Severstal reports Q2 & H1 2017 operational results

Severstal reports Q2 & H1 2017 operational results

Moscow, Russia - 12 July 2017 - PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world's leading vertically integrat--ed steel and steel-related mining companies, today announces its operational results for Q2 & H1 2017.

Q2 2017 GROUP HIGHLIGHTS 

· Hot metal output decreased 4% to 2.24 mln tonnes (Q1 2017: 2.34 mln tonnes) compared with the previous quarter due to maintenance works at BF#2, BF#4 and BF#5.

· Crude steel production declined 1% to 2.83 mln tonnes (Q1 2017: 2.86 mln tonnes). Crude steel output at CherMK was impacted by planned maintenance works at converter #1.

· Consolidated steel product sales grew 9% to 2.75 mln tonnes compared with the previous quarter (Q1 2017: 2.53 mln tonnes). During Q2 2017 the Company sold-off stocks of HVA products accumulated in previous quarters, responding to increased demand from local traders which primary reflects the beginning of construction season in Russia. Semi-finished product sales were impacted by the maintenance works at converter #1.

· Responding to improved domestic demand in Q2, the Company increased domestic sales volumes to 60% (Q1 2017: 58%) of the sales mix.

· Following the refurbishment of the four-stand cold rolling mill at CherMK and the increase in production volumes, cold-rolled coil sales volumes in H1 2017 were up 52% compared with H1 2016.

· The company maintained its share of high value-added (HVA) products within the sales portfolio at 44% (Q1 2017: 44%) as increased cold-rolled, galvanized and colour-coated sales were matched by growth in HRC and long product sales.

· In Q2 2017, coking coal concentrate sales volumes from Vorkutaugol increased 16%, driven by production volumes growth after scheduled long-wall repositioning at the Vorkutinskaya and Komsomolskaya mines in Q1.

· Iron ore concentrate sales volumes surged 54% q/q to 1.24 mln tonnes (Q1 2017: 0.80 mln tonnes). Iron ore pellet sales improved 12% and totalled 2.88 mln tonnes (Q1 2017: 2.58 mln tonnes).

· Steel and raw material prices were under pressure due to high inventories in China, but capacity cuts and stable Chinese demand supported the markets. The anticipated supply normalisation in the seaborne hard coking coal market was temporarily disrupted by storm Debbie in Queensland. The final decision by the EU Commission on HRC Anti-Dumping duties expected in October. Russian domestic steel demand is slowly recovering, according to industry sources.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES AND SELLING PRICES DATA

SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

SEVERSTAL RESOURCES

· In Q2 2017 coking coal concentrate sales volumes from Vorkutaugol increased 16% driven by production volumes growth following scheduled long-wall repositionings at the Vorkutinskaya and Komsomolskaya mines in Q1. As anticipated, internal coking coal concentrate procurement increased 16% while the minor volumes allocated by Vorkutaugol to external sales remained broadly flat.

· Steam coal sales at Vorkutaugol declined 9% q/q reflecting weaker demand from domestic consumers at the end of the heating season.

· Iron ore concentrate sales volumes surged 54% q/q to 1.24 mln tonnes (Q1 2017: 0.80 mln tonnes). Iron ore concentrate sales improvement in Q2 reflects seasonal dynamics and planned production increase.

· Iron ore pellet sales improved 12% and totalled 2.88 mln tonnes (Q1 2017: 2.58 mln tonnes). Iron ore pellet sales volumes were impacted by stock reduction.

SEVERSTAL RUSSIAN STEEL ('RSD')

· RSD steel product sales increased 9% to 2.76 mln tonnes compared with the previous quarter (Q1 2017: 2.54 mln tonnes). During Q2 2017 the Company sold off stocks of HVA products accumulated in previous quarters due to increased domestic demand from local traders and the beginning of the construction season in Russia. The maintenance works at converter #1 impacted semi-finished product sales.

· Responding to improved domestic demand in Q2 the Company increased domestic sales volumes to 60% (Q1 2017: 58%) of the sales mix.

· Following the refurbishment of the four-stand cold rolling mill at CherMK and the increase in production volumes, cold-rolled coil sales volumes in H1 2017 were up 52% in comparison with H1 2016. Moreover, previously accumulated seasonal cold-rolled coil (CRC) stock was sold in Q2 which drove an 8% sales increase q/q.

· Increased cold-rolled, galvanised and colour-coated sales supported the share of high value-added (HVA) products within the sales portfolio flat q/q at 44% (Q1 2017: 44%).

· Large diameter pipe (LDP) sales volumes declined 15% q/q driven by lower LDP sales from Izhora Pipe Mill for Gazprom projects. Meanwhile, Izhora Pipe Mill remains at full capacity utilisation and continues to supply LDPs to Gazprom, Transneft and other customers. The company expects to reduce LDP inventories accumulated since the beginning of 2017 in subsequent quarters.

· Average selling prices for hot-rolled coil increased due to a higher share of domestic shipments. Colour-coated prices declined following a negative price trend in the Russian market. The company allocated some volumes of hot-dip galvanised (HDG) products to export markets which supported the average price. Long product prices decreased due to a decline in raw materials and weaker domestic demand impacted by a deferred construction season.

1) All production data is reported in metric tonnes;

2) Sales prices are stated on EXW basis;

3) Segmental data includes intercompany sales;

4) Semi-finished products include pig iron, slabs, billets, ingots, steel casting and forgings;

5) Metalware sales volumes and metalware average selling prices include Severstal Metiz, Severstal Distribution LLC and AO Severstal Distribution data;

6) Large diameter pipes include all pipes with a diameter between 820 and 1420 mm.

Investor Relations

Evgeny Belov

T: +7 (495) 926-77-66 ext. 6445

[email protected]

Public Relations

Anastasia Mishanina

T: +7 (495) 926-77-66 ext. 6457

[email protected]

Severstal's financial communications agency - Hudson Sandler

Andrew Hayes / Emily Dillon / Fern Duncan

T: +44 (0) 20 7796 4133

PАО Severstal is one of the world's leading vertically integrated steel and steel related mining companies, with assets in Russia, Ukraine, Latvia and Poland. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $5,916 million and EBITDA of $1,911 million in 2016. Severstal's crude steel production in 2016 reached 11.6 million tonnes www.severstal.com