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PAO Severstal (SVST)
Severstal reports Q2 & H1 2018 operational results
19-Jul-2018 / 09:00 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Severstal reports Q2 & H1 2018 operational results
Moscow, Russia - 19 July 2018 - 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 Q2 & H1 2018.
Q2 2018 GROUP HIGHLIGHTS
· Hot metal output declined 4% in Q2 2018 to 2.26 mln tonnes (Q1 2018:
2.35 mln tonnes) compared with the previous quarter impacted by short-term
maintenance works at BF#4 and BF#5, whereas crude steel production
declined only 1% to 3.00 mln tonnes (Q1 2018: 3.03 mln tonnes) as a result
of lower consumption of pig iron in BOFs. Meanwhile, the Company continues
its efficiency programmes aimed at decreasing raw material consumption
ratios in the steel production process.
· Consolidated steel product sales were broadly stable at 2.84 mln tonnes
in Q2 2018 compared with the previous quarter (Q1 2018: 2.86 mln tonnes).
Domestic sales increased to 64% (Q1 2018: 52%) reflecting a more
attractive pricing environment driven by the commencement of the
construction season in Russia.
· The share of high value-added (HVA) products within the sales portfolio
increased 1 p.p. to 46% (Q1 2018: 45%) as the company increased its sales
volumes of galivanised, colour coated and thick plate products. This was
partially mitigated by lower large diameter pipe ("LDP") and cold-rolled
product sales.
· Coking coal concentrate sales volumes from Vorkutaugol grew 19% largely
driven by higher production volumes of "2ZH", "GZHO" and "Concentrate K"
grades. Meanwhile, Vorkutaugol sold-off stocks of "1ZH" grade which also
contributed to Q2 2018 sales volumes growth.
· Iron ore pellet sales surged 31% and totalled 3.12 mln tonnes (Q1 2018:
2.38 mln tonnes) after the realisation of finished goods in transit in Q2,
carried over from the previous quarter.
· Iron ore concentrate sales increased to 1.36 mln tonnes (Q1 2018: 1.29
mln tonnes) driven by seasonal production growth at Olcon.
H1 2018 GROUP HIGHLIGHTS
· Hot metal output increased 1% in H1 2018 to 4.61 mln tonnes (H1 2017:
4.58 mln tonnes) compared with the previous period as a result of fewer
maintenance works in H1 2018 and declining idle time at BF's. Crude steel
production increased 6% to 6.03 mln tonnes (H1 2017: 5.70 mln tonnes)
following steel production efficiency improvement after the launch of the
ladle furnace #2 in July 2017 and higher production volumes of Balakovo
mini-mill.
· Consolidated steel product sales improved to 5.71 mln tonnes in H1 2018
(H1 2017: 5.28 mln tonnes). Severstal increased sales volumes of HVA
products, which was partially offset by the growth in semi-finished
product sales. This resulted in 2 ppts improvement of the HVA product mix
to 46% (H1 2017: 44%).
· Average selling prices for the majority of steel products substantially
grew c.4%-22% in H1 following global trends and sales and marketing
initiatives run by Severstal.
· The improvement of H1 2018 iron ore concentrate sales y/y partially
reflects the consolidation of the Yakovlevskiy mine.
SUMMARY OF KEY PRODUCTION, SALES VOLUMES
Production, Q2 2018 Q1 2018 Change, % H1 2018 H1 2017 Change, %
thousands of
tonnes
Crude Steel 3,001 3,033 (1%) 6,034 5,695 6%
(Russian
Steel)
Hot metal 2,259 2,347 (4%) 4,606 4,582 1%
(Russian
Steel)
Sales Q2 2018 Q1 2018 Change, % H1 2018 H1 2017 Change, %
volumes,
thousands of
tonnes
Coking coal 750 628 19% 1,378 1,538 (10%)
concentrate
Iron ore 3,123 2,377 31% 5,500 5,459 1%
pellets
Iron ore 1,364 1,292 6% 2,656 2,039 30%
concentrate
Total steel 2,844 2,864 (1%) 5,708 5,281 8%
products
(Consolidate
d)
Total steel 2,857 2,874 (1%) 5,731 5,300 8%
products
(Russian
Steel)
High value Q2 2018 Q1 2018 Change, % H1 2018 H1 2017 Change, %
added steel
products, %
Severstal 46% 45% 1 ppts 46% 44% 2 ppts
(Consolidate
d)
Severstal 46% 45% 1 ppts 45% 44% 1 ppts
Russian
Steel
SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)
Sales volumes, thousands Q2 2018 Q1 Change, H1 H1 Change,
of tonnes 2018 % 2018 201 %
7
Coal: 342 404 (15%) 746 910 (18%)
Coking coal 35 46 (24%) 81 19 n/a
concentrate
Steam coal 307 358 (14%) 665 891 (25%)
Iron ore: 2,165 1,44 50% 3,60 3,0 19%
1 6 42
Iron ore pellets 2,054 1,18 73% 3,24 3,0 8%
8 2 11
Iron ore 111 253 (56%) 364 31 n/a
concentrate
Semi-finished 185 256 (28%) 441 228 93%
products
Rolled products: 2,219 2,16 2% 4,38 4,2 4%
6 5 05
Hot-rolled coil 969 963 1% 1,93 2,0 (5%)
2 42
Hot-rolled plate 226 198 14% 424 378 12%
Cold-rolled coil 321 389 (17%) 710 665 7%
Galvanised and 218 198 10% 416 267 56%
metallic coated
coil
Colour coated 105 67 57% 172 185 (7%)
coil
Long products 380 351 8% 731 668 9%
Downstream 440 442 (0%) 882 848 4%
products:
Metalware 146 128 14% 274 315 (13%)
products
Large diameter 86 119 (28%) 205 127 61%
pipes
Other tubes, 208 195 7% 403 406 (1%)
pipes, formed
shapes
SEVERSTAL RESOURCES
· Coking coal concentrate sales volumes from Vorkutaugol grew 19% largely
driven by higher production volumes of "2ZH", "GZHO" and "Concentrate K"
grades. Meanwhile, Vorkutaugol sold-off stocks of "1ZH" grade which also
contributed to Q2 2018 sales volumes growth. Internal coking coal
concentrate procurement increased to 95% in Q2 2018 while the minor
volumes allocated by Vorkutaugol to external sales marginally declined
q/q.
· Steam coal sales at Vorkutaugol declined 14% q/q reflecting weaker
demand from domestic consumers due to the end of the heating season.
· Iron ore pellet sales surged 31% and totalled 3.12 mln tonnes (Q1 2018:
2.38 mln tonnes) after the realisation of a share of finished goods in
transit in Q2, carried over from the previous quarter.
· Iron ore concentrate sales increased to 1.36 mln tonnes (Q1 2018: 1.29
mln tonnes) driven by seasonal production growth at Olcon.
Sales Q2 2018 Q1 2018 Change, % H1 2018 H1 2017 Change, %
volumes,
thousands of
tonnes
Coal: 1,057 986 7% 2,043 2,429 (16%)
Coking coal 750 628 19% 1,378 1,538 (10%)
concentrate
Steam coal 307 358 (14%) 665 891 (25%)
Iron ore: 4,487 3,669 22% 8,156 7,498 9%
Iron ore 3,123 2,377 31% 5,500 5,459 1%
pellets
Iron ore 1,364 1,292 6% 2,656 2,039 30%
concentrate
SEVERSTAL RUSSIAN STEEL ('RSD')
· RSD steel product sales declined to 2.86 mln tonnes compared with the
previous quarter (Q1 2018: 2.87 mln tonnes). Domestic sales increased to
64% (Q1 2018: 52%) reflecting a more attractive pricing environment driven
by the commencement of the construction season in Russia.
· The share of high value-added (HVA) products within the sales portfolio
remained high at 46% (Q1 2018: 45%) benefitting from higher sales volumes
of thick plate, colour coated and galivanised products, partially offset
by lower LDP and cold rolled steel sales.
· Semi-finished product volumes decreased, reflecting declining volumes of
billets, which were redirected to the production of long steel products.
· Severstal increased its sales of the HDG and colour-coated products
responding to seasonally strong demand in Russia. This resulted in lower
cold-rolled coil sales volumes.
· LDP sales volumes declined 28% q/q due to the accumulation of finished
goods to be dispatched in Q3 2018 from the Izhora Pipe Mill. In March
2018, the Izhora Pipe Mill won a tender to supply approximately 165kt of
LDPs for Gazprom projects during 2018-2019.
· Average selling prices for the majority of steel products remained high
in Q2 2018 in line with global trends. The increase in semi-finished
product average selling prices was a result of a higher share of slabs in
the product mix and the decline in LDP average selling price was
compensated by higher sales volumes of thick plate.
Sales volumes, Q2 2018 Q1 Change, % H1 2018 H1 Change,
thousands of 2018 2017 %
tonnes
Total steel 2,857 2,874 (1%) 5,731 5,300 8%
products
Semi-finished 185 256 (28%) 441 228 93%
products
Rolled 2,232 2,176 3% 4,408 4,224 4%
products:
Hot-rolled coil 969 963 1% 1,932 2,043 (5%)
Hot-rolled 226 198 14% 424 378 12%
plate
Cold-rolled 321 389 (17%) 710 665 7%
coil
Galvanised and 218 198 10% 416 267 56%
metallic coated
coil
Colour coated 105 67 57% 172 185 (7%)
coil
Long products 393 361 9% 754 686 10%
Downstream 440 442 (0%) 882 848 4%
products:
Metalware 146 128 14% 274 315 (13%)
products
Large diameter 86 119 (28%) 205 127 61%
pipes
Other tubes, 208 195 7% 403 406 (1%)
pipes, formed
shapes
Sales price, Q2 2018 Q1 Change, % H1 2018 H1 Change,
$/tonne 2018 2017 %
Semi-finished 511 428 19% 462 385 20%
products
Hot-rolled coil 590 551 7% 571 485 18%
Hot-rolled 729 741 (2%) 734 602 22%
plate
Cold-rolled 639 626 2% 632 596 6%
coil
Galvanised and 782 734 7% 759 724 5%
metallic coated
coil
Colour coated 948 899 5% 929 892 4%
coil
Long products 503 496 1% 499 407 23%
Metalware 979 1,013 (3%) 995 885 12%
products
Large diameter 1,047 1,284 (18%) 1,185 1,494 (21%)
pipes
Other tubes, 629 602 4% 616 579 6%
pipes, formed
shapes
Q2 & H1 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 Q2 2018, LTIFR*
decreased 47% q/q to 0.78 (Q1 2018: 1.47). However, in the whole H1 2018
unfortunately we had two fatalities of our staff and one contractor. We
are investigating each of these cases to prevent occurrence in the future.
· We continue applying innovative occupational health and safety
initiatives. In H1 2018, Vorkutaugol started assembling a multi-functional
safety system called Strata, thus becoming one of the first companies in
Russia to have mines completely equipped with this new innovative system
for online monitoring of key underground processes.
Health Q2 2018 Q1 2018 Change, % H1 2018 H1 Change
and 2017 , %
Safety
LTIFR* 0.78 1.47 (47%) 1.12 0.82 37%
· At Severstal Russian Steel atmospheric emissions of pollutants remained
almost unchanged in H1 2018 at 154,100 tonnes compared with the previous
period (H1 2017: 154,800 tonnes). Atmospheric emission of pollutants per
tonne of steel products went down by 6% to 25.5 kg per tonne of steel in
H1 2018 (H1 2017: 27.1 kg per tonne) due to the reconstruction of coke
battery #4 starting May 2017 and the launch of central gas cleaning system
for ladle furnace #2. Renovation of the blast furnace slag treatment plant
continued in H1 2018 to decrease atmospheric emissions of pollutants and
is expected to be completed by the end of 2018.
· At Severstal Resources atmospheric emissions of pollutants slightly
decreased in H1 2018 compared with the previous period and totaled 107,700
tonnes (H1 2017: 108,200 tonnes).
Environment** Q2 2018 Q1 2018 Change, H1 2018 H1 2017 Change,
% %
Atmospheric 71.8 82.3 (13%) 154.1 154.8 (0%)
emission of
pollutants,
thousand
tonnes
(Russian
Steel)
Atmospheric 57.1 50.1 14% 107.7 108.2 (0%)
emission of
pollutants,
thousand
tonnes
(Severstal
Resources)
Specific 23.9 27.1 (12%) 25.5 27.1 (6%)
atmospheric
emission of
pollutants,
kg per tonne
of steel***
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
***
P?? 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 [1]
ISIN: US8181503025
Category Code: TST
TIDM: SVST
LEI Code: 213800OKDPTV6K4ONO53
Sequence No.: 5762
EQS News ID: 706121
End of Announcement EQS News Service
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July 19, 2018 02:01 ET (06:01 GMT)
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