Severstal Posts $1.2 Billion Loss

Russia's largest steel producer reported a $1.2 billion net loss in the fourth quarter of 2008 and warned that up to 9,500 people may be laid off in Russia.

MOSCOW (AP) -- Severstal, Russia's largest steel producer, on Wednesday reported a $1.2 billion net loss in the fourth quarter of 2008 and warned of possible lay-offs in Russia.

Alexei Mordashov, the company's chief executive and majority owner, said in a conference call on Wednesday that some 9,000 to 9,500 people may be laid off from the company's key factory in Cherepovetsk.

He also said the company is developing a plan to reduce its U.S. costs.

Faced with a steel market slowdown, Severstal has cut output at some of its facilities in Russia, Italy and the United States over the past several months as steel demand slumped.

The steelmaker's North American division continues temporary layoffs that began in December. The layoffs affect operations at plants in West Virginia, Ohio, Maryland and Michigan.

The company reported a 10 percent increase in its full-year net profit to $2 billion, while revenues rose 44 percent to $22.4 billion in 2008 due to high metals prices and higher production after U.S. acquisitions.

Unless the market situation improves significantly, Severstal will not pay dividends for 2009 and the fourth quarter of 2008, Mordashov said.

However, the steel market saw a "modest increase" last month in Russia as well as the United States, according to the company's chief executive.

"We also see modest improvement in demand along 2009," he said.

Mordashov noted that market conditions remain "challenging" but refrained from providing any precise figures for this year's outlook "until visibility and current conditions improve".

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