Wednesday , October 5 2022

Severstal announces an updated strategy on the 2018 investment day



PAO Severstal, one of the world's leading vertically integrated steel and mining companies, holds the annual Investor's Day in London today. During the event, the top manager will announce an updated company strategy that will focus on further increasing financial results as well as maximizing returns and return on investments to shareholders.

On the eve of the meeting PAO Severstal provides the following information to market participants:

  • Severstal remains the industry's foremost industry leader in terms of efficiency, indicating the world's highest EBITDA margin amongst steel companies, generating positive free cash flow throughout the cycle and achieving the goals set;
  • In order to ensure additional indicator growth, the company updated its proven efficiency strategy, retained its core benefits, but added new features. The new vision of the company is to become the leader of future metallurgy and the company's first choice for customers, employees and partners.
  • To achieve this, we have set new strategic priorities for us to help us differ from our competitors, with our customers' excellent customer experience leading to cost and new opportunities. These strategic priorities will be realized on the basis of the company's unique corporate culture.

Within the "Excellent Customer Experience" priority, we intend to offer our customers unique offers across all of our target markets.

As part of the "cost management" priority, our goal is to achieve a significant cost advantage in terms of producing basic products compared to competitors. Part of our "smart kapex" will focus on achieving this goal, including investment in increasing raw material extraction and iron and steel production, which will lead to further cost reductions.

As part of the "New Opportunities" strategic priority, our challenge is to access and successfully use advanced technologies and new business models that are emerging on the market.

Introducing this set of initiatives will enable us to achieve the above-mentioned financial goal – to increase EBITDA by 10-15% per year over the next five years (excluding price / macroeconomic factors).

The Company's financial strategy will be implemented in accordance with previously announced objectives:

  1. In the years 2012-2018, the company's investment program amounted to roughly $ 800 million. As previously announced, we are launching a first redistribution capacity renewal program that will require significant investment. In 2019, our investment program will cost about $ 1.4 billion, of which a significant proportion of development projects (~ 75%). The cost of maintaining existing capacity will remain $ 358 million in 2019. After 2022, when our key projects will be implemented, the investment program will gradually be normalized to 900 million and will decrease to about 750 million by 2023. Severstal will continue to adhere to the "smart kapex", which means that our IRR projects should exceed 20%. Key investment projects, impacts on EBITDA and IRR for each of them will be presented in the presentation of the Chief Financial Officer.
  2. The company's dividend policy remains unchanged. However, in order to maximize value creation for investors, Severstal will use the so-called "normalized free cash flow" for the calculation of dividends for the intensive phase of the investment program. This means that the investment will be excluded from the calculation of the base of dividends, exceeding the "basic" level of previous years of $ 800 million.
  3. Our goal is to maintain a comfortable debt burden for the company: the ratio of net debt to EBITDA will not exceed the previously announced target of 1.5x.

"As a world leader in efficiency and continuous improvement of our results throughout the history of our company, we are looking for new growth points and we see significant opportunities for ourselves. We have developed a growth strategy with very clear growth points and financial goals – adding EBITDA 10-15% each year. At the same time, we will strive to maintain a cautious approach to investment and we expect that the temporary growth of our capital will not affect the company's "dividend history", which together with promising development projects will create added value for our shareholders, Severstal Alexander Shevelev.

A live broadcast of the presentation, during which Severstal's senior management team will comment more on the above statement, will start at 12:00 GMT (15:00 at the time of Moscow) and will be available on the / eng / ir / cmd /

This publication of PJSC Severstal includes certain forward-looking statements about the company's production activities and its expected results, economic indicators, financial situation, projects and development perspectives. Anything that is not associated with the facts at the time of disclosure relates to a statement about the future. The words "can", "will," "expect," "estimate," "plan," "predict," "assume," " Forms indicate the predictive nature of a statement made on the basis of assumptions and estimates that the Company considers appropriate at the time of publication of the disclosure. These forward-looking statements about the future are linked to uncertainties, assumptions and general and private risks. There is a possibility that assumptions, intentions and other forward-looking statements may not be implemented. The company notes that actual results may differ from the forward-looking statements that are only valid at the time of this annual report. The Company does not approve and does not guarantee that the results of the activities expressed in the forward-looking statements will be achieved and should therefore not be considered as the most probable


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