Azovstal cuts net loss 18% yoy in 1H13

Azovstal (AZST UK) reported on July 24 a net loss of USD 127 mln in 1H13, which decreased 18% yoy, while its operating loss (EBITDA) was 53% lower yoy at USD 38 mln. Financials improved despite a 14% yoy decline in revenue to USD 1,313 mln.

Roman Topolyuk: Azovstal reduced its net loss in 1H13 since production costs (raw material prices) decreased sooner than steel product selling prices did, which was also the case for Azovstal’s sister company, Yenakiieve Steel. The average selling price in 1H13 fell 10% yoy to USD 626/t, while average production cost without depreciation declined 11% yoy to USD 655/t. That coincides with market trends for finished steel products and raw materials, such as coke and scrap (their prices fell 16% and 11% yoy in 1H13, respectively). The company’s operations are still far from breakeven, but we expect further recovery in 3Q13 on higher market prices for steel products and cheaper raw materials.