Severstal - ao — Earnings Release 2017

Jul 12, 2017

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RNS Number : 8121K

Public Joint Stock Co. Severstal

12 July 2017

Severstal reports Q2 & H1 2017 operational results

Moscow, Russia - 12 July 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 Q2 & H1 2017.

Q2 2017 GROUP HIGHLIGHTS 

·        Hot metal output decreased 4% to 2.24 mln tonnes (Q1 2017: 2.34 mln tonnes) compared with the previous quarter due to maintenance works at BF#2, BF#4 and BF#5.

·        Crude steel production declined 1% to 2.83 mln tonnes (Q1 2017: 2.86 mln tonnes). Crude steel output at CherMK was impacted by planned maintenance works at converter #1.

·        Consolidated steel product sales grew 9% to 2.75 mln tonnes compared with the previous quarter (Q1 2017: 2.53 mln tonnes). During Q2 2017 the Company sold-off stocks of HVA products accumulated in previous quarters, responding to increased demand from local traders which primary reflects the beginning of construction season in Russia. Semi-finished product sales were impacted by the maintenance works at converter #1.

·        Responding to improved domestic demand in Q2, the Company increased domestic sales volumes to 60% (Q1 2017: 58%) 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 in H1 2017 were up 52% compared with H1 2016.

·        The company maintained its share of high value-added (HVA) products within the sales portfolio at 44% (Q1 2017: 44%) as increased cold-rolled, galvanized and colour-coated sales were matched by growth in HRC and long product sales.

·        In Q2 2017, coking coal concentrate sales volumes from Vorkutaugol increased 16%, driven by production volumes growth after scheduled long-wall repositioning at the Vorkutinskaya and Komsomolskaya mines in Q1.

·        Iron ore concentrate sales volumes surged 54% q/q to 1.24 mln tonnes (Q1 2017: 0.80 mln tonnes). Iron ore pellet sales improved 12% and totalled 2.88 mln tonnes (Q1 2017: 2.58 mln tonnes).

·        Steel and raw material prices were under pressure due to high inventories in China, but capacity cuts and stable Chinese demand supported the markets. The anticipated supply normalisation in the seaborne hard coking coal market was temporarily disrupted by storm Debbie in Queensland. The final decision by the EU Commission on HRC Anti-Dumping duties expected in October. Russian domestic steel demand is slowly recovering, according to industry sources.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

Production, tonnes	Q2 2017	Q1 2017	Change, %	H1 2017	H1 2016	Change, %
Crude Steel (Russian Steel)	2,831,209	2,863,947	(1%)	5,695,156	5,721,334	(0%)
Hot metal (Russian Steel)	2,240,758	2,341,719	(4%)	4,582,477	4,565,439	0%
Sales volumes, tonnes	Q2 2017	Q1 2017	Change, %	H1 2017	H1 2016	Change, %
Coking coal concentrate	827,154	710,622	16%	1,537,776	2,436,867	(37%)
Iron ore pellets	2,879,930	2,579,417	12%	5,459,347	5,257,288	4%
Iron ore concentrate	1,236,364	802,939	54%	2,039,303	2,047,971	(0%)
Total steel products (Consolidated)	2,749,721	2,530,181	9%	5,279,902	5,238,164	1%
Total steel products (Russian Steel)	2,758,891	2,540,351	9%	5,299,242	5,260,184	1%

High value added steel products, %	Q2 2017	Q1 2017	Change, %	H1 2017	H1 2016	Change, %
Severstal (Consolidated)	44%	44%	0 ppts	44%	43%	1 ppts
Severstal Russian Steel	44%	44%	0 ppts	44%	43%	1 ppts

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

Sales volumes, tonnes		Q2 2017	Q1 2017	Change, %	H1 2017	H1 2016	Change, %
Coal:	436,545		473,233	(8%)	909,778	1,877,456	(52%)
Coking coal concentrate	11,472		7,677	49%	19,149	688,572	(97%)
Steam coal	425,073		465,556	(9%)	890,629	1,188,884	(25%)
Iron ore:	1,700,787		1,341,387	27%	3,042,174	2,886,231	5%
Iron ore pellets	1,669,871		1,341,387	24%	3,011,258	2,816,105	7%
Iron ore concentrate	30,916		0	n.a.	30,916	70,126	(56%)
Semi-finished products	110,776		117,042	(5%)	227,818	273,483	(17%)
Rolled products:	2,199,008		2,006,200	10%	4,205,208	3,992,372	5%
Hot-rolled coil	1,058,106		984,077	8%	2,042,183	2,023,724	1%
Hot-rolled plate	184,536		193,298	(5%)	377,834	354,309	7%
Cold-rolled coil	345,170		320,186	8%	665,356	437,105	52%
Galvanised and metallic coated coil	149,503		117,517	27%	267,020	281,568	(5%)
Colour coated coil	100,206		84,404	19%	184,610	198,288	(7%)
Long products	361,487		306,718	18%	668,205	697,378	(4%)
Downstream products:	439,937		406,939	8%	846,876	972,309	(13%)
Metalware products	170,356		144,429	18%	314,785	321,294	(2%)
Large diameter pipes	58,170		68,367	(15%)	126,537	228,741	(45%)
Other tubes, pipes, formed shapes	211,411		194,143	9%	405,554	422,274	(4%)

SEVERSTAL RESOURCES

·       In Q2 2017 coking coal concentrate sales volumes from Vorkutaugol increased 16% driven by production volumes growth following scheduled long-wall repositionings at the Vorkutinskaya and Komsomolskaya mines in Q1. As anticipated, internal coking coal concentrate procurement increased 16% while the minor volumes allocated by Vorkutaugol to external sales remained broadly flat.

·       Steam coal sales at Vorkutaugol declined 9% q/q reflecting weaker demand from domestic consumers at the end of the heating season.

·       Iron ore concentrate sales volumes surged 54% q/q to 1.24 mln tonnes (Q1 2017: 0.80 mln tonnes). Iron ore concentrate sales improvement in Q2 reflects seasonal dynamics and planned production increase.

·       Iron ore pellet sales improved 12% and totalled 2.88 mln tonnes (Q1 2017: 2.58 mln tonnes). Iron ore pellet sales volumes were impacted by stock reduction.

Sales volumes, tonnes	Q2 2017	Q1 2017	Change, %	H1 2017	H1 2016	Change, %
Coal:	1,252,366	1,176,178	6%	2,428,544	3,625,751	(33%)
Coking coal concentrate	827,154	710,622	16%	1,537,776	2,436,867	(37%)
Steam coal	425,212	465,556	(9%)	890,768	1,188,884	(25%)
Iron ore:	4,116,294	3,382,356	22%	7,498,650	7,305,259	3%
Iron ore pellets	2,879,930	2,579,417	12%	5,459,347	5,257,288	4%
Iron ore concentrate	1,236,364	802,939	54%	2,039,303	2,047,971	(0%)

SEVERSTAL RUSSIAN STEEL ('RSD')

·      RSD steel product sales increased 9% to 2.76 mln tonnes compared with the previous quarter (Q1 2017: 2.54 mln tonnes). During Q2 2017 the Company sold off stocks of HVA products accumulated in previous quarters due to increased domestic demand from local traders and the beginning of the construction season in Russia. The maintenance works at converter #1 impacted semi-finished product sales.

·      Responding to improved domestic demand in Q2 the Company increased domestic sales volumes to 60% (Q1 2017: 58%) 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 in H1 2017 were up 52% in comparison with H1 2016. Moreover, previously accumulated seasonal cold-rolled coil (CRC) stock was sold in Q2 which drove an 8% sales increase q/q.

·      Increased cold-rolled, galvanised and colour-coated sales supported the share of high value-added (HVA) products within the sales portfolio flat q/q at 44% (Q1 2017: 44%).

·      Large diameter pipe (LDP) sales volumes declined 15% q/q driven by lower LDP sales from Izhora Pipe Mill for Gazprom projects. Meanwhile, Izhora Pipe Mill remains at full capacity utilisation and continues to supply LDPs to Gazprom, Transneft and other customers. The company expects to reduce LDP inventories accumulated since the beginning of 2017 in subsequent quarters.

·      Average selling prices for hot-rolled coil increased due to a higher share of domestic shipments. Colour-coated prices declined following a negative price trend in the Russian market. The company allocated some volumes of hot-dip galvanised (HDG) products to export markets which supported the average price. Long product prices decreased due to a decline in raw materials and weaker domestic demand impacted by a deferred construction season.

Sales volumes, tonnes	Q2 2017	Q1 2017	Change, %	H1 2017	H1 2016	Change, %
Total steel products	2,758,891	2,540,351	9%	5,299,242	5,260,184	1%
Semi-finished products	110,776	117,042	(5%)	227,818	273,485	(17%)
Rolled products:	2,207,620	2,016,107	9%	4,223,727	4,011,891	5%
Hot-rolled coil	1,058,282	984,350	8%	2,042,632	2,024,184	1%
Hot-rolled plate	184,657	193,491	(5%)	378,148	354,546	7%
Cold-rolled coil	345,170	320,186	8%	665,356	437,106	52%
Galvanised and metallic coated coil	149,503	117,517	27%	267,020	281,568	(5%)
Colour coated coil	100,206	84,404	19%	184,610	198,288	(7%)
Long products	369,802	316,159	17%	685,961	716,199	(4%)
Downstream products:	440,495	407,202	8%	847,697	974,808	(13%)
Metalware products	170,443	144,511	18%	314,954	322,471	(2%)
Large diameter pipes	58,170	68,367	(15%)	126,537	229,377	(45%)
Other tubes, pipes, formed shapes	211,882	194,324	9%	406,206	422,960	(4%)

Sales price, $/tonne		Q2 2017		Q1 2017		Change, %		H1 2017	H1 2016		Change, %
Semi-finished products		396		374		6%		385	251		53%
Hot-rolled coil		487		481		1%		485	309		57%
Hot-rolled plate		637		569		12%		602	409		47%
Cold-rolled coil		592		602		(2%)		596	409		46%
Galvanised and metallic coated coil		737		708		4%		724	510		42%
Colour coated coil		879		908		(3%)		892	698		28%
Long products		382		435		(12%)		407	313		30%
Metalware products		874		899		(3%)		885	716		24%
Large diameter pipes		1,553		1,443		8%		1,494	1,129		32%
Other tubes, pipes, formed shapes		587		570		3%		579	413		40%
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

Public Relations

Anastasia Mishanina

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

anastasia.mishanina@severstal.com

Severstal's financial communications agency - Hudson Sandler

Andrew Hayes / Emily Dillon / Fern Duncan

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 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

The company news service from the London Stock Exchange

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