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Metinvest announces 3Q and 9M 2016 operational results

2 November 2016

Metinvest B.V., the parent company of a vertically integrated group of steel and mining companies (jointly referred to as “Metinvest” or “the Group”), today announces its operational results for the third quarter and the nine months ended 30 September 2016.



OPERATIONAL HIGHLIGHTS

('000 tonnes)3Q 20162Q 2016∆ ‘000 t∆ %9M 20169M 2015∆ ‘000 t∆ %
Crude steel 2,149 2,191 -42 -2% 6,336 5,957 379 6%
Iron ore concentrate (total) 7,137 7,902 -765 -10% 22,948 23,995 -1,047 -4%
Coal concentrate (total) 739 781 -42 -5% 2,320 2,482 -162 -7%

METALLURGICAL SEGMENT

Hot metal production

('000 tonnes)3Q 20162Q 2016∆ ‘000 t∆ %9M 20169M 2015∆ ‘000 t∆ %
Hot metal 2,332 2,223 109 5% 6,613 6,087 526 9%
   Azovstal 821 874 -53 -6% 2,373 2,193 180 8%
   Ilyich Steel 1,033 926 107 12% 2,860 2,682 178 7%
   Yenakiieve Steel 478 423 55 13% 1,380 1,212 168 14%

Crude steel production

('000 tonnes)3Q 20162Q 2016∆ ‘000 t∆ %9M 20169M 2015∆ ‘000 t∆ %
Crude steel 2,149 2,191 -42 -2% 6,336 5,957 379 6%
   Azovstal 950 1,027 -77 -7% 2,759 2,531 228 9%
   Ilyich Steel 690 714 -24 -3% 2,117 2,059 58 3%
   Yenakiieve Steel 509 450 59 13% 1,460 1,367 93 7%


In 3Q 2016, the Group’s hot metal output increased by 5% q-o-q to 2,332 thousand tonnes, as production rose at Ilyich Steel and Yenakiieve Steel. Ilyich Steel boosted hot metal output by 107 thousand tonnes, following the launch of blast furnace no. 4 in May 2016. Production rose at Yenakiieve Steel by 55 thousand tonnes due to lower blast furnace downtime q-o-q following a shortage of raw materials in 2Q 2016. At the same time, production decreased at Azovstal by 53 thousand tonnes, as blast furnace no. 6 was shut down for a major overhaul for 23 days over July and August.

In 3Q 2016, Metinvest’s crude steel production decreased by 2% q-o-q to 2,149 thousand tonnes, mainly due to Azovstal reducing output by 77 thousand tonnes, driven by lower hot metal output. Crude steel production at Ilyich Steel declined by 24 thousand tonnes, as hot metal was redirected to produce pig iron. Crude steel production at Yenakiieve Steel rose by 59 thousand tonnes amid greater hot metal output.

In 9M 2016, the Group’s hot metal output increased by 9% y-o-y to 6,613 thousand tonnes, driven by a partial rebound in production at the steel plants, following a decline during the first half of 2015, as the conflict in Eastern Ukraine continued from the second half of 2014. In particular, due to the conflict, Yenakiieve Steel was shut down completely from 7 February to 16 March 2015 and raw material supplies to Azovstal and Ilyich Steel were constrained. During the reporting period, hot metal output increased by 178 thousand tonnes at Ilyich Steel, 180 thousand tonnes at Azovstal and 168 thousand tonnes at Yenakiieve Steel.

The increase in hot metal output drove a rise in crude steel production. In 9M 2016, crude steel output totalled 6,336 thousand tonnes, up 6% y-o-y, with increases of 58 thousand tonnes at Ilyich Steel, 228 thousand tonnes at Azovstal and 93 thousand tonnes at Yenakiieve Steel.

Metal product output1

('000 tonnes)3Q 20162Q 2016∆ ‘000 t∆ %9M 20169M 2015∆ ‘000 t∆ %
Semi-finished products 668 522 146 28% 1,742 1,828 -86 -5%
   Pig iron 379 250 129 52% 848 810 38 5%
   Slabs 236 217 19 9% 653 558 95 17%
   Square billets 53 55 -2 -4% 241 460 -219 -48%
Finished products 1,658 1,709 -51 -3% 4,868 4,406 462 10%
   Flat products 1,072 1,171 -99 -8% 3,282 3,148 134 4%
   Long products 536 472 64 14% 1,444 1,130 314 28%
   Railway products 19 40 -21 -53% 66 19 47 >100%
   Tubular products 31 26 5 19% 76 109 -33 -30%
      Large-diameter           pipes 9 1 8 N/A 11 66 -55 -83%
      Other pipes 22 25 -3 -12% 65 43 22 51%
TOTAL 2,326 2,231 95 4% 6,610 6,234 376 6%

In 3Q 2016, the Group’s output of merchant semi-finished products increased by 28% q-o-q to 668 thousand tonnes, as merchant pig iron production rose by 129 thousand tonnes following the completion of the overhaul of blast furnace no. 4 at Ilyich Steel. Output of merchant slabs rose by 19 thousand tonnes to fulfil orders.

In 9M 2016, Metinvest’s output of merchant semi-finished products fell by 5% y-o-y to 1,742 thousand tonnes, as output of square billets decreased by 219 thousand tonnes amid a redistribution of production to higher-margin finished products. At the same time, output of merchant slabs increased by 95 thousand tonnes due to lower skelp production for internal needs as Khartsyzk Pipe had been idle since June 2015, as well as lower demand for flat products. Merchant pig iron output increased by 38 thousand tonnes amid more favourable market conditions.

In 3Q 2016, the Group’s output of finished products decreased by 51 thousand tonnes q-o-q to 1,658 thousand tonnes.

In 3Q 2016, Metinvest’s output of flat products dropped by 99 thousand tonnes q-o-q to 1,072 thousand tonnes, driven by falling demand and the shutdown of European re-rolling mills in August for their annual maintenance. The Ukrainian plants decreased output of flat products by 24 thousand tonnes, reducing that of plates by 47 thousand tonnes and increasing that of coils by 23 thousand tonnes. At the same time, the European re-rolling mills decreased output of plates by 38 thousand tonnes and coils by 37 thousand tonnes.

In 3Q 2016, Metinvest’s output of long products rose by 64 thousand tonnes q-o-q. Production increased by 77 thousand tonnes at Yenakiieve Steel, offsetting a decline of 13 thousand tonnes at Azovstal as a result of lower demand.

The Group’s output of rails dropped by 21 thousand tonnes in 3Q 2016, driven by a lack of orders.

Metinvest’s output of tubular products rose by 5 thousand tonnes q-o-q in 3Q 2016 due to an increase of large-diameter pipe (LDP) production at Khartsyzk Pipe.

In 9M 2016, Metinvest’s output of finished goods rose by 10% y-o-y to 4,868 thousand tonnes, as the steel market revived and operations at Yenakiieve Steel stabilised:

  • Flat product output increased by 134 thousand tonnes, mainly due to a rise in plate production at Ilyich Steel of 325 thousand tonnes and coil output at the EU re-rolling mills of 25 thousand tonnes. This compensated a decrease in plate production of 11 thousand tonnes at Azovstal, and a reduction in coil production of 205 thousand tonnes at Ilyich Steel.
  • Long product output increased by 314 thousand tonnes, driven by higher production at Azovstal (21 thousand tonnes), the resumption of operations at Yenakiieve Steel and its Makiivka branch (207 thousand tonnes) and greater output at Promet Steel (87 thousand tonnes) as deliveries of billets for re-rolling stabilised.
  • Rail output increased by 47 thousand tonnes, driven by supplies to Ukrzaliznytsia and the fulfilment of orders from Uzbekistan.
  • Tubular product output dropped by 33 thousand tonnes amid a decline in LDP production of 55 thousand tonnes at Khartsyzk Pipe, which was partly offset by a rise in output of other pipes of 22 thousand tonnes at Ilyich Steel. Khartsyzk Pipe had been idle amid a lack of orders since June 2015.

Coke production2

('000 tonnes)3Q 20162Q 2016∆ ‘000 t∆ %9M 20169M 2015∆ ‘000 t∆ %
Coke production (total) 1,126 1,066 60 6% 3,316 2,974 342 11%
Coke (dry) 282 263 19 7% 817 634 183 29%


In 3Q 2016, coke output rose by 6% q-o-q to 1,126 thousand tonnes, as Avdiivka Coke, Zaporizhia Coke and Azovstal increased production by 3 thousand tonnes, 20 thousand tonnes and 37 thousand tonnes, respectively. The rise was driven by more stable shipments of coking coal concentrate from Krasnodon Coal’s mines and other mines.

Coke output in 9M 2016 rose by 11% y-o-y, as operations were restored at Avdiivka Coke and the needs of the Group’s metallurgical plants increased.

On average, around 75% of overall coke output in 9M 2016 was used within the Group.

 

MINING SEGMENT

Iron ore concentrate and pellet output3

('000 tonnes)3Q 20162Q 2016∆ ‘000 t∆ %9M 20169M 2015∆ ‘000 t∆ %
Iron ore concentrate (total) 7,137 7,902 -765 -10% 22,948 23,995 -1,047 -4%
Iron ore products 3,989 4,582 -593 -13% 13,429 14,856 -1,427 -10%
   Iron ore concentrate 2,602 2,947 -345 -12% 8,981 9,335 -354 -4%
   Pellets 1,387 1,635 -248 -15% 4,448 5,521 -1,073 -19%

In 3Q 2016, Metinvest’s overall production of iron ore concentrate decreased by 765 thousand tonnes q-o-q to 7,137 thousand tonnes, amid a lower rate of overburden removal due to the unsatisfactory condition of mining transportation equipment. Northern GOK reduced output by 253 thousand tonnes, Central GOK by 14 thousand tonnes and Ingulets GOK by 498 thousand tonnes.

In 3Q 2016, the Group’s merchant iron ore product output fell by 13% q-o-q to 3,989 thousand tonnes as a result of lower production of:

  • merchant concentrate by 345 thousand tonnes, due to a drop in overall iron ore concentrate production and an increase in intragroup consumption of 49 thousand tonnes;
  • merchant pellets by 248 thousand tonnes, due to major overhaul work on the roasting machines at Northern GOK.

In 9M 2016, overall production of iron ore concentrate fell by 4% y-o-y to 22,948 thousand tonnes.

In 9M 2016, Metinvest’s merchant concentrate output totalled 8,981 thousand tonnes, down 4% y-o-y, due to lower output of overall concentrate caused by the poor condition of mining transportation equipment and redistribution of concentrate to pellets for intragroup consumption.

In 9M 2016, total output of merchant pellets fell by 19% y-o-y to 4,448 thousand tonnes due to increased intragroup consumption.

Coal concentrate production4

('000 tonnes)3Q 20162Q 2016∆ ‘000 t∆ %9M 20169M 2015∆ ‘000 t∆ %
Coal concentrate (total) 739 781 -42 -5% 2,320 2,482 -162 -7%
Coal concentrate 332 326 6 2% 1,080 1,288 -208 -16%


In 3Q 2016, the Group’s coal concentrate production equalled 739 thousand tonnes, down 5% q-o-q. United Coal decreased coal concentrate output by 157 thousand tonnes due to the annual holiday season in July. Krasnodon Coal's output increased by 115 thousand tonnes due to greater extraction of coal, as shipments of finished products resumed following the lifting of the ban on cargo transportation by Donetsk Railways in June 2016.

In 9M 2016, Metinvest’s production of coal concentrate dropped by 7% y-o-y to 2,320 thousand tonnes. Coal mining at Krasnodon Coal increased by 309 thousand tonnes y-o-y as shipments of finished goods were partly (or temporarily) resumed. Mining at United Coal dropped by 471 thousand tonnes y-o-y due to unfavourable market prices in 1Q 2016 and 2Q 2016, as well as poor geological conditions.



1. Excluding intragroup sales and intragroup utilisation 

Pig iron – merchant pig iron

Flat products include rolled plates, hot-rolled, cold-rolled and hot-dip galvanised sheets and coils

Long products include hot-rolled sections (light, medium, heavy), rebars, merchant bars and wire rods

Rail products include light and heavy rails and rail fasteners

Large-diameter pipes are LSAW (longitudinally submerged arc-welded) large-diameter pipes

Other pipes include other ERW (electric resistance-welded) pipes and seamless pipes

2. The data on production of merchant coke exclude intragroup sales and consumption.

3. The data on production of iron ore materials exclude intragroup sales and consumption.

4. Coal concentrate (total) production figures present coal production in equivalent of coal concentrate. Merchant coal concentrate production excludes intragroup sales and intragroup utilisation.

For editors:

Andriy Bondarenko
Head of Investor Relations Department
Tel: +41 22 591 03 74 (Switzerland)
Tel: +380 62 388 16 24 (Ukraine)
andriy.bondarenko@metinvestholding.com

Yana Kalmykova
Manager of Investor Relations
Tel: +380 62 389 71 36 (Ukraine)
yana.kalmykova@metinvestholding.com

METINVEST GROUP is a vertically integrated group of steel and mining companies that manages every link of the value chain, from mining and processing iron ore and coal to making and selling semi-finished and finished steel products. It comprises steel and mining production facilities located in Ukraine, Europe and the US, as well as a sales network covering all key global markets. The Group is structured into two operating segments, Metallurgical and Mining, and its strategic vision is to become a leading vertically integrated steel producer in Europe, delivering sustainable growth and profitability resilient to business cycles and providing investors with returns above the industry benchmarks. For the six months ended 30 June 2016, the Group reported revenues of US$2.9 billion and an EBITDA margin of 20%.

METINVEST HOLDING, LLC is the management company of Metinvest Group.