On April 6, the Russian steelmaker Novolipetsk Steel (NLMK) released its financial results for 2009 under US GAAP (Generally Accepted Accounting Principles).
Accordingly, in 2009 NLMK registered a net profit of $215 million. "Stable demand in the developing markets coupled with the beginning of restocking in Russia and globally in the second half of 2009 were the key drivers for steel price growth and contributed to a better financial performance during the period," reads the company's statement.
Q4 2009, ($ million) | Q3 2009, ($ million) | Change (%) | FY 2009, ($ million) | FY 2008, ($ million) | Change (%) | |
Sales revenue | 1.815 | 1.739 | 4 | 6.140 | 11.699 | -48 |
Gross profit | 686 | 610 | 12 | 1.990 | 5.391 | -63 |
Operating profit | 347 | 340 | 2 | 892 | 4.061 | -78 |
EBITDA | 528 | 486 | 9 | 1.444 | 4.538 | -68 |
EBITDA margin (%) | 29 | 28 | - | 24 | 39 | - |
Net loss/profit | 294 | 164 | 80 | 215 | 2.279 | -91 |
Operating cash flow | 143 | 324 | -56 | 1.394 | 2.781 | -50 |
Net debt | 796 | 761 | 5 | 796 | 842 | -5 |
In 2009, NLMK was the only Russian steelmaker that succeeded in maintaining and even increasing steel production volumes (10.6 million mt - up one percent year on year). "Our sustainable low production cost base coupled with cost reduction initiatives and timely increase of capacity utilization allowed the group to maintain its strong market position and even increase production volumes in the challenging market environment," NLMK's CFO Galina Aglyamova commented.
In 2009, NLMK's average selling price for steel declined by 48 percent year on year to $513/mt, and its high value‐added product sales decreased due to the niche characteristics of the products and lower demand in the domestic market. In 2009, NLMK's sales of galvanized steel dropped by 22 percent, color‐coated steel sales went down by three percent, and transformer steel and dynamo steel sales were down 55 and 50 percent respectively. Meanwhile, in 2009 NLMK increased sales of slabs and HRC, the more common types of steel products, by 11 and 57 percent year on year respectively.
In addition, in 2009 NLMK's share of local sales decreased by 27 percent (to about 2.9 million mt), due to lower demand in spite of some recovery in purchases from the construction sector starting from Q2 2009. The share of export sales mirrored this pattern, with deliveries to Southeast Asia and the EU growing from 11 and 16 percent respectively in 2008 to 22 and 19 percent in 2009.
"Last year our efforts were constantly directed towards cutting costs, maintaining the market position and increasing sales," Ms. Aglyamova said.
In 2010, NLMK expects to increase its steel production by around ten percent year on year to 11.6 million mt, and to raise its local sales due to the stabilization of the Russian domestic market. NLMK expects higher returns from high value-added product sales, supported by increasing coated steel capacities and stabilization of demand in the transformer steel market. The company believes that steel prices may increase by 15‐25 percent year on year.
"In 2010 apparent world steel consumption is expected to grow ten percent year on year to around 1.2 billion mt. This increase is associated with continued growth in developing markets and the beginning of restocking in OECD countries. Growing prices for raw material will also drive steel price increases," reads the company's statement.
In Q1 2010, NLMK's production volumes will remain unchanged at around 2.8 million mt of steel, with its EBITDA margin expected to be around 20‐25 percent.