Evraz Plans US$6 Billion Spend to Meet Global Steel Demand
06/19/2012 - Russian steel and mining group Evraz Plc set out plans for US$6 billion of capital spending through the next four years as it seeks to meet growing global demand for railways and pipelines, particularly in North America.
Russian steel and mining group Evraz Plc set out plans for US$6 billion of capital spending through the next four years as it seeks to meet growing global demand for railways and pipelines, particularly in North America.
Evraz, Russia's largest steel producer and part-owned by billionaire Chelsea soccer club owner Roman Abramovich, said it plans capital expenditure of US$1.5 billion a year on average through the coming four years.
The London-listed group also said it was targeting earnings before interest, taxes, depreciation and amortization (EBITDA) of US$5 billion in 2016, compared with US$2.9 billion in 2011.
Evraz plans "increased investment focused on adding value to steel products, particularly in the rail and pipe segments," the company said, adding that a "positive contribution of investments to EBITDA and cash flow (is) expected from 2013."
The company, which earlier this week approved a 2011 dividend of US$0.17 per ordinary share, said it would remain committed to maintaining a balance between investment and the payment of dividends.
Evraz, whose debt stood at US$7.38 billion as of March 31, said its net leverage was likely to rise by year-end, but net debt will not exceed two times EBITDA in the medium term.
The company, which leads the U.S. market for large-diameter pipes (LDP) by production capacity, is upbeat on prospects for growth in the North American steel market in coming years, forecasting growth of 4.0% a year through 2016 in a presentation for investors published on its website.
It expects to benefit from a strong market share in western Canada, the Dakotas and Rockies, areas which it said were "emerging as centers of (the) North American oil and gas renaissance."
The company also intends to expand its rail business in the U.S. and improve quality to beat Japanese competitors and gain market share from imports.
"Volumes (are) to be expanded to 525 kilotonnes per annum from the current record level of 480 kilotonnes in 2011, still leaving enough room for the import of Evraz rails from Russia," it said. "(Evraz sees) increasing profitability by shifting (the product) mix from standard to premium (head-hardened) rails."
The company is one of the world's top-20 steel producers with crude steel output of 16.8 million tonnes in 2011.
