REG - Evraz Plc - EVRAZ Q2 2012 Operational Results

Mon Jul 16, 2012 8:43am EDT

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RNS Number : 7519H
Evraz Plc
16 July 2012
 



EVRAZ Q2 2012 OPERATIONAL RESULTS

16 July 2012 - EVRAZ plc (LSE: EVR) today released its operational results for the second quarter of 2012.

 

HIGHLIGHTS Q2 2012 vs. Q1 2012:

 

·    Consolidated crude steel production decreased by 6%, mainly due to scheduled capital repairs, maintenance work and modernisation at Russian steel mills

·    The share of finished products in the consolidated steel product mix remained unchanged at 80%

·    Coking coal production decreased by 7% due to a longwall repositioning at Yuzhkuzbassugol's Uskovskaya (former Ulyanovskaya) mine

·    Prices for most steel product groups were marginally flat or a little higher (except in South Africa)

 

 

STEEL

 

In Q2 2012, EVRAZ's overall production of crude steel decreased by 6% against Q1 2012 and by 4% vs. Q2 2011, mainly due to lower steel production levels at EVRAZ's Russian steel mills as described below. The steel product volumes also declined, by 6% and 8% respectively, partly driven by the scheduled modernisation of production facilities (i.e. in Russia) and partly driven by weaker demand in some markets, i.e. in Europe and South Africa. The share of finished products in the total steel products output remained unchanged - 80% in Q1 and Q2 2012 and 79% in Q2 2011.

 

Russia

Crude steel production volumes decreased by 11% in Q2 2012 compared to the previous quarter and by 7% compared to Q2 2011 due to the following:

·    capital repairs at EVRAZ's Russian steel mills' blast furnaces: BF 5 at EVRAZ NTMK in April and BF 3 at EVRAZ ZSMK in June 2012,

·    a temporary shutdown of one of the two electric arc furnaces (and a related shutdown for the upgrade of one of the two continuous casters at EVRAZ ZSMK) as part of the rail mill modernization project,

·    the scheduled maintenance of three converters (6-7 days each) at EVRAZ ZSMK in Q2 2012.

 

The remaining steelmaking facilities operated at their full capacity. However, as a result of the decreased steel production described above overall Russian output of steel products decreased - by 9% compared to Q1 2012 and by 5% compared to Q2 2011.

 

As the EVRAZ ZSMK's rail mill has been closed for modernisation for five months since 20 April 2012, as previously announced by the Company, production of railway products, mainly rails, was down by 18% vs. Q1 2012 and by 13% vs. Q2 2011.

 

Russian steel production will return to normalised levels in H2 2012 as no major repairs of production facilities are planned.

 

 

Ukraine

 

In Q2 2012, crude steel production increased by 29% compared to Q1 2012 and by 23% compared to Q1 2011 due to the improving efficiency of the blast furnaces operation at EVRAZ DMZ Petrovskogo as well as the completion of planned maintenance at one of the two blast furnaces in Q1 2012. This led to a 27% increase of production volumes of steel products vs. both Q1 2012 and Q1 2011, mainly exported semi-finished products while the volumes of finished goods sold were generally down due to softer demand in Ukraine and Europe.

 

In Q3 2012 steel production will be impacted by major maintenance work at oxygen generation unit scheduled to start in September. The maintenance will take 45 days, and crude steel production is expected to decrease by 12% compared to Q2 2012.

 

North America

 

In Q2 2012, EVRAZ's North American steel mills have continued to operate at high utilisation levels.

 

As a result of a number of operational improvements at EVRAZ Pueblo in Q1 2012 (a four-day shutdown of the rail mill for clearing the finishing docks, developing a Lean process flow and ultimately increasing the finishing capacity), the rail production increased by 12% quarter-on-quarter.

 

Production of tubular goods increased by 7% relative to the Q1 2012 volumes and remained at nearly the same level as a year earlier supported by continuing demand for OCTG pipes and an improving demand for large diameter pipes in the North American market.

 

No major repairs of production facilities are scheduled in Q3 2012.

 

Europe

 

The production of crude steel at EVRAZ Vitkovice Steel (EVS) in Q2 2012 increased by 12% compared to the previous quarter in line with increased hot metal quarterly deliveries by ArcelorMittal Ostrava under a "take or pay" contract. Construction products output dropped down to zero in Q2 2012 following the shutdown in February of a loss-making heavy section mill. Production of flat-rolled products went down by 10% vs. Q1 2012 and by 20% vs. Q2 2011 in response to worsening plate demand in European markets.

 

The production of the steel shop at EVS will be suspended from mid-July for 30 days due to scheduled repairs at the transportation route. The operation shutdown will be used for yearly maintenance at the plant.

 

South Africa

 

Production of crude steel and steel products in Q2 2012 vs. Q1 2012 decreased by 13% and 16% respectively due to weak South African market and unstable operations at iron and steel plants. In response to losses incurred in the first half of the year, management took actions to reduce fixed costs and stabilise production to start generating a positive margin under current market conditions. These improvements assume curtailment of steel production to 45,000 tonnes per month starting June and exit from the low-margin export business in order to focus on higher margin domestic customers, optimising operating labour schedules and SG&A costs.

 

 

MINING

 

Iron Ore

 

Overall production of saleable iron ore products by the Company was flat compared with Q1 2012 and Q2 2011.

 

Coking Coal

 

In Q2 2012, raw coking coal production at Yuzhkuzbassugol decreased by 7% compared to Q1 2012 due to a longwall repositioning at the Uskovskaya (former Ulyanovskaya) mine in May 2012. It increased by 10% compared to the same period last year when the production had been negatively impacted by shutdowns of the mines to resolve operational issues associated with safety risks. 

 

Production of coking coal concentrate decreased by 7% quarter-on-quarter due to

 

·    reduced internal supplies of raw coal from the Yesaulskaya mine that had a longwall repositioning at the end of March to the beginning of April (the Q1 2012 concentrate production was not affected due to use of raw coal from stock), and

·    the Company's decision to stop concentrate production from (external) raw coal supplied by the Polosukhinskaya mine.

 

All the Yuzhkuzbassugol's mines are to be operational in Q3 2012 with no longwall repositionings planned during this period

 

Steam Coal

 

Both Yuzhkuzbassugol's steam coal mines, Gramoteinskaya and Kusheyakovskaya, that underwent longwall repositionings in Q1 2012, resumed operation in Q2 , which was also reflected in growth of steam coal concentrate production. There are no longwall repositionings scheduled for Q3 2012.

 

 

VANADIUM

 

In Q2 2012, EVRAZ's total production of primary vanadium (vanadium slag) decreased by 11% compared to Q1 2012, due to lower iron production both in Russia and South Africa (as mentioned above). The 18% decrease in production of ferrovanadium compared to Q1 2012 and by 10% compared to Q2 2011 was driven by weaker market demand. Nitrovan® production rose by 85% compared to Q1 2012 after completion of the planned maintenance at Vametco, South Africa, in Q1 2012.

 

* * *

 

Please note that the total volume of steel products in the table below excludes those re-rolled at other EVRAZ's mills. These volumes are eliminated as intercompany sales for purposes of EVRAZ's consolidated operating results.

 

 

PRODUCTION VOLUMES

 

Product, '000 tonnes unless

otherwise stated

 

Q2 2012

 

Q2 2011

 

Q2 2012/ Q2 2011, change

Q1 2012

 

Q2 2012/ Q1 2012, change

Steel products






Coke (saleable)

417

449

(7.0)%

306

36.5%

Pig iron

2,889

2,929

(1.4)%

3,050

(5.3)%

Pig iron (saleable)

27

56

(51.6)%

22

22.3%

Crude steel

4,039

4,225

(4.4)%

4,327

(6.6)%

Steel products, net of re-rolled volumes

3,491

3,780

(7.7)%

3,727

(6.3)%

Semi-finished products

667

780

(14.5)%

733

(9.0)%

Construction products

1,249

1,299

(3.9)%

1,319

(5.3)%

Railway products

497

550

(9.6)%

561

(11.5)%

Flat-rolled products

661

730

(9.5)%

705

(6.2)%

Tubular products

219

216

1.5%

206

6.6%

Other steel products

183

204

(10.4)%

202

(9.4)%

Russia






Coke (saleable)

139

144

(3.7)%

113

23.0%

Pig iron

2,487

2,539

(2.1)%

2,671

(6.9)%

Pig iron (saleable)

22

15

48.1%

20

10.0%

Crude steel

2,819

3,026

(6.9)%

3,171

(11.1)%

Steel products, net of re-rolled volumes

2,574

2,720

(5.4)%

2,817

(8.6)%

Semi-finished products

949

1,027

(7.6)%

1,050

(9.6)%

Construction products

1,037

1,034

0.3%

1,069

(3.0)%

Railway products

366

421

(12.9)%

445

(17.6)%

Flat-rolled products

84

81

4.1%

104

(18.9)%

Other steel products

138

158

(12.9)%

150

(8.3)%

Ukraine






Coke (saleable)

278

304

(8.6)%

193

44.4%

Pig iron

239

232

2.8%

183

30.3%

Pig iron (saleable)

5

41

(88.2)%

2

153.8%

Crude steel

251

203

23.4%

194

29.0%

Steel products

215

169

27.2%

169

26.8%

Semi-finished products

98

28

244.8%

40

146.5%

Construction products

92

115

(20.6)%

95

(3.4)%

Other steel products

25

25

0.3%

35

(27.5)%

Europe






Crude steel

197

220

(10.7)%

176

11.6%

Steel products

267

343

(22.3)%

294

(9.2)%

Construction products

n/a

35

0

17

n/a

Flat-rolled products

243

303

(19.6)%

269

(9.6)%

Other steel products

23

6

310.2%

8

207.9%

North America






Crude steel

620

602

3.0%

610

1.7%

Steel products, net of re-rolled volumes

697

674

3.3%

666

4.6%

Construction products

80

68

17.1%

83

(3.7)%

Railway products

131

129

1.4%

117

12.1%

Flat-rolled products

267

261

2.1%

261

2.2%

Tubular products

219

216

1.5%

206

6.6%

South Africa






Pig iron

163

158

3.2%

196

(16.8)%

Crude steel

153

173

(11.8)%

176

(13.0)%

Steel products

124

159

(21.9)%

148

(16.2)%

Semi-finished products

3

11

(75.4)%

12

(76.8)%

Construction products

41

47

(12.9)%

56

(27.2)%

Flat-rolled products

66

85

(22.3)%

70

(5.8)%

Other steel products

14

16

(7.7)%

10

48.5%

Mining products






Iron ore






Lumpy ore (Ukraine)

735

743

(1.1)%

734

0.1%

Concentrate, saleable (Russia)

1,427

1,675

(14.8)%

1,288

10.8%

Sinter (Russia)

1,130

1,108

2.0%

1,209

(6.6)%

Pellets (Russia)

1,528

1,421

7.5%

1,555

(1.7)%

Fines ore (South Africa)

132

151

(12.7)%

157

(16.0)%

Lumpy ore (South Africa)

307

298

2.9%

261

17.4%

Coal






Raw coking coal (mined)

1,935

1,756

10.2%

2,078

(6.9)%

Raw steam coal (mined)

700

768

(8.8)%

47

1,385.3%

Coking coal concentrate (production)

1,575

1,778

(11.4)%

1,700

(7.4)%

Steam coal concentrate (production)

190

150

26.8%

20

832.9%

Vanadium products (tonnes of V) 1






Vanadium in slag (gross production)

5,343

5,222

2.3%

6,026

(11.3)%

Russia

3,683

2,957

24.6%

3,879

(5.1)%

South Africa

1,660

2,265

(26.7)%

2,147

(22.7)%

Vanadium in final products (saleable)






Ferrovanadium

3,760

4,183

(10.1)%

4,571

(17.7)%

Produced at own facilities

1,899

1,605

18.3%

2,082

(8.8)%

Processed at 3rd parties' facilities

1,862

2,577

(27.8)%

2,489

(25.2)%

Nitrovan®

763

727

4.9%

412

85.3%

Oxides, vanadium aluminium and chemicals

329

359

(8.3)%

372

(11.5)%







Equity investments






Raspadskaya 2






Coking coal (mined)

1,843

1,682

9.6%

1,591

15.8%

 

*Numbers may not add to totals due to rounding. Percent changes based on numbers prior to rounding.

 

1 Calculated in pure vanadium equivalent.

2 EVRAZ holds a 41% effective interest in the Raspadskaya coal company.

 

 

 



AVERAGE SELLING PRICES

 

USD/tonne (ex works) unless otherwise stated

Q2 2012

Q1 2012

Q2 2011

Steel products




Russia




Coke

201

193

254

Pig iron

465

450

467

Steel products




Semi-finished products

510

480

565

Construction products

683

675

740

Railway products

909

852

926

Flat-rolled products

628

644

745

Other steel products

728

761

824

Ukraine




Coke

222

225

320

Pig iron

465

478

487

Steel products




Semi-finished products

547

534

600

Construction products

660

654

695

Other steel products

924

877

1,083

Europe




Steel products




Construction products

n/a

865

936

Flat-rolled products

775

791

993

North America




Steel products




Construction products

904

903

921

Railway products

1,028

1,065

1,007

Flat-rolled products

1,081

1,060

1,212

Tubular products

1,550

1,529

1,454

South Africa




Steel products




Semi-finished products

658

485

574

Construction products

665

858

896

Flat-rolled products

732

853

899

Other steel products

715

869

957

Mining products




Iron ore




Lumpy ore (Ukraine)

67

66

81

Concentrate, saleable (Russia)

94

91

123

Sinter (Russia)

98

105

141

Pellets (Russia)

94

104

144

Fines ore (South Africa)

16

11

26

Coal




Raw coking coal

79

85

99

Raw steam coal

30

29

36

Coking coal concentrate

135

159

226

Steam coal concentrate

55

70

80





Vanadium products (USD/t of V)




Vanadium in final products




Ferrovanadium

25,564

23,109

28,562

Nitrovan®

29,697

26,521

30,814

Oxides, vanadium aluminium and chemicals

33,277

31,241

37,805

 

Notes:

Semi-finished products include slabs, billets, pipe blanks and other semi-finished products.

Construction products include beams, channels, angles, rebars, wire rods, wire, and other construction products.

Railway products include rails, wheels, tyres and other railway products.

Flat-rolled products include commodity plate, specialty plate and other flat products.

Tubular products include large diameter line pipes, ERW pipes and casings, seamless pipes and other tubular products.

Other steel products include rounds, grinding balls, mine uprights, strips etc. For Ukraine they also include railway products, for Europe - slabs and crane rails; for South Africa - rails.

 

###

 

 

For further information:

 

Investor Relations:
Alexander Boreyko
Director, Investor Relations
London: +44 207 832 8990          Moscow: +7 495 232 1370

ir@evraz.com

 

Media Relations:
Oleg Kuzmin
VP, Corporate Communications
London: +44 207 832 8998          Moscow: +7 495 937 6871
media@evraz.com

 

 

EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Ukraine, USA, Canada, Czech Republic, Italy and South Africa. EVRAZ is among the top 20 steel producers in the world based on crude steel production of 16.8 million tonnes in 2011. In 2011 EVRAZ sold 15.5 million tonnes of steel products. A significant portion of the company's internal consumption of iron ore and coking coal is covered by its mining operations. The company's consolidated revenues for the year ended 31 December 2011 were US$16,400 million and consolidated adjusted EBITDA amounted to US$2,898 million.


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