•        Production: Hot metal output fell by 16% qoq to 2.43 mln tonnes. Crude steel production decreased by 18% qoq to 2.4    mln tonnes, due to repairs rescheduled to Q2 2022 to balance actual capacities and narrowing demand for steel.

•           Steel sales declined by 17% qoq to the 2.27 mln tonnes, affected by difficult access to export markets coupled with the declining demand in the domestic market. Sales of HVA amounted to 1.08 mln tonnes (-15% qoq) with the decline in sales of cold-rolled and galvanized steel as well as tubes other than LDP.

•           Total share of high value-added (HVA) products was flat at 47%.

•           Raw materials sales: Iron ore sales to third parties increased to 0.72 mln tonnes, driven by a lower Cherepovets steel mill demand for raw materials. Coal sales amounted only to 6 k tonnes as a result of sale of Vorkutaugol in the end of April 2022.

•        Production: Hot metal output was flat yoy at 5.3 mln tonnes. Crude steel production decreased by 7% yoy to 5.32    mln tonnes, as a result of converter repairs which was rescheduled to Q2 2022.

•        Steel sales were down by 6% yoy to 5 mln tonnes, due to limited access to export markets followed by a decrease in the domestic demand. Semis sales were 12% higher yoy due to strong sales of pig iron to the USA in Q1 2022. Commercial steel sales were lower by 9% yoy to 2 mln tonnes as a result of import ban imposed by the European Union in March 2022. HVA sales reduced to 2.35 mln tonnes (-7% yoy) mainly due to decline in galvanized steel and metalware sales.

•           Total share of high value-added (HVA) products amounted to 47% (-1 ppts yoy).

•           Raw materials sales: Iron ore sales to third parties reduced by 57% yoy to 1 mln tonnes, due to a redistribution of sales to Cherepovets steel mill.

•           In 6m 2022 LTIFR among employees amounted to 0.83 (+51% yoy). The overall LTIFR among employees and contractors was 0.81 (+23% yoy). The main reason for the growth is the increase in the number of reported cases of minor injuries, while the number of cases of severe injuries remained at the same level, and the number of fatalities decreased.

•           In Q2 2022 no fatalities occurred. In 6m 2022 one fatality involving a contractor’s employee occurred. We conducted an internal investigation for the case and took measures to eliminate the causes of fatality. The incident was caused by OHS requirements violation and misuse of a loading and hauling machine.

•           Total emissions of air pollutants decreased by 44% qoq to 72,800 tonnes in Q2 2022.

•           In 6m 2022 total emissions of air pollutants decreased by 20% yoy to 202,280 tonnes due to a decline in production at Cherepovets steel mill and JSC Vorkutaugol's spin-off from the Company.

•           Gross GHG emissions (Scope 1 and 2) decreased by 7% as a result of JSC Vorkutaugol's disposal from the Company on April 29, 2022 and a decrease in production at Cherepovets steel mill.

•           The intensity of greenhouse gas emissions of steel production increased by 5%, mainly due to non-optimal loading of technological units as a result of the volume of production decrease.

The first half of 2022 was extremely challenging for Russian steelmakers and Severstal. Against the background of sanctions pressure, we were forced to take urgent steps to preserve the stability of the business. Thus, after the complete shutdown of exports to the EU countries, we had to redirect sales to other, less marginal markets, as well as rebuild our supply chain of inventory to ensure the operation of enterprises. Due to the ongoing restructuring of the company's processes, we made the difficult decision not to disclose the financial results for the Q1 and Q2 2022. But we plan to return to this practice in the future.

The difficult access to exports followed by a decrease in the domestic demand, a sharp strengthening of the ruble and the decline in domestic prices altogether put a pressure on the company's results. Consolidated steel sales were down by 6% yoy to 5 mln tonnes in H1 2022 with the most difficult Q2 2022 - a drop in steel sales for April-June amounted to 17%. As a result of difficulties in sales, we were forced to revise the production program. This led to the fact that steel production decreased by 7% YoY to 5.32 mln tonnes and utilization rate decreased to 75%. At the same time, there was an increase in the cost of production, mainly due to inflationary pressure from transport costs and tariffs of natural monopolies.

Despite the difficult situation, we continue to fulfill our social obligations and in April indexed the salaries of all employees, as well as paid a one–time remuneration - as a result, the average salary for the company increased by 15%. We also continue our environmental protection activities and participation in the federal Clean Air project.

The company's management and staff continue to make active efforts to minimize the negative impact of external factors on the company's business. Severstal has an effective business model and a high level of underlying strength, as it has been engaged in cost reduction, product quality improvement and customer experience improvement for many years. However, in the face of unprecedented challenges, the impact of which is only increasing in the third quarter, we are forced to move to more radical cost reduction programs.

The anti-crisis plan developed by the company's management, which is designed to ensure the company's stability even in the event of a negative development of the situation, involves a comprehensive audit of all the company's business processes and optimization of the least effective projects and initiatives in the medium term. By the end of this year, we aim to reduce administrative costs, personnel costs and outsourcing by a total of 10%. The management will make every effort to preserve the company's team, key competencies and expertise accumulated over the years.

In addition, we will focus on improving the efficiency of procurement and maintenance programs, as well as continue to examine the investment program and to optimize it, primarily through initiatives with a long-term payback. We are confident that the well-coordinated work of the company's management and staff and the accumulated experience in improving the efficiency of processes will allow us to remain competitive in this difficult period."