DJ PAO Severstal: Severstal Q2 2022 and 6m 2022 operational results
PAO Severstal (SVST) PAO Severstal: Severstal Q2 2022 and 6m 2022 operational results 21-Jul-2022 / 16:03 MSK Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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Severstal Q2 2022 and 6m 2022 operational results
Moscow, Russia - 21 July 2022 - PAO Severstal (MOEX: CHMF; LSE: SVST) consolidated steel sales decreased by 6% yoy in 6m 2022. Iron ore products consolidated sales were 57% lower yoy due to export constraints, while coal sales almost disappeared from consolidated results following Vorkutaugol divestiture. KEY CONSOLIDATED OPERATIONAL RESULTS
Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy Production, kt Hot metal 2,428 2,878 -16% 5,305 5,301 0% Crude steel 2,403 2,922 -18% 5,325 5,737 -7% Sales, kt Steel products, incl: 2,269 2,726 -17% 4,994 5,308 -6% HVA 1,077 1,272 -15% 2,349 2,530 -7% Iron ore products 716 281 >100% 997 2,334 -57% Coal 6 22 -72% 29 628 -95% Q2 2022 Consolidated operational results
-- Production: Hot metal output fell by 16% qoq to 2.43 mln tonnes. Crude steel production decreased by 18% qoq to 2.4 mln tonnes, due to repairs rescheduled to Q2 2022 to balance actual capacities and narrowing demandfor steel.
-- Steel sales declined by 17% qoq to the 2.27 mln tonnes, affected by difficult access to export marketscoupled with the declining demand in the domestic market. Sales of HVA amounted to 1.08 mln tonnes (-15% qoq) withthe decline in sales of cold-rolled and galvanized steel as well as tubes other than LDP.
-- Total share of high value-added (HVA) products was flat at 47%.
-- Raw materials sales: Iron ore sales to third parties increased to 0.72 mln tonnes, driven by a lower Cherepovets steel mill demand for raw materials. Coal sales amounted only to 6 k tonnes as a result of sale ofVorkutaugol in the end of April 2022. 6m 2022 Consolidated operational results
-- Production: Hot metal output was flat yoy at 5.3 mln tonnes. Crude steel production decreased by 7% yoy to 5.32 mln tonnes, as a result of converter repairs which was rescheduled to Q2 2022.
-- Steel sales were down by 6% yoy to 5 mln tonnes, due to limited access to export markets followed by adecrease in the domestic demand. Semis sales were 12% higher yoy due to strong sales of pig iron to the USA in Q12022. Commercial steel sales were lower by 9% yoy to 2 mln tonnes as a result of import ban imposed by the EuropeanUnion in March 2022. HVA sales reduced to 2.35 mln tonnes (-7% yoy) mainly due to decline in galvanized steel andmetalware sales.
-- Total share of high value-added (HVA) products amounted to 47% (-1 ppts yoy).
-- Raw materials sales: Iron ore sales to third parties reduced by 57% yoy to 1 mln tonnes, due to aredistribution of sales to Cherepovets steel mill. HEALTH AND SAFETY PERFORMANCE
-- In 6m 2022 LTIFR among employees amounted to 0.83 (+51% yoy). The overall LTIFR among employees andcontractors was 0.81 (+23% yoy). The main reason for the growth is the increase in the number of reported cases ofminor injuries, while the number of cases of severe injuries remained at the same level, and the number offatalities decreased.
-- In Q2 2022 no fatalities occurred. In 6m 2022 one fatality involving a contractor's employee occurred. Weconducted an internal investigation for the case and took measures to eliminate the causes of fatality. Theincident was caused by OHS requirements violation and misuse of a loading and hauling machine. POLLUTANTS AND GHG EMISSIONS
-- Total emissions of air pollutants decreased by 44% qoq to 72,800 tonnes in Q2 2022.
-- In 6m 2022 total emissions of air pollutants decreased by 20% yoy to 202,280 tonnes due to a decline inproduction at Cherepovets steel mill and JSC Vorkutaugol's spin-off from the Company.
-- Gross GHG emissions (Scope 1 and 2) decreased by 7% as a result of JSC Vorkutaugol's disposal from theCompany on April 29, 2022 and a decrease in production at Cherepovets steel mill.
-- The intensity of greenhouse gas emissions of steel production increased by 5%, mainly due to non-optimalloading of technological units as a result of the volume of production decrease. ALEXANDER SHEVELEV, CEO OF SEVERSTAL MANAGEMENT, COMMENTED:
The first half of 2022 was extremely challenging for Russian steelmakers and Severstal. Against the background of sanctions pressure, we were forced to take urgent steps to preserve the stability of the business. Thus, after the complete shutdown of exports to the EU countries, we had to redirect sales to other, less marginal markets, as well as rebuild our supply chain of inventory to ensure the operation of enterprises. Due to the ongoing restructuring of the company's processes, we made the difficult decision not to disclose the financial results for the Q1 and Q2 2022. But we plan to return to this practice in the future.
The difficult access to exports followed by a decrease in the domestic demand, a sharp strengthening of the ruble and the decline in domestic prices altogether put a pressure on the company's results. Consolidated steel sales were down by 6% yoy to 5 mln tonnes in H1 2022 with the most difficult Q2 2022 - a drop in steel sales for April-June amounted to 17%. As a result of difficulties in sales, we were forced to revise the production program. This led to the fact that steel production decreased by 7% YoY to 5.32 mln tonnes and utilization rate decreased to 75%. At the same time, there was an increase in the cost of production, mainly due to inflationary pressure from transport costs and tariffs of natural monopolies.
Despite the difficult situation, we continue to fulfill our social obligations and in April indexed the salaries of all employees, as well as paid a one-time remuneration - as a result, the average salary for the company increased by 15%. We also continue our environmental protection activities and participation in the federal Clean Air project.
The company's management and staff continue to make active efforts to minimize the negative impact of external factors on the company's business. Severstal has an effective business model and a high level of underlying strength, as it has been engaged in cost reduction, product quality improvement and customer experience improvement for many years. However, in the face of unprecedented challenges, the impact of which is only increasing in the third quarter, we are forced to move to more radical cost reduction programs.
The anti-crisis plan developed by the company's management, which is designed to ensure the company's stability even in the event of a negative development of the situation, involves a comprehensive audit of all the company's business processes and optimization of the least effective projects and initiatives in the medium term. By the end of this year, we aim to reduce administrative costs, personnel costs and outsourcing by a total of 10%. The management will make every effort to preserve the company's team, key competencies and expertise accumulated over the years.
In addition, we will focus on improving the efficiency of procurement and maintenance programs, as well as continue to examine the investment program and to optimize it, primarily through initiatives with a long-term payback. We are confident that the well-coordinated work of the company's management and staff and the accumulated experience in improving the efficiency of processes will allow us to remain competitive in this difficult period." SEGMENT PERFORMANCE Severstal Russian Steel (RSD)
Sales, kt Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy Steel sales 2,277 2,737 -17% 5,014 5,333 -6% Semis 180 464 -61% 644 577 12% Commercial 1,020 1,000 2% 2,020 2,224 -9% HVA 1,078 1,272 -15% 2,350 2,532 -7% Q2 2022 results
-- Steel sales lost 17% qoq and amounted to 2.28 mln tonnes mainly due to lower sales of pig iron and slabsbecause of high exposure of semis to export markets. As a result, semis sales fell by 61% qoq to 0.18 mln tonnes.Commercial steel sales increased by 2% qoq to 1.02 mln tonnes on the back of Russian market recovery for long steelproducts. HVA product sales also decreased by 15% to 1.08 mln tonnes mainly due to decline in demand for tubesother than LDP and cold-rolled steel in Russia and followed by a simultaneous decrease in export of galvanizedsteel.
-- Total share of high value-added (HVA) products increased to 47% (+1 ppts qoq). 6m 2022 results
-- Steel sales declined by 6% yoy to 5.01 mln tonnes affected by export constrains. Semis sales were higherby 12% yoy due to strong sales of pig iron to the US in the Q1 2022. But commercial and HVA steel sales decreased by 9% yoy and 7% yoy respectively, due to decline in export sales, which was partially compensated by reallocationof sales to the domestic market.
-- Total share of high value-added (HVA) products was flat at 47%. Severstal Resources
Sales, kt Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy Coal 304 1,327 -77% 1,631 2,448 -33% Coking coal concentrate 298 1,307 -77% 1,605 1,893 -15% Steam coal 6 20 -68% 26 554 -95% Iron ore 4,197 4,089 3% 8,286 8,801 -6% Iron ore pellets 2,378 2,398 -1% 4,776 5,646 -15% Iron ore concentrate 1,819 1,691 8% 3,510 3,155 11% Q2 2022 results
-- Coal sales dropped by 77% qoq to 0.3 mln tonnes as a result of completed sale of Vorkutaugol in the endof April 2022. Coal will be not included in division results in future periods anymore.
-- Iron ore sales increased by 3% qoq to 4.2 mln tonnes: stronger iron ore concentrate sales (+8% qoq to1.82 mln tonnes) were provided with higher sales to 3rd parties in the Russian market. Pellets sales decreased by1% qoq to 2.38 mln tonnes due to lower demand from Cherepovets steel mill. 6m 2022 results
-- Coal sales decreased by 33% yoy to 1.63 mln tonnes.
-- Iron ore sales lost 6% yoy and amounted to 8.29 mln tonnes due to the stop of pellets export to the EU inMarch 2022. Iron ore concentrate sales increased by 11% yoy to 3.51 mln tonnes due to stable demand from 3rdparties in the Russian market. ANNEX* 1. Consolidates sales by product
Sales volumes, Kt Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy Coal: 6 22 -72% 29 628 -95% Coking coal concentrate 0 3 -100% 3 73 -96% Steam coal 6 20 -68% 26 554 -95% Iron ore: 716 281 >100% 997 2,334 -57% Iron ore pellets 485 268 81% 754 2,287 -67% Iron ore concentrate 231 13 >100% 244 47 >100% Steel: 2,269 2,726 -17% 4,994 5,308 -6% Semi-finished products 180 464 -61% 644 577 12% Pig iron 57 222 -74% 279 66 >100% Slabs 123 242 -49% 365 511 -29% Hot-rolled steel: 996 1,062 -6% 2,059 2,293 -10% incl. Hot-rolled high value added 185 215 -14% 400 412 -3% Cold-rolled steel 230 276 -17% 507 537 -6% Galvanized steel 185 231 -20% 416 530 -21% Colour coated coil 100 94 7% 194 202 -4% Long steel 200 142 41% 342 320 7% Metalware 108 141 -23% 248 317 -22% Large diameter pipes 133 81 65% 215 135 59% Other tubes, pipes, formed shapes 129 225 -43% 353 397 -11% Steel solutions 7 10 -29% 17 0 >100% 2. Russian Steel Division average prices by main products Sales price, RUB/tonne Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy Pig iron 24,742 41,869 -41% 38,366 39,290 -2% Slabs 19,108 45,203 -58% 36,420 43,466 -16% Hot-rolled steel 58,455 67,316 -13% 63,027 54,285 16% Long products 48,851 58,838 -17% 53,073 45,686 16% Average selling price 62,819 69,732 -10% 66,592 59,486 12% 3. Environmental protection data Kt Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy Total emissions of air pollutants (Group), kt 72.8 129.68 -44% 202.28 253.94 -20% Emissions of air pollutants (Severstal Russian steel), kt 53.37 74.05 -28% 127.23 140.95 -10% NOx, kt 2.67 2.9 -8% 5.64 5.65 0% SOx, kt 5.13 6.25 -18% 11.38 14.35 -21% CO, kt 41.38 60.4 -31% 101.78 112.35 -9% VOC, kt 0.12 0.13 -8% 0.25 0.23 10% Particulate matter, kt 3.56 3.98 -10% 7.54 7.82 -4% Emissions of air pollutants (Severstal Resources), kt 19.43 55.62 -65% 75.05 112.99 -34% NOx, kt 1.08 1.49 -28% 2.56 3.54 -28% SOx, kt 16.6 20.02 -17% 36.62 45.00 -19% CO, kt 0.51 1.1 -53% 1.61 2.23 -28% VOC, kt 0.13 0.14 -3% 0.27 0.23 16% Particulate matter, kt 1.05 1.76 -40% 2.81 4.31 -35% Specific air emissions (Severstal Russian steel), kg/t of steel 21.7 24.89 -13% 23.41 24.15 -3%
* Totals may differ from the sum of rows due to rounding 4. GHG emissions data
Q2 2022 Q1 2022 qoq 6m 2022 6m 2021 yoy Greenhouse gas emissions 6.28 7.99 -21% 14.27 15.26 -7% (Scope 1 + Scope 2), million tonnes of CO2-eq. Direct greenhouse gas emissions (Scope 1), million tonnes of CO2-eq. 6 7.5 -20% 13.5 14.27 -5% Indirect Energy Emissions of Greenhouse Gases (Scope 2), million tonnes of 0.28 0.49 -43% 0.77 0.99 -22% CO2-eq. GHG intensity, tonnes of CO2/t of steel** 2.33 2.19 6% 2.26 2.16 5%
** According to the methodology of the Worldsteel Association
For further information, please contact:
Severstal Investor Relations Vladimir Zaluzhsky, Nikita Klimantov T: +7 (495) 926-77-66
vladimir.zaluzhsky@severstal.com na.klimantov@severstal.com
Severstal Public Relations
Anastasia Mishanina T: +7 (495) 926-77-66
anastasia.mishanina@severstal.com
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P?? Severstal is one of the world's most efficient metals and mining companies, creating new products and integrated steel solutions together with its customers and partners. The company's assets are located in Russia, Latvia and Poland. Severstal is listed on MOEX and the company's GDRs are traded on the LSE. Severstal reported revenue of USD11.6 billion and EBITDA of USD6.0 billion in 2021. Severstal's crude steel production in 2021 reached 11.6 mln tonnes. www.severstal.com
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ISIN: US8181503025 Category Code: MSCH TIDM: SVST LEI Code: 213800OKDPTV6K4ONO53 OAM Categories: 3.1. Additional regulated information required to be disclosed under the laws of a Member State Sequence No.: 176406 EQS News ID: 1403361 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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July 21, 2022 09:03 ET (13:03 GMT)
