Page 118 - RusRPTDec19

● Steel
Russian steel maker​ ​Severstal​ increased its annual CapEx guidance for 2020-23 to $1.5-1.7bn, which analysts say is negative for the name. ​The increase in CapEx would translate to higher leverage, as the company would continue to pay more than 100% of free cash flow (FCF) based on its current dividend policy. Severstal increased 2020-23 CapEx guidance to $1.5-1.7bn annually. Guidance was increased from the c$0.8-1.4bn target announced during the 2018 Capital Markets Day, according to company’s CEO Shevelev, who gave an interview with Kommersant. After 2023, Severstal’s CapEx is seen at $800-900mn annually vs $750mn previous guidance. However, the director said the steelmakers’ investment program is flexible and CapEx may be reduced if the market environment deteriorates. Also, Shevelev confirmed last year’s EBITDA growth target at $2.1bn (after all projects are realized). Separately, on national projects, the CEO said he believes they will materialize, though there may be some delay
Russian steel major ​MMK​ (Magnitogorsk Iron and Steel Works) held a Capital Markets Day, at which it announced a capital expenditure guidance of $900mn for 2020-2023 and $700mn for 2024-2025, ​in addition to the annual $300mn maintenance capex. MMK and other Russian metals majors have been pressured to increase their investment because of poor market conditions that has seen the price of iron and steel fall. MMK said that the extra $200mn investment for 2020-2023 will not affect the dividend payments, which could imply rising leverage. This, in turn, could decrease the dividend payment in medium-term once the net debt to EBITDA crosses 1.0x, in the current negative marker conditions, BCS Global Markets warned on November 14.
Russian metals major MMK (​Magnitogorsk Iron and Steel Works​) could see its output dive by 1.45mn tonnes from November 29 ​due to maintenance and upgrade works at two hot-rolling facilities, calculations of BCS Global Markets and Metal Expert said on November 29. As reported bybn​e IntelliNews,​ MMK along with other Russian metals majors ​adopted higher spending plans in the medium term despite the weak market​. But the works at Mill-2000 (capacity 6mn tonnes, regular maintenance planned in February) and Mill-2500 (2.9mn tonnes, upgrade in March-June) risk to further undermine MMK's performance. The estimated fallout in output is more than a quarter-long volume of sales, BCS Global Markets warns. "We estimate
118​ RUSSIA Country Report​ December 2019 ​ ​www.intellinews.com