Statement of operations

In its full-year financial results for 2020, EVRAZ reported a 18.1% year-on-year decrease in consolidated revenues, which totalled US$9,754 million, compared with US$11,905 million in 2019. The reduction was primarily the result of a drop in sales prices for steel, vanadium and coal products against a background of less favourable market trends.
EVRAZ’ consolidated EBITDA amounted to US$2,212 million in the period, compared with US$2,601 million in 2019, with the EBITDA margin rising to 22.7%, from 21.8%, and free cash flow amounting to US$1,020 million in 2020. The decline in EBITDA was primarily attributable to lower steel, vanadium and coal product sales prices, as well as lower sales of tubular and flat-rolled steel products resulting from weakening market demand in North America.
The Steel segment’s revenues (including inter-segment) dropped by 14.4% year-on-year to US$6,969 million, or 65.4% of the Group’s total before elimination. The decrease was mainly due to lower revenues from sales of vanadium and steel products, which fell by 46.0% and 8.4% year-on-year respectively. This was primarily due to a downturn in average sales prices of 42.7% for vanadium and 9.4% for steel products, underpinned by unfavourable market conditions. The Group’s lower prices from sales of steel products were partly offset by higher sales volumes, which increased from 11.0 million tonnes in 2019 to 12.1 million tonnes in 2020, following an increase in production volumes at Russian mills amid higher demand.
The Steel, North America segment’s revenues decreased by 28.8% year-on-year. Steel product revenues fell by 29.2%, driven by declining sales volumes (down 21.7%) and lower prices (down 7.5%).
The Coal segment’s revenues fell by 26.3% year-on-year, due to a 35.1% decline in coal product sales prices which was partly offset by a 9.6% increase in coal product sales volumes. Coal prices followed the downward trend set by global benchmarks during the period.
In 2020, the Steel segment’s EBITDA rose amid lower expenses compared to revenue, as a result of a decline in prices for raw materials, including coal, scrap and other raw materials, and exchange rate impact on rouble denominated costs.
The Steel, North America segment’s EBITDA decreased due to lower revenues from sales of flat-rolled, tubular, railway, and construction products.
The Coal segment’s EBITDA was down, amid lower coal product sales prices, while the cost of sales was largely unchanged.
Eliminations mainly reflect unrealised profits or losses that relate to the inventories produced by the Steel segment on the Steel, North America segment’s balance sheet, and coal inventories produced by the Coal segment on the Steel segment’s balance sheet.
Segment | 2020 | 2019 | Change | Change, % |
---|---|---|---|---|
Steel | 6,969 | 8,143 | (1,174) | (14.4) |
Steel, North America | 1,779 | 2,500 | (721) | (28.8) |
Coal | 1,490 | 2,021 | (531) | (26.3) |
Other operations | 410 | 483 | (73) | (15.1) |
Eliminations | (894) | (1,242) | 348 | (28.0) |
Total | 9,754 | 11,905 | (2,151) | (18.1) |
Region | 2020 | 2019 | Change | Change, % |
---|---|---|---|---|
Russia | 3,722 | 4,373 | (651) | (14.9) |
Asia | 2,949 | 2,893 | 56 | 1.9 |
Americas | 1,915 | 2,709 | (794) | (29.3) |
CIS (excl. Russia) | 584 | 865 | (281) | (32.5) |
Europe | 461 | 956 | (495) | (51.8) |
Africa and the rest of the world | 123 | 109 | 14 | 12.8 |
Total | 9,754 | 11,905 | (2,151) | (18.1) |
Segment | 2020 | 2019 | Change | Change, % |
---|---|---|---|---|
Steel | 1,930 | 1,795 | 135 | 7.5 |
Steel, North America | (28) | 38 | (66) | n/a |
Coal | 400 | 843 | (443) | (52.6) |
Other operations | 15 | 18 | (3) | (16.7) |
Unallocated | (126) | (141) | 15 | (10.6) |
Eliminations | 21 | 48 | (27) | (56.3) |
Total | 2,212 | 2,601 | (389) | (15.0) |
The following table details the effect of the Group’s cost-cutting initiatives.
Improving yields and raw material costs, including | 102 |
Various improvements at coal washing plants and mines | 60 |
Auxiliary materials and service costs of Urals and Siberia operations | 28 |
Auxiliary materials and service costs of North American and Vanadium operations | 14 |
Increasing productivity and cost effectiveness | 40 |
Others, including | 50 |
Reduction of general and administrative (G&A) costs and non-G&A headcount | 49 |
Assets optimisation | 1 |
Total | 192 |
2020 | 2019 | Change | Change, % | |
---|---|---|---|---|
Steel segment | ||||
Revenues | 6,969 | 8,143 | (1,174) | 14.4 |
Cost of revenues | (4,596) | (5,836) | (1,240) | (21.2) |
Gross profit | 2,373 | 2,307 | 66 | 2.9 |
Steel, North America segment | ||||
Revenues | 1,779 | 2,500 | (721) | (28.8) |
Cost of revenues | (1,604) | (2,204) | 600 | (27.2) |
Gross profit | 175 | 296 | (121) | (40.9) |
Coal segment | ||||
Revenues | 1,490 | 2,021 | (531) | (26.3) |
Cost of revenues | (1,027) | (1,046) | (20) | (1.9) |
Gross profit | 463 | 975 | (512) | (52.5) |
Other operations – gross profit | 115 | 116 | (1) | (1.0) |
Unallocated – gross profit | (8) | (4) | 4 | n/a |
Eliminations – gross profit | (76) | (58) | 18 | (31.0) |
Total | 3,042 | 3,632 | (590) | (16.2) |
2020 | 2019 | Change | Change, % | |
---|---|---|---|---|
Gross profit | 3,042 | 3,632 | (590) | (16.2) |
Selling and distribution costs | (840) | (966) | 126 | (13.0) |
General and administrative expenses | (552) | (611) | 59 | (9.7) |
Social and social infrastructure maintenance expenses | (31) | (26) | (5) | 19.2 |
Gain/(loss) on disposal of property, plant and equipment, net | (3) | 3 | (6) | n/a |
Impairment of assets | (310) | (442) | 132 | (29.9) |
Foreign exchange gains/(losses), net | 408 | (341) | 749 | n/a |
Other operating income and expenses, net | (43) | (32) | (11) | 34.4 |
Profit from operations | 1,671 | 1,217 | 454 | 37.3 |
Interest expense, net | (322) | (328) | 6 | (1.8) |
Share of profits/(losses) of joint ventures and associates | 2 | 9 | (7) | (77.8) |
Impairment of non-current financial assets | - | (56) | (56) | n/a |
Gain/(loss) on financial assets and liabilities, net | (71) | 17 | (88) | n/a |
Gain/(loss) on disposal groups classified as held for sale, net | 1 | 29 | (28) | (96.6) |
Other non-operating losses, net | 14 | 14 | - | - |
Profit before tax | 1,295 | 902 | 393 | 43.6 |
Income tax expense | (437) | (537) | 100 | (18.6) |
Net profit | 858 | 365 | 493 | n/a |
In 2020, selling and distribution expenses fell by 13.0%, amid lower railroad transportation costs related to lower shipment volumes and tariffs. General and administrative expenses fell by 9.7%, mostly due to a furlough in the May-July period and staff reductions in North America caused by weak market conditions and idling.
In 2020, EVRAZ recognised a US$310 million impairment loss. As a result of impairment testing, in 2020, the Group recognised a US$234 million impairment loss with respect to the Large diameter pipes cash-generating unit, which was allocated to goodwill (US$65 million), intangible assets (US$16 million) and property, plant and equipment (US$ 153 million) and a US$67 million impairment loss with respect to the Oil Country Tubular Goods cash-generating unit, which was allocated to goodwill. The impairment was caused by the reassessment of demand on the steel, oil and commodities markets in the USA and Canada.
Foreign exchange gains amounted to US$408 million, mainly related to intra-group loans denominated in roubles and payable by subsidiaries, whose functional currency is the US dollar, to the Russian subsidiaries, which have the rouble as their functional currency. The depreciation of the Russian rouble against the US dollar in 2020 led to exchange gains recognised in the income statements of non-Russian subsidiaries.
The loss on financial assets and liabilities amounted to US$71 million and consisted primarily of losses on foreign currency swap contracts.
For the reporting period, the Group had an income tax expense of US$437 million, compared with US$537 million in 2019. The change reflects the decline in the operating results.
2020 | 2019 | Change | Change, % | |
---|---|---|---|---|
Cash flows from operating activities before changes in working capital | 1,593 | 2,057 | (464) | (22.6) |
Changes in working capital | 335 | 373 | (38) | (10.2) |
Net cash flows from operating activities | 1,928 | 2,430 | (502) | (20.7) |
Short-term deposits at banks, including interest | 4 | 7 | (3) | (42.9) |
Purchases of property, plant and equipment and intangible assets | (647) | (762) | 115 | (15.1) |
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs | 11 | 44 | (33) | (75.0) |
Other investing activities | 8 | 46 | (38) | (82.6) |
Net cash flows used in investing activities | (624) | (665) | 41 | (6.2) |
Net cash flows used in financing activities | (1,107) | (1,415) | 308 | (21.8) |
including dividends paid | (872) | (1,086) | 214 | (19.7) |
Effect of foreign exchange rate changes on cash and cash equivalents | 7 | 6 | 1 | 16.7 |
Net increase/(decrease) in cash and cash equivalents | 204 | 356 | (152) | (42.7) |
2020 | 2019 | Change | Change, % | |
---|---|---|---|---|
EBITDA | 2,212 | 2,601 | (389) | (15.0) |
EBITDA excluding non-cash items | 2,203 | 2,615 | (412) | (15.8) |
Changes in working capital | 335 | 373 | (38) | (10.2) |
Income tax accrued | (579) | (532) | (47) | 8.8 |
Social and social infrastructure maintenance expenses | (31) | (26) | (5) | 19.2 |
Net cash flows from operating activities | 1,928 | 2,430 | (502) | (20.7) |
Interest and similar payments | (269) | (302) | 33 | (10.9) |
Capital expenditures, including recorded in financing activities | (657) | (762) | 105 | (13.8) |
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs | 11 | 44 | (33) | (75.0) |
Other cash flows from investing activities | 7 | 46 | (39) | (84.8) |
Free cash flow | 1,020 | 1,456 | (436) | (29.9) |
In 2020, net cash flows from operating activities decreased by 20.7% year-on-year. Free cash flow for the period was US$1,020 million.