Severstal could revise investment program if rates remain high, demand for steel cools

MOSCOW. Dec 20 (Interfax) - Severstal could revise the timeframes and scale of a number of projects planned for implementation in 2025 within the framework of the approved strategy for 2024-2028 if interest rates remain high and demand from key steel consumers cools.

"We are concerned about the high level of interest rates in the economy, as this has a negative impact on our customers, consumers of steel products, especially in the construction sector, which is a key consumer of rolled steel in Russia. In this regard, the timeframes and scale of several projects in our investment program could be revised. Key strategic projects, such as the pelletizing plant, and social and environmental projects will be implemented according to plan," Anastasia Mishanina, director of the company's communications and investor relations department, told Interfax.

Nevertheless, Severstal is confident in its long-term strategy and sustainable development even amid the high cost of capital.

"In February next year, we plan to present an updated forecast for the volume of capital investments for 2025," Mishanina said. In June, the company announced a capex target of 119 billion rubles in 2024 and a capex forecast of 170 billion rubles in 2025.

In June this year, Severstal published a development strategy up to 2028, inclusive, which envisages a large-scale investment program in line with the possibilities for its financing, the company representative said.

"The company's debt load is at a more than comfortable level. The net debt/EBITDA ratio has remained below zero [-0.25x at the end of the third quarter] over the past two years. In other words, we have formed a stable net cash position. The volume of cash in the accounts exceeds the volume of debt obligations. Thus, we can afford to implement development projects," Mishanina said.

The company also does not plan to revise the current dividend policy.

"It was adopted in April 2018 and has proven to be effective and flexible. Our dividend policy allows us to distribute profits objectively and regularly in the interests of the company's development, as well as in the interests of investors. We plan to retain it in the current version," Mishanina said.

Severstal's dividend policy is tied to free cash flow. The company may distribute up to 100% of FCF as quarterly dividends at a net debt/EBITDA ratio below 0.5x. The metallurgical company returned to quarterly dividend payments in 2024 after a long break since the third quarter of 2021.