Should I buy shares in Evraz?

Shares in Evraz, Russia's largest steelmaker, dropped 9% on Thursday after it reported an unexpected post-tax loss of $335 million (£218 million) for 2012, missing consensus forecasts of a $43 million profit and down from a $453 million profit a year earlier.

The miner also decided to forgo a final dividend for 2012 after suffering a 31% drop in earnings as metals prices fell.

Evraz stated global steel prices had softened as a result of global economic conditions and that it expected global prospects to remain fragile for the rest of 2013.

"The year 2012 was characterised by challenging trading conditions for the global steelmaking industry," stated chief executive Alexander Frolov. "Although some recovery was seen during the first half of the year, there was a significant deterioration in sentiment towards the year end.

"As a result, steel and raw material markets remained highly volatile with global steel industry capacity experiencing substantial underutilisation."

Relegation to FTSE 250?

Mike van Dulken, head of research at Accendo Markets, pointed out the company was at the bottom of the FTSE 100 (UKX) in terms of market capitalisation at £3.09 billion.

"This leaves it closer to the precipice of relegation to the FTSE 250, joining recently-demoted copper-mining favourite Kazakhmys, having struggled since admission in December 2011 under the weight of issues such as corporate governance, [less than] 25% share free float and global growth concerns," he said.

Van Dulken added: "We see the shares remaining under pressure in the short term after the recent fall below 225p and the eight-month shallow trendline of rising support (potentially becoming resistance).

"The prospect of relegation at the next review of the UK flagship index may also hinder any advances."

No bounce prospects

Analysts at Societe Generale reiterated their 'sell' rating on the stock. In their preview note, they stated: "As the stock dropped massively from the January peak, we think that the current share price largely discounts expectations of a poor year lying ahead.

"That said, the stock is still slightly above our price target and we do not see reasons for a meaningful bounce given a rather vague market outlook."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.