July 31, 2018 / 9:15 AM / 9 months ago

UPDATE 1-Russian steelmaker NLMK reports Q2 earnings at decade high

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MOSCOW, July 31 (Reuters) - NLMK on Tuesday reported its highest second-quarter core earnings in a decade as Russia’s largest steelmaker benefited from an improved product mix and efficiency gains.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 52 percent year-on-year to $915 million, beating the $906 million expected by analysts in a Reuters poll.

Net profit jumped 70 percent to $581 million on revenue up 22 percent to $3.1 billion.

“A widening of steel product/raw material price spreads, an improved product mix, and gains from completed capex projects and operational efficiency programmes were the key factors behind the growth of EBITDA this quarter,” Deputy CFO Nelli Meshcheryakova said in a statement.

NLMK, controlled by billionaire Vladimir Lisin, said quarter-on-quarter demand was up across the board, rising 8 percent in Russia, 2 percent in the United States and 1 percent in the European Union.

It said its board had recommended a second-quarter dividend of 5.24 roubles per share, equivalent to approximately 100 percent of the company’s free cash flow and net income, based on results for the first half of 2018.

However, free cash flow fell 52 percent quarter-on-quarter, the company said.

“Free cash flow was hit by a massive $357 million outflow from working capital stemming from higher steel prices and sales, although capital expenditure declined by 11 percent quarter on quarter to $116 million,” said Oleg Petropavlovsky, an analyst at BCS Global Markets.

“(The) lower material miss on free cash flow should lead to a dividend yield of less than 3 percent, we estimate,” he said.

Reporting by Polina Ivanova; editing by Denis Pinchuk and Jason Neely

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