Severstal reports Q4 & FY2018 operational results

Severstal reports Q4 & FY2018 operational results

 

Moscow, Russia - 18 January 2019 - 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 Q4 and FY2018.

Q4 2018 GROUP HIGHLIGHTS

  • Hot metal output decreased 3% q/q in Q4 2018 to 2.23 mln tonnes (Q3 2018: 2.31 mln tonnes),due to BF#2 short-term maintenance works. Crude steel production declined by 4% to 2.94 mln tonnes (Q3 2018: 3.06 mln tonnes) reflecting a decrease in pig iron production and seasonalslowdown of production at Balakovo mini-mill.

 

  • Consolidated steel product sales increased 2% q/q to 2.76 mln tonnes in Q4 2018 (Q3 2018: 2.71mln tonnes), following short-term maintenance works at rolling-mill facilities in the previous quarter. The share of domestic sales declined to 62% as a result of seasonal slowdown indomestic consumption (Q3 2018: 65%).

 

  • The share of high value-added (HVA) products within the sales portfolio decreased four ppts to44% (Q3 2018: 48%), driven by an increase in semi-finished and hot rolled coil sales and declining sales volumes of large diameter pipes, colour coated and hot rolled thick plate.

 

  • Coking coal concentrate sales volumes from Vorkutaugol continued to grow, increasing 9% q/q following 27% increase in Q3. This was largely driven by higher production volumes at theZapolyarnaya and Komsomolskaya mines.

 

  • Iron ore pellet sales increased 15% to 2.94 mln tonnes (Q3 2018: 2.55 mln tonnes) as a result of higher production volumes and stock sell-off in Q4.

 

FY2018 GROUP HIGHLIGHTS

  • Hot metal output remained almost unchanged in 2018 at 9.15 mln tonnes, however crude steel production increased 3% to 12.04 mln tonnes (FY2017: 11.65 mln tonnes). This was driven by an improvement in steel production efficiency following the launch of ladle furnace #2 and higher production volumes from Balakovo mini-mill. Meanwhile, the Company is continuing its efficiency programmes aimed at decreasing raw material consumption ratios in the steel production process.

 

  • Consolidated steel product sales increased 2% y/y to 11.18 mln tonnes in FY2018 (FY2017: 10.92mln tonnes), reflecting crude steel production growth. The high share of HVA products remainedhigh at 46% in FY2018 (FY2017: 46%).

 

  • Average selling prices for the majority of steel products grew substantially, by 5%-12% inFY2018, reflecting global trends as well as Severstal's sales and marketing initiatives.

 

  • The higher iron ore concentrate sales y-o-y for FY2018 partially reflects the consolidation of the Yakovlevskiy mine and an uptick in production volumes at Olcon.

 

  • Coking coal concentrate sales volumes at Vorkutaugol increased by 2% to 3.37 mln tonnes in 2018.

 

  • As announced at Severstal's Capital Markets Day in November 2018, the Company plans to achieve coking coal concentrate production volumes growth of up to approximately 5.6mt per annum at the Vorkutaugol mines and plans to ramp-up Yakovlevskiy mine to approximately 5mt per annum in 2023, which will result in a higher level of vertical integration.

 

 

 

 

 

SUMMARY OF KEY PRODUCTION, SALES VOLUMES

Production, thousands of tonnes

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Crude Steel (Russian Steel)

2,941

3,064

(4%)

12,039

11,651

3%

Hot metal (Russian Steel)

2,233

2,307

(3%)

9,146

9,158

(0%)

 

 

 

 

 

 

 

Sales volumes, thousands of tonnes

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Coking coal concentrate

1,043

953

9%

3,374

3,294

2%

Iron ore pellets

2,943

2,554

15%

10,997

11,133

(1%)

Iron ore concentrate

1,430

1,424

0%

5,510

4,251

30%

Total steel products (Consolidated)

2,756

2,712

2%

11,176

10,919

2%

Total steel products (Russian Steel)

2,767

2,722

2%

11,220

10,959

2%

 

High value added steel products, %

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Severstal (Consolidated)

44%

48%

(4 ppts)

46%

46%

0 ppts

Severstal Russian Steel

44%

48%

(4 ppts)

46%

46%

0 ppts

 

 

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

Sales volumes, thousands of tonnes

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Coal:

544

381

43%

1,671

1,700

(2%)

Coking coal concentrate

169

109

55%

359

127

183%

Steam coal

375

272

38%

1,312

1,573

(17%)

Iron ore:

2,128

1,671

27%

7,405

6,645

11%

Iron ore pellets

1,871

1,465

28%

6,578

6,514

1%

Iron ore concentrate

257

206

25%

827

131

531%

Semi-finished products

157

97

62%

695

519

34%

Rolled products:

2,186

2,148

2%

8,719

8,540

2%

Hot-rolled coil

1,017

946

8%

3,895

3,949

(1%)

Hot-rolled plate

210

218

(4%)

852

804

6%

Cold-rolled coil

296

280

6%

1,286

1,324

(3%)

Galvanised and metallic coated coil

208

211

(1%)

835

654

28%

Colour coated coil

97

122

(20%)

391

403

(3%)

Long products

358

371

(4%)

1,460

1,406

4%

Downstream products:

413

467

(12%)

1,762

1,861

(5%)

Metalware products

136

150

(9%)

560

615

(9%)

Large diameter pipes

107

128

(16%)

440

416

6%

Other tubes, pipes, formed shapes

170

189

(10%)

762

830

(8%)

               

 

 

SEVERSTAL RESOURCES

  • Coking coal concentrate sales volumes from Vorkutaugol continued to grow by 9% q/q following a27% increase in Q3. This was largely driven by higher production volumes at the Zapolyarnayaand Komsomolskaya mines.  Internal coking coal concentrate procurement declined to 83% in Q42018 as the Company increased sales to third parties due to a favourable pricing environment in the local market.

 

  • Steam coal sales at Vorkutaugol increased by 37% q/q, reflecting seasonally stronger domestic demand driven by the beginning of the heating season.

 

  • Iron ore pellet sales increased by 15% to 2.94 mln tonnes (Q3 2018: 2.55 mln tonnes) driven byhigher production volumes and stock sell-off in Q4.

 

  • Iron ore concentrate sales remained almost flat in Q4 at 1.43 mln tonnes (Q3 2018: 1.42 mln tonnes). The higher iron ore concentrate sales y/y for FY2018 partially reflects the consolidation of the Yakovlevskiy mine and growth in production volumes at Olcon.

Sales volumes, thousands of tonnes

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Coal:

1,417

1,226

16%

4,686

4,868

(4%)

Coking coal concentrate

1,043

953

9%

3,374

3,294

2%

Steam coal

374

273

37%

1,312

1,574

(17%)

Iron ore:

4,373

3,978

10%

16,507

15,384

7%

Iron ore pellets

2,943

2,554

15%

10,997

11,133

(1%)

Iron ore concentrate

1,430

1,424

0%

5,510

4,251

30%

 

 

SEVERSTAL RUSSIAN STEEL ('RSD')

  • RSD steel product sales increased by 2% to 2.77 mln tonnes in Q4 2018 compared with the previous quarter (Q3 2018: 2.72 mln tonnes), following short-term maintenance works at rolling-mill facilities in the previous quarter. The share of domestic sales declined to 62% due to aseasonal slowdown in domestic consumption (Q3 2018: 65%).
  • The share of high value-added (HVA) products within the sales portfolio decreased by four ppts to 44% (Q3 2018: 48%), driven by an increase in semi-finished (slab) and hot rolled coil sales anddeclining volumes of large diameter pipes, colour coated and hot rolled thick plate.
  • In Q4 2018, the Company increased sales of hot rolled coil to European customers and decreased sales of the product to the Middle East market.
  • Severstal increased stocks of colour-coated products, which reflects lower sales volumes for the period.
  • LDP sales volumes declined 16% q/q due to specifics of the product range and after a sell-off of finished goods at the Izhora Pipe Mill in Q3 where the utilisation rate continued to remain high in Q4 2018. In March 2018, the Izhora Pipe Mill was awarded a tender to supply approximately 165,000 tonnes of LDPs for Gazprom projects during 2018-2019.
  • Average selling prices for the majority of steel products declined in Q4 2018 in line with globalbenchmarks, however selling prices for HVA products were less affected by this downward trenddue to the nature of the contracts and Severstal's sales and marketing initiatives. The decline in LDP average selling price in FY2018 was offset by higher sales volumes of thick plate.

Sales volumes, thousands of tonnes

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Total steel products

2,767

2,722

2%

11,220

10,959

2%

Semi-finished products

157

97

62%

695

519

34%

Rolled products:

2,195

2,157

2%

8,760

8,579

2%

Hot-rolled coil

1,017

947

7%

3,896

3,950

(1%)

Hot-rolled plate

210

218

(4%)

852

805

6%

Cold-rolled coil

296

280

6%

1,286

1,324

(3%)

Galvanised and metallic coated coil

208

211

(1%)

835

654

28%

Colour coated coil

97

122

(20%)

391

403

(3%)

Long products

367

379

(3%)

1,500

1,443

4%

Downstream products:

415

468

(11%)

1,765

1,862

(5%)

Metalware products

137

151

(9%)

562

615

(9%)

Large diameter pipes

107

128

(16%)

440

416

6%

Other tubes, pipes, formed shapes

171

189

(10%)

763

831

(8%)

 

Sales price, $/tonne

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Semi-finished products

444

493

(10%)

463

422

10%

Hot-rolled coil

526

545

(3%)

553

492

12%

Hot-rolled plate

683

679

1%

708

642

10%

Cold-rolled coil

610

616

(1%)

623

591

5%

Galvanised and metallic coated coil

730

763

(4%)

753

718

5%

Colour coated coil

899

963

(7%)

932

876

6%

Long products

452

482

(6%)

483

431

12%

Metalware products

958

925

4%

967

893

8%

Large diameter pipes

982

1,006

(2%)

1,083

1,373

(21%)

Other tubes, pipes, formed shapes

561

601

(7%)

599

571

5%

 

 

Q4, H2 & FY 2018 ESG (ENVIRONMENTAL, SOCIAL, GOVERNANCE) HIGHLIGHTS

 

  • Health and safety of our employees and contractors is crucial for all our operations. Severstal targets zero fatalities in its operations.
  • In Q4 2018, LTIFR* decreased 5% q/q to 0.78 (Q3 2018: 0.82).
  • In FY 2018 LTIFR was 0.95, decreasing 1% y/y (FY 2017: 0.96). In H2 2018, there were no fatalities of Severstal staff or its contractors.
  • Personnel involvement in safety issues has increased in 2018 and was confirmed by the results of the Accident Prevention System audits. On a five-point scale Severstal Russian Steel outperformed the target, achieving 3.3 points, Vorkutaugol reached the base target of 2.6 points.

 

Health and Safety

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

LTIFR*

0.78

0.82

(5%)

0.95

0.96

(1%)

 

 

  • At Severstal Russian Steel atmospheric emissions of pollutants decreased in 2018 by 3% to 301,710 tonnes (2017: 312,039 tonnes). Atmospheric emission of pollutants per tonne of steelproducts went down by 6% to 25.1 kg per tonne of steel in 2018 (2017: 26.8 kg per tonne) due to the reconstruction of coke battery #4 starting Q2 2017 and decommissioning of the gas filtering systems in complex steel processing facilities №№ 1-3.

 

  • At Severstal Resources atmospheric emissions of pollutants increased in 2018 by 7% y/y and totaled 218,694 tonnes (2017: 204,986 tonnes). The growth mostly reflects increased iron ore pellets production and increased emissions of ventilation and drained methane at Vorkutaugol, explained by decommissioning from the drainage system of previously worked out coalfields, and the increased coal production volumes.

Environment**

Q4 2018

Q3 2018

Change, %

2018

2017

Change, %

Atmospheric emission of pollutants, thousand tonnes (Russian Steel)

74.2

75.6

(2%)

301.7

312.0

(3%)

Atmospheric emission of pollutants, thousand tonnes (Severstal Resources)

54.0

57.0

(5%)

218.7

205.0

7%

Specific atmospheric emission of pollutants, kg per tonne of steel***

25.2

24.7

2%

25.1

26.8

(6%)

 

 

 

Notes to this section:

 

* LTIFR refers to Lost Time Injury Frequency Rate of Severstal staff, the number of lost time injuries occurring in a workplace per 1 million hours worked.

** Emissions data is calculated in accordance with Russian regulation and is reported to the relevant Russian authorities on an annual basis and reviewed by them.

*** Steel production at Cherepovets Steel Mill and Severstal Long Product Mill Balakovo.

Notes:

 

 

 

 

 

 

 

1) All production data is reported in thousands of 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 2018 reached 12.0 million tonnes www.severstal.com