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Evraz biggest FTSE 100 riser as earnings soar

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Evraz has operations in the Russian Federation, the US, Canada, the Czech Republic and Kazakhstan. and is counted among the world's top steel makers. Photo: Sergei Bobylev\TASS via Getty Images
Evraz has operations in the Russian Federation, the US, Canada, the Czech Republic and Kazakhstan and is counted among the world's top steel makers. Photo: Sergei Bobylev\TASS via Getty

Shares in London-listed mining company Evraz (EVR.L) soared as much as 20% in early trade on Friday as the vertically integrated steel, mining and vanadium business rebound after earnings rose.

Revenue and profit for 2021 beat expectations, the company's latest annual results, released on Friday, showed. Total segment revenues rose to $14.2bn (£10.6bn) year-on-year, up from $9.75bn.

The FTSE 100 (^FTSE) steelmaker turned a net profit of £3.1bn in 2021, up from £858m in the year before. Free cash flow more than doubled to $2.26bn from $1.02bn.

Russian billionaire owner of Chelsea FC Roman Abramovich is the largest shareholder of Evraz and has a 29% stake in the miner.

Read more: Oil prices hit seven-year high amid Russian supply jitters

The firm has operations in the Russian Federation, the US, Canada, the Czech Republic and Kazakhstan and is counted among the world's top steel makers, producing 13.6 million tonnes in 2020.

Evraz said that the cash cost of slabs increased to $308 per tonne from $213 in 2020, due to higher raw material prices for coal, iron ore, ferroalloys, and increased auxiliary, services and repairs costs.

Cash costs for coal concentrate increased to $41 per tonne up from $31, mainly as a result of the surge of mining costs.

Cash costs of iron ore products increased to $42 per tonne from $36, which the miner said was mainly driven by higher fixed costs as inflationary pressure intensified.

Iron ore hit a record of over $230 a tonne in May, however, prices in the commodity have been volatile.

The commodity retreated to the mid $80s in the second half of 2021 as China reined in the output of its steel makers to meet stricter environmental standards. The market has since rallied, touching $150 earlier in 2022 after monetary easing and relaxed climate targets raised confidence in robust Chinese steel output in the coming year.

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Underlying EBITDA (earnings before interest, tax deprecation, and amortisation) — a measure of a firm's overall performance — rose to $5.02bn from $2.21bn.

Evraz said it boosted its EBITDA margin to 35.4% for the year ended 31 December, from 22.7%. The board reported the total EBITDA effect from cost-cutting and its customer focus initiatives was $590m last year.

Assessing the long-term implications of Russia's warmongering, the firm's CEO Aleksey Ivanov said Evraz is "conscious of the current geopolitical circumstances" and will provide an update on how any developments in Eastern Europe may influence its operations.

Evraz shares soared as much as 20% in early trading on Friday in London, currently up 16.6% to 199.3p at the time of writing.

Shares in the miner rose 16.6% to 199.3p on Friday afternoon in London. Graph: Yahoo Finance
Shares in the miner rose 16.6% to 199.3p on Friday afternoon in London. Chart: Yahoo Finance UK

Polymetal International (POLY.L), which has the bulk of its operations in Russia, joined Evraz as a top performer in London's bluechip index, leaping 7.1%.

Evraz declared an interim dividend of $729m, or $0.50 per share, which the board said reflected their "confidence" in the group's financial position and outlook.

The company's demerger of its coal arm is expected to be completed in late March. It added that Raspadskaya — its Russia-based coal mining business— would announce a dividend according to its guidance in its financial statements for 2021.

Read more: How Russia's war on Ukraine is impacting stock prices

"In the reporting period, we announced the demerger of Raspadskaya, our coal business, a process currently expected to complete in late March 2022," Ivanov said.

"In our view, the demerger will establish a clear and focused equity story for both companies and provide greater flexibility to execute dedicated strategy for each."

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