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Evraz Plc EVRAZ Q3 2020 TRADING UPDATE

29/10/2020 7:00am

UK Regulatory (RNS & others)


Evraz (LSE:EVR)
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From Oct 2020 to Jan 2021

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RNS Number : 5923D

Evraz Plc

29 October 2020

EVRAZ Q 3 2020 TRADING UPDATE

29 October 2020 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its trading update for the third quarter of 2020.

Q3 2020 vs Q2 2020 HIGHLIGHTS

-- In Q3 2020, EVRAZ' consolidated crude steel output fell by 4.4% QoQ, mainly due to the planned shutdown of blast furnace no. 5 and the launch of blast furnace no. 6 after the completion of a major overhaul at EVRAZ NTMK.

-- Total sales of steel products decreased by 9.5% QoQ. Sales of semi-finished products fell by 24.1% QoQ following the increase of sales of finished goods to the Russian market.

-- Sales of finished products increased by 5.7% QoQ amid better market conditions in Russia and an improved product mix.

-- Total raw coking coal production went up by 14.6% QoQ, driven by the completion of longwall moves at the Alardinskaya and Esaulskaya mines in Q2 2020.

-- While production at the Razrez Raspadsky open pit remained suspended during the reporting period due to unfavourable market conditions, operations were resumed in October 2020 amid dwindling stockpiles and rising prices for coal products.

-- External sales volumes of coking coal products climbed by 23.6% QoQ following an improvement in market conditions.

-- External sales of iron ore products grew by 9.0% QoQ amid higher shipments to export markets in Q3 2020.

-- Sales of vanadium products rose by 13.4% QoQ, mainly due to increased steel utilisation rates and a slight recovery of the automotive industry. The regional sales and product mix was also changed to serve the more active Chinese oxide market.

 
 Product, '000 tonnes            Q3       Q2     Q3 2020/ Q2 2020, change     9m       9m     9m 2020/ 9m 2019, change 
                                 2020     2020                                2020     2019 
----------------------------  -------  -------  -------------------------  -------  -------  ------------------------- 
 Total crude steel 
  production                    3,227    3,377                      -4.4%   10,163   10,364                      -1.9% 
   Russia                       2,893    2,992                      -3.3%    9,006    8,945                       0.7% 
   North America                  334      385                     -13.2%    1,157    1,419                     -18.5% 
 Total raw coking coal mined    4,775    4,165                      14.6%   14,632   20,159                     -27.4% 
 Total coking coal 
  concentrate 
  production                    3,873    3,820                       1.4%   11,440   12,385                      -7.6% 
 Iron ore products 
  production                    3,508    3,460                       1.4%   10,563   10,488                       0.7% 
 Total sales of steel 
  products                      3,062    3,382                      -9.5%    9,668    9,884                      -2.2% 
   Semi-finished products       1,309    1,724                     -24.1%    4,476    4,131                       8.4% 
   Finished products            1,753    1,658                       5.7%    5,192    5,753                      -9.8% 
 Total sales of third-party 
  steel products                  267      197                      35.5%      639      601                       6.3% 
 Sales of coking coal 
  products                      3,460    2,800                      23.6%    9,539    8,539                      11.7% 
 Sales of iron ore products       486      446                       9.0%    1,287      861                      49.5% 
 Sales of vanadium in slag      1,605    1,996                     -19.6%    4,366    4,529                      -3.6% 
 Sales of vanadium final 
  products (1)                  2,779    2,450                      13.4%    8,397    9,369                     -10.4% 
----------------------------  -------  -------  -------------------------  -------  -------  ------------------------- 
 

Note. Numbers in this table and the tables below may not add up to totals due to rounding.

(1) In tonnes of pure vanadium

CONFERENCE CALL DETAILS

A conference call to discuss the trading update will be held on Thursday, 29 October 2020, at:

   --             08:00 (New York time) 
   --             12:00 (London time) 
   --             15:00 (Moscow time) 

Key speakers:

   --             Alexey Ivanov , Senior Vice President, Commerce and Business Development 
   --             Evgeny Terekhov , Head of sales, Coal Division 
   --             Olesya Afanasyeva , Vice President Finance, Interim CFO, EVRAZ North America 

To join the call, please dial:

 
 +44 (0)330 336 9411 (local access) or 0800       UK 
  279 7204 (toll free) 
 +7 495 646 9190 (local access) or 8 10 8002      Russia 
  8675011 (toll free) 
 +1 646-828-8193 (local access) or 888-394-8218   US 
  (toll free) 
 
   Access code :   6381713 

To avoid any technical inconvenience, it is recommended that participants dial in 10 minutes before the start of the call.

The Q 3 2020 trading update presentation will be available on the Group's website, www.evraz.com , on Thursday,

29   October 2020, at the following link: 

https://www.evraz.com/en/investors/reports-and-results/presentations/

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements", which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of the Group's shares or GDRs, financial risk management and the impact of general business and global economic conditions. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and each of EVRAZ and the Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in EVRAZ' or the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Neither the Group, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document.

STEEL SEGMENT

Total production volumes

 
                                                   Q3 2020/ Q2 2020, 
 Product, '000 tonnes       Q3 2020   Q2 2020           change            9m 2020   9m 2019   9m 2020/ 9m 2019, change 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 Pig iron production          2,686     2,792                     -3.8%     8,306     8,252                       0.7% 
  EVRAZ ZSMK                  1,556     1,532                      1.6%     4,644     4,517                       2.8% 
  EVRAZ NTMK                  1,130     1,260                    -10.3%     3,662     3,735                      -2.0% 
 Crude steel production       2,893     2,992                     -3.3%     9,006     8,945                       0.7% 
   EVRAZ ZSMK                 1,880     1,878                      0.1%     5,738     5,703                       0.6% 
   EVRAZ NTMK                 1,013     1,114                     -9.1%     3,268     3,242                       0.8% 
 Total steel products 
  production, net of 
  re-rolled volume(1)         2,600     2,739                     -5.1%     8,206     8,149                       0.7% 
   EVRAZ ZSMK                 1,608     1,657                     -3.0%     5,008     5,047                      -0.8% 
   EVRAZ NTMK                   930       994                     -6.4%     2,956     2,607                      13.4% 
   EVRAZ Caspian Steel           62        88                    -29.5%       242       208                      16.3% 
 Iron ore products 
  production                  3,508     3,460                      1.4%    10,563    10,488                       0.7% 
   Pellets (EVRAZ KGOK)       1,607     1,616                     -0.6%     4,888     4,672                       4.6% 
   Sinter (EVRAZ KGOK)          833       905                     -8.0%     2,654     2,709                      -2.0% 
   Concentrate saleable 
    (EVRAZ KGOK, 
    Evrazruda)                1,068       939                     13.7%     3,021     3,107                      -2.8% 
 Coking coal concentrate 
  production                    475       496                     -4.2%     1,457     1,454                       0.2% 
   From own raw coal(2)         317       480                    -34.0%     1,147     1,004                      14.2% 
   From third-party raw 
    coal                        158        16                    887.5%       310       450                     -31.1% 
 Gross vanadium slag 
  production(3)               4,419     5,098                    -13.3%    14,496    13,713                       5.7% 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 

Note. Numbers in this table and the tables below may not add up to totals due to rounding.

(1) Including EVRAZ Palini e Bertoli

(2) From Coal segment

(3) In tonnes of pure vanadium

In Q3 2020, pig iron production fell by 3.8% QoQ, mainly due to the planned shutdown of blast furnace no. 5 and launch of blast furnace no. 6 at EVRAZ NTMK after completion of major overhaul.

Crude steel output decreased by 3.3% QoQ, primarily due to lower pig iron availability.

Total output of steel products fell by 5.1% QoQ amid lower crude steel availability. EVRAZ Caspian Steel reduced production by 29.5% QoQ due to lower demand.

Output of iron ore products went up by 1.4% QoQ, mainly due to an increase in primary concentrate production volumes at EVRAZ ZSMK (former Evrazruda). This was partly offset by scheduled capital repairs at EVRAZ KGOK's sinter plant in July-August 2020.

Total sales volumes

 
 Product, '000 tonnes    Q3 2020        Q2     Q3 2020/ Q2 2020, change      9m        9m     9m 2020/ 9m 2019, change 
                                        2020                                 2020      2019 
----------------------  --------  ----------  -------------------------  ---------  -------  ------------------------- 
 Coke                        130          81                      60.5%        316      271                      16.6% 
 Steel products, 
  external sales           2,703       2,921                      -7.5%      8,331    8,199                       1.6% 
 Semi-finished 
  products                 1,309       1,670                     -21.6%      4,332    3,970                       9.1% 
   Slabs                     436         737                     -40.8%      1,743    1,723                       1.2% 
   Billets                   735         820                     -10.4%      2,211    1,753                      26.1% 
   Other steel 
    products(1)              138         113                      22.1%        378      494                     -23.5% 
 Finished products         1,394       1,251                      11.4%      3,999    4,228                      -5.4% 
   Construction 
    products                 925         783                      18.1%      2,547    2,476                       2.9% 
   Railway products          310         311                      -0.3%        979    1,024                      -4.4% 
   Flat products               0           0                        n/a          0      268                    -100.0% 
   Other steel 
    products                 159         157                       1.3%        473      460                       2.8% 
 Steel products, 
  inter-segment sales          3           3                       0.0%         46      308                     -85.1% 
 Third-party steel 
  products, external 
  sales                      267         197                      35.5%        639      601                       6.3% 
 Iron ore products, 
  external sales             486         446                       9.0%      1,287      861                      49.5% 
 Pellets                     486         446                       9.0%      1,287      861                      49.5% 
 Sales of vanadium in 
  slag                     1,605       1,996                     -19.6%      4,366    4,529                      -3.6% 
 Sales of vanadium 
  final products(2)        2,779       2,450                      13.4%      8,397    9,369                     -10.4% 
----------------------  --------  ----------  -------------------------  ---------  -------  ------------------------- 
 

Note. Numbers in this table and the tables below may not add to totals due to rounding.

(1) Includes tonnes of pig iron

(2) In tonnes of pure vanadium

In Q3 2020, external sales of steel products fell by 7.5% QoQ. Sales of semi-finished products went down by 21.6% QoQ following the increase of sales of finished goods to the Russian market.

Sales of finished products rose by 11.4% QoQ due to better market conditions in Russia and an improved product mix.

Sales of iron ore products surged by 9.0% QoQ amid higher shipments to export markets in Q3 2020.

Sales of vanadium products grew by 13.4% QoQ, primarily due to increased steel utilisation rates and a slight recovery of the automotive industry. The regional sales and product mix was also changed to serve the more active Chinese oxide market.

 
 Cash cost, US$/t             Q3      Q2     Q3 2020 / Q2 2020, change      9m       9m    9m 2020 / 9m 2019, change 
                              2020    2020                                 2020     2019 
--------------------------  ------  ------  --------------------------  -------  -------  -------------------------- 
 Slab cash cost vertically 
  integrated                   200     198                          1%      206      234                        -12% 
 Iron ore products (Fe 
  62%)                          35      35                          0%       36       39                         -8% 
--------------------------  ------  ------  --------------------------  -------  -------  -------------------------- 
 
 

Average selling prices

 
 US$/tonne (ex-works)                                                                     Q3      Q2      9m      9m 
                                                                                          2020    2020    2020    2019 
--------------------------------------------------------------------------------------  ------  ------  ------  ------ 
 Coke                                                                                      135     148     149     225 
 Steel products                                                                            435     401     437     493 
   Semi-finished products(1)                                                               315     296     318     378 
   Construction products                                                                   473     441     474     548 
   Railway products                                                                        796     812     848     780 
   Other steel products                                                                    477     490     492     590 
   Pellets                                                                                  61      47      54      77 
 Metal Bulletin Ferro-Vanadium basis 78% min, free DDP, consumer plant, 1st grade 
  Western Europe(2)                                                                      24.23   24.94   25.74   56.35 
 Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid(2)                            21.81   23.28   25.23   67.87 
--------------------------------------------------------------------------------------  ------  ------  ------  ------ 
 

(1) Includes prices for pig iron

(2) US$/kgV

In Q4 2020, pig iron production volumes are expected to increase following the launch of blast furnace no.6 at EVRAZ NTMK.

Iron ore pellet production volumes are expected to rise following the completion of scheduled repairs of the roast and sinter machines at EVRAZ KGOK's sinter plant in Q3 2020.

STEEL, NORTH AMERICA SEGMENT

Production and sales volumes

 
 Product, '000 tonnes                 Q3     Q2 2020       Q3 2020/       9m 2020    9m     9m 2020/ 9m 2019, change 
                                      2020              Q2 2020, change              2019 
----------------------------------  ------  --------  -----------------  --------  ------  ------------------------- 
 Crude steel                           334       385             -13.3%     1,157   1,419                     -18.5% 
   EVRAZ US mills                      181       210             -13.8%       642     711                      -9.7% 
   EVRAZ Canadian mills                153       175             -12.6%       516     708                     -27.1% 
 Total steel products production, 
  net of re-rolled volume              377       446             -15.6%     1,291   1,700                     -24.1% 
   EVRAZ US mills                      257       288             -10.8%       856   1,092                     -21.6% 
   EVRAZ Canadian mills                119       158             -24.5%       435     608                     -28.5% 
 Sales of steel products               359       461             -22.1%     1,337   1,686                     -20.7% 
   Semi-finished products                0        54            -100.0%       144     161                     -10.6% 
   Construction products                61        68             -10.1%       194     201                      -3.5% 
   Railway products                     91       107             -15.0%       304     339                     -10.3% 
   Flat-rolled products                100        69              44.9%       269     408                     -34.1% 
   Tubular products                    107       163             -34.4%       426     577                     -26.2% 
----------------------------------  ------  --------  -----------------  --------  ------  ------------------------- 
 
 

In Q3 2020, crude steel production was 13.3% lower QoQ, which was attributable primarily to continued depressed demand across North American steel markets due to the slow economic recovery amid the COVID-19 pandemic and energy market uncertainty.

Total output of steel products declined by 15.6%, as steep drops in demand brought on by the pandemic remained in place for OCTG and other products in the Group's portfolio. In addition, production was affected by a planned maintenance outage in Pueblo.

Semi-finished products sales fell by 100.0% following fulfilment of the contract with a key customer.

Flat-rolled product sales spiked 44.9% QoQ as the Q3 2020 volumes improved over extremely low Q2 2020 levels. Higher sales were driven by service centres' purchases to replenish inventories, which dropped to historically low levels in Q2 2020. Demand, however, remains soft given continued market uncertainty.

Construction product sales decreased by 10.1% due to maintenance downtime in July and August 2020.

Railway product sales decreased by 15.0% amid the usual seasonal slowdown of purchases from Class I railroads, accompanied by a planned maintenance outage in September.

Sales volumes of tubular products dropped by 34.4% QoQ, as the Group's OCTG mills in Canada and the US remained idled. At the same time, line pipe production continued to be stable with both large and small diameter mills producing to current orders.

Prices for construction products remained flat QoQ, while those for tubular products rose by 9% QoQ, driven primarily by changes in the order mix. Prices for flat-rolled products, however, showed a 6% QoQ decline, as producers continued to compete for the limited available demand, putting downward pressure on prices.

Average selling prices

 
 US$/tonne (ex-works)       Q3      Q2      9m      9m 
                            2020    2020    2020    2019 
------------------------  ------  ------  ------  ------ 
 Construction products*     649     647     660     772 
 Flat-rolled products*      719     764     765     958 
 Tubular products*         1,401   1,283   1,300   1,354 
------------------------  ------  ------  ------  ------ 
 

* The Q2 2020 data have been adjusted

In Q4 2020, headwinds will remain for production and sales volumes for all product groups due to the uncertainty in energy markets and slow economic recovery during the resurgent COVID-19 pandemic, leaving North American customers cautious in their purchasing decisions.

COAL SEGMENT

Production volumes

 
 Product, '000 tonnes            Q3      Q2     Q3 2020/ Q2 2020, change   9m 2020     9m     9m 2020/ 9m 2019, change 
                                 2020    2020                                          2019 
-----------------------------  ------  ------  -------------------------  --------  -------  ------------------------- 
 Raw coking coal (mined)        4,775   4,165            14.6%             14,632    20,159            -27.4% 
   Yuzhkuzbassugol              3,341   2,053            62.7%              8,098    9,115             -11.2% 
   Raspadskaya                  1,434   2,112            -32.1%             6,498    10,112            -35.7% 
   Mezhegeyugol                   0       0               n/a                36       932              -96.1% 
 Coking coal concentrate 
  (production)                  3,398   3,324             2.2%              9,983    10,931            -8.7% 
  Produced at Yuzhkuzbassugol 
   coal 
   washing plants               1,506   1,328            13.4%              4,245    4,840             -12.3% 
  Produced at the Raspadskaya 
   coal 
   washing plant                1,892   1,996            -5.2%              5,738    6,091             -5.8% 
-----------------------------  ------  ------  -------------------------  --------  -------  ------------------------- 
 

In Q3 2020, overall raw coking coal output grew by 14.6% QoQ, primarily due to the completion of longwall moves at the Alardinskaya and Esaulskaya mines in Q2 2020.

Production at Raspadskaya went down by 32.1% QoQ, mainly as a result of the continued suspension of production at the Razrez Raspadsky open pit, which began in May 2020 due to unfavourable market conditions, as well as due to dome formation problems, difficult gas conditions and increased water ingress at the Raspadskaya mine. The Raspadskaya-Koksovaya mine also saw a reduction in output due to additional gas safety work and the gradual return to target mining volumes after completing a longwall move.

Output of coking coal concentrate rose by 2.2% QoQ due to the completion of longwall moves at the Osinnikovskaya, Esaulskaya and Alardinskaya mines in Q2 2020, which was partly offset by lower production volumes at Raspadskaya coal washing plant due to reduced raw coal availability.

Sales volumes

 
 Product, '000 tonnes           Q3          Q2     Q3 2020/ Q2 2020, change    9m      9m     9m 2020/ 9m 2019, change 
                                2020        2020                               2020    2019 
------------------------  --------------  ------  -------------------------  ------  ------  ------------------------- 
 External sales                    3,460   2,800                      23.6%   9,539   8,539                      11.7% 
   Raw coking coal                   822     492                      67.2%   2,021   1,685                      19.9% 
   Coking coal 
    concentrate                    2,638   2,309                      14.3%   7,518   6,854                       9.7% 
 Intersegment sales                1,824   1,880                      -3.0%   5,327   4,882                       9.1% 
    Raw coking coal                  622     712                     -12.6%   1,826   1,581                      15.5% 
  Coking coal 
   concentrate                     1,202   1,167                       2.9%   3,501   3,301                       6.1% 
------------------------  --------------  ------  -------------------------  ------  ------  ------------------------- 
 

In Q3 2020, external sales volumes of coking coal products climbed by 23.6% QoQ. Raw coking coal sales volumes grew by 67.2% QoQ due to higher sales of coal from the Uskovskaya mine to serve clients' needs.

 
 Cash cost, US$/t            Q3      Q2     Q3 2020 / Q2 2020, change    9m      9m     9m 2020 / 9m 2019, change 
                             2020    2020                                2020    2019 
-------------------------  ------  ------  --------------------------  ------  ------  -------------------------- 
 Coking coal concentrate     31      34                -9%               33      35                -6% 
-------------------------  ------  ------  --------------------------  ------  ------  -------------------------- 
 

Average selling prices

 
                                  Q3           Q2      9m      9m 
  US$/tonne (ex-works)            2020         2020    2020    2019 
-------------------------  ----------------  ------  ------  ------ 
 Raw coking coal                         30    39      34      53 
 Coking coal concentrate                 57    65      64      103 
-------------------------  ----------------  ------  ------  ------ 
 

In Q3 2020, coking coal selling prices moved in line with global benchmarks.

In Q4 2020, raw coal production is expected to increase QoQ amid a return to the planned capacity after eliminating mining and geological violations at the Raspadskaya and Raspadskaya-Koksovaya mines. This will also be supported by the completion of a longwall move at the Esaulskaya mine and resumption of production at the Razrez Raspadsky open pit. Might be partly offset though by a longwall move at the Uskovskaya mine in Q4 2020.

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 further information:

Media Relations:

+7 495 937 6871

media@evraz.com

Investor Relations:

+7 495 232 1370

ir@evraz.com

EVRAZ is a vertically integrated steel, mining and vanadium business with operations in Russia, Kazakhstan, the US, Canada and Czech Republic. EVRAZ is among the top steel producers in the world based on crude steel production of 14 million tonnes in 2019. A significant portion of the Group's internal consumption of iron ore and coking coal is covered by its mining operations. The Group's consolidated revenues for the year ended 31 December 2019 were US$11,905 million, and consolidated EBITDA amounted to US$2,601 million.

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