Having enjoyed a 150% share price rise in the past 12 months, investors in steel maker-to-iron ore miner Evraz (EVR) are to get another big reward. The FTSE 250 constituent has proposed to return up to $375 million via a tender offer. It is offering to pay $3.10 per share which is 10% above last night's closing price.
Evraz says it will buy up to 8% of the issued share capital. The Russian industrials group says the tender offer is the result of having strong positive cash flow and liquidity to service debt and meet liabilities over the next two years.
The news coincides with publication of full-year resultsfor 2014 which shows a $1.08 billion pre-tax loss, far greater than the $637 million loss in 2013.
Given this negative financial performance, you may think it odd that Evraz is effectively giving a large sum of cash away.
Yet the business is still highly cash generative with a 3% rise in net cash flow from operating activities to just shy of $2 billion.
Capital expenditure fell by 27% to $654 million in the year and net debt was slashed by 11% to $5.8 billion.
Its share price has rallied over the last year as the business adapts to the depressed commodities environment. It has been selling assets, cutting costs and has enjoyed favourable foreign exchange rates on several occasions.
But forex tailwinds turned into headwinds with the business suffering a $1 billion currency loss in 2014, going some way to explain why the headline financial results are in negative territory.
The other reason behind recording a net loss was a $540 million impairment on assets.
Many analysts have questioned the ability for the shares to keep rising given that Russian steel demand looks vulnerable to a slowdown. Evraz directors have also been selling shares.
Today's news sustains momentum in the stock, rising 5.4% to 197.75p.
