UPDATE 2-Russia Severstal Q2 net misses f’cast on foreign ops

* Severstal Q2 net $192 mln, Reuters poll forecast $319 mln

* Q2 sales $4.25 bln, poll forecast $4.12 bln

* EBITDA $955 mln, poll forecast $849 mln

* Co sees steel prices up after soft start to Q3

* Severstal shares fall 0.2 pct, underperform index

(Adds CEO remarks, analyst comments, share price)

MOSCOW, Sept 6 (BestGrowthStock) – Severstal, (CHMF.MM: ) Russia’s
largest steel maker, swung to a second-quarter net profit of
$192 million, missing analysts’ forecasts, as it lost money on
its Italian mills and its U.S. operations stayed in the red.

The company sold a 50.8 percent stake in its loss-making
Italian business to Severstal Chief Executive Alexei Mordashov
in June, and said on Monday that it had an impairment loss of
$208 million on the operations in the quarter. [ID:nLDE65T2A2]

The company’s results were up from a year ago when it posted
a net loss of $290 million, but short of the $319 million
average forecast in a poll of analysts.

Though steel makers in Russia, the world’s third-largest
producer, have been benefiting from their position as low cost
producers after a difficult 2009, Severstal’s foreign assets
have remained a drag on the company.

Severstal said its U.S. operations posted a $1 million loss
in the second quarter, compared with a first quarter loss of
$138 million.

Overall second-quarter earnings before interest, taxation,
depreciation and amortisation (EBITDA) reached $955 million,
ahead of the $849 million poll forecast.

Analysts said they were positively surprised by the
operating results.

“The big surprise is SNA (Severstal North America) finally
turning positive in Q2 at the EBITDA level, and also the mining
division, which contributed over 40 percent of consolidated
EBITDA,” Deutsche Bank analyst Olga Okuneva said.

Severstal Resources, which includes iron ore, gold and coal
mines, achieved a second quarter EBITDA of $420 million, while
EBITDA at its North American mills reached $59 million.

Total sales in the period were $4.25 billion, also beating
the $4.12 billion estimate.

The company said its board was not recommending a
second-quarter dividend, but that it anticipated resuming
dividends “in the foreseeable future”.

It did not provide any financial outlook for the rest of the
year, though it sees global steel prices rising after a soft
start to the third quarter.

By 1404 GMT its shares were down 0.2 percent at 392.9
roubles on Moscow’s MICEX, underperforming the metals and mining
index (.MCXMM: ), which was up 0.37 percent.


Severstal’s highly profitable domestic mills remain the key
strength for the company, with second quarter EBITDA at $528
million, up 30.7 percent from the year-earlier period.

The company is investing a major part of its $1.4 billion
annual capex budget in the mills in order to enhance its product
mix and improve its competitive position.

“I would distinguish first of all the necessity to continue
operational improvements in Russia which Russian steel
demonstrated in the last year and a half,” Mordashov said during
a conference call with journalists.

Mordashov reiterated that his company is exploring a range
of strategic options for the U.S. mills, while declining to
comment on any specific asset sales. [ID:nLDE67B0B0]

“Restructuring is the highest priority for us,” he said.

Severstal’s net debt reached $4.3 billion in the second
quarter, up from $3.6 billion at the end of last year.

The company also has cash and short-term bank deposits of
$2.01 billion and credit lines of $564 million.
(Reporting by Alfred Kueppers; Editing by Sharon Lindores)

UPDATE 2-Russia Severstal Q2 net misses f’cast on foreign ops