International credit rating agency Fitch Ratings has announced that it has upgraded Russian steel company Severstal's long-term rating to 'BB+' from 'BB', while the outlook is stable.
Fitch stated that the upgrade reflects improvement of Severstal's profitability following gains in production efficiencies and successful deleveraging.
According to Fitch, Severstal has been successful in improving its production efficiency, which boosted profitability in the final quarters of 2013 despite a weak market environment. Fitch believes the company has room for further efficiency improvement and expects its EBIDTA margin to improve to 16-17 percent in 2014-2016, from 15.3 percent in 2013.
The credit agency pointed out that Severstal is one of Russia's most vertically integrated companies with a balanced product mix and strong geographical diversification. The company benefits from almost full self-sufficiency in iron ore and is more than self-sufficient in coking coal. Its mining assets are located close to its main steel production sites and are among the lowest cash cost producers globally. Severstal is one of the leading Russian steel producers by its share of high value-added products in total sales (48 percent). This, along with vertical integration, allows Severstal to enjoy above-average profitability, Fitch added.