Severstal reports Q1 2018 operational results

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