The Evraz (LSE: EVR) share price has sunk in recent weeks, due to the tragic conflict between Russia and Ukraine. As most of the company’s operations take place in Russia, this has led to fears of significant consequences. Further, a lot of the shares are owned by Russian oligarchs, and the largest shareholder is Roman Abramovich, who is believed to be close friends with Vladimir Putin. Accordingly, there has also been the risk that Evraz would be hit by Western sanctions. Despite this, the Evraz share price has recently returned to over 100p, after hitting lows of 50p last week. This is still a year-on-year decrease of over 80%.
There was an encouraging update for Evraz today. In fact, the group confirmed that the current conflict had had “no material direct impact on day-to-day operations”. This was even though the sanctions were creating certain frictions across its supply chains, logistical operations, and flow of money. Considering the fact that the Evraz share price has sunk around 75% over the past month, this shows that the disruption may not have been as severe as initially feared. The group also believes that it is not an entity owned by, or acting on behalf or at the direction of, any persons connected with Russia, and this may enable it to avoid sanctions.
Further, the recent results were also extremely impressive. For example, FY2021 revenues were over $14bn and net profits increased to over $3bn, in comparison to just $858m the previous year. This also allowed a dividend of 50 cents to be announced, which is expected to go ex tomorrow. The interim dividend alone means that Evraz shares have a dividend yield of around 40%, clearly far higher than any other UK share.
However, this recent update did not consider the effects of the war. As such, although the effects of the conflict are extremely hard to judge, I highly doubt that profits will remain at these levels. This is a key risk to point out.
Is the Evraz share price set to soar?
Clearly, there may have been a slight overreaction over the past couple of weeks regarding Evraz shares, especially as many investment funds vowed to dump all their Russian stocks. From a valuation perspective, this has left the Evraz share price looking extremely cheap.
But although I believe that the Evraz share price has the potential to soar, I’m still not buying. Firstly, I’m not buying shares in any companies that are directly impacted from the dreadful conflict in Ukraine. This is due to the risks of significant volatility over the next few months. Secondly, due to the large number of Russian shareholders, I also have ESG concerns. This is a factor I believe could also depress the shares further.