Severstal - ao — Earnings Release 2014

Jul 14, 2014

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RNS Number : 1910M

OAO Severstal

14 July 2014

Severstal reports Q2 2014 and H1 2014 operational results

Moscow, Russia - July 14, 2014 - OAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading steel and steel-related mining companies, today announces its operational results for Q2 2014 and H1 2014.

Q2 2014 GROUP HIGHLIGHTS

● Crude steel production increased 5% q/q driven by production growth both at the Russian Steel Division (RSD) and Severstal North America (SNA). 

● Consolidated sales of steel products increased 10% due to seasonal growth in the Russian steel market, strong export markets for RSD and sustainable demand growth in the US (for SNA).

● The q/q pricing environment was favourable for RSD with almost all rolled products demonstrating price increases in Q2 2014; sales prices at SNA were flat overall; while prices for coking coal concentrate and iron ore prices saw a further decline in line with market trends.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

Production, tonnes	Q2 2014	Q1 2014		Change		H1 2014		H1 2013	Change
Crude steel (Total output):	4 148 112	3 932 664		5 %	8 080 776			7 866 987	3 %
Russian Steel (RSD)	2 834 277	2 713 759		4 %	5 548 036			5 405 682	3 %
Severstal North America (SNA)	1 313 836	1 218 904		8 %	2 532 740			2 461 305	3 %
Hot metal (total output):	2 695 865	2 697 370		(0) %	5 393 235			5 325 011	1 %
Russian Steel	2 226 364	2 246 364		(1) %	4 472 728			4 325 753	3 %
North America	469 501	451 006		4 %	920 507			999 258	(8) %
Sales volumes, tonnes	Q2 2014	Q1 2014		Change			H1 2014	H1 2013	Change
Coking coal concentrate	1 220 431	1 391 490		(12) %	2 611 921			3 614 667	(28) %
Iron ore pellets	2 539 568	2 582 560		(2) %	5 122 128			5 138 384	(0) %
Iron ore concentrate	1 211 144	1 099 297		10 %	2 310 441			2 272 905	2 %
Total steel products (Consolidated)	3 950 818	3 588 180		10 %	7 538 998			7 564 712	(0) %
Total steel products (Russian Steel)	2 739 100	2 453 932		12 %	5 193 032			5 386 979	(4) %
Total steel products (SNA)	1 252 361	1 182 755		6 %	2 435 116			2 282 801	7 %
Average price, $/tonne	Q2 2014	Q1 2014		Change			H1 2014	H1 2013	Change
Coking coal concentrate, Vorkutaugol	93	96		(3) %	95			115	(18) %
Iron ore pellets, Karelsky Okatysh	89	107		(17) %	98			111	(12) %
Hot-rolled coil (RSD)	501	469		7 %	485			535	(9) %
Rolled products (SNA)	827	835		(1) %	831			798	4 %
High value added steel products, %	Q2 2014	Q1 2014	Change		H1 2014			H1 2013	Change
Severstal (Consolidated)	46%	47%		(1) ppts	47%			46%	1 ppts
Severstal Russian Steel	47%	47%		0  ppts	47%			45%	2 ppts
Severstal North America	44%	46%		(2) ppts	45%			45%	0 ppts

SEVERSTAL RESOURCES

●Iron ore pellet sales remained broadly flat with only a 2% decline q/q, while sales of iron ore concentrate increased 10% on seasonally weak production and sales in Q1 as well as growth in export shipments in Q2. 

● Coking coal concentrate sales saw a further decline due to long wall repositioning which also impacted production volumes in Q1. In 2014, Vorkutaugol will commission 11 new coalfaces across all five of its mines. A new face at the Chetvertiy seam (Zapolyarnaya mine) has recently been commissioned. Production at another face (Severnaya mine) will be started in July.

● In May, Severstal launched a gas-reciprocating power plant running on methane (a coal by-product) at the Severnaya mine (Vorkutaugol). The power plant will supply around 80% of the electricity used by the Severnaya mine and approximately half of the mine's required thermal power. The launch of the project will increase electricity savings at Vorkutaugol by up to 12%.

● Prices for iron ore pellets declined further (17% down q/q) following a decrease in prices of global benchmarks for iron ore products in Q2 2014. Prices for coking coal concentrate were more resilient with only a 3% decline for coking coal concentrate at Vorkutaugol.

Sales volumes, tonnes	Q2 2014	Q1 2014	Change	H1 2014	H1 2013	Change

Coal:	1 712 435	1 869 528	(8) %	3 581 963	5 102 043	(30) %
Coking coal concentrate, including:	1 220 431	1 391 490	(12) %	2 611 921	3 614 667	(28) %
Vorkutaugol	1 002 645	1 192 711	(16) %	2 195 356	2 687 305	(18) %
PBS Coals	217 786	198 779	10 %	416 565	927 362	(55) %
Raw coking coal,  Vorkutaugol	25 967	32 032	(19) %	57 999	324 506	(82) %
Steam coal, including:	466 036	446 006	4 %	912 042	1 162 870	(22) %
Vorkutaugol	457 807	432 783	6 %	890 591	1 089 085	(18) %
PBS Coals	8 229	13 223	(38) %	21 452	73 785	(71) %
Iron ore:	3 750 712	3 681 857	2 %	7 432 569	7 411 289	0 %
Iron ore pellets	2 539 568	2 582 560	(2) %	5 122 128	5 138 384	(0) %
Iron ore concentrate	1 211 144	1 099 297	10 %	2 310 441	2 272 905	2 %

Sales price, $/tonne	Q2 2014	Q1 2014	Change	H1 2014	H1 2013	Change
Coking coal concentrate, Vorkutaugol	93	96	(3) %	95	115	(17) %
Coking coal concentrate, PBS Coals	103	111	(7) %	107	113	(5) %
Raw coking coal,  Vorkutaugol	60	57	5 %	58	52	12 %
Steam coal, Vorkutaugol	36	36	0 %	36	39	(8) %
Steam coal, PBS Coals	51	78	(35) %	68	50	36 %
Iron ore pellets	89	107	(17) %	98	111	(12) %
Iron ore concentrate	63	70	(10) %	66	80	(18) %

SEVERSTAL RUSSIAN STEEL

● Severstal Russian Steel demonstrated solid q/q sales growth in rolled and downstream products in Q2 2014, with 10% and 12% growth respectively, largely driven by sales of long products (up 27% q/q), colour coated coils (up 43% q/q) and metalware products (up 21% q/q).

● This sales growth was driven by a seasonal pickup in demand in the domestic market in Q2 as well as strong export markets.

● The share of high value added (HVA) products remained strong at 47%.

● Shipments of 813 mm diameter pipes for the South Stream Pipeline have been launched in May from the Izhora Pipe Mill (part of Severstal's Russian Steel division). A 29% decline in large diameter sales in Q2 resulted from technical transportation constraints for that type of product. At the same time production volumes in Q2 were strong with the Izhora Pipe Mill running at a high utilization rate.

● With the exception of metalware products and large diameter pipes, average sales prices increased 1-18% q/q with the most significant price growth in colour coated and long products, supported by strong seasonal demand.

Sales volumes, tonnes	Q2 2014	Q1 2014	Change	H1 2014	H1 2013	Change
Total steel products	2 739 100	2 453 932	12 %	5 193 032	5 386 979		(4) %
Semi-finished products	170 139	119 604	42 %	289 743	331 852		(13) %
Rolled products:	2 123 265	1 937 075	10 %	4 060 340	4 204 619		(3) %
Hot-rolled coil	1 001 448	944 129	6 %	1 945 577	2 178 051		(11) %
Hot-rolled plate	193 185	230 355	(16) %	423 540	369 971		14 %
Cold-rolled coil	386 368	335 082	15 %	721 450	702 269		3 %
Galvanised and metallic coated coil	138 873	119 716	16 %	258 589	291 547		(11) %
Color coated coil	110 970	77 867	43 %	188 837	217 510		(13) %
Long products	292 420	229 926	27 %	522 346	445 271		17 %
Downstream products:	445 696	397 253	12 %	842 949	850 508		(1) %
Metalware products	177 096	145 813	21 %	322 909	334 868		(4) %
Large diameter pipes	54 192	75 844	(29) %	130 036	165 519		(21) %
Other tubes, pipes, formed shapes	214 408	175 596	22 %	390 004	350 120		11 %

Sales price, $/tonne	Q2 2014	Q1 2014	Change	H1 2014	H1 2013	Change
Semi-finished products	465	423	10 %	448	456	(2) %
Hot-rolled coil	501	469	7 %	485	535	(9) %
Hot-rolled plate	791	741	7 %	764	741	3 %
Cold-rolled coil	583	579	1 %	581	639	(9) %
Galvanised and metallic coated coil	796	741	7 %	770	851	(9) %
Color coated coil	1 075	909	18 %	1 007	1 074	(6) %
Long products	566	490	15 %	532	604	(12) %
Metalware products	1 073	1 099	(2) %	1 085	1 197	(9) %
Large diameter pipes	1 521	1 564	(3) %	1 546	1 555	(1) %
Other tubes, pipes, formed shapes	650	626	4 %	639	705	(9) %

SEVERSTAL NORTH AMERICA

● Severstal North America delivered significant growth in sales of its rolled products, which jumped 6% q/q.

● The share of HVA products in the sales portfolio decreased slightly from 46% to 44% while the share of HVA products in H1 was stable YoY (45%).

● Average sales prices in H1 2014 were up 4% YoY, while rolled product prices remained mostly flat with prices for cold rolled coils the most resilient.

Sales volumes, tonnes	Q2 2014	Q1 2014	Change	H1 2014	H1 2013	Change
Rolled products:	1 248 084	1 182 755	6 %	2 430 839	2 282 680	6 %
Hot-rolled coil and plate	696 663	638 170	9 %	1 334 833	1 255 605	6 %
Cold-rolled coil	135 180	144 829	(7) %	280 009	271 699	3 %
Galvanised and metallic coated coil	416 241	399 756	4 %	815 997	755 377	8 %

Sales price, $/tonne	Q2 2014	Q1 2014	Change	H1 2014	H1 2013	Change
Rolled products	827	835	(1) %	831	798	4 %

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

Sales volumes, tonnes		Q2 2014	Q1 2014	Change	H1 2014	H1 2013	Change
Coal:	861 805		949 485	(9) %	1 811 290	3 375 579	(46) %
Coking coal concentrate	369 800		471 448	(22) %	841 248	1 888 203	(55) %
Raw coking coal	25 967		32 032	(19) %	57 999	324 506	(82) %
Steam coal	466 036		446 006	4 %	912 042	1 162 870	(22) %
Iron ore:	1 373 044		1 528 347	(10) %	2 901 391	3 011 077	(4) %
Iron ore pellets	1 285 837		1 483 140	(13) %	2 768 977	2 968 575	(7) %
Iron ore concentrate	87 207		45 207	93 %	132 414	42 502	212 %
Semi-finished products	174 416		89 633	95 %	264 049	241 371	9 %
Rolled products:	3 332 255		3 102 659	7 %	6 434 914	6 475 587	(1) %
Hot-rolled coil	1 665 295		1 569 216	6 %	3 234 511	3 430 356	(6) %
Hot-rolled plate	193 078		230 245	(16) %	423 323	369 682	15 %
Cold-rolled coil	521 207		479 911	9 %	1 001 118	973 968	3 %
Galvanised and metallic coated coil	555 110		519 471	7 %	1 074 581	1 046 923	3 %
Color coated coil	110 970		77 867	43 %	188 837	217 510	(13) %
Long products	286 595		225 949	27 %	512 544	437 148	17 %
Downstream products:	444 146		395 889	12 %	840 035	847 754	(1) %
Metalware products	176 236		145 398	21 %	321 634	334 339	(4) %
Large diameter pipes	53 795		75 213	(28) %	129 008	163 564	(21) %
Other tubes, pipes, formed shapes	214 116		175 277	22 %	389 393	349 850	11 %

Notes

1) All production data is reported in metric tonnes;

2) Sales prices are stated on EXW basis;

3)  Segmental data includes intercompany sales;

4) Semi-finished products include pig iron, slabs, billets, ingots, steel casting and forgings;

5) Metalware sales volumes and metalware average selling prices include Severstal Metiz, Cherepovets Steel Mill, Severstallat and Severstal Invest data;

6) Large diameter pipes include all pipes  with a diameter between 820 and 1420 mm;

7) Group and RSD volumes and average selling prices for H1 2013 were restated due to a change in recognised revenues, based on a re- classification of products

Contacts

Investor Relations

Vladimir Zaluzhsky

T: +7 (495) 926-77-66 ext. 6375

vladimir.zaluzhsky@severstal.com

Public Relations

Elena Kovaleva

T: +7 (495) 926-77-66 ext. 6447

elena.kovaleva@severstal.com

Severstal's financial communications agent - Hudson Sandler

Andrew Hayes / Maria Ignatova / Alex Brennan

T: +44 (0) 20 7796 4133

***

ОАО Severstal is one of the world's leading vertically integrated steel and steel related mining companies, with assets in Russia, the USA, Ukraine, Latvia, Poland, Italy, Liberia and Brazil. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $13,312 million and EBITDA of $2,063 million in 2013. Severstal's crude steel production in 2013 reached 15.7 million tonnes. www.severstal.com

This information is provided by RNS

The company news service from the London Stock Exchange

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