NLMK issues Q1 operational results, expects improvement in Q2

The Russian steelmaker Novolipetsk Steel (NLMK) has announced that in Q1 2010 its steel production amounted to 2.8 million mt - down six percent quarter on quarter, but is expected to increase to 2.9 million mt in the second quarter of this year, along with the company's earnings, on the back of higher demand and prices.

"In Q2 2010 the group's financial performance will be supported by growing steel prices in both the international and domestic markets, as well as by recovering demand from the Russian steel consuming industries," reads the company's statement. In Q1 2010 NLMK's revenue is expected to total about $1.65 billion, and the EBITDA margin is expected to be in the range of 20‐25 percent.

In Q1 2010, NLMK's steelmaking facilities were running at approximately 92 percent capacity, with its main production site in Lipetsk running at 100 percent, while its long product division companies were running at about 60 percent capacity.

NLMK Group's Q1 total steel product sales amounted to about 2.8 million mt, showing no change quarter‐on‐quarter and up 19.8 percent year on year. This number includes 94,000 mt of pig iron - up 5.2 percent, one million mt of slabs - up 56.3 percent, 1.35 million mt of flat products - up 16.5 percent, 43,000 mt of billets - down 40.4 percent, 254,000 mt of long products - down 24 percent, and 48,000 mt of metalware - up 34.7 percent, all compared to Q1 2009.

In the first quarter this year, the Lipetsk plant's sales fell by 10 percent quarter on quarter, due to the seasonal decline in demand from the construction sector, which was offset by sales growth at NLMK's international assets. In the period in question, demand from its traditional export regions including Europe, the Middle East and Southeast Asia remained strong (in particular for commoditized products such as slabs and HRC). The growing demand was coupled with steadily increasing steel prices. In the local market, in spite of some seasonal decline in demand from its main consumers, there were certain signs of a recovery in the first quarter, mainly due to the start of restocking before the new construction season.

"Growing steel prices, among other factors, driven by increased production costs due to higher global raw material prices, allow NLMK to maintain its competitiveness supported by a high level of vertical integration and balanced product mix," reads NLMK's release.

NLMK's Q1 production volumes, excluding inter-group operations (million mt):