Severstal reports Q4 & FY2019 operatioal results

January 17, 2020

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 Q4 and FY2019.

Q4 2019 GROUP HIGHLIGHTS

• Hot metal output declined 4% q/q in Q4 2019 to 2.36 mln tonnes (Q3 2019:
  2.46 mln tonnes) due to short-term maintenance works at blast furnace
  facilities in Q4 2019. Crude steel production declined 10% to 2.71 mln tonnes
  (Q3 2019: 3.03 mln tonnes) affected by short-term maintenance works at the BOF
  and EAF facilities and lower EAF production in Q4 2019 following the sale of
  the Balakovo mini-mill in the previous quarter.
• Consolidated steel product sales declined 6% q/q to 2.65 mln tonnes in Q4
  2019 (Q3 2019: 2.83 mln tonnes). The Company increased the share of steel
  export shipments to 41% (Q3 2019: 33%) responding to a seasonal slowdown in
  domestic demand.
• The share of high value-added (HVA) products within the sales portfolio
  remained at 45% (Q3 2019: 45%), supported by higher sales of hot rolled thick
  plate and cold rolled coil products and declining volumes of long and hot
  rolled coil sales.
• Coking coal concentrate sales volumes from Vorkutaugol declined 1% q/q due
  to a decrease in run-of-mine production q/q.
• Iron ore pellet sales grew 14% to 2.81 mln tonnes (Q3 2019: 2.46 mln
  tonnes) reflecting higher production of pellets at Karelsky Okatysh. Iron ore
  concentrate sales volumes declined 17% to 1.60 mln tonnes (Q3 2019: 1.93 mln
  tonnes) driven by a decline in iron ore volumes at Karelsky Okatysh.

FY2019 GROUP HIGHLIGHTS

• Hot metal output increased 4% y/y to 9.49 mln tonnes in 2019 (FY2018: 9.15
  mln tonnes) driven by improved efficiency arising from maintenance works and
  higher quality raw materials. Crude steel production in 2019 declined 2% to
  11.85 mln tonnes (FY2018: 12.04 mln tonnes), as higher aggregate productivity
  levels were offset by lower EAF production in H2 2019 following the sale of the
  Balakovo mini-mill.
• Coking coal concentrate sales volumes from Vorkutaugol surged 38% y/y, as a
  result of planned production growth.
• Iron ore concentrate sales volumes increased 14% y/y to 6.26 mln tonnes
  (FY2018: 5.51 mln tonnes) predominantly reflecting production volumes growth at
  Karelsky Okatysh and the Yakovlevskiy mine. • The share of HVA products
  remained high at 45% in FY2019 (FY2018: 46%), reflecting higher sales of thick
  plate, as well as galvanised and colour-coated products following the launch of
  new product lines, which reached full utilisation in the beginning of
  2019.
• In 2019 the share of domestic shipments reached 65% (FY2018: 61%) due to
  more attractive pricing in the Russian market.

SUMMARY OF KEY PRODUCTION, SALES VOLUMES

SEVERSTAL’S CONSOLIDATED SALES (NET OF INTERCOMPANY
SALES

Q4, H2 & FY 2019 ESG (ENVIRONMENTAL, SOCIAL, GOVERNANCE)
HIGHLIGHTS

• The health and safety of all our employees and contractors is an absolute
  priority for Severstal as we remain committed to reaching zero fatalities
  across all our operations.
• The LTIFR for FY 2019 stood at 0.61, decreasing by 36% y/y (FY2018: 0.95),
  surpassing our set target of 0.84 for 2019 by 27%. The total number of
  incidents in 2019 decreased to 55 from 81 in 2018.
• Tragically, there were three fatal incidents in H2 2019 including two
  members of our staff and one contractor. We are investigating each of these
  cases in detail and taking preventative measures to ensure that similar
  incidents do not take place in the future.
• The overall level of employee engagement in safety issues has increased in
  2019; this is confirmed by the results of our Accident Prevention System (APS)
  audits, which demonstrate that both Russian Steel and Severstal Metiz exceeded
  their set targets, achieving engagement levels of 3.9 and 2.8 out of 5
  respectively. Vorkutaugol also met its target engagement level of 3.0.

• At Severstal Russian Steel, the total emissions of air pollutants decreased
  by 8% in 2019 to 277,492 tonnes (2018: 301,695 tonnes). The level of emissions
  of air pollutants per tonne of steel products was reduced by 7% to 23.4 kg per
  tonne of steel in 2019 (2018: 25.1 kg per tonne), due to decreased consumption
  intensity of coke fines while sintering following reconstruction of solid fuel
  preparation unit at Sinter plant 3. The overall reduction in total emissions is
  also related to the sale of Mini-Mill Balakovo in 2019 and its inclusion into
  the calculations scope for H1 2019 only (leading to 8,300 tonnes reduction in
  pollutants).
• At Severstal Resources, the total emissions of air pollutants fell by 3% in
  2019 to 213,291 tonnes (2018: 220,016 tonnes). This decrease primarily reflects
  reduced emissions levels at Vorkutaugol due to higher volumes of methane
  utilised at the mines’ boiler units.

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 1 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 a review of
methodology and scope of emissions measurement at Karelsky Okatysh and
Olcon.

**** Steel production at Cherepovets Steel Mill and Severstal Long
Product Mill Balakovo (the latter for Jan – Jul 2019)