PAO Severstal (SVST) PAO Severstal: Severstal Q2 2022 and 6m
2022 operational results 21-Jul-2022 / 16:03 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.
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Severstal Q2 2022 and 6m 2022 operational results
Moscow, Russia - 21 July 2022 - PAO Severstal (MOEX: CHMF; LSE:
SVST) consolidated steel sales decreased by 6% yoy in 6m 2022. Iron
ore products consolidated sales were 57% lower yoy due to export
constraints, while coal sales almost disappeared from consolidated
results following Vorkutaugol divestiture. KEY CONSOLIDATED
OPERATIONAL RESULTS
Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy
Production, kt
Hot metal 2,428 2,878 -16% 5,305 5,301 0%
Crude steel 2,403 2,922 -18% 5,325 5,737 -7%
Sales, kt
Steel products, incl: 2,269 2,726 -17% 4,994 5,308 -6%
HVA 1,077 1,272 -15% 2,349 2,530 -7%
Iron ore products 716 281 >100% 997 2,334 -57%
Coal 6 22 -72% 29 628 -95% Q2 2022 Consolidated operational results
-- Production: Hot metal output fell by 16% qoq to 2.43 mln
tonnes. Crude steel production decreased by 18% qoq to 2.4 mln
tonnes, due to repairs rescheduled to Q2 2022 to balance actual
capacities and narrowing demandfor steel.
-- Steel sales declined by 17% qoq to the 2.27 mln tonnes,
affected by difficult access to export marketscoupled with the
declining demand in the domestic market. Sales of HVA amounted to
1.08 mln tonnes (-15% qoq) withthe decline in sales of cold-rolled
and galvanized steel as well as tubes other than LDP.
-- Total share of high value-added (HVA) products was flat at
47%.
-- Raw materials sales: Iron ore sales to third parties
increased to 0.72 mln tonnes, driven by a lower Cherepovets steel
mill demand for raw materials. Coal sales amounted only to 6 k
tonnes as a result of sale ofVorkutaugol in the end of April 2022.
6m 2022 Consolidated operational results
-- Production: Hot metal output was flat yoy at 5.3 mln tonnes.
Crude steel production decreased by 7% yoy to 5.32 mln tonnes, as a
result of converter repairs which was rescheduled to Q2 2022.
-- Steel sales were down by 6% yoy to 5 mln tonnes, due to
limited access to export markets followed by adecrease in the
domestic demand. Semis sales were 12% higher yoy due to strong
sales of pig iron to the USA in Q12022. Commercial steel sales were
lower by 9% yoy to 2 mln tonnes as a result of import ban imposed
by the EuropeanUnion in March 2022. HVA sales reduced to 2.35 mln
tonnes (-7% yoy) mainly due to decline in galvanized steel
andmetalware sales.
-- Total share of high value-added (HVA) products amounted to
47% (-1 ppts yoy).
-- Raw materials sales: Iron ore sales to third parties reduced
by 57% yoy to 1 mln tonnes, due to aredistribution of sales to
Cherepovets steel mill. HEALTH AND SAFETY PERFORMANCE
-- In 6m 2022 LTIFR among employees amounted to 0.83 (+51% yoy).
The overall LTIFR among employees andcontractors was 0.81 (+23%
yoy). The main reason for the growth is the increase in the number
of reported cases ofminor injuries, while the number of cases of
severe injuries remained at the same level, and the number
offatalities decreased.
-- In Q2 2022 no fatalities occurred. In 6m 2022 one fatality
involving a contractor's employee occurred. Weconducted an internal
investigation for the case and took measures to eliminate the
causes of fatality. Theincident was caused by OHS requirements
violation and misuse of a loading and hauling machine. POLLUTANTS
AND GHG EMISSIONS
-- Total emissions of air pollutants decreased by 44% qoq to
72,800 tonnes in Q2 2022.
-- In 6m 2022 total emissions of air pollutants decreased by 20%
yoy to 202,280 tonnes due to a decline inproduction at Cherepovets
steel mill and JSC Vorkutaugol's spin-off from the Company.
-- Gross GHG emissions (Scope 1 and 2) decreased by 7% as a
result of JSC Vorkutaugol's disposal from theCompany on April 29,
2022 and a decrease in production at Cherepovets steel mill.
-- The intensity of greenhouse gas emissions of steel production
increased by 5%, mainly due to non-optimalloading of technological
units as a result of the volume of production decrease. ALEXANDER
SHEVELEV, CEO OF SEVERSTAL MANAGEMENT, COMMENTED:
The first half of 2022 was extremely challenging for Russian
steelmakers and Severstal. Against the background of sanctions
pressure, we were forced to take urgent steps to preserve the
stability of the business. Thus, after the complete shutdown of
exports to the EU countries, we had to redirect sales to other,
less marginal markets, as well as rebuild our supply chain of
inventory to ensure the operation of enterprises. Due to the
ongoing restructuring of the company's processes, we made the
difficult decision not to disclose the financial results for the Q1
and Q2 2022. But we plan to return to this practice in the
future.
The difficult access to exports followed by a decrease in the
domestic demand, a sharp strengthening of the ruble and the decline
in domestic prices altogether put a pressure on the company's
results. Consolidated steel sales were down by 6% yoy to 5 mln
tonnes in H1 2022 with the most difficult Q2 2022 - a drop in steel
sales for April-June amounted to 17%. As a result of difficulties
in sales, we were forced to revise the production program. This led
to the fact that steel production decreased by 7% YoY to 5.32 mln
tonnes and utilization rate decreased to 75%. At the same time,
there was an increase in the cost of production, mainly due to
inflationary pressure from transport costs and tariffs of natural
monopolies.
Despite the difficult situation, we continue to fulfill our
social obligations and in April indexed the salaries of all
employees, as well as paid a one-time remuneration - as a result,
the average salary for the company increased by 15%. We also
continue our environmental protection activities and participation
in the federal Clean Air project.
The company's management and staff continue to make active
efforts to minimize the negative impact of external factors on the
company's business. Severstal has an effective business model and a
high level of underlying strength, as it has been engaged in cost
reduction, product quality improvement and customer experience
improvement for many years. However, in the face of unprecedented
challenges, the impact of which is only increasing in the third
quarter, we are forced to move to more radical cost reduction
programs.
The anti-crisis plan developed by the company's management,
which is designed to ensure the company's stability even in the
event of a negative development of the situation, involves a
comprehensive audit of all the company's business processes and
optimization of the least effective projects and initiatives in the
medium term. By the end of this year, we aim to reduce
administrative costs, personnel costs and outsourcing by a total of
10%. The management will make every effort to preserve the
company's team, key competencies and expertise accumulated over the
years.
In addition, we will focus on improving the efficiency of
procurement and maintenance programs, as well as continue to
examine the investment program and to optimize it, primarily
through initiatives with a long-term payback. We are confident that
the well-coordinated work of the company's management and staff and
the accumulated experience in improving the efficiency of processes
will allow us to remain competitive in this difficult period."
SEGMENT PERFORMANCE Severstal Russian Steel (RSD)
Sales, kt Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy
Steel sales 2,277 2,737 -17% 5,014 5,333 -6%
Semis 180 464 -61% 644 577 12%
Commercial 1,020 1,000 2% 2,020 2,224 -9%
HVA 1,078 1,272 -15% 2,350 2,532 -7% Q2 2022 results
-- Steel sales lost 17% qoq and amounted to 2.28 mln tonnes
mainly due to lower sales of pig iron and slabsbecause of high
exposure of semis to export markets. As a result, semis sales fell
by 61% qoq to 0.18 mln tonnes.Commercial steel sales increased by
2% qoq to 1.02 mln tonnes on the back of Russian market recovery
for long steelproducts. HVA product sales also decreased by 15% to
1.08 mln tonnes mainly due to decline in demand for tubesother than
LDP and cold-rolled steel in Russia and followed by a simultaneous
decrease in export of galvanizedsteel.
-- Total share of high value-added (HVA) products increased to
47% (+1 ppts qoq). 6m 2022 results
-- Steel sales declined by 6% yoy to 5.01 mln tonnes affected by
export constrains. Semis sales were higherby 12% yoy due to strong
sales of pig iron to the US in the Q1 2022. But commercial and HVA
steel sales decreased by 9% yoy and 7% yoy respectively, due to
decline in export sales, which was partially compensated by
reallocationof sales to the domestic market.
-- Total share of high value-added (HVA) products was flat at
47%. Severstal Resources
Sales, kt Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy
Coal 304 1,327 -77% 1,631 2,448 -33%
Coking coal concentrate 298 1,307 -77% 1,605 1,893 -15%
Steam coal 6 20 -68% 26 554 -95%
Iron ore 4,197 4,089 3% 8,286 8,801 -6%
Iron ore pellets 2,378 2,398 -1% 4,776 5,646 -15%
Iron ore concentrate 1,819 1,691 8% 3,510 3,155 11% Q2 2022 results
-- Coal sales dropped by 77% qoq to 0.3 mln tonnes as a result
of completed sale of Vorkutaugol in the endof April 2022. Coal will
be not included in division results in future periods anymore.
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