The credit rating of PJSC “EVRAZ NTMK” (hereinafter, EVRAZ NTMK, the Group, or the Company) has been downgraded due to the debt service indicator falling below 5.0x in 2024 and the high likelihood of it remaining below the specified level in 2025 and 2026.
The Company’s credit rating is based on the standalone creditworthiness assessment (SCA) driven by a strong market position and very strong business profile assessment, which takes into account the very high degree of vertical integration of the Group, a significant share of products with high added value in the structure of sales, and high product diversification. The rating is supported by a high assessment of geographic diversification of sales and strong corporate governance.
EVRAZ NTMK is one of Russia’s largest vertically integrated metallurgical holdings that controls the entire production chain, from iron ore extraction to production of a wide range of metallurgy products, ranging from steel products for construction to high-tech steel products such as train wheels and rails. The Group is Russia’s largest producer of vanadium used in the production of alloyed steel grades.
key assessment factors
The very strong business profile reflects the strong positions of EVRAZ NTMK in a number of sub-factors such as degree of vertical integration, share of products with high added value, and diversification of sales markets. The Group fully controls the entire production chain and maintains high operating profitability thanks to the supply of high-quality iron ore and coking coal. The Company’s product portfolio is rather wide, but is dominated by steel products for construction (share of products with high added value ranging from 20% to 50%). Exports account for a rather significant share of revenues. In Russia, the Company essentially owns three separate sites for the smelting of steel and the production of steel products. Taking this into account, the Concentration on One Plant sub-factor received the highest score. In ACRA’s opinion, the Group occupies a more advantageous position in terms of this indicator compared to other vertically integrated metallurgy holdings.
The strong corporate governance reflects the consistency of carrying out the strategy to upgrade production facilities and make them more environmentally friendly, increase the share of products with high added value, improve energy savings, and reduce production costs. Besides the Management Strategy sub-factor, such corporate governance sub-factors as Risk Management, Management Structure also received very high scores. The assessment of the Financial Transparency sub-factor is medium because the Company does not release IFRS reporting to the public.
Financial risk profile assessment. The scale of the Company’s business (FFO before net interest payments and taxes exceeds RUB 100 bln) is very large for the Russian corporate segment. Profitability is high (the FFO margin before interest payments and taxes was 21% in 2024 vs. 28% in 2023). According to ACRA’s expectations, the Group’s profitability will decline to 19% by the end of this year. Leverage is assessed as low. The ratio of total debt to FFO before net interest payments was 1.8x in 2024 (1.6x in 2023). The Agency expects leverage to increase to 1.9x by the end of 2025. The debt service indicator has been reduced from very high to medium because the ratio of FFO before net interest payments to interest payments declined from 9.3x in 2023 to 3.7x in 2024, and is expected to be 3.2x by the end of 2025 both as a result of high interest rates on loans and a decrease in operating cash flow amid falling profitability. According to ACRA’s assessments, the liquidity of the Group is high. The size of cash held in accounts and undrawn credit limits cover with a margin of safety expected repayments, the largest of which are due in 2025–2026.
From 2022 to 2024, the Company’s free cash flow (FCF) was positive. The Agency assumes that FCF will remain positive in the forecast period from 2025 to 2027 due to an absence of dividend payments.
KEY ASSUMPTIONS
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Capital expenditures in line with the Company’s business plan;
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No dividend payments.
potential OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- The debt service indicator (FFO before net interest payments to interest payments) exceeding 10.0x.
A negative rating action may be prompted by:
- Leverage exceeding 2.0x.
RATING COMPONENTS
SCA: aa.
Support: none.
ISSUE RATINGS
Exchange-traded variable coupon bonds of EvrazHolding Finance LLC, series 003P-01 (RU000A108G05), maturity date: November 7, 2026, issue volume: RUB 40 bln — AA(RU).
Exchange-traded secured non-convertible interest-bearing uncertificated bonds of EvrazHolding Finance LLC, series 003P-02 (RU000A10ANH6), maturity date: July 16, 2026, issue volume: RUB 30 bln — AA(RU).
Exchange-traded secured non-convertible interest-bearing uncertificated bonds of EvrazHolding Finance LLC, series 003P-03 (RU000A10B3Z3), maturity date: March 8, 2027, issue volume: USD 300 mln — AA(RU).
Rationale. The guarantor for the bond issues of EvrazHolding Finance LLC is PJSC “EVRAZ NTMK”. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as equal to other existing and future unsecured and unsubordinated debt obligations of PJSC “EVRAZ NTMK” in terms of priority. As per ACRA’s methodology, the simplified approach was used, according to which the credit ratings of the issues are equivalent to that of PJSC “EVRAZ NTMK”, i.e. AA(RU).
regulatory disclosure
The credit ratings of PJSC “EVRAZ NTMK” and the bond issues of EvrazHolding Finance LLC (RU000A108G05, RU000A10ANH6, RU000A10B3Z3) have been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation was also applied to assign the credit ratings to the above issue.
The credit ratings of PJSC “EVRAZ NTMK” and the bond issues of EvrazHolding Finance LLC (RU000A108G05, RU000A10ANH6, RU000A10B3Z3) were published by ACRA for the first time on October 24, 2022, May 21, 2024, January 22, 2025, and March 18, 2025, respectively. The credit rating of PJSC “EVRAZ NTMK” and its outlook and the credit ratings of the bond issues of EvrazHolding Finance LLC (RU000A108G05, RU000A10ANH6, RU000A10B3Z3) are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on data provided by PJSC “EVRAZ NTMK”, information from publicly available sources, and ACRA’s own databases. The credit ratings were assigned based on the consolidated IFRS financial statements of PJSC “EVRAZ NTMK”. The credit ratings are solicited and PJSC “EVRAZ NTMK” participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to PJSC “EVRAZ NTMK”. No conflicts of interest were discovered in the course of credit rating assignment.
