Severstal reports Q2 2019 operatioal results

July 12, 2019

PAO Severstal (MICEX-RTS: CHMF; LSE: SVST), one of the world’s leading vertically integrated steel and steel-related mining companies, today announces its operational results for Q2 2019.

Q2 2019 GROUP HIGHLIGHTS

• Hot metal output declined q/q in Q2 2019 to 2.30 mln tonnes (Q1 2019: 2.36 mln tonnes) due to short-term maintenance works at BF#1, BF#4 and BF#5. Crude steel production remained almost flat at 3.06 mln tonnes (Q1 2019: 3.04 mln tonnes) mainly reflecting EAF steel output growth. 
• Consolidated steel product sales remained unchanged q/q at 2.84 mln tonnes in Q2 2019 (Q1 2019: 2.83 mln tonnes). The share of domestic sales rose to 70% due to the increased attractiveness of domestic sales (Q1 2019: 65%). 
• The share of high value-added (HVA) products within the sales portfolio increased 2 ppts to 46% (Q1 2019: 44%), reflecting a decline in sales of semi-finished, hot rolled coil products and higher sales of galvanised, colour-coated and large diameter pipes (LDPs). 
• Coking coal concentrate sales volumes from Vorkutaugol declined 7% due to planned short-term modernisation works at coal beneficiation facilities in Q2 2019. Meanwhile run-of-mine (ROM) coal production at Vorkutaugol in Q2 2019 increased 13% q/q. 
• Iron ore pellet sales increased 2% to 2.90 mln tonnes (Q1 2019: 2.83 mln tonnes) due to seasonal factors despite a q/q decline in production. 
• Iron ore concentrate sales volumes increased 10% to 1.43 mln tonnes (Q1 2019: 1.30 mln tonnes) following production growth.

H1 2019 GROUP HIGHLIGHTS

• Hot metal output increased 1% y/y in H1 2019 to 4.67 mln tonnes (H1 2018: 4.61 mln tonnes) driven by the improved efficiency of maintenance works and the higher quality of raw materials. Crude steel production increased to 6.10 mln tonnes (H1 2018: 6.03 mln tonnes) mainly reflecting EAF steel output growth and higher productivity of aggregates.
• Coking coal concentrate sales volumes from Vorkutaugol increased 44% y/y driven by coal production growth. Iron ore concentrate sales volumes increased 3% y/y to 2.73 mln tonnes (H1 2018: 2.66 mln tonnes) mainly reflecting ramp-up of the Yakovlevskiy mine.
• The share of HVA products remained high in H1 2019 at 45% which primarily reflects higher sales of galvanised and colour-coated sales following the launch of new product lines, which reached their full utilisation rates in Q1 2019, as well as higher sales of hot rolled thick plate y/y.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES

SEVERSTAL’S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES)

Q2 & H1 2019 ESG (ENVIRONMENTAL, SOCIAL, GOVERNANCE) HIGHLIGHTS

• The health and safety of our employees and contractors is the Group’s foremost priority. Severstal constantly scrutinises health and safety performance across its operations, and targets zero fatalities. In Q2 2019, the Group’s LTIFR* decreased 44% q/q to 0.51 (Q1 2019: 0.91). In H1 2019 LTIFR reduced 37% compared with the comparative period to 0.71 (H1 2018 – 1.12).
• In H1 2019 there were no fatalities of our staff, however, there were unfortunately two contractor fatalities. We are investigating each of these cases to prevent similar incidents from taking place in the future.
• In H1 2019 Severstal started implementing its Health and Safety 2025 strategy, which aims at a sustainable reduction of occupational accidents (to reduce LTIFR by 50% compared with 2017 and to eliminate all work-related fatalities) including through introducing innovative technologies (computer vision, controlling systems). The development and implementation of effective tools is focused on three areas:

1. Preventing health and safety rule violation;
2. Identifying hazards which are not currently being managed and assessing their risk level with the maximum involvement of workers;
3. Managing workers’ conditions and preventing hazards emerging due to any deterioration.

• At Severstal Russian Steel’s atmospheric emissions of pollutants decreased 8% in H1 2019, to 142,500 tonnes compared with the previous period (H1 2018: 154,400 tonnes). Atmospheric emission of pollutants per tonne of steel products fell by 9% to 23.3 kg per tonne of steel in H1 2019. Atmospheric emissions of pollutants were reduced through the reduction of carbon monoxide emissions at the coke battery due to lower consumption of solid fuel and limestone in sinter plant-3, increased iron ore concentration and a reduction of silicon oxides in the concentrate.
• At Severstal Resources atmospheric emissions of pollutants decreased 7% in H1 2019 compared with the previous period and totalled 100,200 tonnes (H1 2018: 107,800 tonnes). This was achieved through the utilisation of a larger volume of degassing methane at Vorkutaugol compared with H1 2018.

Notes to this section:

* LTIFR refers to Lost Time Injury Frequency Rate of Severstal staff, the number of lost time injuries occurring in a workplace per one million hours worked.

** Emissions data is calculated in accordance with Russian regulations and is reported to the relevant Russian authorities on an annual basis and reviewed by them.

***Minor changes in data for H1 2018 took place due to changes in scope: starting in 2019, the scope included the following Severstal Group subsidiaries: Severstal Steel Solutions, Severstal Distribution, Severstal Vtorchermet, Severstal Airlines, Severstal-SMC-Vsevolozhsk, Severstal TPZ Sheksna and Yakovlevsky Mine **** Steel production at Cherepovets Steel Mill and Severstal Long Product Mill Balakovo.

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