Shares in Russian steelmaking and mining giant Evraz (EVR) reported lower production and flat sales, failing to allay concerns over its thinly-covered dividend.

In a third quarter update, the firm said crude steel output decreased by 3.4% quarter-on-quarter, mainly due to lower production volumes at its plant in Western Siberia due to scheduled maintenance.

The firm was also impacted by weaker demand in North America, with lower output at its steel mills in the US and Canada.

Shares in Evraz barely moved on the news, nudging 1.5p lower to 365.7p.

With an annual dividend for 2019 forecasted at $0.66, or about 51p pe share, it implies yield of 13.9%, covered just 1.34-times. That's by far the biggest of all FTSE 100 stocks, an implies that the market simply does not believe such a payout is sustainable in the longer-term

BUSINESS SLOWING DOWN

Sales of semi-finished products were up 5.6%, but in a sign of where global infrastructure spending seems to be heading, it added that sales of finished products were 3.1% down due to ‘lower sales of flat-rolled products and railway products’.

Evraz also produces coal and vanadium, commodities which have had contrasting fortunes.

The firm’s production of raw coking coal decreased by 9.7% quarter-on-quarter, mainly following the decision to reduce production at its Razrez Raspadsky open-pit as a response to substantial accumulated stockpiles of raw coal.

But sales of final vanadium products rose by 9.8% quarter-on-quarter, mainly due to increased demand in China.

Evraz said demand from China was up thanks to robust infrastructure sector development, as well as ferrovanadium re-stocking in the rest of the world due to lower prices.

Despite being a FTSE 100 regular, just two investment funds out of 83 in the UK Equity Income sector hold Evraz in their portfolios. By comparison, 63 funds out of the 83 hold oil giants BP (BP.) and Royal Dutch Shell (RDSB).

READ MORE ABOUT EVRAZ HERE

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Issue Date: 01 Nov 2019