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Evraz Plc (EVR)

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Thursday 30 April, 2020

Evraz Plc

EVRAZ Q1 2020 TRADING UPDATE

RNS Number : 3847L
Evraz Plc
30 April 2020
 

EVRAZ Q1 2020 TRADING UPDATE

30 April 2020 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its trading update for the first quarter of 2020.

 

 

Q1 2020 vs Q4 2019 HIGHLIGHTS

 

· In Q1 2020, EVRAZ' consolidated crude steel output rose by 3.2% QoQ, mainly due to completion of capital repairs at EVRAZ NTMK's converter no. 2 , which   took place in Q4 2019.

· Total steel product sales fell by 10.4% QoQ. Sales of semi-finished products dropped by 15.3% QoQ, due to higher than usual sales volumes from Russia at Q4 2019 on the back of good export market conditions.

· Sales of finished products went down by 6.1%, due to seasonal decline in demand in the first quarter of the year in Russia as well as due to the sale of Palini e Bertoli in 2019. In addition, sales of finished products were impacted by lower tubular product sales volumes due to a lack of line pipe orders and deterioration of oil country tubular goods (OCTG) market demand in North America .

· Total raw coking coal production decreased by 4.8% QoQ, driven by weaker demand for coal on global markets as well as lower production at Yuzhkuzbassugol's mines following the longwall move at the Uskovskaya mine. Production at Mezhegeyugol has been suspended until favourable market conditions are restored.

· External sales volumes of coking coal products surged by 30.4% QoQ due to successfully completed task to maximise product shipments as well as higher sales volumes to China.

· External sales of iron ore products jumped by 30.0% QoQ as most of the Q4 2019 sales volumes were delivered in Q1 2020 due to logistical limitations on shipments to China.

· Sales of vanadium products fell by 9.9% QoQ, mainly due to weaker demand for FeV in Europe as a result of reduced steel utilisation rates following lower demand in the automotive industry. Lower FeV sales to Europe was partially compensated by increased FeV and oxide sales to Asia and Russia.

 

 

 

Product, '000 tonnes

Q1

2020

Q4

2019

Q1 2020/ Q4 2019, change

Q1

 2019

Q1 2020/ Q1 2019, change

Total crude steel production

3,559

3,449

3.2%

3,488

2.0%

Russia

3,121

3,008

3.8%

2,986

4.5%

North America

438

441

-0.7%

502

-12.7%

Total raw coking coal mined

5,692

5,981

-4.8%

6,844

-16.8%

Total coking coal concentrate
production

3,747

3,537

5.9%

3,684

1.7%

Iron ore products production

3,595

3,277

9.7%

3,636

-1.1%

Total sales of steel products

3,227

3,603

-10.4%

3,135

2.9%

  Semi-finished products

1,437

1,697

-15.3%

1,335

7.6%

  Finished products

1,790

1,906

-6.1%

1,800

-0.6%

Total sales of third-party steel products

175

200

-12.7%

180

-2.8%

Sales of coking coal products

3,278

2,514

30.4%

2,656

23.4%

Sales of iron ore products

355

273

30.0%

464

-23.5%

Sales of vvanadium in slag

765

1,923

-60.2%

1,176

-34.9%

Sales of vanadium final products*

3,168

3,514

-9.9%

2,518

25.8%

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

* In tonnes of pure vanadium

 

CONFERENCE CALL DETAILS

 

A conference call to discuss the trading update will be held on Thursday, 30 April 2020, at:

· 11 am (New York time)

· 4 pm (London time)

· 6 pm (Moscow time)

Key speakers:

· Alexey Ivanov, Senior Vice President, Commerce and Business Development

· 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)2039362999

UK

+7 495 2839705

Russia

+1 646 664 1960

US


Access code: 171622

 

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

 

The Q1 2020 trading update presentation will be available on the Group's website, www.evraz.com, on Thursday, 30 April 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

Product, '000 tonnes

Q1 2020

Q4 2019

Q1 2020/ Q4 2019, change

Q1 2019

Q1 2020/ Q1 2019, change

Pig iron production

2,828

2,764

2.3%

2,712

4.3%

EVRAZ ZSMK

1,556

1,555

0.1%

1,471

5.8%

EVRAZ NTMK

1,272

1,209

5.2%

1,241

2.5%

Crude steel production

3,121

3,008

3.8%

2,986

4.5%

EVRAZ ZSMK

1,980

1,956

1.2%

1,895

4.5%

EVRAZ NTMK

1,141

1,052

8.5%

1,091

4.6%

Total steel products production, net of re-rolled
volume1

2,867

2,871

-0.1%

2,622

9.3%

EVRAZ ZSMK

1,743

1,770

-1.5%

1,686

3.4%

EVRAZ NTMK

1,032

983

5.0%

794

30.0%

EVRAZ Caspian Steel

92

76

21.1%

45

104.4%

Iron ore products production

3,595

3,277

9.7%

3,636

-1.1%

Pellets (EVRAZ KGOK)

1,665

1,531

8.8%

1,643

1.3%

Sinter (EVRAZ KGOK)

916

802

14.2%

898

2.0%

Concentrate saleable (EVRAZ KGOK, Evrazruda)

1,014

944

7.4%

1,095

-7.4%

Coking coal concentrate production

486

493

-1.4%

454

7.0%

From own raw coal2

350

331

5.7%

256

36.7%

From third-party raw coal

136

162

-16.0%

198

-31.3%

Gross vanadium slag production3

4,979

4,667

6.7%

4,446

12.0%

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

1Including EVRAZ Palini e Bertoli

2 From Coal segment

3 In tonnes of pure vanadium

 

In Q1 2020, pig iron production grew by 2.3% QoQ, with a 5.2% QoQ increase in production volumes at EVRAZ NTMK mainly due to the resumption of operations at blast furnace no. 5 following the completion of capital repairs that affected production in Q4 2019.

Crude steel output rose by 3.8% QoQ, mainly due to completion of capital repairs at EVRAZ NTMK's converter no. 2, which took place in Q4 2019.

Total output of steel products remained almost flat QoQ, with a 5% QoQ increase in production volumes at EVRAZ NTMK due to a greater output of steel. In addition, EVRAZ Caspian Steel increased production by 21.1% QoQ due to higher demand from customers.

Output of iron ore products rose by 9.7% QoQ, mainly due to completion of capital repairs of roasting machine no. 1 and lower pellet production, which took place at EVRAZ KGOK in Q4 2019.

Consolidated output of vanadium slag edged up by 6.7% QoQ due to higher vanadium content in iron ore and pig iron as well as duplex process at EVRAZ NTMK.
 

Total sales volumes

Product, '000 tonnes

Q1 2020

Q4 2019

Q1 2020/

Q4 2019, change

Q1 2019

Q1 2020/ Q1 2019, change

Coke1

105

90

17.2%

86

22.1%

Steel products, external sales

2,754

3,073

-10.4%

2,582

6.7%

Semi-finished products

1,401

1,665

-15.9%

1,279

9.5%

  Slabs

570

719

-20.7%

482

18.3%

  Billets

656

767

-14.5%

646

1.5%

  Other steel products2

175

179

-2.3%

151

15.9%

Finished products

1,353

1,408

-3.9%

1,303

3.8%

  Construction products

839

855

-2.0%

729

15.1%

  Railway products

358

370

-3.4%

343

4.4%

  Flat products

-

52

-100.0%

91

-100.0%

  Other steel products

157

131

20.3%

140

12.1%

Steel products, inter-segment sales

40

10

315.9%

186

-78.5%

Third-party steel products, external sales

175

200

-12.7%

180

-2.8%

Iron ore products, external sales

355

273

30.0%

464

-23.5%

Pellets

355

273

30.0%

464

-23.5%

Sales of vanadium in slag

765

1,923

-60.2%

1,176

-34.9%

Sales of vanadium final products3

3,168

3,514

-9.9%

2,518

25.8%

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

1 The Q1 2019 and Q4 2019 data have been adjusted

2 Includes tonnes of pig iron

3 In tonnes of pure vanadium

 

In Q1 2020, external sales of steel products went down by 10.4% QoQ. Sales of semi-finished products fell by 15.9% QoQ due to higher than usual sales volumes from Russia at Q4 2019 on the back of good export market conditions. The decline was partly offset by the completion of capital repairs at EVRAZ NTMK's oxygen-converter steelmaking shop, which took place in Q4 2019.

 

Sales of finished products dropped by 3.9% QoQ due to seasonal decline in demand in the first quarter of the year in Russia as well as due to the sale of Palini e Bertoli in 2019. 

 

Sales of iron ore products surged by 30.0% QoQ as most of the Q4 2019 sales volumes were  delivered in Q1 2020 due to logistical limitations on shipments to China.

 

Sales of vanadium final products fell by 9.9% QoQ, mainly due to weaker demand for FeV in Europe as a result of reduced steel utilisation rates following lower demand in the automotive industry. Lower FeV sales to Europe was partially compensated by increased FeV and oxide sales to Asia and Russia.

 

Cash cost, US$/t

Q1

2020

Q4

2019

Q1 2020 / Q4 2019, change

 Q1

2019

Q1 2020 / Q1 2019, change

Slab cash cost vertically integrated

223

243

-8%

223

0%

Iron ore products (Fe 62%)

38

47

-19%

37

3%

 

Average selling prices

US$/tonne (exworks)

Q1

2020

Q4

2019

Q1

2019

Coke

167

187

223

Steel products

474

454

481

Semi-finished products1

346

317

381

Construction products

503

488

522

Railway products

923

940

743

Other steel products

498

530

593

Pellets

54

53

75

Metal Bulletin Ferro-Vanadium basis 78% min, free DDP, consumer plant, 1st grade Western Europe2

26,54

23,05

73,33

Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid2

27,18

26,05

87,93

1 Includes prices for pig iron

2 US$/kgV

 

In Q2 2020, the Group expects that the COVID-19 pandemic does not significantly affect the production of pig iron and steel on its operations in Russia, however it could possibly affect the rolling mills utilisation following expected decrease in demand on the domestic market.

 

Pig iron production volumes are expected to decrease following capital repairs of blast furnace no. 2 in May 2020, the gas pause in June at EVRAZ ZSMK and capital repairs of blast furnace no. 7 in May 2020 at EVRAZ NTMK.

 

Iron ore pellet production volumes are expected to be slightly lower, mainly due to capital repairs at the pelletising plant and reduced sinter production due to capital repairs at EVRAZ KGOK's sinter plant in May 2020.

 

 

STEEL, NORTH AMERICA SEGMENT

 

Production and sales volumes

Product, '000 tonnes

Q1

2020

Q4 2019

Q1 2020/

Q4 2019, change

Q1 2019

Q1 2020/ Q1 2019, change

Crude steel

438

441

-0.7%

502

-12.7%

EVRAZ US mills

251

213

17.8%

235

6.8%

EVRAZ Canadian mills

188

228

-17.5%

267

-29.6%

Total steel products production, net of re-rolled volume

486

510

-4.7%

559

-13.1%

EVRAZ US mills

336

324

3.7%

351

-4.3%

EVRAZ Canadian mills

150

186

-19.4%

208

-27.9%

Sales of steel products

473

530

-10.8%

553

-14.5%

Semi-finished products

36

32

12.5%

56

-35.7%

Construction products

66

55

20.0%

67

-1.5%

Railway products*

105

117

-10.3%

98

7.1%

Flat-rolled products

107

115

-7.0%

140

-23.6%

Tubular products*

159

211

-24.6%

192

-17.2%

* The Q1 2019 data have been adjusted

 

In Q1 2020, crude steel production edged down by 0.7% QoQ. This was attributable to a sharp drop in steel volumes at EVRAZ Regina due to a large outage, which was offset by greater output from EVRAZ Pueblo. EVRAZ Pueblo's steel production rose due to the greater number of operating days following the planned maintenance outage in October 2019 and an improved operating performance.

 

Total output of steel products fell by 4.7%, mainly driven by a large shutdown in March 2020 (3.5 weeks) due to the Ryuk virus cyberattack and due to a decision to move EVRAZ Regina's planned outage from April to March 2020.

 

In Q1 2020, sales of semi-finished products rose by 12.5%, driven by the greater slab sales.

 

Sales of construction products surged by 20% QoQ with improved market demand as customers had drawn down inventories and required replacement material.

 

Sales of railway products fell by 10.3% QoQ amid a slower order intake in Q1 2020.

 

Flat-rolled product sales dropped by 7% QoQ as a result of weakening market demand.

 

Tubular products sales volumes went down by 24.6% QoQ due to the lack of LP orders and deterioration of OCTG market demand.

 

Prices for construction products climbed by 6% QoQ, driven primarily by higher scrap costs. Prices for tubular products were down due to a change in LDP order mix, as well as higher competition in the OCTG and LP sector while facing softening demand.

 

 

 

 

Average selling prices

US$/tonne (ex-works)

Q1

2020

Q4

2019

Q1

2019

Construction products

685

644

848

Flat-rolled products

767

747

1,048

Tubular products*

1,219

1,348

1,356

* The Q1 2019 data have been adjusted

Sales volumes for EVRAZ North America in Q2 2020 expected to be relatively flat with decline in OCTG volume driven by significantly lower drilling activity in Western Canada to be offset by higher LDP shipments.
 

COAL SEGMENT

 

Production volumes

Product, '000 tonnes

Q1

2020

Q4

2019

Q1 2020/ Q4 2019, change

Q1 2019

Q1 2020/ Q1 2019, change

Raw coking coal (mined)

5,692

5,981

-4.8%

6,844

-16.8%

Yuzhkuzbassugol

2,704

3,065

-11.8%

2,606

3.8%

Raspadskaya

2,952

2,712

8.8%

3,916

-24.6%

Mezhegeyugol

36

204

-82.4%

322

-88.8%

Coking coal concentrate (production)

3,261

3,044

7.1%

3,229

1.0%

Produced at Yuzhkuzbassugol coal
washing plants

1,411

1,407

0.3%

1,433

-1.5%

Produced at the Raspadskaya coal
washing plant

1,850

1,637

13.0%

1,796

3.0%

 

In Q1 2020, overall raw coking coal output fell by 4.8% QoQ, primarily due to weaker market demand as well as lower production at Yuzhkuzbassugol's mines following the longwall move at the Uskovskaya mine. A higher rate of mining equipment failures and more complex geological conditions at the Osinnikovskaya mine also contributed to the overall output decline at Yuzhkuzbassugol's mines QoQ. Production of raw coking coal at Mezhegeyugol went down by 82.4% after the decision was taken to suspend output due to unfavourable market conditions.

 

This was partly offset by higher production volumes at the Raspadskaya mine due to the resumption of mining on three longwalls following the completion of a longwall move.

 

Raw coking coal mined dropped by 16.8% YoY after the Razrez Raspadsky open pit's output was reduced to an appropriate volume for current market demand, as well as due to decision to transfer resources to the production of a more premium coking coal grade at the open-pit site of Raspadskaya-Koksovaya mine.

 

Output of coking coal concentrate rose by 7.1%, primarily due to higher sales volumes QoQ.

 

Sales volumes

Product, '000 tonnes

Q1

2020

Q4

2019

Q1 2020/ Q4 2019, change

Q1

2019

Q1 2020/ Q1 2019, change

External sales

3,278

2,514

30.4%

2,656

23.4%

Raw coking coal

707

527

34.0%

497

42.3%

Coking coal concentrate

2,572

1,987

29.5%

2,160

19.1%

Intersegment sales

1,624

1,688

-3.8%

1,519

6.9%

  Raw coking coal

492

464

6.0%

396

24.2%

Coking coal concentrate

1,132

1,224

-7.5%

1,123

0.8%

 

In Q1 2020, external sales volumes of coking coal products surged by 30.4%. Raw coking coal sales volumes jumped by 34.0% QoQ following higher shipments from the Erunakovskaya and Uskovskaya mines. Coking coal concentrate sales volumes rose by 29.5% QoQ due to successfully completed task to maximise product shipments as well as higher sales volumes to China.

 

Cash cost, US$/t

Q1

2020

Q4

2019

Q1 2020 / Q4 2019, change

 Q1

2019

Q1 2020 / Q1 2019, change

Coking coal concentrate

33

37

-11%

35

-6%

 

Average selling prices

 

US$/tonne (ex works)

 

Q1

2020

Q4

2019

Q1

2019

Raw coking coal

33

35

57

Coking coal concentrate

70

84

117

 

In Q1 2020, coking coal selling prices moved in line with global benchmarks.

 

In Q2 2020, raw coal production is expected to decrease QoQ due to longwall moves at the Raspadskaya-Koksovaya, Uskovskaya mines and reduced output at the Razrez Raspadsky open pit, as well as due to the reserves depletion at one of the longwalls at Raspadskaya mine. The decline will be partly offset by the completion of 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.

 

 

 

###

 

For further information:

 

Media Relations:

Moscow: +7 495 937 6871

[email protected]

 

Investor Relations:

Moscow: +7 495 232 1370

[email protected]

 

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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