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Russia's Evraz scraps dividend after 2012 loss

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(GlobalPost/GlobalPost)

By Alessandra Prentice

MOSCOW (Reuters) - Russia's largest steelmaker Evraz <EVRE.L> scrapped its dividend on Thursday, citing a precarious market outlook as it became the latest giant in the sector to post a major net loss for 2012.

The shock loss sent Evraz shares down by 16 percent to an all-time low in London trading, before they recovered to trade 9.2 percent lower on the session - the worst performance of any stock in the FTSE 100 large-cap index.

Steelmakers across the world have been struggling to cope with weak prices as a growth slowdown in China and Europe's debt crisis hit construction and industrial production. Demand from the European Union alone slumped 9 percent last year.

ArcelorMittal, the world's top steelmaker, reported a multi-billion dollar loss for 2012, while Evraz's Russian sector peers also significantly underperformed over the same period.

Evraz, controlled partly by Chelsea football club owner Roman Abramovich, posted a 2012 net loss of $335 million (217 million pounds) compared with profit of $453 the previous year. Analysts on average had expected a net profit of $43 million.

The firm said a $413 million impairment of its iron ore division was a key contributor to the 2012 loss.

"Notwithstanding some recent signs of stabilisation, global prospects remain fragile, with strong downside risks and volatility likely to persist throughout the year," Chief Executive Alexander Frolov said in a statement.

LARGEST ONE-DAY FALL

The share-price slide was the largest daily fall since Evraz won a coveted FTSE 100 listing in 2011. A 40 percent decline in its share price since then has eroded the company's market value to 2.8 billion pounds.

The cancellation of a final dividend payout for 2012 caused traders to hit the 'sell' button, although Alexei Morozov, a steel analyst at UBS in Moscow, said the market reaction may be overdone.

"The market was expecting a dividend, but ... not paying a dividend makes sense because their leverage is not that low, so they don't want to be breaking any covenants and putting the company under any additional stress," he said.

Evraz, which like other Russian steelmakers has been disposing of assets including subsidiary Evraztrans to manage its $6 billion in debts, said it might permanently halt smelting capacity at its Czech unit Vitkovice Steel or sell the entire business.

"If we find buyers interested in continuing steel production at the unit, and the conditions are right for us, then we would go for this option because it would be less painful for the company and its employees," Chief Financial Officer Giacomo Baizini said in a conference call.

Evraz said it planned to reduce capital expenditure by 10 percent in 2013 as it winds up investment projects.

While the net loss contrasted with the net profit forecast by analysts, Evraz's 2012 revenue of $14.7 billion - down 10.2 percent on a year earlier - was in line with expectations.

"Evraz may surprise the market to the downside in the first half of 2013, as the company is likely to face debt problems and its financial performance seems set to deteriorate further," BCS analysts wrote in a note.

(This story corrects paragraph 11 to clarify firm might halt smelting capacity at Czech unit rather than halt all output.)

(Editing by Douglas Busvine and Stephen Nisbet)

http://www.globalpost.com/dispatch/news/thomson-reuters/130411/russias-evraz-scraps-dividend-after-2012-loss-0