Evraz Plc EVRAZ Q2 2012 Operational Results (7519H)

TIDMEVR

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(R) 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         Q2 2012   Q2 2011   Q2 2012/    Q1 2012   Q2 2012/ 
              unless                                     Q2 2011,              Q1 2012, 
         otherwise stated                                 change                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 3(rd) parties' 
      facilities                      1,862     2,577     (27.8)%     2,489     (25.2)% 
 Nitrovan(R)                            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)              Q2 2012   Q1 2012   Q2 2011 
  unless otherwise stated 
 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(R)                    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: [phone]          Moscow: [phone] 

[e-mail]

Media Relations: Oleg Kuzmin VP, Corporate Communications

 London: [phone]          Moscow: [phone] [e-mail] 

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.

This information is provided by RNS

The company news service from the London Stock Exchange

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