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. Last Updated: 07/27/2016

Severstal Reports Q2 Net Loss of $290M

Severstal posted its third consecutive quarterly net loss Monday and said a “fragile” market recovery would depend on a disciplined approach by steelmakers worldwide.

Severstal said it was finalizing its strategy to cope with loss-making U.S. assets, which were the main contributors to the company’s $290 million net loss in the second quarter, making it the third steel major to finish the period in the red.

“The Russian division performed well — EBITDA margin was 18 percent — and the mining division also showed an increase in profitability, but this wasn’t enough to cover the losses of its foreign assets,” Deutsche Bank mining analyst Olga Okuneva said.

The world economic slowdown has slashed demand for steel from the construction and automotive sectors, reversing several years of boom that led steelmakers in Russia, the world’s No. 4 producer, to venture abroad in search of new assets and markets.

Russian companies snapped up about a tenth of steel-making capacity in the United States and Severstal became the country’s fourth-largest steel company by production capacity. But its mills in Warren, Ohio and Wheeling, West Virginia, remain idle.

“We are committed to operating in North America, which is one of the world’s most important long-term markets for steel, and will retain our most efficient units with a view to making them even more flexible and efficient,” Severstal said.

The company gave no more details about its U.S. plans. Its North American operations reported negative earnings before interest, taxation, depreciation and amortization of $236 million in the second quarter of the year.

The group’s total second-quarter EBITDA was a negative $5 million, below the $10.6 million profit forecast by analysts.

Severstal’s second-quarter net loss, slightly worse than forecast by analysts in a Reuters poll, narrowed from $654 million in the first three months of 2009. Its billionaire main owner, Alexei Mordashov, said prices had turned the corner.

“The second quarter marked a turning point for the steel market, after prices reached their lowest levels in May,” Mordashov, the firm’s chief executive, said in a statement.

“A sustained recovery will depend on renewed global economic growth and discipline in production and pricing across the industry,” he added.

Second-quarter revenues, at $2.85 billion, were slightly above the $2.8 billion earned during the first quarter of 2009.

Severstal, which is in the process of cutting up to 9,500 jobs in Russia, boosted EBITDA at its Russian operations by 175 percent in the second quarter to $242 million.

The company’s net debt crept up over the first six months of 2009 to $4.93 billion from $4.78 billion at the end of last year, but the company reduced its total debt to $7.51 billion from $8.26 billion in the period.