Trading update for the first 9 months of 2013

The information in this press release has been prepared based on preliminary financial results. Intragroup transactions have been eliminated in consolidation. This announcement does not contain sufficient information to constitute a full set of financial statements. The following preliminary results may differ from financial statements prepared in accordance with International Financial Reporting Standards (IFRS). The numbers in this press release have not been audited or reviewed.

Metinvest B.V. publishes consolidated financial statements prepared in accordance with IFRS for the six months ending 30 June and for the year ending 31 December.

FINANCIAL HIGHLIGHTS

Revenues

In 9M 2013, Metinvest's consolidated revenues remained broadly stable year-on-year (y-o-y) and totaled US$9,805 million. The Metallurgical division accounted for 76% of external sales (74% in 9M 2012) and the Mining division for 24% (26% in 9M 2012).

Metallurgical division

Revenues in the Metallurgical division come from sales of steel and coke products as well as re-sales of steel products. In 9M 2013, the division’s top line amounted to US$7,409 million, up 3% y-o-y. Sales of steel products accounted for 94% of the total. Despite falling average steel prices and lower sales volumes, primarily of tubular products, revenues were largely compensated by higher re-sale volumes of other steel products.

Sales volumes of other steel products increased by 1,496 thousand tonnes y-o-y, of which 92% was attributable to re-sales of Zaporizhstal’s output, following its integration with Metinvest. Steel re-sales from Zaporizhstal increased by US$761 million and contributed US$1,112 million to the division’s revenues in 9M 2013. Around 50% of steel re-sales went to the Middle East and North Africa (MENA), another 40% to Europe and the CIS, and the rest to Ukraine.

In 9M 2013, sales of semi-finished products totalled US$1,067 million, down 4% y-o-y, due to a fall in the average prices of pig iron, slabs and square billets. At the same time, sales of pig iron increased by 34% y-o-y, driven by higher sales volumes, mainly to the US (159 thousand tonnes) and Europe (71 thousand tonnes), partly offset by a drop in shipments to MENA and other regions (79 thousand tonnes overall).

The average prices for slabs and square billets fell by 13% and 11% y-o-y, respectively, reducing revenues from their sales by 8% and 14%. The fall in revenues from slabs was partly compensated by an increase in sales volumes to Europe and MENA (59 thousand tonnes overall).

Revenues from sales of finished products declined by 14% y-o-y to US$4,484 million in 9M 2013. This was mainly due to a fall in average prices for flat, long and tubular products, as well as a slump in sales volumes of tubular products.

In 9M 2013, sales of flat products fell by 10% y-o-y to US$2,869 million, of which 11 pp was attributable to a decline in average prices throughout our markets. At the same time sales volumes marginally increased y-o-y as a result of increased shipments to Southeast Asia, Europe and MENA, which were offset by an overall decline of 291 thousand tonnes in Ukraine and the CIS.

Revenues from sales of long products fell by 6% y-o-y to US$1,276 million in 9M 2013. The main cause was a 9% drop in average product prices, which was partly compensated by increased sales volumes in Europe and the CIS. 

Revenues from sales of tubular products fell by 84% y-o-y to US$70 million in 9M 2013. This was caused by a 79% slump in sales volumes, as various large pipeline projects were completed in 2012 and some planned projects were rescheduled, in particular, the second phase of the East-West pipeline (Turkmenistan) and the third stage of the Central Asia-China pipeline.

Revenues from sales of railway products increased by 5% y-o-y to US$269 million in 9M 2013, due to an increase in average prices of 5%. The volumes sold remained stable y-o-y.

Mining division

Revenues in the Mining division come from sales of iron ore, coal and other products. Sales of iron ore products accounted for 87% of the division’s top line in 9M 2013. The division’s revenues dropped by 7% y-o-y to US$2,396 million due to a substantial decrease in sales of coal products.

In 9M 2013, sales of iron ore products grew by 8% y-o-y to US$2,094 million. This was driven mainly by a rise in sales volumes of iron ore concentrate of 1,412 thousand tonnes and pellets of 534 thousand tonnes.

Despite a dip in average sales prices y-o-y, revenues from iron ore concentrate increased by 10% to US$1,174 million, driven by a boost in shipments to China of 1,705 thousand tonnes. Sales volumes to Europe and Ukraine dropped by 293 thousand tonnes overall y-o-y.

Sales of pellets increased by 8% y-o-y to US$867 million. The rise was attributable to higher sales volumes to China, Ukraine and MENA, partly offset by lower sales to Europe.

Sales of coking coal concentrate dropped by 38% y-o-y to US$215 million in 9M 2013. The decline was the result of a slump in the average concentrate prices y-o-y. Volumes sold increased by 171 thousand tonnes in the US, but decreased by 192 thousand tonnes in Ukraine, remaining broadly stable overall y-o-y.

Sales of steam coal