Evraz Plc (EVR) - Interim Management Statement for Q3 2012 RNS Number : 9712O Evraz Plc 18 October 2012 EVRAZ Q32012 PRODUCTION REPORT AND INTERIM MANAGEMENT STATEMENT 18 October 2012-EVRAZ plc (LSE: EVR) today released its operational results for the third quarter of 2012 and Interim Management Statement. Q32012 OPERATIONAL HIGHLIGHTS and RECENT DEVELOPMENTS: · Consolidated crude steel production decreased by 3% compared to Q22012 mainly due to lower production at EVRAZ Vitkovice Steel in the Czech Republic and EVRAZ Highveld in South Africa. · Despite reduced crude steel output total production volumes of steel products increased by 2% mostly due to greater use of purchased third parties slabs. · Coking coal production increased by 20% and steam coal production by 27% compared to Q22012 in absence of any longwall repositionings at the coal mines. · Prices for most steel product groups reduced due to ongoing uncertainty in global steel markets and decreasing prices of iron ore and coking coal. · In EVRAZ's two largest product groups (semi-finished and construction products) average selling prices for semi-finished products in Russia decreased by 13% quarter-on-quarter whilst prices for construction products remained flat. · In Q42012 we expect to be subject to usual seasonal trends, including slowdown in the construction activity in Russia. · EVRAZ continues to expect its net leverage ratio to increase at the end of 2012 versus 30June 2012 (but within the limits set by our covenants). · On 4 October 2012 EVRAZ announced that it had agreed the terms of the acquisition of an indirect controlling interest in the Raspadskaya coking coal company through the purchase of the remaining 50% interest in Corber Enterprises Limited ("Corber"), which it did not previously hold. Corber holds 82% of the share capital of Raspadskaya.As consideration for the acquisition, EVRAZ will (i) issue 132.7million new shares representing 9.9% of the existing issued share capital of EVRAZ; (ii) issue 33.9million new warrants to subscribe for 33.9million new shares representing 2.53% of the existing issued share capital of EVRAZ, and (iii) pay an amount, in cash, of US$1,949.80 for each of 103,600 ordinary Corber shares, payable in four equal instalments in Q1, Q2, Q3 2013 and Q1 2014. Completion of the deal is expected in Q42012. · In October EVRAZ announced the purchase of two scrap yards in Colorado that will become part of EVRAZ Recycling, a division of EVRAZ North America. · In October EVRAZ temporarily shut the steel production at EVRAZ Vitkovice Steel in the Czech Republic due to low demand and to optimise the raw materials inventory. STEEL Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Coke (saleable) 367 324 13.4% 429 (14.5)% Pig iron 3,006 2,865 4.9% 2,889 4.1% Pig iron (saleable) 67 29 128.5% 27 149.0% Crude steel 3,909 4,024 (2.9)% 4,035 (3.1)% Steel products, net of re-rolled volumes* 3,658 3,697 (1.1)% 3,594 1.8% Semi-finished products ** 979 793 23.5% 803 21.9% Finished products 2,679 2,904 (7.8)% 2,791 (4.0)% Construction products 1,345 1,351 (0.4)% 1,249 7.7% Railway products 392 517 (24.2)% 500 (21.6)% Flat-rolled products 569 609 (6.5)% 648 (12.1)% Tubular products 219 238 (8.2)% 211 3.5% Other steel products 153 188 (18.7)% 183 (16.2)% Note. Numbers in this table and the tables below may not add to totals due to rounding. Percent changes based on numbers prior to rounding. * Total volume of steel products in the tables excludes those re-rolled at other EVRAZ's mills. These volumes are eliminated as intercompany sales for purposes of EVRAZ's consolidated operating results. ** Consolidated production volumes of semi-finished products are preliminary as intra-group re-rolling volumes are yet to be finalised In Q32012, EVRAZ's overall production of crude steel decreased by 3% against both Q22012 and Q32011, mainly due to decreased steel production levels at EVRAZ steel mills in the Czech Republic and South Africa as described below. Production volumes of steel products increased by 2% because more slabs produced in Russia in Q32012 were sold to market and therefore included in the total steel volumes, while in Q22012 significant volumes of slabs were shipped to North America and Europe for further re-rolling and therefore were excluded from the total steel volumes. This reduction in the intragroup supply of semis was compensated by purchases of third party semis by EVRAZ mills in North America and Europe. The production of semi-finished products increased by 24% compared to Q32011 and by 22% compared to Q22012. Consolidated production of finished steel goods decreased by 8% compared to the same period last year and by 4% compared to the previous quarter of this year due to lower output of flat-rolled products in Russia and Europe and lower production of rails in Russian and American mills. Finished products accounted for 73% of the consolidated output of steel products, a decrease from 79% in Q32011 and 78% in Q22012. RUSSIA Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Coke (saleable) 135 128 5.4% 139 (3.1)% Pig iron 2,695 2,540 6.1% 2,487 8.4% Pig iron (saleable) 45 18 147.2% 22 101.9% Crude steel 2,931 2,909 0.7% 2,819 4.0% Steel products, net of re-rolled volumes 2,721 2,639 3.1% 2,574 5.7% Semi-finished products 1,122 915 22.6% 949 18.2% Finished products 1,599 1,724 (7.3)% 1,625 (1.6)% Construction products 1,127 1,089 3.5% 1,037 8.7% Railway products 277 396 (30.1)% 366 (24.4)% Flat-rolled products 74 102 (27.2)% 84 (11.8)% Other steel products 120 137 (11.9)% 138 (12.5)% In Q32012 pig iron output increased by 6% compared to the same period last year and by 8% compared to Q22012 as overall repair downtime at EVRAZ's blast furnaces was shorter in Q32012 than in comparable periods. Crude steel production volumes remained flat year-on-year and increased by 4% in Q32012 compared to the previous quarter. Production of construction products increased by 4% compared to Q32011 and by 9% vs. Q22012 reflecting growing demand for long steel products in Russia. As the EVRAZ ZSMK's rail mill has been closed for modernisation since 20April 2012, production of railway products, mainly rails, decreased by 30% vs. Q32011 and by 24% vs. Q22012. The modernised rail mill is expected to resume production, as scheduled, in Q4 2012. It is expected that in Q42012 crude steel production in Russia will be negatively affected by scheduled repairs of converter No 4 at EVRAZ NTMK and of converter No 4 at EVRAZ ZSMK. The completion of the PCI project at EVRAZ ZSMK has been delayed until Q22013 due to revisions in the project design documentation. UKRAINE Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Coke (saleable) 232 196 18.6% 290 (20.0)% Pig iron 227 209 8.3% 239 (4.9)% Pig iron (saleable) 22 11 98.5% 5 366.9% Crude steel 208 215 (3.5)% 251 (17.1)% Steel products 162 186 (13.0)% 215 (24.5)% Semi-finished products 49 47 3.8% 98 (50.2)% Finished products 113 139 (18.6)% 117 (2.9)% Construction products 88 118 (25.1)% 92 (3.8)% Other steel products 25 22 16.5% 25 0.3% In Q32012, crude steel production decreased by almost 4% compared to Q32011 and by 17% compared to Q22012 due to the scheduled maintenance in the converter shop which began in mid-September and which will continue to the end of October. The maintenance in the converter shop resulted in higher saleable volumes of pig iron compared to Q22012 and reduction of production volumes of steel products by 13% and 25% against Q32011 and Q22012 respectively. Given that the converter shop maintenance is expected to continue until the end of October, steel production is expected to decrease by approximately 17% in Q42012 compared to Q3 2012. NORTH AMERICA Product, '000 tonnes Q32012* Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Crude steel 611 599 2.1% 616 (0.8)% Steel products, net of re-rolled volumes 664 675 (1.6)% 678 (2.1)% Construction products 78 81 (3.4)% 79 (1.9)% Railway products 115 121 (4.7)% 134 (13.9)% Flat-rolled products 252 236 7.1% 254 (0.5)% Tubular products 219 238 (8.2)% 211 3.5% * Q3 2012 production volumes are preliminary In Q32012, EVRAZ's North American steel output remained flat as our North American steel mills have continued to operate at high utilisation levels. Rail production decreased by 14% compared to Q22012 due to scheduled annual maintenance at the Pueblo rail mill in September 2012. It decreased by 5% year-on-year, because, besides the regular maintenance of the rail mill in September 2011, crude steel production at EVRAZ Pueblo is limited and in Q32011 available crude steel volumes were shifted to production of construction products from rail production. Production of tubular goods decreased by 8% compared to the same period last year as a result of a market slowdown leading in particular to temporary idling of the Camrose DSAW mill. Spiral weld pipe production was lower vs Q3 2011mainly due to a switch from 36inch to 30 inch pipe in 2012 that resulted in a 9,000 tonnes decrease in production volumes. In Q3 2012 tubular goods production grew up 4% against the Q22012 volumes that were impacted by a Canadian National railroad strike and a labour dispute in Camrose in May 2012. In Q42012 the rail mill is expected to be fully utilised as rail demand remains strong. Flat-rolled production is expected to grow slightly vs Q3 2012. Spiral pipe capacity in Canada is expected to be fully utilised under existing contracts. Overall demand for OCTG drilling activity remains stable with some slight signs of temporary weakness, while the seamless market is expected to remain solid in the near term. EUROPE Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q32011, Q22012 Q32012/ change Q22012, change Crude steel 81 181 (55.1)% 197 (58.6)% Steel products 237 270 (12.4)% 267 (11.3)% Construction products 26 32 (19.5)% 0 n/a Flat-rolled products 207 216 (4.1)% 243 (14.7)% Other steel products 4 22 (83.8)% 23 (84.7)% Production of crude steel at EVRAZ Vitkovice Steel (EVS) in Q32012 decreased by 55% compared to Q32011 and by 59% compared to Q22012 as the steel plant did not operate in July-August 2012 due to scheduled yearly maintenance. Meanwhile, production of steel products decreased by only 12% and 11% respectively as the plate mill used purchased slabs for its operations. Production of flat-rolled products decreased by 4% vs. Q32011 and by 15% vs. Q22012 in response to weakening plate demand in the European markets, as well as a two week scheduled maintenance of the plate mills in the Czech Republic and Italy in August 2012. The EVS heavy section mill, which was temporarily closed in February due to weak demand in Europe, resumed operations in July as a result of margin and price improvement. On 11 October the crude steel production at EVRAZ Vitkovice Steel was temporarily closed due to low demand and the company's plan to reduce its inventory. The rolling mill and heavy section mills will remain open as the company has open orders through the end of 2012. Q42012 crude steel production plans will be driven by market demand. SOUTH AFRICA Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Pig iron 84 116 (27.1)% 163 (48.3)% Crude steel 78 120 (35.3)% 153 (49.3)% Steel products 65 111 (40.9)% 124 (47.3)% Semi-finished products 0 16 n/a 3 n/a Finished products 65 95 (31.1)% 121 (46.1)% Construction products 27 32 (17.4)% 41 (34.8)% Flat-rolled products 35 55 (36.5)% 66 (47.5)% Other steel products 4 8 (49.9)% 14 (72.4)% In Q32012 production of crude steel and steel products at EVRAZ Highveld Steel and Vanadium decreased compared to last year and to the previous quarter as a result of a four-week industrial action initiated by Highveld's largest union NUMSA. An agreement has been reached between EVRAZ Highveld and NUMSA, and the steelworks re-commenced operations on 13 August 2012. It is expected that the steelworks will return to full production in October and the output of crude steel and steel products will increase compared to Q32012. MINING IRON ORE Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Iron ore products 5,158 5,436 (5.1)% 5,258 (1.9)% Lumpy ore (Ukraine) ^ 559 724 (22.8)% 735 (23.9)% Concentrate, saleable (Russia) 1,569 1,734 (9.5)% 1,427 9.9% Sinter (Russia) 1,128 1,009 11.8% 1,130 (0.1)% Pellets (Russia) 1,397 1,465 (4.7)% 1,528 (8.6)% Fines ore (South Africa) 153 186 (18.0)% 132 15.8% Lumpy ore (South Africa) 352 317 11.1% 307 14.7% Overall production of saleable iron ore products by the Company decreased by 5% compared to Q32011 and was flat compared to Q22012. Sukha Balka produced 23% and 24% less lumpy ore compared to Q32011 and Q22012 respectively due to production being scaled down as a result of a skip conveyor repositioning at the Yubileynaya mine that started in mid-September and is expected to continue until mid-November. Production of lumpy ore is expected to remain almost flat in Q42012 compared to Q32012. Production of saleable concentrate in Russia increased by 10% in Q32012 compared to the previous quarter as a result of higher iron ore production. Pellets production decreased by 5% compared to Q32011 and by 9% compared to Q22012 due to kiln repair at EVRAZ KGOK iron ore processing plant. COAL Product, '000 tonnes Q32012 Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Raw coking coal (mined) 2,313 1,237 86.9% 1,935 19.5% Raw steam coal (mined) 892 889 0.3% 700 27.3% Coking coal concentrate (production) 1,627 1,391 17.0% 1,575 3.3% Steam coal concentrate (production) 132 338 (61.0)% 190 (30.7)% Equity investments - Raspadskaya^* Coking coal (mined) 1,378 1,212 13.7% 1,843 (25.3)% *Reported numbers are for 100% production. As at 30September 2012 EVRAZ held a 41% effective interest in the Raspadskaya coal company. Coking coal In Q32012, raw coking coal production at Yuzhkuzbassugol increased by 87% compared to Q32011 and by 20% compared to Q22012 due to the absence of longwall repositionings at the mines in Q32012. The growth of raw coking coal production led to bigger production volumes of coking coal concentrate. Q42012 coking coal production is expected to decrease, largely driven by a 60-day longwall repositioning at the Osinnikovskaya mine. Steam coal Production of raw steam coal remained unchanged compared to the same period last year and increased by 27% vs. Q22012 due to the loss of a month's production volumes at the Gramoteinskaya mine in April-May as a result of a fire at the mine. Steam coal concentrate production decreased by 61% vs. Q32011 and by 31% vs. Q22012 due to larger raw coal sales. Q42012 steam coal production is expected to be flat, quarter-on-quarter. VANADIUM Product, tonnes of V* Q32012 Q3 2011 Q32012/ Q22012 Q32012/ Q32011, change Q22012, change Vanadium in slag (gross production) 4,528 4,804 (5.7)% 5,343 (15.2)% Russia 3,618 3,201 13.0% 3,683 (1.8)% South Africa 911 1,603 (43.2)% 1,660 (45.1)% Vanadium in final products (saleable) Ferrovanadium 3,297 4,317 (23.6)% 3,769 (12.5)% Produced at own facilities 1,671 1,535 8.9% 1,899 (12.0)% Processed at 3^rd parties' facilities 1,626 2,782 (41.6)% 1,871 (13.1)% Nitrovan® 782 819 (4.6)% 763 2.4% Oxides, vanadium aluminium and chemicals 443 302 46.9% 329 34.5% *Calculated in pure vanadium equivalent. In Q32012, EVRAZ's total production of primary vanadium (vanadium slag) decreased by 6% compared to Q32011 and by 15% compared to Q22012, negatively affected by the four-week union industrial action at EVRAZ Highveld Steel and Vanadium. Production of ferrovanadium decreased by 24% compared to Q32011 and by 13% compared to Q22012 due to the scheduled maintenance at EVRAZ Nikom plant in the Czech Republic and reduced raw materials (slag) availability as a result of the industrial action at EVRAZ Highveld. AVERAGE SELLING PRICES USD/tonne (ex works) unless otherwise stated Q32012 Q22012 Q3 2011 Steel products Russia Coke 189 201 222 Pig iron 340 465 494 Steel products Semi-finished products 443 510 537 Construction products 680 683 761 Railway products 908 909 914 Flat-rolled products 577 628 707 Other steel products 714 728 833 Ukraine Coke 201 222 311 Pig iron 349 465 498 Steel products Semi-finished products 505 547 623 Construction products 634 660 706 Other steel products 883 924 1,103 Europe Steel products Construction products 877 n/a 906 Flat-rolled products 715 775 942 North America Steel products Construction products 804 890 944 Railway products 933 1,031 1,040 Flat-rolled products 986 1,086 1,188 Tubular products 1,486 1,566 1,540 South Africa Steel products Semi-finished products 742 465 642 Construction products 712 673 838 Flat-rolled products 740 738 926 Other steel products 615 673 961 Mining products Iron ore Lumpy ore (Ukraine) 61 67 84 Concentrate, saleable (Russia) 82 94 115 Sinter (Russia) 89 98 121 Pellets (Russia) 95 94 133 Fines ore (South Africa) 9 16 22 Coal Raw coking coal 65 79 104 Raw steam coal 27 30 37 Coking coal concentrate 129 135 224 Steam coal concentrate 59 55 85 Vanadium products (USD/t of V) Vanadium in final products Ferrovanadium 24,527 25,405 27,811 Nitrovan® 28,615 29,815 30,333 Oxides, vanadium aluminium and chemicals 30,944 34,524 34,635 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 cut shapes; for South Africa -rails. ### For further information: Investor Relations: London: +442078328990 Moscow: +74952321370 email@example.com Media Relations: Oleg Kuzmin VP, Corporate Communications London: +442078328998 Moscow: +74959376871 firstname.lastname@example.org 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 EBITDA amounted to US$2,898 million. The H12012 consolidated revenue was US$7,619million and the H12012 EBITDA was US$1,175million. This information is provided by RNS The company news service from the London Stock Exchange END IMSEASEPFFSAFEF -0- Oct/18/2012 06:00 GMT
Evraz Plc EVR Interim Management Statement for Q3 2012
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