TIDMEVR

RNS Number : 8792R

Evraz Plc

01 November 2019

EVRAZ Q3 2019 TRADING UPDATE

1 November 2019 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its trading update for the third quarter of 2019.

Q3 2019 vs Q2 2019 HIGHLIGHTS

-- In Q3 2019, EVRAZ' consolidated crude steel output decreased by 3.4% QoQ, mainly due to lower production volumes at EVRAZ ZSMK amid scheduled capital repairs. Production was also impacted by reduced output at EVRAZ' US and Canadian mills following scheduled downtimes and by weaker demand.

-- Total steel product sales remained flat QoQ. Sales of semi-finished products increased by 5.6% QoQ due to better market conditions. This was partly offset by a 3.1% QoQ drop in finished products due to lower sales of flat-rolled products (decreased production at EVRAZ Palini e Bertoli as well as weaker demand from service centres at North America) and railway products (capital repairs at EVRAZ ZSMK and EVRAZ NTMK).

-- Production of raw coking coal decreased by 9.7% QoQ mainly following the decision to reduce production at the Razrez Raspadsky open-pit as a response to substantial accumulated stockpiles of raw coal.

   --      External sales volumes of coking coal products remained flat QoQ. 

-- External sales of iron ore products descended by 73 kt (31.1%) QoQ as production volumes of pellets were down amid capital repairs at EVRAZ KGOK's roasting machine no. 2.

-- Sales of final vanadium products rose by 9.8% QoQ, mainly due to increased demand in China. This was a result of robust infrastructure sector development, as well as ferrovanadium re-stocking in the rest of the world due to lower prices.

 
                                                   Q3 2019/ Q2 2019, 
 Product, kt                Q3 2019   Q2 2019           change            9m 2019   9m 2018   9m 2019/ 9m 2018, change 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 Total crude steel 
  production                  3,380     3,498                     -3.4%   10,366      9,917                       4.5% 
   Russia                     2,953     3,006                     -1.8%    8,945      8,368                       6.9% 
   Ukraine                        0         0                       n/a      0          154                    -100.0% 
   North America                427       492                    -13.2%    1,421      1,395                       1.9% 
 Total raw coking coal 
  mined                       6,319     6,996                     -9.7%   20,159     17,335                      16.3% 
 Total coking coal 
  concentrate 
  production                  4,244     4,458                     -4.8%   12,386     11,967                       3.5% 
 Iron ore products 
  production                  3,319     3,533                     -6.1%   10,488     10,148                       3.4% 
 Total sales of steel 
  products(1)                 3,385     3,371                      0.4%    9,893      9,328                       6.1% 
   Semi-finished 
    products(2,3)             1,443     1,367                      5.6%    4,146      3,726                      11.3% 
   Finished products(3)       1,942     2,004                     -3.1%    5,747      5,602                       2.6% 
 Total sales of 
  third-party steel 
  products(3)                   225       196                     14.8%     601         672                     -10.6% 
 Sales of coking coal 
  products                    2,953     2,929                      0.8%    8,539      8,244                       3.6% 
 Sales of iron ore 
  products(2)                   162       235                    -31.1%     861       1,514                     -43.1% 
 Sales of vanadium in 
  slag(2)                     1,693     1,660                      2.0%    4,528      4,760                      -4.9% 
 Sales of vanadium final 
  products(4)                 3,585     3,266                      9.8%    9,369      9,693                      -3.3% 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 

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

(1) Q3 2019 production and sales volumes of EVRAZ North America are preliminary

(2) 9m 2018 data has been adjusted

(3) Q2 2019 data has been adjusted

(4) in tonnes of pure vanadium

CONFERENCE CALL DETAILS

A conference call to discuss the trading update will be held on Friday, 1 November 2019, at:

   --      1 pm (London time) 
   --      4 pm (Moscow time) 
   --      9 am (New York time) 

Key speakers:

   --      Ilya Shirokobrod, Vice President, Sales and Logistics 
   --      Alexander Erenburg, Vice President, Head of the Vanadium Division 
   --      Sergey Stepanov, Vice President, Head of the Coal Division 
   --      Alexander Vasiliev, Chief Financial Officer, EVRAZ North America 

To join the call, please dial:

   +44 (0)330 336 9125      UK 
   +7 495 213 1767            Russia 
   +1 646-828-8193            US 

Conference ID: 7150635

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

The Q3 2019 Trading update presentation will be available on the Group's website, www.evraz.com, on Friday, 1 November 2019, at the following link:

https://www.evraz.com/en/investors/reports-and-results/presentations/#2019

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 2019/ Q2 2019, 
 Product, kt                Q3 2019   Q2 2019           change            9m 2019   9m 2018   9m 2019/ 9m 2018, change 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 Pig iron production          2,795     2,745                      1.8%     8,252     7,645                       7.9% 
  EVRAZ ZSMK                  1,516     1,530                     -0.9%     4,517     4,105                      10.0% 
  EVRAZ NTMK                  1,279     1,215                      5.3%     3,735     3,386                      10.3% 
  EVRAZ DMZ                       0         0                       n/a         0       153                    -100.0% 
 Crude steel production       2,953     3,006                     -1.8%     8,945     8,522                       5.0% 
   EVRAZ ZSMK                 1,866     1,942                     -3.9%     5,703     5,357                       6.5% 
   EVRAZ NTMK                 1,087     1,064                      2.2%     3,242     3,011                       7.7% 
   EVRAZ DMZ                      0         0                       n/a         0       154                    -100.0% 
 Total steel products 
  production, net of 
  re-rolled 
  volume                      2,766     2,759                      0.3%     8,147     7,580                       7.5% 
   EVRAZ ZSMK                 1,624     1,737                     -6.5%     5,047     4,839                       4.3% 
   EVRAZ NTMK                   969       844                     14.8%     2,607     2,213                      17.8% 
   EVRAZ DMZ                      0         0                       n/a         0       132                    -100.0% 
   EVRAZ Palini e Bertoli        88       101                    -12.9%       286       266                       7.5% 
   EVRAZ Caspian Steel           86        77                     11.7%       207       130                      59.2% 
 Iron ore products 
  production                  3,319     3,533                     -6.1%    10,488    10,148                       3.4% 
   Pellets (EVRAZ KGOK)       1,456     1,573                     -7.4%     4,672     4,938                      -5.4% 
   Sinter (EVRAZ KGOK)          883       928                     -4.8%     2,709     2,633                       2.9% 
   Concentrate (EVRAZ 
    KGOK, Evrazruda)            980     1,032                     -5.0%     3,107     2,577                      20.6% 
 Coking coal concentrate 
  production                    511       489                      4.5%     1,454     1,538                      -5.5% 
   From own raw coal(1)         407       341                     19.4%     1,004       922                       8.9% 
   From third-party raw 
    coal                        104       148                    -29.7%       450       616                     -26.9% 
 Gross vanadium slag 
  production(2)               4,734     4,533                      4.4%    13,713    12,675                       8.2% 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 

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

(1) from Coal segment

(2) in tonnes of pure vanadium

In Q3 2019, EVRAZ` pig iron output rose by 1.8% QoQ, mainly following the completion of capital repairs in April at EVRAZ NTMK's blast furnace no. 5.

Crude steel production volumes fell by 1.8% QoQ, primarily due to scheduled capital repairs in July-August 2019 at EVRAZ ZSMK.

Total output of steel products remained almost flat QoQ, with a 14.8% QoQ increase in production volumes at EVRAZ NTMK due to lower re-rolled volumes of slabs at the Steel, North America segment. EVRAZ Caspian Steel boosted production by 11.7% following higher demand from customers. This was partly offset by production at EVRAZ Palini e Bertoli going down by 12.9% due to unscheduled downtime in August 2019.

Iron ore products output fell by 6.1% QoQ, mainly due to capital repairs in August-September 2019 at EVRAZ KGOK's roasting machine no. 2.

Total sales volumes

 
 Product, kt                  Q3     Q2 2019   Q3 2019/ Q2 2019, change   9m 2019   9m 2018   9m 2019/ 9m 2018, change 
                              2019 
-------------------------  -------  --------  -------------------------  --------  --------  ------------------------- 
 Coke                           93       113                     -17.7%       271       318                     -14.8% 
 Steel products, external 
  sales(2)                   2,847     2,770                       2.8%     8,200     7,757                       5.7% 
 Semi-finished products      1,398     1,293                       8.1%     3,971     3,700                       7.3% 
   Slabs                       669       572                      17.0%     1,724     1,377                      25.2% 
   Billets                     562       545                       3.1%     1,752     1,943                      -9.8% 
   Other steel 
    products(1)                167       176                      -5.1%       495       379                      30.6% 
 Finished products(2)        1,448     1,477                      -2.0%     4,229     4,057                       4.2% 
   Construction 
    products(2)                883       864                       2.2%     2,476     2,367                       4.6% 
   Railway products            314       367                     -14.4%     1,025     1,010                       1.5% 
   Flat products                79        98                     -19.4%       269       263                       2.3% 
   Other steel 
    products(2)                172       148                      16.2%       461       417                      10.6% 
 Steel products, 
  inter-segment sales           27       115                     -76.5%       328       423                     -22.5% 
 Third-party steel 
  products, external 
  sales(2)                     225       196                      14.8%       601       672                     -10.6% 
 Iron ore products, 
  external sales               162       235                     -31.1%       861     1,514                     -43.1% 
  Pellets                      162       235                     -31.1%       861     1,514                     -43.1% 
 Sales of vanadium in 
  slag(3)                    1,693     1,660                       2.0%     4,528     4,760                      -4.9% 
 Sales of vanadium final 
  products(4)                3,585     3,266                       9.8%     9,369     9,693                      -3.3% 
-------------------------  -------  --------  -------------------------  --------  --------  ------------------------- 
 

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

(1) includes tonnes of pig iron

(2) Q2 2019 data has been adjusted

(3) 9m 2018 data has been adjusted

(4) in tonnes of pure vanadium

In Q3 2019, external sales of steel products were up 2.8% QoQ. Sales of semi-finished products rose by 8.1% QoQ, primarily due to better market conditions.

Sales of finished products fell by 2% QoQ. Sales of railway products were down 14.4% QoQ amid capital repairs at EVRAZ NTMK's rail and beam mill and EVRAZ ZSMK's electric-arc furnace shop. In addition, sales of flat-rolled products dropped by 19.4% QoQ, primarily due to a decline in production volumes at EVRAZ Palini e Bertoli.

Inter-segment sales declined by 76.5% QoQ due to lower sales of slabs to the Steel, North America segment following a decline in demand from customers.

Sales of iron ore products fell by 31.1% QoQ after a reduction in pellet production volumes due to capital repairs in August-September at EVRAZ KGOK's roasting machine no. 2.

Sales of final vanadium products rose by 9.8% QoQ, mainly due to increased demand in China. This was the result of robust infrastructure sector development, as well as ferrovanadium re-stocking in the rest of the world due to lower prices.

 
 Cash cost, US$/t                 Q3     Q2 2019   Q3 2019/ Q2 2019, change    9m      9m     9m 2019/ 9m 2018, change 
                                  2019                                         2019    2018 
-----------------------------  -------  --------  -------------------------  ------  ------  ------------------------- 
 Slab cash cost vertically 
  integrated                       241       238                       1.3%     234     235                      -0.4% 
 Iron ore products (Fe 62%)*        41        40                       2.5%      39      36                       8.3% 
-----------------------------  -------  --------  -------------------------  ------  ------  ------------------------- 
 

* Q2 2019 data has been adjusted

Average selling prices

 
                                                                                      9m      9m 
 US$/t (ex works)                                                Q3 2019   Q2 2019    2019    2018 
--------------------------------------------------------------  --------  --------  ------  ------ 
 Coke                                                                214       240     225     229 
 Steel products**                                                    480       507     489     548 
   Semi-finished products*                                           341       392     371     464 
   Construction products**                                           557       563     548     598 
   Railway products                                                  842       763     780     693 
   Other steel products                                              579       598     590     638 
   Pellets                                                            76        81      77      64 
 Metal Bulletin Ferro-Vanadium basis 78% min, free DDP, 
  consumer plant, 1st grade Western Europe***                      30.72     39.36   47.80   72.17 
 Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid***      34.93     47.81   56.89   75.50 
--------------------------------------------------------------  --------  --------  ------  ------ 
 

* includes prices for pig iron

** Q2 2019 data has been adjusted

*** US$/kgV

In Q4 2019, pig iron production volumes are expected to edge down QoQ due to capital repairs in October at EVRAZ NTMK's blast furnace no. 5. This will be partly offset by a QoQ uptick in pig iron production volumes following completion of capital repairs in July-August 2019 at EVRAZ ZSMK.

STEEL, NORTH AMERICA SEGMENT

Production and sales volumes*

 
                                                   Q3 2019/ Q2 2019, 
 Product, kt                Q3 2019   Q2 2019           change            9m 2019   9m 2018   9m 2019/ 9m 2018, change 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 Crude steel                    427       492                    -13.2%     1,421     1,395                       1.9% 
   EVRAZ US mills               223       251                    -11.2%       709       678                       4.6% 
   EVRAZ Canadian mills         204       241                    -15.4%       712       716                      -0.6% 
 Total steel products 
  production, net of 
  re-rolled volume              535       605                    -11.6%     1,698     1,616                       5.1% 
   EVRAZ US mills               352       384                     -8.3%     1,087     1,007                       7.9% 
   EVRAZ Canadian mills         183       220                    -16.8%       611       609                       0.3% 
 Sales of steel products        539       601                    -10.3%     1,693     1,571                       7.8% 
   Semi-finished products        45        74                    -39.2%       175        26                        n/a 
   Construction products         66        69                     -4.3%       202       213                      -5.2% 
   Railway products             106       122                    -13.1%       329       304                       8.2% 
   Flat-rolled products         128       141                     -9.2%       409       442                      -7.5% 
   Tubular products             194       195                     -0.5%       578       586                      -1.4% 
-------------------------  --------  --------  ------------------------  --------  --------  ------------------------- 
 

*Q3 2019 production and sales volumes data is preliminary

In Q3 2019, crude steel production dropped by 13.2% QoQ. The reduction was made at EVRAZ Regina facility in anticipation of weaker demand for both OCTG and line pipe in the upcoming months, as well as by lower production at EVRAZ Pueblo, which came as a result of scheduled downtimes and unplanned repairs.

Sales of semi-finished products (slabs) fell by 39.2% QoQ driven primarily by the timing of customer orders, which fluctuate throughout the year.

Sales of construction products decreased by 4.3% QoQ with continued sluggish demand caused by substantial customer inventories and imports of wire rod and rebar.

Sales of railway products were down 13.1% QoQ in the period due to planned major maintenance outage in September.

Flat-rolled product sales descended by 9.2% QoQ as a result of weakening demand from service centres. End user demand did not decrease in Q3 2019.

Tubular product sales volumes were almost flat (down 0.5%) QoQ as Canadian OCTG market remains soft.

Average selling prices

 
 US$/t (ex works)          Q3      Q2      9m      9m 
                           2019    2019    2019    2018 
-----------------------  ------  ------  ------  ------ 
 Construction products      695     768     771     796 
 Flat-rolled products       875     953     961     967 
 Tubular products         1,340   1,347   1,353   1,230 
-----------------------  ------  ------  ------  ------ 
 

Prices for construction products decreased in the period, driven primarily by falling scrap pricing and sluggish market demand. Prices for flat-rolled products dropped further as service centres continue to curtail purchases amid rapidly falling scrap prices and market uncertainty driven by soft demand. Prices for tubular products were almost flat in Q3 2019 (up 0.5% QoQ) thanks to higher priced large-diameter pipe (LDP) orders, although this was offset by a continued softening on the OCTG markets and lower line pipe prices.

In Q4 2019, crude steel output is expected to climb by as much as 5% compared with the average level for Q2 and Q3 2019. Tubular sales volumes are expected to rise QoQ, driven by increased recognition of current LDP orders and higher line pipe sales volumes. Sales of flat-rolled products are forecast to remain flat or marginally decline QoQ, driven by continued softness in the market along with the usual seasonal decline in demand at the end of the year.

COAL SEGMENT

Production volumes

 
 Product, kt                    Q3      Q2     Q3 2019/ Q2 2019, Change   9m 2019   9m 2018   9m 2019/ 9m 2018, change 
                                2019    2019 
----------------------------  ------  ------  -------------------------  --------  --------  ------------------------- 
 Raw coking coal (mined)       6,319   6,996                      -9.7%    20,159    17,335                      16.3% 
   Yuzhkuzbassugol             3,043   3,466                     -12.2%     9,115     8,172                      11.5% 
   Raspadskaya                 2,965   3,231                      -8.2%    10,112     8,364                      20.9% 
   Mezhegeyugol                  311     299                       4.0%       932       799                      16.6% 
 Coking coal concentrate 
  (production)                 3,733   3,969                      -5.9%    10,931    10,428                       4.8% 
  Produced at 
   Yuzhkuzbassugol coal 
   washing plants              1,570   1,837                     -14.5%     4,840     4,991                      -3.0% 
  Produced at the 
   Raspadskaya coal 
   washing plant               2,163   2,132                       1.5%     6,091     5,437                      12.0% 
----------------------------  ------  ------  -------------------------  --------  --------  ------------------------- 
 

In Q3 2019, overall raw coking coal output fell by 9.7% QoQ mainly following the decision to reduce production at the Razrez-Raspadsky open-pit as a response to substantial accumulated stockpiles of raw coal. In addition, production volumes were lower QoQ due to the longwall move at the Uskovskaya mine in the period.

Output of coking coal concentrate dropped by 5.9% QoQ, primarily due to higher sales of raw coal from the Uskovskaya mine.

Sales volumes

 
 Product, kt                   Q3       Q2     Q3 2019/ Q2 2019, change   9m 2019   9m 2018   9m 2019/ 9m 2018, change 
                               2019     2019 
--------------------------  -------  -------  -------------------------  --------  --------  ------------------------- 
 External sales               2,953    2,929                       0.8%     8,539     8,244                       3.6% 
   Raw coking coal              741     447*                      65.8%    1,685*     1,377                      22.4% 
   Coking coal concentrate    2,212    2,482                     -10.9%     6,854     6,867                      -0.2% 
 Intersegment sales           1,712    1,650                       3.8%     4,882     4,545                       7.4% 
    Raw coking coal             629      556                      13.1%     1,580     1,455                       8.6% 
   Coking coal concentrate    1,084    1,094                      -0.9%     3,301     3,090                       6.8% 
--------------------------  -------  -------  -------------------------  --------  --------  ------------------------- 
 
 

* The data include sales volumes of 1 kt of coal recognised as steam-grade coal based on its quality characteristics.

In Q3 2019, external sales volumes of coking coal products remained flat QoQ. Raw coking coal sales volumes surged by 65.8% QoQ due to higher sales at the Uskovskaya mine to match customer needs. This was partly offset by lower coking coal concentrate sales volumes due to logistical limitations of shipments to Russia's Far East as a result of maintenance works at railroads.

 
 Cash cost, US$/t            Q3      Q2     Q3 2019/ Q2 2019, change   9m 2019   9m 2018   9m 2019/ 9m 2018, change 
                             2019    2019 
-------------------------  ------  ------  -------------------------  --------  --------  ------------------------- 
 Coking coal concentrate       35      33                       6.1%        35        47                     -25.5% 
-------------------------  ------  ------  -------------------------  --------  --------  ------------------------- 
 

Average selling prices

 
                             Q3      Q2       9m       9m 
  US$/t (ex works)           2019    2019     2019     2018 
-------------------------  ------  ------  -------  ------- 
 Raw coking coal               45      62       53       65 
 Coking coal concentrate       88     104      103      123 
-------------------------  ------  ------  -------  ------- 
 

In Q3 2019, coking coal selling prices moved in line with global benchmarks.

In Q4 2019, raw coal production is expected to remain flat QoQ as the effect from the completion of the longwall move at the Uskovskaya mine will be partly offset by the longwall move at the Erunakovskaya mine.

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. They also include railway products for Ukraine.

###

For further information:

Media Relations:

Moscow: +7 495 937 6871

media@evraz.com

Investor Relations:

Moscow: +7 495 232 1370

ir@evraz.com

EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Kazakhstan, US, Canada, Czech Republic and Italy. EVRAZ is among the top steel producers in the world based on crude steel production of 13mt in 2018. 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 2018 were US$12,836m and consolidated EBITDA amounted to US$3,777m.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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