities 266 230
7,729 7,858
Current liabilities
Trade and other payables 1,497 1,488
Advances from customers 129 180
Short-term loans and current portion of long-term loans 12 1,244 1,816
Payables to related parties 9 149 458
Income tax payable 94 57
Other taxes payable 227 202
Provisions 78 45
Dividends payable by the parent entity to its shareholders 11 90 -
Dividends payable by the Group's subsidiaries to non-controlling shareholders - 5
3,508 4,251
Liabilities directly associated with disposal groups classified as held for sale 16 117
3,524 4,368
Total equity and liabilities $ 16,333 $ 17,689
$ 17,689
* The amounts shown here do not correspond to the financial statements for the year ended 31 December 2013 and
reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale (Note 2).
The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.
Unaudited Interim Condensed Consolidated Statement of Cash Flows
(In millions of US dollars)
Six-month period ended30 June
2014 2013
restated*
Cash flows from operating activities
Net profit/(loss) $ 1 $ (146)
Adjustments to reconcile net profit/(loss) to net cash flows from operating activities:
Deferred income tax (benefit)/expense (59) (140)
Depreciation, depletion and amortisation 435 580
Loss on disposal of property, plant and equipment 21 14
Impairment of assets 147 7
Foreign exchange (gains)/losses, net 180 179
Interest income (9) (16)
Interest expense 296 373
Share of (profits)/losses of associates and joint ventures (5) (3)
(Gain)/loss on derecognition of equity investments, net - (89)
(Gain)/loss on financial assets and liabilities, net 43 71
(Gain)/loss on disposal groups classified as held for sale, net (113) (54)
Other non-operating (gains)/losses, net - 2
Bad debt expense 21 (1)
Changes in provisions, employee benefits and other long-term assets and liabilities (2) (43)
Expense arising from the equity-settled awards 15 11
Other (1) (2)
970 743
Changes in working capital:
Inventories (35) 101
Trade and other receivables (74) (176)
Prepayments 29 15
Receivables from/payables to related parties (186) 94
Taxes recoverable (1) 68
Other assets 10 (3)
Trade and other payables 118 (225)
Advances from customers (46) (32)
Taxes payable 66 42
Other liabilities (7) 1
Net cash flows from operating activities 844 628
Cash flows from investing activities
Issuance of loans receivable to related parties (1) (1)
Issuance of loans receivable - (1)
Proceeds from repayment of loans receivable, including interest 1 1
Purchases of subsidiaries, net of cash acquired (102) 82
Purchase of interest in a joint venture - (16)
Restricted deposits at banks in respect of investing activities 2 (1)
Short-term deposits at banks, including interest 3 680
Purchases of property, plant and equipment and intangible assets (339) (492)
Proceeds from disposal of property, plant and equipment 4 3
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs (Note 4) 296 (1)
Dividends received - 1
Other investing activities, net 13 (17)
Net cash flows from/(used in) investing activities (123) 238
Cash flows from financing activities
Purchase of treasury shares $ (13) $ -
Proceeds from loans provided by related parties (Note 9) 267 -
Repayment of loans provided by related parties (Note 9) (251) -
Proceeds from bank loans and notes 1,052 1,776
Repayment of bank loans and notes, including interest (1,286) (2,849)
Net proceeds from/(repayment of) bank overdrafts and credit lines, including interest (712) 412
Payments for purchase of property, plant and equipment on deferred terms (26) -
Gain on derivatives not designated as hedging instruments 25 19
Collateral under swap contracts (10) (26)
Payments under finance leases, including interest (1) (2)
Other financing activities (5) -
Net cash flows used in financing activities (960) (670)
Effect of foreign exchange rate changes on cash and cash equivalents (20) (49)
Net increase/(decrease) in cash and cash equivalents (259) 147
Cash and cash equivalents at beginning of year 1,604 1,382
Add back: decrease in cash of disposal groups classified as assets held for sale 8 5
Cash and cash equivalents at end of period $ 1,353 $ 1,534
Supplementary cash flow information:
Cash flows during the period:
Interest paid $ (264) $ (302)
Interest received 10 17
Income taxes paid (94) (126)
(94)
(126)
* The amounts shown here do not correspond to the financial statements for the six-month period ended 30 June 2013
and reflect adjustments made in connection with the cessation of classification of a subsidiary as held for sale and the
completion of initial accounting (Note 2).
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 Treasury shares Additional paid-incapital Revaluation surplus Other reserves Unrealised gains and losses Accumulated profits Translation difference Total Non-controlling interests Total Equity
capital
At 31 December 2013 (as reported) $ 1,473 $ (1) $ 2,326 $ 162 $ 156 $ 12 $ 2,566 $ (1,687) $ 5,007 $ 427 $ 5,434
Subsidiary that ceased to be classified as held for sale (Note 2) - - - - - - 23 2 25 4 29
At 31 December 2013 (as restated) 1,473 (1) 2,326 162 156 12 2,589 (1,685) 5,032 431 5,463
Net profit/(loss) - - - - - - 38 - 38 (37) 1
Other comprehensive income/(loss) - - - (3) - (9) (16) (258) (286) (10) (296)
Total comprehensive income/(loss) for the period - - - (3) - (9) 22 (258) (248) (47) (295)
Issue of shares (Note 11) 34 - 122 - (156) - - - - - -
Acquisition of non-controlling interests in existing subsidiaries - - 6 - - - - - 6 (6) -
Purchase of treasury shares (Note 11) - (13) - - - - - - (13) - (13)
Transfer of treasury shares to participants of the Incentive Plans (Note 11) - 13 - - - - (13) - - - -
Share-based payments - - 15 - - - - - 15 - 15
Dividends declared by the parent entity to its shareholders (Note 11) - - - - - - (90) - (90) - (90)
At 30 June 2014 $ 1,507 $ (1) $ 2,469 $ 159 $ - $ 3 $ 2,508 $ (1,943) $ 4,702 $ 378 $ 5,080
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 Treasury shares Additional paid-incapital Revaluation surplus Other reserves Unrealised gains and losses Accumulated profits Translation difference Total Non-controlling interests Total Equity
capital
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