Severstal - ao — Earnings Release 2018

Apr 10, 2018

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RNS Number : 3803K

Public Joint Stock Co. Severstal

10 April 2018

Severstal reports Q1 2018 operational results

Moscow, Russia - 10 April 2018 - 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 2018.

Q1 2018 GROUP HIGHLIGHTS 

·        Hot metal output remained almost unchanged at 2.35 mln tonnes (Q4 2017: 2.34 mln tonnes) compared with the previous quarter, and crude steel production marginally increased 1% to 3.03 mln tonnes (Q4 2017: 3.01 mln tonnes).

·      Consolidated steel product sales increased 3% to 2.86 mln tonnes compared with the previous quarter (Q4 2017: 2.78 mln tonnes). Meanwhile, the Company reduced steel product stock levels at its export subsidiaries in Q1 2018. Growth in semi-finished product volumes was driven by a change in the structure of product mix and increased demand for billets.

·      The Company increased export sales volumes to 48% (Q4 2017: 42%) due to increased profitability of export deliveries. The share of high value-added (HVA) products within the sales portfolio remained high at 45% (Q4 2017: 47%), declining only 2 ppts due to a seasonal change in product mix.

·      Coking coal concentrate sales volumes from Vorkutaugol declined 25% affected by the long-wall repositioning at the Vorgashorskaya mine impacting production of "GZHO" grade concentrate. Meanwhile the Company managed to keep production of "2ZH" grade coal stable, fully matching the production needs of CherMK.

·      Iron ore pellet sales decreased 28% and totalled 2.38 mln tonnes (Q4 2017: 3.30 mln tonnes) after the realisation of a significant share of finished goods in transit in Q4, shifted from the previous quarter, and an increased share of goods in transit in Q1 2018, which will be realised in subsequent periods.

·      Iron ore concentrate sales were up 14% q/q to 1.29 mln tonnes (Q4 2017: 1.14 mln tonnes) despite the seasonal slowdown in production at Olkon. Iron ore concentrate sales improvement in Q1 2018 reflects the consolidation of the Yakovlevskiy mine and stock sell-off at Olkon.

·      In Q1 2018 steel and raw material demand remained high. Global steel prices were supported by winter restrictions in China and seasonal increased Chinese demand in March, which contributed towards higher prices of raw materials. Additionally, HCC prices were high due to various supply disruptions in Australia and iron ore prices were high as a result of higher steel margins in China and stronger demand for high quality iron ore. Russian export prices, which are currently exceeding Chinese export prices due to steady demand in most consuming regions, are expected to follow global trends in Q2 2018.

·      In 2018, Severstal Resources anticipates an increase in production volumes of 40kt of pellets at Karelsky Okatysh and 370kt of coking coal concentrate at Vorkutaugol. Yakovlevskiy mine's iron ore output is estimated to be c.1.3 million tonnes for 2018. Severstal Russian Steel production volumes growth will be positively impacted by a new ladle furnace (+75kt of crude steel) and a new HDG (+400kt) and colour-coating (+200kt) unit.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES

Production, tonnes	Q1 2018	Q4 2017	Change, %	Q1 2018	Q1 2017	Change, %
Crude Steel (Russian Steel)	3,033,094	3,012,107	1%	3,033,094	2,863,947	6%
Hot metal (Russian Steel)	2,347,372	2,343,386	0%	2,347,372	2,341,719	0%
Sales volumes, tonnes	Q1 2018	Q4 2017	Change, %	Q1 2018	Q1 2017	Change, %
Coking coal concentrate	628,463	832,559	(25%)	628,463	710,622	(12%)
Iron ore pellets	2,376,920	3,297,251	(28%)	2,376,920	2,579,417	(8%)
Iron ore concentrate	1,291,529	1,136,650	14%	1,291,529	802,939	61%
Total steel products (Consolidated)	2,864,783	2,784,373	3%	2,864,783	2,530,181	13%
Total steel products (Russian Steel)	2,874,862	2,792,509	3%	2,874,862	2,540,351	13%

High value added steel products, %	Q1 2018	Q4 2017	Change, %	Q1 2018	Q1 2017	Change, %
Severstal (Consolidated)	45%	47%	(2 ppts)	45%	44%	1 ppts
Severstal Russian Steel	45%	47%	(2 ppts)	45%	44%	1 ppts

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

Sales volumes, tonnes		Q1 2018	Q4 2017	Change, %	Q1 2018	Q1 2017	Change, %
Coal:	403,842		418,486	(3%)	403,842	473,233	(15%)
Coking coal concentrate	46,126		57,687	(20%)	46,126	7,677	501%
Steam coal	357,716		360,799	(1%)	357,716	465,556	(23%)
Iron ore:	1,441,068		2,239,773	(36%)	1,441,068	1,341,387	7%
Iron ore pellets	1,187,612		2,159,754	(45%)	1,187,612	1,341,387	(11%)
Iron ore concentrate	253,456		80,019	217%	253,456	0	n.a.
Semi-finished products	256,159		217,935	18%	256,159	117,042	119%
Rolled products:	2,166,456		2,073,440	4%	2,166,456	2,006,200	8%
Hot-rolled coil	963,107		905,081	6%	963,107	984,077	(2%)
Hot-rolled plate	198,205		239,361	(17%)	198,205	193,298	3%
Cold-rolled coil	388,586		306,426	27%	388,586	320,186	21%
Galvanised and metallic coated coil	198,400		176,104	13%	198,400	117,517	69%
Colour coated coil	67,294		84,791	(21%)	67,294	84,404	(20%)
Long products	350,864		361,677	(3%)	350,864	306,718	14%
Downstream products:	442,168		492,998	(10%)	442,168	406,939	9%
Metalware products	128,251		129,123	(1%)	128,251	144,429	(11%)
Large diameter pipes	118,910		166,189	(28%)	118,910	68,367	74%
Other tubes, pipes, formed shapes	195,007		197,686	(1%)	195,007	194,143	0%

SEVERSTAL RESOURCES

·      Coking coal concentrate sales volumes from Vorkutaugol declined 25% affected by the long-wall repositioning at the Vorgashorskaya mine impacting production of "GZHO" grade concentrate. Meanwhile the Company managed to achieve stable production of "2ZH" grade coal, fully matching the production needs of CherMK. Internal coking coal concentrate procurement remained unchanged at 93% in Q1 2018 while the minor volumes allocated by Vorkutaugol to external sales remained almost flat q/q.

·      Steam coal sales at Vorkutaugol remained high, declining only 1% q/q reflecting stronger demand from domestic consumers influenced by the ongoing heating season.

·      Iron ore pellet sales decreased 28% and totalled 2.38 mln tonnes (Q4 2017: 3.30 mln tonnes) after the realisation of a significant share of finished goods in transit in Q4, shifted from the previous quarter, and increased share of goods in transit in Q1 2018, which will be realised in subsequent periods.

·      Iron ore concentrate sales were up 14% q/q to 1.29 mln tonnes (Q4 2017: 1.14 mln tonnes) despite the seasonal slowdown in production at Olkon. The improvement of iron ore concentrate sales in Q1 2018 reflects the consolidation of the Yakovlevskiy mine and stock sell-off at Olkon.

Sales volumes, tonnes	Q1 2018	Q4 2017	Change, %	Q1 2018	Q1 2017	Change, %
Coal:	986,249	1,193,359	(17%)	986,249	1,176,178	(16%)
Coking coal concentrate	628,463	832,559	(25%)	628,463	710,622	(12%)
Steam coal	357,786	360,800	(1%)	357,786	465,556	(23%)
Iron ore:	3,668,449	4,433,901	(17%)	3,668,449	3,382,356	8%
Iron ore pellets	2,376,920	3,297,251	(28%)	2,376,920	2,579,417	(8%)
Iron ore concentrate	1,291,529	1,136,650	14%	1,291,529	802,939	61%

SEVERSTAL RUSSIAN STEEL ('RSD')

·      RSD steel product sales increased 3% to 2.87 mln tonnes compared with the previous quarter (Q4 2017: 2.79 mln tonnes). Meanwhile, the Company reduced steel product stock levels at its export subsidiaries in Q1 2018. Semi-finished product volumes growth was driven by the change in structure of product mix and increased demand for billets.

·      The Company increased export sales volumes to 48% (Q4 2017: 42%) due to higher profitability of export deliveries at the beginning of the year. The share of high value-added (HVA) products within the sales portfolio remained high at 45% (Q4 2017: 47%) declining only 2 ppts due to a seasonal change in product mix.

·      Severstal increased its sales of the HDG and cold-rolled coil products to the U.S. market and hot-rolled coil to European destinations due to the attractive pricing environment.

·      Large diameter pipe sales volumes declined 28% q/q, followed by H2 2017 destocking of finished goods produced in the beginning of 2017 at Izhora Pipe Mill. In March 2018, Izhora Pipe Mill won a tender to supply around 165kt of LDPs for Gazprom projects during 2018-2019.

·      Average selling prices for the majority of steel products remained high in Q1 2018 following global trends. Export steel prices were supported by winter steel production restrictions in China. Domestic prices were catching up with global price trends but with a time lag, resulting in more attractive selling prices at export destinations for some products. The decline in semi-finished product average selling prices was a result of a higher share of billets in the product mix.

Sales volumes, tonnes	Q1 2018	Q4 2017	Change, %	Q1 2018	Q1 2017	Change, %
Total steel products	2,874,862	2,792,509	3%	2,874,862	2,540,351	13%
Semi-finished products	256,159	217,935	18%	256,159	117,042	119%
Rolled products:	2,176,290	2,081,329	5%	2,176,290	2,016,107	8%
Hot-rolled coil	963,278	905,157	6%	963,278	984,350	(2%)
Hot-rolled plate	198,240	239,404	(17%)	198,240	193,491	2%
Cold-rolled coil	388,586	306,427	27%	388,586	320,186	21%
Galvanised and metallic coated coil	198,400	176,104	13%	198,400	117,517	69%
Colour coated coil	67,294	84,791	(21%)	67,294	84,404	(20%)
Long products	360,492	369,446	(2%)	360,492	316,159	14%
Downstream products:	442,413	493,245	(10%)	442,413	407,202	9%
Metalware products	128,411	129,283	(1%)	128,411	144,511	(11%)
Large diameter pipes	118,910	166,189	(28%)	118,910	68,367	74%
Other tubes, pipes, formed shapes	195,092	197,773	(1%)	195,092	194,324	0%

Sales price, $/tonne		Q1 2018		Q4 2017		Change, %		Q1 2018	Q1 2017		Change, %
Semi-finished products		428		468		(9%)		428	374		14%
Hot-rolled coil		551		535		3%		551	481		15%
Hot-rolled plate		741		716		3%		741	569		30%
Cold-rolled coil		626		610		3%		626	602		4%
Galvanised and metallic coated coil		734		723		2%		734	708		4%
Colour coated coil		899		891		1%		899	908		(1%)
Long products		496		466		6%		496	435		14%
Metalware products		1,013		961		5%		1,013	899		13%
Large diameter pipes		1,284		1,315		(2%)		1,284	1,443		(11%)
Other tubes, pipes, formed shapes		602		579		4%		602	570		6%
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 / Dan de Belder

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 $7,848 million and EBITDA of $2,577 million in 2017. Severstal's crude steel production in 2017 reached 11.7 million tonnes www.severstal.com

This information is provided by RNS

The company news service from the London Stock Exchange

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