NLMK.L Regulatory News (NLMK)

21 Jan 2008 07:00

OJSC Novolipetsk Steel21 January 2008 Novolipetsk Steel (NLMK) trading update for Q4 2007 and FY 2007 Novolipetsk Steel (LSE: NLMK) today released the following regular trading update for Q4 2007 and FY 2007. 1. Production* The table below shows the production volume of NLMK's principal steel products from its main site in Lipetsk, Russia: Production Q4 2007 Q3 2007 Q4 2007 / Q3 2007 2006 2007 / 2006 2007 (mln. tonnes) Pig iron 2.376 2.233 6.4% 9.056 9.043 0.1% Steel 2.282 2.231 2.3% 9.056 9.125 -0.8% Slabs 0.887 0.864 2.7% 3.724 3.866 -3.7% Hot-rolled steel** 0.479 0.482 -0.6% 1.792 1.626 10.2% Cold-rolled steel 0.401 0.358 11.8% 1.625 1.752 -7.2% Hot dip galvanized steel 0.128 0.123 4.4% 0.476 0.430 10.7% Pre-painted steel 0.066 0.098 -32.6% 0.344 0.341 1.0% Non-grain-oriented steel 0.090 0.095 -5.9% 0.376 0.342 9.8% Grain-oriented steel 0.038 0.030 27.7% 0.139 0.142 -2.1%** including supply to subsidiaries The table below shows the principal product tonnage produced at NLMK's Danish subsidiary, DanSteel A/S: Production Q4 2007 Q3 2007 Q4 2007 / Q3 2007 2006 2007 / 2006 2007 (mln. tonnes) Heavy plates 0.136 0.107 27.2% 0.522 0.468 11.6% The table below shows the principal product tonnage produced at NLMK's subsidiary, VIZ-Stal: Production Q4 2007 Q3 2007 Q4 2007 / Q3 2007 2006 2007 / 2006 2007 (mln. tonnes) Non-grain-oriented steel 0.049 0.047 2.4% 0.189 0.180 4.9% Grain-oriented steel 0.005 0.005 -5.7% 0.019 0.016 17.5% The table below shows the production volume of principal product tonnage produced at NLMK's subsidiary, Stoilensky GOK: Production Q4 2007 Q3 2007 Q4 2007 / Q3 2007 2006 2007 / 2006 2007 (mln. tonnes) Iron ore concentrate 2.865 2.920 -1.9% 11.622 11.305 2.8% Sinter ore 0.428 0.469 -8.7% 1.743 1.377 26.6% The table below shows the principal product tonnage produced at NLMK's subsidiary, Altai-koks: Production Q4 2007 Q3 2007 Q4 2007 / Q3 2007 2006 2007 / 2006 2007 (mln. tonnes) Coke (moisture 6%) 0.898 0.971 -7.5% 3.792 2.960 28.1% * All information on Q4 2007 and FY 2007 production volumes is preliminary and may be subject to change; 2. Realized prices* Realized prices are calculated by dividing sales revenue by sales volume. Suchcalculations do not differentiate between particular product types and gradeswithin a product sub-category. Realized prices are not indicative of actualcontract prices and can only serve as an approximation. All information on Q42007 prices is preliminary and may be subject to change. The table below shows the average price realized for each of NLMK's main steelproducts: USD per tonne (FCA)* Q4 2007 Q3 2007 Q4 2007 / Q3 2007 Pig Iron 318.7 294.9 8.1% Slabs 476.4 473.8 0.5% Hot-rolled steel 575.9 588.4 -2.1% Cold-rolled steel 654.6 661.8 -1.1% Hot dip galvanized steel 923.2 934.8 -1.2% Pre-painted steel 1 236.1 1 310.6 -5.7% Non-grain-oriented steel 783.6 739.7 5.9% Grain-oriented steel 3 524.5 3 466.8 1.7% The table below shows the DanSteel A/S average heavy plate prices: EUR per tonne (FCA)* Q4 2007 Q3 2007 Q4 2007 / Q3 2007 Heavy plates • 767.2 • 753.4 1.8% The table below shows average VIZ-Stal product prices: USD per tonne (FCA)* Q4 2007 Q3 2007 Q4 2007 / Q3 2007 Grain-oriented steel 3 730.5 3 617.4 3.1% Non-grain-oriented steel 985.7 941.3 4.7% The table below shows average Stoilensky GOK product prices: USD per tonne (FCA)* Q4 2007 Q3 2007 Q4 2007 / Q3 2007 Iron ore concentrate 67.5 65.7 2.7% Sinter ore 27.7 27.0 2.5% The table below shows the Altai-koks average coke prices: USD per tonne (FCA)* Q4 2007 Q3 2007 Q4 2007 / Q3 2007 Coke (moisture 6%) 230.6 140.8 63.8% * Excluding freight charge 3. Management comments In 2007, total crude steel production was 9.056 million tonnes. This is nearlyin line with the planned production volume despite the temporaryunderperformance of blast furnace No.6 during Q2/Q3 2007. The decrease in slab output (-3.7%) in 2007 compared to 2006 is primarilyattributable to the increase of hot-rolled steel production. The increase in hot-rolled output (+10.7%) and decrease in cold-rolled output(-7.2%) in 2007 was prompted by the higher margins available for hot-rolledsteel export sales than for cold-rolled steel export sales. The decrease incold-rolled steel output also resulted from further processing of cold-rolledsteel into higher value-added products (pre-painted steel, dynamo steel,transformer steel). . The commissioning of the third hot dip galvanizing line resulted in a 10.7%increase of HDG steel production in 2007 compared to 2006. The increase in dynamo steel output (+9.8%) in 2007 compared to 2006 isattributable to growing number of orders for this product. The minor decrease of grain-oriented (transformer) steel output on a y-o-y basiswas caused by further development of the electrical steel product portfolio. Thesubstantial growth of grain-oriented steel production in Q4 2007 compared to theprevious quarter is attributable to modernization of electrical steel mills inQ3 2007 focused on improving product quality. In 2007, DanSteel A/S increased the production of hot-rolled thick plates on ay-o-y basis by switching to a four-shift work schedule. The growth of hot-rolledthick plate production in Q4 2007 compared to the previous quarter resulted fromthe annual maintenance schedule during July - August 2007. The optimization of the technological process focused on reducing metal lossresulted in grain-oriented steel production growth at VIZ-Stal (+4.9%) in 2007compared to 2006. As for the mining segment, Stoilensky GOK demonstrated an increase in productionof iron ore concentrate in 2007 due to the commissioning of the first stage ofthe fourth section of the beneficiating plant in 2006. The growth of sinter oreproduction is attributable to favorable mining and geological conditions of thedeposit. The increase of coke production (+28.1%) on a y-o-y basis results from puttinginto operation a new coke battery at the end of 2006 and growing demand in coremarkets. The seasonal year end demand weakness has resulted in price decreases forcertain flat steel products supplied by NLMK. However, the seasonal factor didnot significantly impact on overall price level for NLMK's products. Moreover,prices for certain products including pig iron, slabs and electrical steelsurged due to growing demand on the domestic and global market and further USdollar weakening. The DanSteel and VIZ-Stal product prices demonstrated growthduring the reporting period. Despite the fact that prices for Stoilensky GOK products were fixed during Q3-Q42007, the lowering USD/RUR exchange rate resulted in growing average prices foriron ore concentrate and sinter ore at Stoilensky GOK in Q4 2007 compared toprevious quarter. The supply shortage on the coking coal market resulted ingrowing coking coal concentrate prices and, as a consequence, Altai-koks cokeprices. 4. Outlook In general, NLMK's main production site and major subsidiaries successfullyrealized production targets in 2007. Meanwhile, growing steel prices, as well aschanges in the product mix towards products being in greater demand andproviding higher earnings per tonne of sales, positively impacted overallcompany profitability. We believe that NLMK's consolidated sales revenue will increase in 2007 comparedto 2006. NLMK's EBITDA in 2007 is expected to grow approximately 25-30% comparedto the previous year. We note the growth of steel prices at the beginning of 2008 caused by theincrease in basic raw materials prices. We expect steel price to rise during thefirst half of the year followed by mid-year flattening. For further information: NLMK Anton Bazulev +7 495 915 1575 Financial Dynamics Jon Simmons +44 207 831 3113 This information is provided by RNS The company news service from the London Stock Exchange