NLMK posts net profit of $132 million in Q1

The Russian steel producer Novolipetsk Steel (NLMK) has announced that, under US GAAP (Generally Accepted Accounting Principles), in Q1 2010 it recorded a net income amounting to $132 million compared to a net loss of $194 million in Q1 2009.

Accordingly, Q1 2010, the seasonal decline in demand in the domestic market and in a number of international markets had a negative impact on NLMK's sales structure and average prices. In Q1 2010, the share of local sales remained flat at 27 percent (about 0.7 million mt) of the company's total sales, while the shares of steel sales to the EU and North America increased quarter on quarter by 43 percent and 2.5 times respectively to 30 percent and eight percent respectively. As a result, NLMK's Q1 2010 sales amounted to 2.8 million mt, remaining flat quarter on quarter and increasing by 19 percent year on year.

In Q2 2010, NLMK expects its steel sales volume to grow by about ten percent quarter on quarter to three million mt and its average selling prices are estimated to increase by 20‐30 percent quarter on quarter. According to NLMK's preliminary estimates, its EBITDA margin in Q2 2010 will be between 25‐30 percent.

At the same time, in Q3 2010, NLMK expects prices for a wide range of its products to decline due to the lack of clear signs of recovery in developed economies.

NLMK's net debt as of March 31, 2010 totaled $955 million - up 20 percent compared to the end of 2009, due to the insignificant increase in total debt, as well as a reduction in cash funds and short‐term financial investments.