NLMK.L Regulatory News (NLMK)

10 Jul 2006 08:49

OJSC Novolipetsk Steel10 July 2006 Novolipetsk Steel (NLMK) releases trading update for Q2 2006 OJSC Novolipetsk Steel (LSE: NLMK) today released the following regular trading update for Q2 2006.* 1. Production The table below shows the production volume of NLMK's principal steel products on its main site: Q2 2006 Q1 2006 Q2 2005 Change (%) Amount Amount Amount Q206 /Q205 Q206 /Q106 (in million of metric tonnes, except for percentages) Pig Iron 2.322 2.201 1.919 21.00% 5.48% Steel 2.3 2.291 1.895 21.37% 0.41% Slabs 0.977 0.979 0.581 68.16% -0.15% Hot-rolled steel 0.355 0.433 0.537 -33.89% -18.05% Cold-rolled steel 0.641 0.414 0.535 19.81% 54.87% Hot dip galvanized steel 0.103 0.092 0.074 39.19% 11.71% Pre-painted steel 0.08 0.081 0.06 33.33% -0.99% Non-grain-oriented steel 0.083 0.088 0.093 -10.75% -5.14% Grain-oriented steel 0.034 0.035 0.035 -2.86% -3.13% The table below shows the principal product tonnage produced at NLMK's Danish subsidiary, DanSteel A/S: Q2 2006 Q1 2006 Q2 2005 Change (%) Amount Amount Amount Q206 /Q205 Q206 /Q106 (in million of metric tonnes, except for percentages) Heavy plates 0.111 0.113 0.101 9.17% -1.61% The table below shows the production volume of NLMK's mining segment: Q2 2006 Q1 2006 Q2 2005 Change (%) Amount Amount Amount Q206 /Q205 Q206 /Q106 (in million of metric tonnes, except for percentages) Iron ore Iron ore concentrate 3.283 2.876 2.717 20.83% 14.15% Sinter ore 0.286 0.262 0.289 -1.04% 9.16% Coal Coking coal 0.610 0.600 0.620 -1.61% 1.64% Energy coal 0.139 0.117 0.205 -32.20% 18.80% Other raw materials 0.201 0.245 0.260 -22.53% -18.01% The table below shows the principal product tonnage produced at Altai-koks: Q2 2006 Q1 2006 Q2 2005 Change (%) Amount Amount Amount Q206 /Q205 Q206 /Q106 (in million of metric tonnes, except for percentages) Coke 0.644 0.593 0.717 -10.18% 8.67 * All information on production volumes is preliminary and may be subject to change. 2. Prices The table below shows the average price realized for each of NLMK's main steelproducts**: USD per tonne (FCA) Change (%) Q2 2006 Q1 2006 Q2 2005 Q206 /Q205 Q206 /Q106 Pig Iron 213 181 273 -22.05% 17.64% Slabs 331 255 416 -20.44% 29.82% Hot-rolled steel 510 426 503 1.31% 19.61% Cold-rolled steel 612 509 599 2.08% 20.24% Hot dip galvanized steel 794 745 823 -3.50% 6.59% Pre-painted steel 933 883 930 0.34% 5.67% Non-grain-oriented steel 686 601 779 -11.92% 14.03% Grain-oriented steel 2652 2909 2591 2.33% -8.83% The table below shows the DanSteel A/S average heavy plate prices**: USD per tonne (FCA) Change (%) Q2 2006 Q1 2006 Q2 2005 Q206 /Q205 Q206 /Q106Heavy plates 681 647 879 -22.53% 5.26% The table below shows the average price realized for each of NLMK's main miningsegment products**: USD per tonne (FCA) Change (%) Q2 2006 Q1 2006 Q2 2005 Q206 /Q205 Q206 /Q106 Iron ore Iron ore concentrate 36.7 32.9 56.1 -34.59% 11.33% Sinter ore 20.3 18.7 21.4 -5.25% 8.33% Coal Coking coal 52.6 50.8 54.3 -3.11% 3.44% Energy coal 11.6 7.8 16.6 -30.33% 48.03% The table below shows the Altai-koks average coke prices**: USD per tonne (FCA) Change (%) Q2 2006 Q1 2006 Q2 2005 Q206 /Q205 Q206 /Q106 Coke 114.4 115.9 143.6 -20.34% -1.29% ** excluding freight charge 3. Management Boards' comments The substantial increase in steel production during Q2 2006 compared with Q22005 resulted from the restoring production level after scheduled midyearmaintenance at the major blast furnace and steelmaking facilities last year. InQ4 2005, we put into operation new hot dip galvanizing facilities with installedannual capacity of 340 thousand tonnes. The change in the company's product portfolio in comparison with Q2 2005resulted in greater volumes of high value-added products, including 39% increasein hot dip galvanized steel and 33% increase in pre-painted steel on q-o-qbasis. The slight decrease in electrical steel production is primarily attributable toscheduled maintenance of these facilities during Q2 2006. At the same time, thereduction of hot-rolled steel production volumes is explained by growinginternal consumption of hot-rolled coils by NLMK's grain-oriented steelfacilities, as well as by an overall increase in cold-rolled steel production. As for NLMK's mining segment, iron ore concentrate production in Q2 2006 went upcompared to Q1 2006 and Q2 2005. This increase resulted from the consolidationof KMA Ruda in March 2006. The growing output at Stoilensky GOK has alsocontributed to the increase in iron ore concentrate production volumes. 4. Outlook We have been observing a strong upward trend in the world slab and flat steelmarket during Q2 2006. The major factors contributing to the recovery of steelprices are growing raw materials and energy prices as well as obvious shortageof supply in the flat steel market. According to our estimates, the increase in steel prices will continue at aslower pace during the rest of the year. The market is likely to stabilize bythe end of the year due to the cooling-off in demand. NLMK believes that averageworld steel prices in 2006 will be slightly higher than the levels seen lastyear. We believe that NLMK's consolidated sales revenue will increase in Q2 2006compared with Q1 2006 due to the growing flat steel prices. The most substantialimprovement of results is expected in the steel segment. According to ourestimates, the operating income in Q2 2006 will benefit from both the highersteel price and a greater proportion of higher value added products. NLMK acquired the coke producer, Altai-koks, in April 2006. We are expecting asubstantial rise in profitability at the newly acquired asset due to thereduction in selling and overhead costs. NLMK will announce its half-yearly US GAAP results for the 6 months ended 30 June 2006 in the second half of September. For further information: NLMKAnton Bazulev +7 495 915 1575 Financial DynamicsJon Simmons +44 207 831 3113 This information is provided by RNS The company news service from the London Stock Exchange