Severstal H1 Net Profit Jumps 69%

Russia's largest steelmaker announced a 69 percent rise in first-half net profit to $1.9 billion Thursday, a company record.

"We grew significantly in all our markets in the first half of the year, driven by both price increases and volume growth," Severstal chief executive Alexei Mordashov said at a news conference.

Severstal's first half revenues rose 36.3 percent to $10.5 billion on soaring global and domestic steel prices.

"We expect steel demand to keep growing," said Mordashov, who owns 82 percent of a Severstal's shares.

He said North American activity was a major factor in the rise in profits.

Severstal has spent more than $3 billion on steel and coal assets in the United States this year, to become the fourth-largest U.S. steelmaker, with a production capacity of 12 million tons. Plans are for that figure to reach 13.7 million tons for 2009.

Severstal's North American operations posted a sixfold rise in first-half earnings before interest, taxation, depreciation and amortization, to $228 million.

"We believe in the U.S. economy," Mordashov said, adding that he was interested in further assets in the United States and elsewhere in the world. "The country's economy will grow due to self-sufficiency in resources like iron ore and its large population."

Severstal fell 2.6 percent for the day on MICEX, closing at 398 rubles.

"Severstal's financial results have exceeded market expectations," Aton brokerage said in an analytical note. "However, the net profits were the result of one-time factors like the re-evaluation of its Sparrows Point, [Maryland steel mill] and the $255 million sale of Kuzbassugol [coal mining company]."

Severstal's results fell just short of those from Evraz Group, Russia's biggest steelmaker by market value, which posted an 82 percent jump, to $2 billion, in first-quarter net income. Magnitogorsk Iron & Steel Works posted a profit of $1 billion, a 19 percent rise year on year, and Novolipetsk Steel boosted its net profit by 44 percent, to $1.53 billion, in the first half.