Severstal - ao — Earnings Release 2017

Oct 10, 2017

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RNS Number : 1607T

Public Joint Stock Co. Severstal

10 October 2017

Severstal reports Q3 & 9M 2017 operational results

Moscow, Russia - 10 October 2017 - 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 Q3 & 9M 2017.

Q3 2017 GROUP HIGHLIGHTS 

·        Hot metal output remained almost unchanged at 2.23 mln tonnes (Q2 2017: 2.24 mln tonnes) compared with the previous quarter, whereas crude steel production was up 4% at 2.94 mln tonnes (Q2 2017: 2.83 mln tonnes). Crude steel output at CherMK in Q2 2017 was lower due to planned maintenance works at converter #1.

·        Consolidated steel product sales continued to grow in Q3, up 4% q/q to 2.86 mln tonnes, following 9% q/q growth in the previous quarter (Q2 2017: 2.75 mln tonnes). During Q3, the Company continued to sell stocks of HVA products accumulated in previous periods in response to increased demand and the ongoing construction season in Russia. Semi-finished product sales were impacted by inventory level normalisation following maintenance works at converter #1 in Q2.

·        The share of domestic sales volumes within the sales mix increased to 65% (Q2 2017: 60%). Improved domestic demand in Q3 was driven by the ongoing construction season.

·        The share of high value-added (HVA) products within the sales portfolio increased significantly, to 49% (Q2 2017: 44%), driven by a destocking of large diameter pipes, cold-rolled, HDG and colour-coated products.

·        Coking coal concentrate sales volumes from Vorkutaugol increased 11% driven by an increase in production volumes following the planned long-wall repositioning at the Vorkutinskaya and Komsomolskaya mines in H1 2017.

·      Iron ore pellet sales decreased 17% and totalled 2.38 mln tonnes (Q2 2017: 2.88 mln tonnes) despite the increase in production volumes q/q. This was due to higher share of finished goods in transit and accumulation of stocks at the end of Q3, following Q2 sell-off. The Company expects an uptick in pellet sales volumes in subsequent periods.

·        Raw material prices were supported by strong steel demand in China during Q3. Export steel prices started to recover, and Russian domestic steel prices followed global trends, but with a time lag. Industry experts anticipate Russian domestic steel demand to increase 5% for 2017. On October 6, 2017 the EU Commission imposed definitive anti-dumping duties against Russian, Ukrainian, Iranian and Brazilian steelmakers. As a result of Severstal's track record of balanced and cautious European sales, the Company got the lowest duty rate among all exporting companies under the investigation, which is even lower than 5.3% for the current price level. The ruling has some slight negative financial effects which are estimated to be immaterial versus our annual earnings and which are fully offset by the ability for us to continue serving our European customers.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

Production, tonnes	Q3 2017	Q2 2017	Change, %	9M 2017	9M 2016	Change, %
Crude Steel (Russian Steel)	2,943,903	2,831,209	4%	8,639,059	8,705,959	(1%)
Hot metal (Russian Steel)	2,231,663	2,240,758	(0%)	6,814,140	6,959,335	(2%)
Sales volumes, tonnes	Q3 2017	Q2 2017	Change, %	9M 2017	9M 2016	Change, %
Coking coal concentrate	914,737	827,154	11%	2,452,513	3,346,341	(27%)
Iron ore pellets	2,376,621	2,879,930	(17%)	7,835,968	8,049,469	(3%)
Iron ore concentrate	1,075,091	1,236,364	(13%)	3,114,394	3,181,220	(2%)
Total steel products (Consolidated)	2,855,071	2,749,721	4%	8,134,973	7,889,893	3%
Total steel products (Russian Steel)	2,867,465	2,758,891	4%	8,166,707	7,921,526	3%

High value added steel products, %	Q3 2017	Q2 2017	Change, %	9M 2017	9M 2016	Change, %
Severstal (Consolidated)	49%	44%	5 ppts	46%	43%	3 ppts
Severstal Russian Steel	49%	44%	5 ppts	46%	42%	4 ppts

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

Sales volumes, tonnes		Q3 2017	Q2 2017	Change, %	9M 2017	9M 2016	Change, %
Coal:	371,465		436,545	(15%)	1,281,243	2,383,337	(46%)
Coking coal concentrate	49,801		11,472	334%	68,950	818,858	(92%)
Steam coal	321,664		425,073	(24%)	1,212,293	1,564,479	(23%)
Iron ore:	1,362,572		1,700,787	(20%)	4,404,746	4,553,401	(3%)
Iron ore pellets	1,342,593		1,669,871	(20%)	4,353,851	4,433,121	(2%)
Iron ore concentrate	19,979		30,916	(35%)	50,895	120,280	(58%)
Semi-finished products	72,769		110,776	(34%)	300,587	463,176	(35%)
Rolled products:	2,261,672		2,199,008	3%	6,466,880	5,996,338	8%
Hot-rolled coil	1,001,739		1,058,106	(5%)	3,043,922	3,023,710	1%
Hot-rolled plate	187,292		184,536	1%	565,126	501,497	13%
Cold-rolled coil	352,617		345,170	2%	1,017,973	682,003	49%
Galvanised and metallic coated coil	210,697		149,503	41%	477,717	437,591	9%
Colour coated coil	133,579		100,206	33%	318,189	306,424	4%
Long products	375,748		361,487	4%	1,043,953	1,045,113	(0%)
Downstream products:	520,630		439,937	18%	1,367,506	1,430,379	(4%)
Metalware products	170,749		170,356	0%	485,534	488,653	(1%)
Large diameter pipes	122,794		58,170	111%	249,331	325,574	(23%)
Other tubes, pipes, formed shapes	227,087		211,411	7%	632,641	616,152	3%

SEVERSTAL RESOURCES

·      Coking coal concentrate sales volumes from Vorkutaugol increased 11% driven by growth in production volumes following the planned long-wall repositioning at the Vorkutinskaya and Komsomolskaya mines in H1 2017. Internal coking coal concentrate procurement was almost 95% in Q3 while the minor volumes allocated by Vorkutaugol to external sales increased significantly, reflecting the low base effect.

·      Steam coal sales at Vorkutaugol declined 24% q/q reflecting weaker demand from domestic consumers following the end of the heating season.

·      Iron ore pellet sales decreased 17% and totalled 2.38 mln tonnes (Q2 2017: 2.88 mln tonnes) despite the increase in production volumes q/q. This was due to higher share of finished goods in transit and accumulation of stocks at the end of Q3, following Q2 sell-off. The Company expects an uptick in pellet sales volumes in subsequent periods.

·      Iron ore concentrate sales decreased 13% q/q to 1.08 mln tonnes (Q2 2017: 1.24 mln tonnes). Iron ore concentrate sales improvement in Q2 reflected seasonal dynamics and planned production increase at Olcon.

Sales volumes, tonnes	Q3 2017	Q2 2017	Change, %	9M 2017	9M 2016	Change, %
Coal:	1,236,818	1,252,366	(1%)	3,665,362	4,910,820	(25%)
Coking coal concentrate	914,737	827,154	11%	2,452,513	3,346,341	(27%)
Steam coal	322,081	425,212	(24%)	1,212,849	1,564,479	(22%)
Iron ore:	3,451,712	4,116,294	(16%)	10,950,362	11,230,689	(2%)
Iron ore pellets	2,376,621	2,879,930	(17%)	7,835,968	8,049,469	(3%)
Iron ore concentrate	1,075,091	1,236,364	(13%)	3,114,394	3,181,220	(2%)

SEVERSTAL RUSSIAN STEEL ('RSD')

·      RSD steel product sales improved 4% to 2.87 mln tonnes compared with the previous quarter (Q2 2017: 2.76 mln tonnes). During Q3, the Company sold off its stocks of HVA products accumulated in previous periods to respond to increased demand and the ongoing construction season in Russia. Semi-finished product sales were impacted by stock normalisation following maintenance works at converter #1 in Q2.

·      The Company increased domestic sales volumes to 65% (Q2 2017: 60%) to respond to improved domestic demand in Q3.

·      Following the refurbishment of the four-stand cold rolling mill at CherMK and the increase in production volumes, cold-rolled coil sales volumes in 9M 2017 were up 49% in comparison with 9M 2016. In addition, the sale of previously accumulated seasonal cold-rolled coil (CRC) stock drove a 2% sales increase q/q.

·      The share of high value-added (HVA) products within the sales portfolio was a record 49% (Q2 2017: 44%) driven by increased cold-rolled, galvanised and colour-coated sales.

·      Large diameter pipe (LDP) sales volumes surged 111% q/q following a destocking of finished goods produced in H1 2017 at Izhora Pipe Mill. Meanwhile, Izhora Pipe Mill remains at full capacity utilisation and continues to supply LDPs to Gazprom, Rosneft and other customers.

·      Average selling prices for the majority of steel products followed global trends in Q3 - while, since July, on export markets the Company has been achieving a recovery in prices. Domestic prices were catching up with global price trends but with a time lag, and this contributed to a decline in average selling prices.

Sales volumes, tonnes	Q3 2017	Q2 2017	Change, %	9M 2017	9M 2016	Change, %
Total steel products	2,867,465	2,758,891	4%	8,166,707	7,921,526	3%
Semi-finished products	72,769	110,776	(34%)	300,587	463,177	(35%)
Rolled products:	2,273,535	2,207,620	3%	6,497,262	6,024,867	8%
Hot-rolled coil	1,001,840	1,058,282	(5%)	3,044,472	3,024,242	1%
Hot-rolled plate	187,376	184,657	1%	565,524	501,734	13%
Cold-rolled coil	352,617	345,170	2%	1,017,973	682,003	49%
Galvanised and metallic coated coil	210,698	149,503	41%	477,718	437,592	9%
Colour coated coil	133,579	100,206	33%	318,189	306,424	4%
Long products	387,425	369,802	5%	1,073,386	1,072,872	0%
Downstream products:	521,161	440,495	18%	1,368,858	1,433,482	(5%)
Metalware products	170,995	170,443	0%	485,949	490,394	(1%)
Large diameter pipes	122,794	58,170	111%	249,331	326,209	(24%)
Other tubes, pipes, formed shapes	227,372	211,882	7%	633,578	616,879	3%

Sales price, $/tonne		Q3 2017		Q2 2017		Change, %		9M 2017	9M 2016		Change, %
Semi-finished products		403		396		2%		389	273		42%
Hot-rolled coil		467		487		(4%)		479	338		42%
Hot-rolled plate		627		637		(2%)		610	438		39%
Cold-rolled coil		564		592		(5%)		585	447		31%
Galvanised and metallic coated coil		706		737		(4%)		716	558		28%
Colour coated coil		844		879		(4%)		872	756		15%
Long products		439		382		15%		418	327		28%
Metalware products		857		874		(2%)		876	742		18%
Large diameter pipes		1,327		1,553		(15%)		1,412	1,176		20%
Other tubes, pipes, formed shapes		548		587		(7%)		568	432		31%

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) 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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