EVRAZ GROUP 1Q 2011 OPERATIONAL RESULTS

15.4.2011

EVRAZ GROUP 1Q 2011 OPERATIONAL RESULTS

15 April 2011 - Evraz Group S.A. (LSE: EVR) ("EVRAZ") today released its operational results for the first quarter of 2011. 

HIGHLIGHTS:  

  • Production of steel and major rolled products increased in 1Q11 as a result of completion of converter shop modernisation at the end of 2010 and improved demand in key markets.
  • Pricing for major product groups increased, reflecting continuous recovery in all the world markets.
  • Iron ore production grew up as a result of efficiency improvements
  • Coking coal production decreased due to one-off events such as longwall repositioning and temporary closure of a mine for air-gas mix monitoring and expected to be higher in 2011 than in 2010.

  

STEEL

The production of finished goods in a year on year first quarter comparison demonstrated growth of 3-14% across the product set.  On a sequential quarter-on-quarter basis, the data reflects seasonality in the business.  Consolidated rolled products volumes increased 7.0% in 1Q11 compared to the previous quarter. There was a 14.0% increase in production of semi-finished products for sale driven by demand and higher prices globally; a 20.2% increase in flat-rolled products output due to recovering markets in Europe and North America; and a 23.2% decrease in tubular goods production due to spring breakup season in North America.

Russia

Russian mills produced more crude steel (+5.4% vs. 4Q10 and +10.0% vs. 1Q10) following modernisation of the converter shop at EVRAZ NTMK which was completed at the end of 2010.

Production of steel rolled products has increased both compared to the previous quarter (+3.7%) and to the similar period last year (+10.1%) as a result of crude steel volumes expansion and a continuous recovery in the Russian and global markets. The year-on-year output of construction products was 10.0% higher in 1Q11 than in 1Q10 and slightly decreased compared to 4Q10 due to seasonal slowdown of the construction activity.

Ukraine

EVRAZ DMZ produced 26.3% more semi-finished products and 13.9% less construction products in 1Q11 compared to 4Q10 due to seasonality.

Europe

In 1Q11, EVRAZ Vitkovice Steel doubled the production of crude steel compared with 4Q10, after reaching an agreement on hot metal supplies in mid-November 2010.

Flat-rolled product output increased by 22.3% in 1Q11 compared to 4Q10 as a result of significant market improvement, particularly in Germany and Central Europe. Production of premium plate and cut shapes (Other steel products) increased due to higher demand from energy-related (wind towers, line pipes) and yellow goods sectors.

 

North America

Production of tubular goods decreased by 23.2% against the 4Q10 volumes and remained at the same level as in 1Q10 driven by the seasonality of the tubular goods industry. 4Q is typically a strong period and in March, April, and May, during the spring breakup, when oil and gas industry activity is low, tubular mills intentionally reduce production in anticipation of a decline in sales. The seasonal weakening of demand did not impact EVRAZ seamless pipe business which continued its expansion through market share gain. A big large diameter pipe order at the EVRAZ Regina spiral weld mill was completed in 2010, but production of large diameter pipes at EVRAZ Regina remains strong. The mill is now producing pipes under small orders from different customers which increases overall changeover time.

In 1Q11, flat-rolled production increased by 30.1% from Q4 2010 and by 10.4% from 1Q10 as a result of significant growth in end-user demand for plate and general improvement of the market sentiment.

Production of railway products at EVRAZ Pueblo showed a 28.3% increase year over year reflecting a general increase in the US rail market.

Construction product output decreased by 10.5% in 1Q11 compared to 1Q last year and by 23.8% compared to 4Q10.  Beginning from the first quarter of 2010, the production of rod and bar decreased quarter over quarter at EVRAZ Pueblo as Evraz has prioritised the production of seamless pipes and rails, two higher margin products, over rods and bars, as EVRAZ Pueblo has limitations on total steel output.

 

South Africa

Pig iron production and crude steel declined by 7.9% and 5.0% respectively vs. 4Q10 due to operational issues at EVRAZ Highveld's iron and steel making facilities.

Production of construction steel increased by 35.4% compared to 4Q10 - the market recovered after the weakness in 4Q10 that had led to the rolling mill's three-week shutdown in November-December 2010. Volumes of flat-rolled products increased by 10.2% vs. 4Q10 due to stronger demand for plate and its shortage in the local market as well as restocking. Improved demand for finished products almost fully eliminated export of semi-finished products. 

  

MINING

Iron Ore

Sinter and pellet production in Russia increased by 19.2% and 1.1% respectively in 1Q11 vs. 4Q10 and by 11.3% and 14.6% respectively vs. 1Q10 as a result of increased mined iron ore volumes.

Sukha Balka in Ukraine produced 54.4% less lumpy ore in 1Q11 compared to 4Q10 because of a scheduled lifting equipment upgrade at the Yubileynaya mine. 

Coking Coal

Raw coking coal production at Yuzhkuzbassugol declined by 17.4% against 4Q10 resulting from the temporary technical issues: longwall repositioning at the Yesaulskaya mine and temporary shutdown of the Alardinskaya mine to conduct air-gas mix monitoring. We expect coking coal volumes to recover in the next quarter with 2011 volumes being higher than in 2010.

Steam Coal

Raw steam coal production was up 37.4% in 1Q11 compared to 4Q10 after the completion of the longwall equipment repositioning at the Gramoteinskaya mine held in September 2010 through January 2011. The output decreased by 45.2% compared to 1Q10, following shutdown of the Tagaryshskaya mine for a safety inspection in 4Q10 and the resulting decision to lay up the mine.

The production of steam concentrate decreased by 10.2% vs. 4Q10 due to refusal of the third party, the Listvyazhnaya Coal Washing Plant, to concentrate raw steam coal mined by Yuzhkuzbassugol.


VANADIUM 

Production of vanadium slag, a by-product of steel production, increased by 12.9% at NTMK in Russia and decreased by 2.6% at Highveld in South Africa in 1Q11 compared to 4Q10 in correlation with steel production.

Production of ferrovanadium rose by 33.2 % and of Nitrovan® by 38.3% in 1Q11, with all the sites operating at maximum V2O5 production capacity and with restart of slag processing in China which increased V2O5 available for processing in 1Q11.

 

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Please note that the total volume of rolled steel products in the table below excludes those re-rolled at other Group's mills. These volumes are eliminated as intercompany sales for purposes of Evraz's consolidated operating results. 

 

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For further information:

Media contact:
Oleg Kuzmin
VP, Corporate Communications
+7 495 937 6871
media@evraz.com

Investor contact:
Alexander Boreyko
Director, Investor Relations
+7 495 232 1370
ir@evraz.com

 

Evraz Group S.A. (EVRAZ) is a vertically-integrated steel, mining and vanadium business with operations in the Russian Federation, Ukraine, the USA, Canada, the Czech Republic, Italy and South Africa. The Company was ranked the 14th largest steel producer in the world based on crude steel production of 15.3 million tonnes in 2009. In 2010, the Company produced 16.3 million tonnes of crude steel and sold 15.5 million tonnes of steel rolled products. EVRAZ's internal consumption of iron ore and coking coal is covered by its mining operations. EVRAZ's consolidated revenues for the year ended 31 December 2010 were US$13,394 million and consolidated adjusted EBITDA amounted to US$2,350 million.

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