The Russian steel producer Severstal has announced that in Q1 2010 it registered a 7.3 percent decrease quarter on quarter in its revenues to $3.142 billion, as a result of lower sales volumes in th Russian Steel and Resources divisions, and lower pricing for steel across all markets, and a net loss of $785 million (compared to $162 million in Q4 2009), including effect of discontinued European operations, i.e. Lucchini, of $855 million.
Severstal's EBITDA in Q1 this year decreased by 20.6 percent quarter on quarter to $492 million, mainly due to lower sales in the Severstal Russian Steel and Severstal Resources divisions, as a result of bad weather conditions. In addition, in Q1 costs were up in all divisions, primarily due to increases in raw material, energy and transport costs.
Severstal Russian Steel's operations were left with substantial inventories of finished steel products for export that could not be shipped from the port of St. Petersburg. In its Resources division, the decline in pellet sales to third parties was a result of increased internal consumption, with pellets partially replacing iron ore concentrate in the sinter feed. Iron ore prices grew strongly in Q1 and coal prices were strong across all markets.
Severstal's North American operations delivered higher revenue, primarily as a result of higher sales volumes. North American volumes continued to improve in Q1 on the back of restocking and stronger end-user demand. Meanwhile, as of March 31, 2010, Severstal's Italian subsidiary Lucchini was classified as held for sale and is presented as a discontinued operation in the company's accounts.
In Q1 2010, Severstal's capital expenditure was $206 million, "below target". Some projects are behind schedule, as poor weather in Russia affected construction and exploration activities. In Q2, Severstal plans to accelerate its capital spending, in order to achieve its target of $1.4 billion for the year.
As of March 21, 2010, Severstal's net debt was broadly flat at $4.281 billion (exclude Lucchini's balances) compared to $4.278 billion as of December 31, 2009, with short-term debt of $1.104 billion.
"The outlook for 2010 continues to improve as economic growth in emerging markets and the gradual recovery of demand in mature markets are accelerating. In Q2 we expect further improvements in the market environment as price increases announced in Q1 will come into effect in the quarter. The release of inventories by the Russian Steel division should also improve sales volumes. In other markets we expect restocking to continue and end-user demand to be healthier. A strong raw material market, expected for the remainder of the first half of 2010 gives Severstal strong competitive advantage through our Resources division," reads the company's statement.