Fitch raises Severstal, NLMK, MMK rating to BBB, outlook stable

MOSCOW, Apr 8 (PRIME) -- International rating agency Fitch Ratings has upgraded the long-term issuer default rating of Russian steelmakers Severstal and Novolipetsk Steel (NLMK) and Magnitogorsk Iron and Steel Works (MMK) to BBB from BBB-, with a stable outlook, the agency said on Monday.

“The rating upgrade reflects Severstal’s tested conservative financial policy during the supply-driven steel price turbulence in 2016-2017 and increasing protectionism since 2018. Its strong financial profile has been driven by very low steel-making costs underpinned by its integration in iron ore and coal, focus on high-value added products with over a 45% share in sales, and modest capex,” Fitch said. “We expect Severstal to maintain its conservative financial profile despite a conservative outlook for steel prices, and temporarily elevated dividends driving negative free cash flow (FCF) until 2021.”

“The upgrade reflects NLMK’s tested conservative financial policy during the supply-driven price turbulence in 2016–2017 and increased protectionism since 2018. The company’s strong financial profile has been driven by a combination of efficiencies achieved through strategic initiatives, very low steel-making costs backed by self-sufficiency in iron ore, and modest capex,” Fitch said.

“The rating upgrade reflects MMK's ability to maintain a conservative financial profile during market turbulence due to the company's low cost of operations, focus on high-value added (HVA) products, leading positions on the Russian steel market and high profit margins through the cycle.”

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