Shareholders at Severstal have consented to not distribute dividends for the year 2024.
Severstal, a prominent Russian steel and mining company, has decided not to pay dividends for the first quarter of 2025, following a difficult financial period in 2024. This decision was made during a general meeting held on June 6.
The company's financial performance took a hit last year, with revenues declining by 16% and net profits halved to 15.5 billion rubles ($195 million). The challenging market conditions also led to a negative cash flow, with outflows exceeding inflows by 29.1 billion rubles ($370 million).
These financial pressures were due to a combination of factors, including higher interest rates, weakened demand (especially from the construction sector), declining metallurgical output, sanctions limiting export markets, and an overall deterioration in Russia's steel sector.
Severstal's decision to suspend dividends reflects the company's need to preserve liquidity amid ongoing economic uncertainty. This move aligns with broader difficulties faced by the Russian steel industry, including a 15% drop in metallurgical output and stagnant domestic demand caused by halted construction activity and high interest rates that curb business investment and consumption.
Historically, Severstal paid dividends regularly until 2023 but ceased paying any dividends starting in 2023 and continuing through 2024. The company's last dividend payment was for the third quarter of 2024, amounting to 49.06 rubles per share.
In the past, Severstal's dividend policy was based on the net cash flow, with the company allocating at least 50% of the net cash flow for dividends if the net debt/EBITDA ratio is above 1x. However, given the negative free cash flow in the first quarter of 2025, Severstal allocated less than 50% of its net cash flow for dividends.
For the full year 2024, Severstal's free cash flow was 96.77 billion rubles, a 19% decrease from the previous year. If the negative free cash flow in the first quarter of 2025 continues for the full year, the company's full-year free cash flow will experience a significant decrease compared to 2024.
Analysts at BCS anticipated this decision due to Severstal's weak quarterly results. The company's board of directors' recommendation not to pay dividends for the first quarter of 2025 is in line with the company's net debt/EBITDA ratio being above 1x, given that EBITDA for the first quarter of 2025 was below net debt.
| Year | Dividend Status (Severstal) | Notes | |-------|----------------------------|------------------------------| | 2014-2020 | Paid dividends (7.76%-16.58%) | Regular dividends, relatively high yield | | 2021-2022 | No dividends paid | Dividend payments stopped | | 2023-2024 | No dividends paid | Continuation of withholding dividends due to financial strain | | Q1 2025 | No dividends paid | Still no payouts amid negative cash flow and reduced profits |
Severstal's CEO, Alexei Mordashov, has publicly acknowledged these challenges affecting company performance. This decision not to pay dividends for the first quarter of 2025 underscores the company's commitment to maintaining financial stability in these challenging times.
The challenging market conditions, including higher interest rates, weakened demand, declining metallurgical output, sanctions limiting export markets, and an overall deterioration in Russia's steel sector, affected Severstal's financial performance in 2024, causing a 19% decrease in free cash flow. This financial strain led to the company's decision not to pay dividends for the first quarter of 2025, a move aimed at preserving liquidity amid ongoing economic uncertainty in the business world and the investing domain. The CEO, Alexei Mordashov, has publicly acknowledged these challenges and emphasized the company's commitment to maintaining financial stability through this period.
