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30 January 2012

Q4 2011 NLMK Group Trading update

NLMK, the LSE-listed leading Russian steel producer, today released the following regular trading upd ate for Q4 2011.


NLMK Group’s steel production in Q4 2011 amounted to 3.2 million tonnes (+9.6% quarter?on?quarter). The Group’s steelmaking facilities were running at about 91% (97% at the Lipetsk production site; 56% at the Long Products Division; and 74% at NLMK’s international divisions, including 71% at NLMK Indiana and 79% at NLMK Verona).

Blast Furnace #7 (BF-7) utilization rates at Novolipetsk (NLMK’s main production site in Lipetsk) continued to increase as planned. As a result, steel output in Lipetsk grew to 2.7 million tonnes (+12% quarter-on-quarter), given the scheduled BF-5 repairs in October 2011. Launching the new BF-7 and the new BOF in Q4 allowed the Company to additionally produce some 0.4 million tonnes of slabs.

In Q4 the Group’s sales grew 7% quarter-on-quarter to 3.6 million tonnes, driven by increased steel product sales from the Lipetsk site on the back of stable sales by NLMK’s international assets which totalled 0,935 million tonnes (-1% quarter-on-quarter).

The Group’s domestic sales grew 11% quarter-on-quarter to 1,263 million tonnes, or 35% of total sales, supported by stable demand in the Russian market, particularly from the construction industry and service centres.

Exports accounted for 65% of sales, with the bulk going to our traditional markets, Europe, the Middle East and South-East Asia.

The steel market weakened on the back of the seasonal slowdown in a number of regions. In addition, the process of destocking initiated in mid Q3 by trading companies and end consumers in Europe. As a consequence dollar prices in the export markets decreased in the range of 2-10%.

The Group’s steel production grew 3.6% to 12 million tonnes, mostly driven by the launch of the new BF-7 (and a new BOF) in H2 2011 at the Lipetsk site.

Following the consolidation of the JV with Duferco rolling assets in H2 2011, total annual sales grew more significantly to a record 12.9 million tonnes. This had an impact on the growth of HVA sales that reached 4.5 million tonnes (+29% year-on-year). This growth was additionally supported as the new pre-painting line at Novolipetsk reached design capacity.

FY2011 domestic sales reached a record 4.5 million tonnes, topping the previous peak of 3.8 million tonnes se t in 2008 (+20%). The Company held a share of 47% in the domestic pre-painted steel market, 20% in galvanized steels, 32% in cold-rolled steels, and 14-17% in the rebar and wire rod market.

NLMK Group businesses produced 7.3 million tonnes of finished products, including 4.8 million tonnes by Russian companies and 2.5 million tonnes by foreign assets (since the consolidation of the JV with Duferco starting from July 1, 2011), accounting for 37% and 19%, respectively, of total steel output.

2011 slab deliveries to the Group’s international rolling assets, including the JV with Duferco, consolidated in H2, totalled 1.6 million tonnes.