Severstal - ao — Earnings Release 2017

Apr 13, 2017

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RNS Number : 4191C

Public Joint Stock Co. Severstal

13 April 2017

Severstal reports Q1 2017 operational results

Moscow, Russia - 13 April 2017 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrat--ed steel and steel-related mining companies, today announces its operational results for Q1 2017.

Q1 2017 GROUP HIGHLIGHTS

·        Hot metal output remained largely unchanged, decreasing only 1% to 2.34 mln tonnes (Q4 2016: 2.36 mln tonnes) compared with the previous quarter.

·        Crude steel production declined 2% to 2.86 mln tonnes (Q4 2016: 2.92 mln tonnes). Crude steel output at CherMK was impacted by planned maintenance works at converters #2 and #3.

·        Consolidated steel product sales declined 9% q/q to 2.53 mln tonnes compared with the previous quarter (Q4 2016: 2.78 mln tonnes). During Q1 2017, following record sales volumes achieved in previous quarter, the Company replenished inventories to normal levels and accumulated finished good stocks for subsequent realisation during 2017 as well as increased export sales in response to weaker domestic demand and lower activity from local traders.

·        The proximity of key assets to the border also enabled the Company to shift sales to export, accordingly steel product export sales volumes grew to 42% (Q4 2016: 38%) of the sales mix.

·        Following the refurbishment of the four-stand cold rolling mill at CherMK and the increase in production volumes, cold-rolled coil sales volumes continued to increase, and were up 14% q/q, following the increase of 15% q/q achieved in Q4 2016.

·        Increased cold-rolled, large diameter pipes and colour-coated sales led to the share of high value-added (HVA) products within the sales portfolio increasing to 44% (Q4 2016: 40%).

·        Supply disruptions in Australia boosted spot hard coking coal prices at the beginning of April 2017, after tropical cyclone Debbie led to closures of the main railway lines. Industry experts estimate it will take up to five weeks before normal operations are restored. Meanwhile the seaborne HCC market is experiencing a shortage thus boosting the spot price of coking coal. Whilst iron ore prices were supported by significant restocking in Q1 2017 they are now softening as port inventories have reached high levels.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

Production, tonnes	Q1 2017	Q4 2016	Change, %	Q1 2017	Q1 2016	Change, %
Crude steel (Russian Steel)	2,863,947	2,924,374	(2%)	2,863,947	2,908,314	(2%)
Hot metal (Russian Steel)	2,341,719	2,358,181	(1%)	2,341,719	2,354,256	(1%)
Sales volumes, tonnes	Q1 2017	Q4 2016	Change, %	Q1 2017	Q1 2016	Change, %
Coking coal concentrate	710,622	800,462	(11%)	710,622	1,360,081	(48%)
Iron ore pellets	2,579,417	2,792,900	(8%)	2,579,417	2,407,186	7%
Iron ore concentrate	802,939	922,169	(13%)	802,939	937,772	(14%)
Total steel products (Consolidated)	2,530,181	2,782,004	(9%)	2,530,181	2,448,043	3%
Total steel products (Russian Steel)	2,540,351	2,793,364	(9%)	2,540,351	2,461,741	3%

High value added steel products, %	Q1 2017	Q4 2016	Change, %	Q1 2017	Q1 2016	Change, %
Severstal (Consolidated)	44%	40%	4 ppts	44%	42%	2 ppts
Severstal Russian Steel	44%	40%	4 ppts	44%	42%	2 ppts

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

Sales volumes, tonnes		Q1 2017	Q4 2016	Change, %	Q1 2017	Q1 2016	Change, %
Coal:	473,233		556,228	(15%)	473,233	1,180,594	(60%)
Coking coal concentrate	7,677		80,684	(90%)	7,677	462,770	(98%)
Steam coal	465,556		475,544	(2%)	465,556	717,824	(35%)
Iron ore:	1,341,387		1,545,101	(13%)	1,341,387	1,154,261	16%
Iron ore pellets	1,341,387		1,545,101	(13%)	1,341,387	1,154,261	16%
Semi-finished products	117,042		260,979	(55%)	117,042	131,402	(11%)
Rolled products:	2,006,200		2,084,938	(4%)	2,006,200	1,848,992	9%
Hot-rolled coil	984,077		1,055,917	(7%)	984,077	966,480	2%
Hot-rolled plate	193,298		189,772	2%	193,298	163,548	18%
Cold-rolled coil	320,186		281,572	14%	320,186	203,972	57%
Galvanised and metallic coated coil	117,517		122,532	(4%)	117,517	117,941	0%
Colour coated coil	84,404		79,592	6%	84,404	82,362	2%
Long products	306,718		355,553	(14%)	306,718	314,689	(3%)
Downstream products:	406,939		436,087	(7%)	406,939	467,649	(13%)
Metalware products	144,429		150,479	(4%)	144,429	147,338	(2%)
Large diameter pipes	68,367		63,280	8%	68,367	113,165	(40%)
Other tubes, pipes, formed shapes	194,143		222,328	(13%)	194,143	207,146	(6%)

SEVERSTAL RESOURCES

·       In Q1 2017 coking coal concentrate sales volumes from Vorkutaugol remained in decline, down 11% q/q to 0.71 mln tonnes (Q4 2016: 0.80 mln tonnes) impacted by scheduled long-wall repositionings at the Vorkutinskaya and Komsomolskaya mines. As anticipated, internal coking coal concentrate procurement decreased 2% and external sales volumes decreased by 90% reflecting the low base effect q/q.

·       Steam coal sales at Vorkutaugol decreased by a marginal 2% q/q and remained relatively high in response to stronger demand from domestic consumers during the heating season.

·       Iron ore concentrate sales volumes declined 13% q/q to 0.80 mln tonnes (Q4 2016: 0.92 mln tonnes) mainly impacted by planned maintenance works.

·     Iron ore pellet sales decreased 8% and totaled 2.58 mln tonnes (Q4 2016: 2.79 mln tonnes). Iron ore pellet sales volumes were impacted by seasonal factors.

Sales volumes, tonnes	Q1 2017		Q4 2016		Change, %		Q1 2017		Q1 2016		Change, %
Coal:		1,176,178		1,276,353		(8%)		1,176,178		2,077,905		(43%)
Coking coal concentrate		710,622		800,462		(11%)		710,622		1,360,081		(48%)
Steam coal		465,556		475,891		(2%)		465,556		717,824		(35%)
Iron ore:		3,382,356		3,715,069		(9%)		3,382,356		3,344,958		1%
Iron ore pellets		2,579,417		2,792,900		(8%)		2,579,417		2,407,186		7%
Iron ore concentrate		802,939		922,169		(13%)		802,939		937,772		(14%)

SEVERSTAL RUSSIAN STEEL ('RSD')

·        RSD steel product sales declined 9% q/q to 2.54 mln tonnes due to the fact that during Q1 2017, after record sales volumes achieved in previous quarter, the Company replenished inventories to normal levels and accumulated finished good stocks for subsequent realisation during 2017 as well as increased export sales in response to weaker domestic demand and lower activity from local traders.

·        This resulted in a decline in domestic deliveries within the sales-mix to 58% in Q1 2017 (Q4 2016: 62%).

·        The share of HVA products within the sales mix improved to 44% (Q4 2016: 40%) fueled by cold-rolled, large diameter pipes and colour-coated sales growth.

·        Cold-rolled coil sales improved further, by 14% q/q, following completion of the refurbishment of the four-stand cold rolling mill at CherMK in 2016. Moreover colour-coated coil seasonal stock was previously created in Q4 which resulted in a 6% sales increase q/q.

·        Large diameter pipe (LDP) sales volumes increased 8% q/q driven by higher LDP sales from Izhora Pipe Mill for Gazprom projects. Meanwhile, Izhora Pipe Mill remains in full utilisation and continues to supply LDPs to Gazprom, Transneft and other customers.

·        Average selling prices for all steel products increased between 8% and 21% q/q, depending on the specific product, reflecting an upward adjustment in global steel prices, driven by high raw material benchmarks during Q1 2017.

Sales volumes, tonnes	Q1 2017	Q4 2016	Change, %	Q1 2017	Q1 2016	Change, %
Total steel products	2,540,351	2,793,364	(9%)	2,540,351	2,461,741	3%
Semi-finished products	117,042	260,979	(55%)	117,042	131,402	(11%)
Rolled products:	2,016,107	2,095,316	(4%)	2,016,107	1,861,119	8%
Hot-rolled coil	984,350	1,055,969	(7%)	984,350	966,772	2%
Hot-rolled plate	193,491	189,775	2%	193,491	163,703	18%
Cold-rolled coil	320,186	281,572	14%	320,186	203,972	57%
Galvanised and metallic coated coil	117,517	122,531	(4%)	117,517	117,941	0%
Colour coated coil	84,404	79,592	6%	84,404	82,362	2%
Long products	316,159	365,877	(14%)	316,159	326,369	(3%)
Downstream products:	407,202	437,069	(7%)	407,202	469,220	(13%)
Metalware products	144,511	150,856	(4%)	144,511	148,060	(2%)
Large diameter pipes	68,367	63,280	8%	68,367	113,800	(40%)
Other tubes, pipes, formed shapes	194,324	222,933	(13%)	194,324	207,360	(6%)

Sales price, $/tonne		Q1 2017		Q4 2016		Change, %		Q1 2017	Q1 2016		Change, %
Semi-finished products		374		318		18%		374	224		67%
Hot-rolled coil		481		423		14%		481	255		89%
Hot-rolled plate		569		512		11%		569	354		61%
Cold-rolled coil		602		518		16%		602	365		65%
Galvanised and metallic coated coil		708		637		11%		708	440		61%
Colour coated coil		908		831		9%		908	589		54%
Long products		435		391		11%		435	239		82%
Metalware products		899		835		8%		899	643		40%
Large diameter pipes		1,443		1,192		21%		1,443	1,054		37%
Other tubes, pipes, formed shapes		570		478		19%		570	361		58%
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.

Contacts

Investor Relations

Evgeny Belov

T: +7 (495) 926-77-66 ext. 6445

evgenii.belov@severstal.com

Vladimir Zaluzhsky

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

vladimir.zaluzhsky@severstal.com

Public Relations

Anastasia Mishanina

T: +7 (495) 926-77-66 ext. 6457

anastasia.mishanina@severstal.com

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, Italy and Poland. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $5,916 million and EBITDA of $1,911 million in 2016. Severstal's crude steel production in 2016 reached 11.6 million tonnes www.severstal.com

This information is provided by RNS

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