Evraz PLC (LSE:EVR) reported a 99.5% drop in net profits and saw its cash flow halved in the first half as the Russian steelmaker was hit by falling demand and prices.
The company, which was sanctioned by the UK government after the invasion of Ukraine due to its "strategic significance" to Moscow, said the Russian steel industry has been hit "a combination of negative effects from deteriorating market conditions in China and other foreign markets, as well as additional pressure from export restrictions, sanctions, the rouble appreciation and tighter competition".
Domestic producers are also experiencing problems with payments from foreign customers, logistics constraints and falling margins.
Evraz reported revenues of US$8.1bn in the six months to end-June, an increase of 31% on a year ago, and underlying earnings (EBITDA) rose 19% to US$2.5bn.
"This was achieved thanks to higher coal sales prices and better performance of our North American operations, as well as our cost-cutting and productivity improvement initiatives and customer focus efforts," said chief executive Aleksey Ivanov.
He acknowledged that "recent geopolitical tensions have given rise to significant corporate governance and operating challenges" for the company, which was also facing headwinds of a strong rouble, declining demand for steel due to the global downturn, and increased competition.
Ivanov pointed to "growing worries over the health of the global economy and persistent supply chain challenges" for falling steel demand, while China lockdowns, low margins and rising steel inventory led to a pullback in steel prices.
Evraz said it has pushed back the schedules of investment in development projects, but improved its total debt position by US$136mln to just under US$4bn, with net debt at US$3.2bn.
In May, the UK's Foreign, Commonwealth & Development Office froze certain assets so no UK citizen or company could do business with the company, saying its Russia-based steel manufacturing and mining operations are "sectors of strategic significance to the government of Russia".
Evraz produces 28% of all Russian railway wheels and 97% of rail-tracks in Russia.
But the former FTSE 100 company's shares proved very popular among retail investors after they, and other Russia-linked stocks, fell over 90% following the Ukraine invasion.
Looking forward, Evraz said a "slight recovery might arrive in the short term if China eases the COVID-19 restrictions and implements its previously announced economic support measures".
However, it noted that China’s intention to keep crude steel output below the 2021 level was a continuing weight on the market, with the country's real estate sector also a headwind, suggesting prices are likely to stay under pressure.