NLMK released operating review for Q3 2011

NLMK Group’s steel production in Q3 2011 amounted to 2.9 million tons (3.6 % down quarter-on-quarter). The Group’s steelmaking facilities were running at about 90% (100% at the Lipetsk production site; over 50% at the Long Products Division; and c.80% at NLMK’s international divisions). Low capacity utilization rates at the Long Products Division were caused by the idling of one of the two EAFs following a transformer failure.
The Group’s total sales amounted to 3.4 million tons, up 10.5% q-o-q and 12.3% y-o-y. These improvements in operating performance can be attributed largely to the consolidation of former Steel Invest and Finance (NLMK’s JV with Duferco Group) rolling assets in the EU and US starting from July 1, 2011. The same factor had a noticeable impact on Q3 sales: +64% for flats and -50% for slabs.
Q3 saw stable domestic demand from construction and machine-building. Domestic sales accounted for 39%, +3 p.p. q-o-q; export deliveries went to our traditional markets, Europe, Middle East and South-East Asia.

Outlook:
• In Q4 2011 we anticipate a 10% q-o-q growth in production volumes, largely driven by the launch of the new BF and BOF at NLMK’s main production site in Lipetsk. This will allow the Group to achieve record production volumes of 12 million tons for 12M 2011, a 0.5 million tons improvement y-o-y.
• Q3 revenue is expected to grow ~5% q-o-q, and the EBITDA margin is estimated to be in the range of 20%.
• Q4 pricing will remain largely volatile. Market conditions will be additionally affected by the seasonal lull in demand in the domestic market, as well as the overall uncertainty in the global economy.