Severstal expects to return to positive FCF in 2027

MOSCOW. July 10 (Interfax) - Severstal expects to return to positive free cash flow (FCF) in 2027, primarily thanks to the implementation of anti-crisis measures such as optimizing operating expenses and cutting investment and a differentiation strategy that includes developing the company's own distribution and product innovations, the Russian steelmaker's head of investor relations, Nikita Klimantov said.

"All this should make it possible to ensure stable, sustainable achievement of positive free cash flow," Klimantov said at a SberInvestments webinar on Thursday.

"With support of EBITDA - in 2027 we expect an effect on EBITDA from the launch of our development projects and reduction of operating expenses - and investment cuts, all this together gives us a certain degree of confidence that we'll manage to achieve steady positive cash flow starting next year," Klimantov said.

It was reported earlier that Severstal tentatively plans to cut its investment program for next year to about 85 billion rubles, but it will continue to work on this issue until the end of 2026. The company's capital expenditures this year were cut by 24% from the initial plan to 112 billion rubles after totalling 173 billion rubles in 2025. Severstal plans to complete construction of an iron ore pellet facility and a waste heat power plant at its Cherepovets Steel Plant (CherMK) in 2026.

Klimantov also said on Thursday that development projects account for about 40% of the tentatively planned capex of around 85 billion rubles for next year.

"Although we're completing the main projects in 2026, the company cannot not invest in its future, we're leaving a certain minimum," Klimantov said, adding that this forecast could also be revised down if the market worsens.

Severstal posted negative FCF of 40.4 billion rubles in the first quarter of 2026 after closing 2025 with negative FCF of 30.5 billion rubles. The company plans to release results for the second quarter of 2026 on July 20.

Severstal's dividend policy is linked to FCF. The company can pay out up to 100% of net FCF if its net debt/EBITDA ratio is below 0.5. This ratio was 0.53 at the end of the first quarter of 2026.

Severstal resumed quarterly dividend payments in 2024 after a lengthy pause from the third quarter of 2021, but it did not pay final dividends for 2024 due to the difficult economic situation and market uncertainty.