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Severstal - ao — Earnings Release 2016
Apr 12, 2016
6426_rns_2016-04-12_2088c57f-981a-4bb7-bd64-28e2b622b830.html
Earnings Release
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RNS Number : 8863U
Public Joint Stock Co. Severstal
12 April 2016
Severstal reports Q1 2016 operational results
Moscow, Russia - 12 April 2016 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrated steel and steel-related mining companies, today announces its operational results for Q1 2016.
Q1 2016 GROUP HIGHLIGHTS
· Hot metal output remained largely unchanged q/q at 2.35 mln tonnes (Q4 2015: 2.34 mln tonnes).
· As operations of converter #1, continuous casters #4 and #5 and the billet caster at Cherepovets Steel Mill were recommenced following maintenance works, crude steel production increased 6% q/q to 2.91 mln tonnes (Q4 2015: 2.75 mln tonnes). Improving production run-rates at Balakovo positively affected crude steel output as well.
· Consolidated sales of steel products decreased 7% q/q to 2.45 mln tonnes (Q4 2015: 2.62 mln), which reflects further contraction in domestic consumption, partially on the back of seasonal factors.
· Moreover, refurbishment of the four-stand cold rolling mill at Cherepovets Steel Mill started in January 2016, which resulted in lower output of high value-added products, which was somewhat offset by an increase in hot rolled coil. This refurbishment, which is expected to be completed in Q2 2016, will increase mill capacity to 200,000 tonnes per annum and significantly improve product quality, enabling the company to expand its product line and enter new markets.
· In the meantime, share of high value-added (HVA) products in the sales portfolio temporarily decreased to 42% (Q4 2015: 47%).
· The abovementioned factors resulted in lower availability of high value-added products for domestic deliveries. That said, the share of domestic steel products sales volumes in the sales mix declined to 60% (Q4 2015: 64%).
· Coking coal concentrate output was negatively affected as a result of the tragic incident at Vorkutaugol's Severnaya mine on 26 February 2016. Whilst the investigation continues, Government Committee has provisionally determined that the main reasons behind the rock burst and subsequent methane blast was geological factors. Mining operations at Severnaya remain suspended. All of Vorkutaugol's other four mines and one open pit are operating as usual. In 2015 the Severnaya mine produced approximately 1.5 mln tonnes of coking coal concentrate, which is approximately 26% of Vorkutaugol's overall production of coking coal concentrate in 2015 (5.7 mln tonnes).
· By the end of 2015 global steel prices had reached the lowest level in the last ten years. Ongoing concerns regarding the prospects of the Chinese economy as well as the lack of growth in steel demand globally continue to put pressure on the steel market. Nevertheless, this subdued picture changed significantly in March 2016 with global hot rolled coil prices rallying more than 40% compared with the previous month. In the domestic market, USD-denominated prices started to increase as well, reflecting both RUB appreciation and proactive initiatives by Russian steel producers to increase local prices in order to catch up with export USD-nominated parity. The domestic market, which usually offers higher sales margins, remains a priority for the Company.
SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | |
| Crude steel (Russian Steel) | 2,908,314 | 2,750,898 | 6% | 2,908,314 | 2,959,389 | (2%) |
| Hot metal (Russian Steel) | 2,354,256 | 2,335,698 | 1% | 2,354,256 | 2,305,312 | 2% |
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | |
| Coking coal concentrate | 1,360,081 | 1,475,919 | (8%) | 1,360,081 | 1,272,642 | 7% |
| Iron ore pellets | 2,407,186 | 2,697,648 | (11%) | 2,407,186 | 2,576,453 | (7%) |
| Iron ore concentrate | 937,772 | 959,895 | (2%) | 937,772 | 984,272 | (5%) |
| Total steel products (Consolidated) | 2,448,043 | 2,619,351 | (7%) | 2,448,043 | 2,544,868 | (4%) |
| Total steel products (Russian Steel) | 2,461,741 | 2,631,266 | (6%) | 2,461,741 | 2,558,524 | (4%) |
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | |
| Coking coal concentrate, Vorkutaugol | 62 | 71 | (13%) | 62 | 64 | (3%) |
| Iron ore pellets, Karelsky Okatysh | 36 | 43 | (16%) | 36 | 51 | (29%) |
| Iron ore concentrate, Olkon | 23 | 31 | (26%) | 23 | 32 | (28%) |
| Hot-rolled coil (RSD) | 255 | 299 | (15%) | 255 | 394 | (35%) |
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | |
| Severstal (Consolidated) | 42% | 47% | (5 ppts) | 42% | 46% | (4 ppts) |
| Severstal Russian Steel | 42% | 47% | (5 ppts) | 42% | 46% | (4 ppts) |
SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | ||
| Coal: | 1,180,594 | 1,221,429 | (3%) | 1,180,594 | 838,072 | 41% | |
| Coking coal concentrate | 462,770 | 544,058 | (15%) | 462,770 | 374,411 | 24% | |
| Raw coking coal | - | - | n.a. | - | 8,719 | n.a. | |
| Steam coal | 717,824 | 677,371 | 6% | 717,824 | 454,942 | 58% | |
| Iron ore: | 1,154,261 | 1,520,891 | (24%) | 1,154,261 | 1,478,702 | (22%) | |
| Iron ore pellets | 1,154,261 | 1,495,833 | (23%) | 1,154,261 | 1,363,627 | (15%) | |
| Iron ore concentrate | - | 25,058 | n.a. | - | 115,075 | n.a. | |
| Semi-finished products | 131,402 | 191,711 | (31%) | 131,402 | 106,891 | 23% | |
| Rolled products: | 1,848,992 | 1,963,490 | (6%) | 1,848,992 | 1,973,655 | (6%) | |
| Hot-rolled coil | 966,480 | 933,573 | 4% | 966,480 | 927,379 | 4% | |
| Hot-rolled plate | 163,548 | 193,762 | (16%) | 163,548 | 191,965 | (15%) | |
| Cold-rolled coil | 203,972 | 329,430 | (38%) | 203,972 | 303,655 | (33%) | |
| Galvanised and metallic coated coil | 117,941 | 147,797 | (20%) | 117,941 | 134,604 | (12%) | |
| Colour coated coil | 82,362 | 100,747 | (18%) | 82,362 | 84,459 | (2%) | |
| Long products | 314,689 | 258,181 | 22% | 314,689 | 331,593 | (5%) | |
| Downstream products: | 467,649 | 464,150 | 1% | 467,649 | 464,322 | 1% | |
| Metalware products | 147,338 | 147,682 | (0%) | 147,338 | 137,627 | 7% | |
| Large diameter pipes | 113,165 | 129,491 | (13%) | 113,165 | 121,227 | (7%) | |
| Other tubes, pipes, formed shapes | 207,146 | 186,977 | 11% | 207,146 | 205,468 | 1% | |
SEVERSTAL RESOURCES
● Coal mining at Vorkutaugol has been negatively impacted due to the tragic incident at the Severnaya mine. The Company is still considering different options for the mine's recovery. Meanwhile, the decision on handling the underground fire in the mine via flooding with water had been taken. The operation will take approximately 60 to 80 days. The mine might be reopened in due course. However, the timeframe is unclear at the moment. The Company will provide further updates as soon as information becomes available. All of Vorkutaugol's other four mines and one open pit are operating as usual.
● Reflecting the abovementioned as well as taking into account coking coal inventories levels onsite, coking coal concentrate sales at Vorkutaugol decreased 8% q/q to 1.36 mln tonnes (Q4 2015: 1.48 mln tonnes).
● Meanwhile, steam coal sales at Vorkutaugol increased 6% q/q reflecting seasonally strong domestic demand.
● While internal procurement of iron ore pellets improved as a result of the completion of maintenance works at the blast furnace shop, seasonally weaker demand both in the domestic and export markets resulted in a 11% q/q decline in iron ore pellets sales to 2.41 mln tonnes (Q4 2015: 2.70 mln tonnes).
● Due to reduced profitability of third party iron ore concentrate sales, Olcon did not make any external shipments in Q1 2016, which is the key reason behind 2% q/q decline in iron ore concentrate sales volumes.
● Average coking coal concentrate selling prices decreased 13% q/q partially reflecting a 9% q/q decline in hard coking coal benchmark contract prices (Australia, FOB) in Q1. A decline in the share of hard coking coal within the sales mix as a result of the incident at Severnaya mine impacted the average selling price as well. Nevertheless, the moderate recovery of global coking coal spot prices throughout the Q1 2016, as well as the RUB appreciation provide Russian coal producers with an ability to start positively revising domestic coal prices.
● Despite a 4% q/q improvement in the global iron ore benchmark (China, CFR) average USD-denominated selling prices of iron ore concentrate at Olcon declined 26% q/q. While average USD-denominated selling prices of iron ore pellets at Karelsky Okatysh declined 16% q/q. Prices for iron ore pellets at Karelsky Okatysh were more resilient due to the geographical structure of sales and structural changes in the global iron ore pellets seaborne market. The USD-denominated prices of domestic iron ore products are expected to increase in Q2 2016 following global raw material markets trends.
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | ||||||||
| Coal: | 2,077,905 | 2,153,290 | (4%) | 2,077,905 | 1,736,303 | 20% | |||||||
| Coking coal concentrate | 1,360,081 | 1,475,919 | (8%) | 1,360,081 | 1,272,642 | 7% | |||||||
| Raw coking coal | - | - | n.a. | - | 8,719 | n.a. | |||||||
| Steam coal | 717,824 | 677,371 | 6% | 717,824 | 454,942 | 58% | |||||||
| Iron ore: | 3,344,958 | 3,657,543 | (9%) | 3,344,958 | 3,560,725 | (6%) | |||||||
| Iron ore pellets | 2,407,186 | 2,697,648 | (11%) | 2,407,186 | 2,576,453 | (7%) | |||||||
| Iron ore concentrate | 937,772 | 959,895 | (2%) | 937,772 | 984,272 | (5%) | |||||||
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | |
| Coking coal concentrate | 62 | 71 | (13%) | 62 | 64 | (3%) |
| Raw coking coal | n.a. | n.a. | n.a. | n.a. | 18 | n.a. |
| Steam coal | 14 | 17 | (18%) | 14 | 21 | (33%) |
| Iron ore pellets | 36 | 43 | (16%) | 36 | 51 | (29%) |
| Iron ore concentrate | 23 | 31 | (26%) | 23 | 32 | (28%) |
SEVERSTAL RUSSIAN STEEL ('RSD')
● RSD steel product sales decreased 6% q/q to 2.46 mln tonnes due to seasonal factors and scheduled four-stand cold rolling mill upgrade at CherMK, which is expected to last until the end of Q2 2016.
● Given the lower rerolling capacity availability sales volumes of hot-rolled coil increased 4% q/q. Meanwhile, sales volumes of cold-rolled coil, galvanized and metallic coated coil and colour coated coil went down 38% q/q, 20% q/q and 18% q/q, respectively.
● Long product sales volumes increased 22% q/q following the billet caster maintenance completion at CherMK.
● Taking into account the above factors the share of HVA products within the sales mix declined to 42% (Q4 2015: 47%), despite a 31% q/q decline in semi-finished products sales volumes due to the lower profitability of export deliveries at the beginning of the year.
● Large diameter pipes (LDP) sales volumes declined 12% q/q reflecting mostly changes in sales mix. In Q1 2016 Izhora Pipe Mill mainly supplied Transneft and Gazprom maintenance projects. At the same time, following the recent auction results, 140,000 tonnes of LDPs will be delivered for Gazprom's major gas transmission projects Power of Siberia and Ukhta-Torzhok-2.
● The steel products average selling price decline of 6-18% q/q reflects the downward adjustment in global steel prices in December 2015. Meanwhile, in March 2016 there were marked positive developments in the global steel markets with export hot-rolled coil price increasing more than 40% comparing with the previous month. In the domestic market, USD-denominated prices started to increase, reflecting both RUB appreciation and initiatives by local steel producers to increase prices in order to catch up with export USD-denominated parity.
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | |
| Total steel products | 2,461,741 | 2,631,266 | (6%) | 2,461,741 | 2,558,524 | (4%) |
| Semi-finished products | 131,402 | 191,711 | (31%) | 131,402 | 106,891 | 23% |
| Rolled products: | 1,861,119 | 1,973,884 | (6%) | 1,861,119 | 1,985,724 | (6%) |
| Hot-rolled coil | 966,772 | 933,742 | 4% | 966,772 | 928,150 | 4% |
| Hot-rolled plate | 163,703 | 193,959 | (16%) | 163,703 | 191,996 | (15%) |
| Cold-rolled coil | 203,972 | 329,430 | (38%) | 203,972 | 303,656 | (33%) |
| Galvanised and metallic coated coil | 117,941 | 147,797 | (20%) | 117,941 | 134,613 | (12%) |
| Colour coated coil | 82,362 | 100,747 | (18%) | 82,362 | 84,459 | (2%) |
| Long products | 326,369 | 268,209 | 22% | 326,369 | 342,850 | (5%) |
| Downstream products: | 469,220 | 465,671 | 1% | 469,220 | 465,909 | 1% |
| Metalware products | 148,060 | 149,079 | (1%) | 148,060 | 138,699 | 7% |
| Large diameter pipes | 113,800 | 129,491 | (12%) | 113,800 | 121,512 | (6%) |
| Other tubes, pipes, formed shapes | 207,360 | 187,101 | 11% | 207,360 | 205,698 | 1% |
| Q1 2016 | Q4 2015 | Change, % | Q1 2016 | Q1 2015 | Change, % | |||||
| Semi-finished products | 224 | 238 | (6%) | 224 | 374 | (40%) | ||||
| Hot-rolled coil | 255 | 299 | (15%) | 255 | 394 | (35%) | ||||
| Hot-rolled plate | 354 | 431 | (18%) | 354 | 486 | (27%) | ||||
| Cold-rolled coil | 365 | 412 | (11%) | 365 | 445 | (18%) | ||||
| Galvanised and metallic coated coil | 440 | 520 | (15%) | 440 | 570 | (23%) | ||||
| Colour coated coil | 589 | 711 | (17%) | 589 | 736 | (20%) | ||||
| Long products | 239 | 289 | (17%) | 239 | 374 | (36%) | ||||
| Metalware products | 643 | 763 | (16%) | 643 | 823 | (22%) | ||||
| Large diameter pipes | 1,054 | 1,169 | (10%) | 1,054 | 1,196 | (12%) | ||||
| Other tubes, pipes, formed shapes | 361 | 414 | (13%) | 361 | 462 | (22%) | ||||
| 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, Severstal Distribution LLC and AO Severstal Distribution data;
6) Large diameter pipes include all pipes with a diameter between 820 and 1420 mm.
Click on, or paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/8863U_-2016-4-12.pdf
| Contacts |
Investor Relations
Victor Drozdov
T: +7 (495) 926-77-66 ext. 6987
Public Relations
Anastasia Mishanina
T: +7 (495) 926-77-66 ext. 6457
Severstal's financial communications agent - Hudson Sandler
Andrew Hayes / Elena Garside / Alex Brennan
T: +44 (0) 20 7796 4133
PАО Severstal is one of the world's leading vertically integrated steel and steel related mining companies, with assets in Russia, Ukraine, Latvia, Poland and Italy. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $6,396 million and EBITDA of $2,096 million in 2015. Severstal's crude steel production in 2015 reached 11.5 million tonnes. www.severstal.com
This information is provided by RNS
The company news service from the London Stock Exchange
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