The Russian steelmaker Novolipetsk Steel (NLMK) has announced that in Q3 2009, the company's financial performance will demonstrate significant sequential improvements, driven by increased production volume, by growth in sale volumes and by an upswing in the prices for its products. A sustainable lower production cost in Q3 2009 will be an additional driver to support profitability improvement, notes the company.
Accordingly, NLMK's targeted revenue is expected to increase by 20 percent quarter on quarter in Q3, while its EBITDA growth rate is to outpace revenue increase. According to the company's preliminary estimates, EBITDA margin will be in the range of 20-25 percent.
In the third quarter this year, NLMK increased its crude steel production by 11 percent quarter on quarter to 2.9 million mt, and upped its finished steel products output by ten percent to 2.8 million mt. This performance is also one percent higher than in Q1 2008 and three percent above Q3 2008, which demonstrates that the company has returned to its pre-crisis production level. In Q3 2009, NLMK's capacities were run at approximately 95 percent, including its main production site in Lipetsk, where utilization rates reached 99 percent, and the companies of the long products division, where utilization rates increased to 80 percent.
In the third quarter of this year, NLMK registered improved demand, followed by increases in prices from the low levels of early this year. This improvement allowed the company to expand its sales volumes across the board including its export sales, which comprise 72 percent of its total sales volumes, i.e. 2.2 million mt.
Due to the higher production volumes and lower stocks, NLMK's total Q3 steel sales increased by 37 percent quarter on quarter, and 17 percent year on year, and stood at a record level of 3.12 million mt, including 221,000 mt of pig iron, 1.05 million mt of slabs - up 27.6 percent, 1.39 million mt of flat products - up 28.9 percent, 60,000 mt of billets - up 6.2 percent, 341,000 mt of long products - up 31.5 percent, and 60,000 mt of metalware - up 20.5 percent, all compared to Q2 2009.
In addition, NLMK said that it expects that the market environment will not demonstrate any significant deterioration in Q4 2009. "However, some decline in demand and, hence, prices, may take place, a decline which is traditionally driven by seasonality in construction sector," reads the company's statement.