Severstal' : Severstal reports Q4 & FY2018 operational results

PAO Severstal (SVST) Severstal reports Q4 & FY2018 operational results 18-Jan-2019 / 10:00 MSK Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. Severstal reports Q4 & FY2018operational results   Moscow, Russia - 18January 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 Q4andFY2018. Q4 2018 GROUP HIGHLIGHTS Hot metal output decreased3% q/q in Q4 2018 to 2.23 mln tonnes (Q3 2018: 2.31 mln tonnes),due to BF#2 short-term maintenance works.Crude steel production declinedby 4% to2.94 mln tonnes (Q3 2018: 3.06 mln tonnes)reflecting a decreasein pig iron production and seasonal slowdown of production at Balakovo mini-mill.   Consolidated steel product sales increased2%q/q to 2.76 mln tonnes in Q4 2018(Q3 2018: 2.71 mln tonnes), followingshort-term maintenance works at rolling-mill facilities in the previous quarter. The share of domestic sales declined to62%as a result of seasonal slowdown in domestic consumption (Q3 2018: 65%).   The share of high value-added (HVA) products within the sales portfolio decreasedfour ppts to 44% (Q3 2018: 48%), driven by an increase in semi-finished and hot rolled coil sales and declining salesvolumes of large diameter pipes, colour coated and hot rolled thick plate.   Coking coal concentrate sales volumes from Vorkutaugol continued to grow, increasing 9% q/q following 27% increasein Q3. This was largely driven by higher production volumes at the Zapolyarnaya and Komsomolskaya mines.   Iron ore pellet sales increased 15% to 2.94 mln tonnes (Q3 2018: 2.55 mln tonnes) as a result of higher production volumes and stock sell-off in Q4.   FY2018 GROUP HIGHLIGHTS Hot metal output remained almost unchanged in 2018 at 9.15 mln tonnes, however crude steel production increased 3% to 12.04 mln tonnes (FY2017: 11.65 mln tonnes). This was driven by an improvement insteel production efficiencyfollowing the launch of ladle furnace #2 and higher production volumesfromBalakovo mini-mill. Meanwhile, the Company is continuing its efficiency programmes aimed at decreasing raw material consumption ratios in the steel production process.   Consolidated steel product sales increased 2%y/y to 11.18mln tonnes in FY2018 (FY2017: 10.92 mln tonnes), reflecting crude steel production growth.The high share of HVA products remained high at 46% in FY2018 (FY2017: 46%).   Average selling prices for the majority of steel products grew substantially, by 5%-12% in FY2018, reflecting global trends as well as Severstal's sales and marketing initiatives.   The higher iron ore concentrate sales y-o-y for FY2018 partially reflects the consolidation of the Yakovlevskiy mine and an uptick in production volumes at Olcon.   Coking coal concentrate sales volumes at Vorkutaugol increased by 2% to 3.37 mln tonnes in 2018.   As announced at Severstal's Capital Markets Day in November 2018, the Company plans to achieve coking coal concentrate production volumes growth of up to approximately 5.6mt per annum at the Vorkutaugol mines and plans to ramp-up Yakovlevskiy mine to approximately 5mt per annum in 2023, which will result in a higher level of vertical integration.           SUMMARY OF KEY PRODUCTION, SALES VOLUMES Production, thousands of tonnes Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Crude Steel (Russian Steel) 2,941 3,064 (4%) 12,039 11,651 3% Hot metal (Russian Steel) 2,233 2,307 (3%) 9,146 9,158 (0%)               Sales volumes, thousands of tonnes Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Coking coal concentrate 1,043 953 9% 3,374 3,294 2% Iron ore pellets 2,943 2,554 15% 10,997 11,133 (1%) Iron ore concentrate 1,430 1,424 0% 5,510 4,251 30% Total steel products (Consolidated) 2,756 2,712 2% 11,176 10,919 2% Total steel products (Russian Steel) 2,767 2,722 2% 11,220 10,959 2%   High value added steel products, % Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Severstal (Consolidated) 44% 48% (4 ppts) 46% 46% 0 ppts Severstal Russian Steel 44% 48% (4 ppts) 46% 46% 0 ppts     SEVERSTAL'S CONSOLIDATED SALES (NET OF INTERCOMPANY SALES) Sales volumes, thousands of tonnes Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Coal: 544 381 43% 1,671 1,700 (2%) Coking coal concentrate 169 109 55% 359 127 183% Steam coal 375 272 38% 1,312 1,573 (17%) Iron ore: 2,128 1,671 27% 7,405 6,645 11% Iron ore pellets 1,871 1,465 28% 6,578 6,514 1% Iron ore concentrate 257 206 25% 827 131 531% Semi-finished products 157 97 62% 695 519 34% Rolled products: 2,186 2,148 2% 8,719 8,540 2% Hot-rolled coil 1,017 946 8% 3,895 3,949 (1%) Hot-rolled plate 210 218 (4%) 852 804 6% Cold-rolled coil 296 280 6% 1,286 1,324 (3%) Galvanised and metallic coated coil 208 211 (1%) 835 654 28% Colour coated coil 97 122 (20%) 391 403 (3%) Long products 358 371 (4%) 1,460 1,406 4% Downstream products: 413 467 (12%) 1,762 1,861 (5%) Metalware products 136 150 (9%) 560 615 (9%) Large diameter pipes 107 128 (16%) 440 416 6% Other tubes, pipes, formed shapes 170 189 (10%) 762 830 (8%)                     SEVERSTAL RESOURCES Coking coal concentrate sales volumes from Vorkutaugol continued to grow by 9% q/q following a 27% increase in Q3. This was largely driven by higher production volumes at the Zapolyarnaya and Komsomolskaya mines.  Internal coking coal concentrate procurement declined to 83% in Q4 2018 as the Company increased sales to third parties due to a favourable pricing environment in the local market.   Steam coal sales at Vorkutaugol increased by 37% q/q, reflecting seasonally stronger domestic demand driven by the beginning of the heating season.   Iron ore pellet sales increased by 15% to 2.94 mln tonnes (Q3 2018: 2.55 mln tonnes) driven by higher production volumes and stock sell-off in Q4.   Iron ore concentrate sales remained almost flat in Q4 at 1.43 mln tonnes (Q3 2018: 1.42 mln tonnes).The higher iron ore concentrate sales y/y for FY2018 partially reflects the consolidation of the Yakovlevskiy mine and growth in production volumes at Olcon. Sales volumes, thousands of tonnes Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Coal: 1,417 1,226 16% 4,686 4,868 (4%) Coking coal concentrate 1,043 953 9% 3,374 3,294 2% Steam coal 374 273 37% 1,312 1,574 (17%) Iron ore: 4,373 3,978 10% 16,507 15,384 7% Iron ore pellets 2,943 2,554 15% 10,997 11,133 (1%) Iron ore concentrate 1,430 1,424 0% 5,510 4,251 30%     SEVERSTAL RUSSIAN STEEL ('RSD') RSD steel product sales increased by 2% to 2.77 mln tonnes in Q4 2018 compared with the previous quarter (Q3 2018: 2.72 mln tonnes), following short-term maintenance works at rolling-mill facilities in the previous quarter. The share of domestic sales declined to 62% due to a seasonal slowdown in domestic consumption (Q3 2018: 65%). The share of high value-added (HVA) products within the sales portfolio decreased by four ppts to 44% (Q3 2018: 48%), driven by an increase in semi-finished (slab) and hot rolled coil sales and declining volumes of large diameter pipes, colour coated and hot rolled thick plate. In Q4 2018, the Company increased sales of hot rolled coil to European customers and decreased sales of the product to the Middle East market. Severstal increased stocks ofcolour-coated products, whichreflects lower sales volumesfor the period. LDPsales volumesdeclined16% q/q due to specifics of the product range and after a sell-off of finished goods at the Izhora Pipe Millin Q3 where theutilisation rate continued to remain high in Q4 2018. In March 2018, the Izhora Pipe Mill was awarded a tender to supply approximately 165,000 tonnes of LDPs for Gazprom projects during 2018-2019. Average selling prices for the majority of steel products declined in Q4 2018 in line with global benchmarks, however selling prices for HVA products were less affected by this downward trend due to the nature of the contracts and Severstal's salesandmarketing initiatives. The decline in LDP average selling price in FY2018 was offset by higher sales volumes of thick plate. Sales volumes, thousands of tonnes Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Total steel products 2,767 2,722 2% 11,220 10,959 2% Semi-finished products 157 97 62% 695 519 34% Rolled products: 2,195 2,157 2% 8,760 8,579 2% Hot-rolled coil 1,017 947 7% 3,896 3,950 (1%) Hot-rolled plate 210 218 (4%) 852 805 6% Cold-rolled coil 296 280 6% 1,286 1,324 (3%) Galvanised and metallic coated coil 208 211 (1%) 835 654 28% Colour coated coil 97 122 (20%) 391 403 (3%) Long products 367 379 (3%) 1,500 1,443 4% Downstream products: 415 468 (11%) 1,765 1,862 (5%) Metalware products 137 151 (9%) 562 615 (9%) Large diameter pipes 107 128 (16%) 440 416 6% Other tubes, pipes, formed shapes 171 189 (10%) 763 831 (8%)   Salesprice, $/tonne Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Semi-finished products 444 493 (10%) 463 422 10% Hot-rolled coil 526 545 (3%) 553 492 12% Hot-rolled plate 683 679 1% 708 642 10% Cold-rolled coil 610 616 (1%) 623 591 5% Galvanised and metallic coated coil 730 763 (4%) 753 718 5% Colour coated coil 899 963 (7%) 932 876 6% Long products 452 482 (6%) 483 431 12% Metalware products 958 925 4% 967 893 8% Large diameter pipes 982 1,006 (2%) 1,083 1,373 (21%) Other tubes, pipes, formed shapes 561 601 (7%) 599 571 5%     Q4, H2 & FY 2018 ESG (ENVIRONMENTAL, SOCIAL, GOVERNANCE) HIGHLIGHTS   Health and safety of our employees and contractors is crucial for all our operations.Severstal targets zero fatalities in its operations. In Q4 2018, LTIFR* decreased 5% q/q to 0.78 (Q3 2018: 0.82). In FY 2018 LTIFR was 0.95, decreasing 1% y/y (FY 2017: 0.96). In H2 2018, there were no fatalities of Severstal staff or its contractors. Personnel involvement in safety issues has increased in 2018 and was confirmed by the results of the Accident PreventionSystem audits. On a five-point scale Severstal Russian Steel outperformed the target, achieving 3.3 points, Vorkutaugol reached the base target of 2.6 points.   Health and Safety Q4 2018 Q3 2018 Change, % 2018 2017 Change, % LTIFR* 0.78 0.82 (5%) 0.95 0.96 (1%)     At Severstal Russian Steel atmospheric emissions of pollutants decreased in 2018 by 3% to 301,710 tonnes (2017: 312,039tonnes). Atmospheric emission of pollutants per tonne of steel products went down by 6% to 25.1 kg per tonne of steel in 2018 (2017: 26.8kg per tonne) due to the reconstruction of coke battery #4 starting Q2 2017 and decommissioning of thegas filtering systems in complex steel processing facilities ?? 1-3.   At Severstal Resourcesatmospheric emissions of pollutants increased in 2018 by 7%y/y and totaled 218,694tonnes (2017:204,986tonnes).The growth mostly reflects increased iron ore pellets production and increased emissions of ventilation and drained methane at Vorkutaugol, explained by decommissioning from the drainage system of previously worked out coalfields, and the increased coal production volumes. Environment** Q4 2018 Q3 2018 Change, % 2018 2017 Change, % Atmospheric emission of pollutants, thousand tonnes (Russian Steel) 74.2 75.6 (2%) 301.7 312.0 (3%) Atmospheric emission of pollutants, thousand tonnes (Severstal Resources) 54.0 57.0 (5%) 218.7 205.0 7% Specific atmospheric emission of pollutants, kg per tonne of steel*** 25.2 24.7 2% 25.1 26.8 (6%)       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 1million hours worked. ** Emissions data is calculated in accordance with Russian regulation and is reported to the relevant Russian authorities on an annualbasis and reviewed by them. *** Steel production at Cherepovets Steel Mill and Severstal Long Product Mill Balakovo. Notes:               1) All production data is reported in thousands of tonnes; 2) Sales prices are stated on EXW basis; 3) Segmental data includes intercompany sales; 4) Semi-finished products include pig iron, slabs, billets, ingots, steel casting and forgings; 5) Large diameter pipes include all pipes with a diameter between 820 and 1420 mm.   Contacts               Investor Relations Evgeny Belov T: [phone] ext. 6445 [e-mail]   Public Relations Anastasia Mishanina T: [phone] ext. 6457 [e-mail]   Severstal's financial communications agency - Hudson Sandler Andrew Hayes / Emily Dillon / Dan de Belder T: [phone] ***   P?? Severstal is one of the world's leading vertically integrated steel and steel related mining companies, with assets in Russia, Ukraine, Latvia and Poland. Severstal is listed on RTS and MICEX and the company's GDRs are traded on the LSE. Severstal reported revenue of $7,848 million and EBITDA of $2,577 million in 2017. Severstal's crude steel production in 2018 reached 12.0 million tonnes www.severstal.com

ISIN:	US8181503025
Category Code:	TST
TIDM:	SVST
LEI Code:	213800OKDPTV6K4ONO53
Sequence No.:	7192
EQS News ID:	767329

End of Announcement	EQS News Service