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. Last Updated: 07/27/2016

Evraz Expands Profit On High Steel Prices

Evraz Group, Russia's biggest steelmaker by market value, announced an 82 percent jump in first-quarter net income to $2 billion because of strong pricing, acquisitions and an improved sales mix, the company said in a statement Friday.

"This is the result of soaring steel prices, which were partly caused by the shortage of raw materials for steelmaking, and our acquisition of new assets," Evraz chief executive Alexander Frolov said during a conference call.

Evraz, which is part-owned by billionaire Roman Abramovich, is almost fully supplied with its own coking coal and iron ore, used for making steel.

The results were higher than expected, analysts said.

"We believe the steel prices will be at the same high level in the next one to two years," Evraz chief financial officer Pavel Tatyanin told reporters in the conference call. "We don't feel the affect of the financial crisis on our company."

Prices for steel have grown 45 percent to 50 percent over the last year, and semifinished and construction steel products have become 60 percent to 70 percent more expensive over the same period.

Russian prices for galvanized steel sheet currently go up to an average of about 38,000 rubles ($1,570) per ton, while girder is priced at about 40,000 rubles per ton and reinforcing bar, or rebar, goes for around 37,000 rubles.

Evraz has redirected almost all of its exports to the domestic and CIS markets to meet growing local demand, the company said in an e-mailed statement. The revenue from Russian and CIS construction products sales grew 51.5 percent to $2.1 billion, up from $1.4 billion in the first quarter of 2007. Overall sales revenues in Russia increased by 53.6 percent to $4.2 billion, the company said.

High global steel prices helped Evraz's non-Russian sales to double to $6.4 billion from $3.2 billion in the first half of the year. The main factor driving revenue growth outside Russia was a strong pricing environment and additional sales volumes from new acquisitions, Evraz said in the statement.

Since December, Evraz has paid more than $5 billion for assets in the United States, Canada and Ukraine.

Tatyanin said Friday that Evraz hoped to secure the approval of Chinese regulators this month for a deal to increase its stake in China's Delong Holdings to 75 percent. Evraz is to pay $860 million for the stake.

"Evraz is benefiting strongly from its strategy of mergers and acquisitions growth in high value-added steel products and its vertical integration into iron ore, coking coal and scrap," UniCredit Aton said in a note to investors Friday, giving a "buy" recommendation for Evraz shares and a 12-month target price of $115.

Evraz Global Depositary Receipts rose in London $3.10, or 4.3 percent, to close at $75.50, after earlier jumping 6.4 percent.

Magnitogorsk Iron & Steel Works, Russia's third-largest steelmaker, boosted its net profit 19 percent to $1.03 billion and Novolipetsk Steel, the country's fourth-largest steelmaker, boosted net profit 44 percent to $1.53 billion in the first half. Severstal is due to release its first-half results Thursday.