Metinvest BV the parent company of the international vertically integrated steel and mining group of companies published a trading update for the nine months of 2012 ended 30 September, 2012.
9 moths 2012 FINANCIAL HIGHLIGHTS
1. Consolidated revenues of USD 9,777 million
2. Adjusted EBITDA1 of USD 1,531million, with an EBITDA margin of 16%
3. Net profit of USD 420million, with a net margin of 4%
4. Total loans and borrowings amounted to US$3,703 million, comprising USD 2,742 million of long-term borrowings and US$961 million of short-term borrowings
7. Seller’s Notes of USD 83 million
8. Cash and cash equivalents of USD 383 million
9. Capital expenditures of US$566 million
9 months 2012 OPERATIONAL HIGHLIGHTS
1. Steel production amounted to 9,579 thousand tonnes
2. Coking coal output amounted to 8,816 thousand tonnes
3. Production of iron ore concentrate amounted to 27,165 thousand tonnes
GROUP REVENUES
In 9 months 2012, Metinvest's consolidated revenues amounted to USD 9,777 million, representing a decrease of 8% compared with USD 10,646 million in 9 months 2011. The decrease in consolidated revenues was a result of a 10% decline in revenues of the Metallurgical division and a 3% decline in revenues of the Mining division. The Metallurgical division accounted for 74% of external sales (vs. 75% in 9 months 2011), while the Mining division accounted for 26% (vs. 25% in 9 months 2011).
METALLURGICAL DIVISION
In 9 months 2012, revenues from sales of semi-finished products decreased by 29% YoY to USD 1,110 million. In particular, slab sales decreased by 52% (USD 612 million), of which 45% constituted a decline in sales volumes and 7% constituted a drop in average slab prices. The unfavorable situation in the slab segment was driven by low buying activity and oversupply in key sales regions (Europe and the Far East), an overall negative market conditions for flat products, and stronger competition, mostly from Russian producers.
At the same time, sales volumes of square billet increased by 82% (278 thousand tonnes) YoY. The square billet market followed trends set on the raw material and long product markets. Prices on the billet market declined against a background of weaker demand and lower scrap prices during 9 months 2012, with temporary growth in August. In general, the situation was more favorable for billets than for slabs during 9 months 2012, which resulted in a 71% (USD 152 million) YoY increase in sales for the former.
Sales of finished steel products decreased YoY by 12% (USD 726 million) during the reporting period mainly due to a reduction in sales volumes and average prices for flat and pipe products.
Revenues from sales of flat products declined YoY by 17% (USD 659 million) in 9 months 2012, of which 6% constituted a decline in sales volumes and 11% constituted a drop in average prices for flat products. Sales of flat products were affected by unfavorable market conditions and low buying activity. The market was influenced by strong competition between Russian and Ukrainian suppliers given lower demand in the EU, the strengthening of sanctions against Iran, deterioration in the political situation in the Middle East and North Africa, and aggressive export tactics from Asian suppliers (Japan and Korea). As a result, market prices dropped to cost-inefficient levels.
In 9 months 2012, sales volumes of tubular product decreased by 17% YoY (76 thousand tonnes) as a number of long-term pipeline construction projects were completed in 3Q 2012 and demand for large diameter pipes in Russia was weak. Stronger competition from Russian and other international large diameter pipe producers led to a significant price decline in all markets, which resulted in a 24% (USD 139 million) decrease YoY in the Group’s revenues.
At the same time, sales volumes of long and railway products increased by 43 thousand tonnes and 84 thousand tonnes, respectively. The growth was mainly driven by an increase in orders from the CIS and boosted rebar sales through Metinvest’s distribution network in Ukraine.
MINING DIVISION
Sales of iron ore products went up by 8% (1,347 thousand tonnes) YoY to 19,294 thousand tonnes in 9 months 2012. This growth was driven by an increase in sales of pellets by 1,514 thousand tonnes due to the redistribution of 649 thousand tonnes of pellets sold to third parties and an increase in production of salable pellets by 865 thousand tonnes at Northern GOK following the commissioning of the repaired facilities.
Sales of coking coal concentrate remained flat YoY at USD 348 million.
Sales volumes of steam coal concentrate decreased YoY by 67% (734 thousand tonnes) during 9 months 2012 due to weak demand for steam coal in the USA, which led to a reduction in coal production at Metinvest’s US-based operations of United Coal.
CAPITAL EXPENDITURES
During 9 months 2012, Metinvest invested in the following key capital expenditure projects in its Metallurgical and Mining Divisions: the construction of pulverised coal injection unit and a new turbo air blower for its blast furnaces at Ilyich Steel; the construction of pulverised coal injection unit for its blast furnaces at Yenakiieve Steel; the construction of an accelerated cooling unit at the plate mill of Azovstal; the refurbishment of the Lurgi 278-B roasting machine for pellet production and construction of the crushing and transferring complex at Northern GOK; and the construction of the Affinity mining complex at United Coal.
