NLMK.L Regulatory News (NLMK)

18 Oct 2007 11:00

OJSC Novolipetsk Steel18 October 2007 Novolipetsk Steel (NLMK) releases trading update for Q3 2007 OJSC Novolipetsk Steel (LSE: NLMK) today released the following regular trading update for Q3 2007. 1. Production volumes* The table below shows the production of principal steel products at NLMK's main production site for Q3 2007: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 Q3 2007 / 2006 Q2 2007 Amount, million metric tonnes Change (%) Pig Iron 2.233 2.109 2.247 -0.6% 5.9% Steel 2.231 2.202 2.217 0.6% 1.3% Slabs 0.868 0.919 0.850 2.1% -5.5% Hot-rolled steel** 0.484 0.419 0.408 18.6% 15.4% Cold-rolled steel 0.370 0.412 0.463 -20.1% -10.2% Hot dip galvanized steel 0.123 0.134 0.111 10.5% -8.3% Pre-painted steel 0.098 0.094 0.092 7.0% 4.3% Non-grain-oriented steel 0.096 0.097 0.092 3.7% -1.9% Grain-oriented steel 0.030 0.036 0.037 -18.7% -17.0% ** Including HR coils supplied to other production facilities The table below shows production at NLMK's Danish subsidiary, DanSteel A/S: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 Amount, million metric tonnes Change (%) Heavy plates 0.107 0.129 0.091 17.4% -16.6% The table below shows production at VIZ-Stal: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 Amount, million metric tonnes Change (%) Grain-oriented steel 0.047 0.048 0.045 4.3% -0.2% Non-grain-oriented steel 0.005 0.006 0.003 80.6% -22.9% The table below shows production at Stoilensky GOK: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 Amount, million metric tonnes Change (%) Iron ore: Iron ore concentrate 2.920 2.945 2.911 0.3% -0.8% Sinter ore 0.469 0.452 0.346 35.5% 3.8% The table below shows coke production at Altai-koks: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 Coke 0.971 1.045 0.807 20.3% -7.1% * All information on Q3 2007 production volumes is preliminary and may be subject to change. 2. Realized prices* Realized prices are calculated by dividing sales revenue after transportationcosts by sales volume. Such a calculation does not differentiate betweenparticular product types and grades within a product sub-category. Realizedprices are not indicative of actual contract prices and can serve as anapproximation only. All information on Q3 2007 prices is preliminary and may besubject to change. The table below shows average prices for NLMK's main steel products in Q3 2007: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 USD per tonne (FCA)*** Change (%) Pig Iron 294.8 281.0 256.8 14.8% 4.9% Slabs 473.8 455.5 454.5 4.3% 4.0% Hot-rolled steel 588.4 596.5 584.9 0.6% -1.3% Cold-rolled steel 662.0 651.6 630.6 5.0% 1.6% Hot dip galvanized steel 934.8 981.5 935.5 -0.1% -4.8% Pre-painted steel 1 310.6 1 258.8 1 034.8 26.7% 4.1% Non-grain-oriented steel 739.7 723.6 678.8 9.0% 2.2% Grain-oriented steel 3 441.4 3 420.3 3 230.0 6.5% 0.6% The table below shows DanSteel A/S average prices: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 EUR per tonne (FCA)* Change (%) Heavy plates €754.0 €742.0 €612.0 23.2% 1.6% The table below shows VIZ-Stal average prices: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 USD per tonne (FCA)* Change (%) Grain-oriented steel 3 617.4 3 495.3 3 117.9 16.0% 3.5% Non-grain-oriented steel 941.3 919.8 927.0 1.5% 2.3% The table below shows Stoilensky GOK average prices: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 USD per tonne (FCA)* Change (%) Iron ore: Iron ore concentrate 65.7 65.3 54.0 21.6% 0.6% Sinter ore 27.0 26.2 20.5 31.3% 3.0% The table below shows the Altai-koks average prices: Q3 2007 Q2 2007 Q3 2006 Q3 2007 / Q3 2007 / Q2 Q3 2006 2007 USD per tonne (FCA)* Change (%) Coke 140.5 119.1 104.0 35.1% 18.0% * Excluding transportation costs 3. Management Board comments The restoration of production levels at NLMK's Blast Furnace #6 in Q3 2007resulted in growing pig iron and crude steel production volumes as compared withthe previous quarter. The twelve-day scheduled maintenance of two 300-tonnes capacity converters inBOF Shop #2 caused the growth rate of crude steel production to be lower thanpig iron production and a slight decrease in volumes of commercial slabs.However, the rolled steel production volume in Q3 2007 exceeded the level of theprevious quarter. An increase in the production of hot-rolled steel in Q3 2007 was due to anincrease in export orders. The hot-rolled and cold-rolled steel pricedevelopments on the global market and the existing cost structure resulted inhigher margins for hot-rolled steel export sales than for cold-rolled steelexport sales. Thus, cold-rolled steel production volumes went down against Q22007 due to an increase in hot-rolled steel sales. The decrease in hot dip galvanized steel production in Q3 2007 compared to Q22007 was caused by increased production volumes of pre-painted steel and furtherdevelopment of product portfolio in this segment. The technical modernization of grain-oriented steel units aimed at improvingqualitative characteristics resulted in a temporary decrease of grain-orientedsteel production that should be offset in the next quarter. The apparent decrease in heavy plate production volumes at DanSteel A/S(Denmark) during Q3 2007 as compared with Q2 2007 was due to scheduledmaintenance in July-August 2007. During Q3 2007 VIZ-Stal non-grain-oriented steel production volumes grew by80.6% compared with Q3 2006 as a result of increased orders for low-alloy andintermediate-alloy steels Stoilensky GOK demonstrated stable levels of iron ore concentrate production.Sinter ore production volumes grew in Q3 2007 against both Q2 2007 and Q3 2006due to favorable mining and geological conditions of the deposit. In Q3 2007 coke production grew by 20.3% compared to Q3 2006, as a new cokebattery was put into operation at the end of 2006. The decrease in cokeproduction during Q3 2007 compared to Q2 2007 was caused by the shortage ofcoking coal supply and breach of supply contracts by several coking coalproducers. We forecast that the shortage of coke and coking supply will persistduring Q4 2007. This situation may result in price increases for Altai-koks'products at a time of stable production. The traditional price deterioration in Q3 2007 caused by seasonal factorsresulted in hot dip galvanized steel price decrease. The slight fall of averagehot-rolled steel prices in Q3 2007 compared to Q2 2007 was caused by redirectionof sales from domestic to export markets. The prices for other NLMK's productsduring the reporting period were at the level or slightly above the level of Q22007 A strong iron ore pricing environment in Q3 2007 resulted in an increase inStoilensky GOK's average iron ore concentrate prices, as compared to Q3 2006.The increase of prices for Altai-koks' products was due to a favorable marketsituation. 4. Outlook We expect a decrease in rolled steel consumption by the end of the year causedby traditional seasonal factors. Despite temporary underperformance at NLMK's Blast Furnace #6 in Q2 2007 and Q32007, we expect only minimum movement from initially planned annual productionlevel. According to our estimates, 2007 sales revenue will exceed 2006 level.The EBITDA increase is estimated at 15-20% on a year on year basis. 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