The Russian steelmaker Novolipetsk Steel (NLMK) has released its financial results for the first quarter of 2009 under US GAAP (Generally Accepted Accounting Principles).
Accordingly, during the period in question NLMK's sales revenue decreased by 45 percent to $1.293 billion, its gross profit went down by 69 percent to $322.3 million, its operating profit declined by 87 percent to $99.1 million and its EBITDA slid by 77 percent to $196.7 million, all compared to Q1 2008.
In Q1 2009, NLMK also registered a 26 percent decrease in its crude steel production to 2.1 million mt and a 10 percent drop in its steel product sales to 2.3 million mt. The company's sales of transformer steel fell by 56 percent, galvanized steel by 40 percent and pre-painted steel by 27 percent year on year. NLMK's average sales price of steel products fell 46 percent from $950/mt in Q4 2008 to $509/mt in Q1 2009.
During the period in question, NLMK's sales in the Russian domestic market in physical terms fell to 24 percent of its overall sales, i.e. about 570,000 mt, due to weakened demand in the domestic market. However, its sales to Southeast Asia and the EU jumped from five percent and 18 percent of overall sales in Q1 2008 to 21 percent and 25 percent respectively in Q1 this year. Meanwhile, NLMK's sales to the US decreased from 11 percent in Q1 2008 to four percent in Q1 2009.
As regards the future, NLMK said it does not expect any significant improvement in the overall steel market in Q2 2009; however, it added that price stabilization and a revival of demand may start to be seen in H2 2009. NLMK's steel production in Q2 2009 is expected to reach 2.7 million mt - up 25 percent quarter on quarter. Currently, NLMK's Lipetsk site is running at around 95 percent capacity.
"In 2009, we expect a significant year-on-year decrease in revenue largely due to price environment deterioration. We anticipate that 2009 production volumes will reach 10 million mt of steel, down only five percent year on year. At the same time, we expect that despite subdued conditions in the global steel market we will maintain high profitability supported by our key competitive advantages, ruble devaluation and driven by management improvement initiatives aimed at cost reduction," NLMK CFO Ms Galina Aglyamova said.