Severstal Q3 2022 and 9m 2022 operational results

• Production: Hot metal output recovered to 2.82 mln tonnes (+16% qoq). Crude steel production increased by 10% qoq to 2.64    mln tonnes, due to end of repairs.

• Steel sales rebounded to 3.13 (+38% qoq), due mainly to step-by-step demand recovering in the domestic market. Sales of HVA increased by 17% qoq to 1.26 mln tonnes.

• Total share of high value-added (HVA) products however decreased to 40% (-7 ppts qoq), on the back of higher growth rates of commercial steel sales and sales of semi-finished products.
  

• Raw materials sales: Iron ore sales to third parties increased by 20% qoq to 0.86 mln tonnes, driven by a strong sales of iron ore concentrate.

• Production: Hot metal output increased by 1% yoy to 8.13 mln tonnes. Crude steel production decreased by 8% yoy to 7.97    mln tonnes, due mainly to a result of converter repairs in Q2 2022 and limited EAF utilization rate on the back of scrap prices growth in 3Q 2022.

• Steel sales were grew by 2% yoy to 8.12 mln tonnes, due to strong results in Q3 2022. Semis sales increased to 1.28 mln tonnes (+20% yoy). Commercial steel sales were lower by 1% yoy and amounted to 3.23 mln tonnes as a result of import ban imposed by the European Union in March 2022. HVA sales reduced to 3.61 mln tonnes (-2% yoy) mainly due to decline in hot-rolled high value added products, galvanized steel and metalware sales.

• Total share of high value-added (HVA) products amounted to 44% (-2 ppts yoy).

• Raw materials sales: Iron ore sales to third parties reduced by 46% yoy to 1.86 mln tonnes, due to a redistribution of sales to Cherepovets steel mill.

• In Q3 2022 LTIFR among employees amounted to 0.65 (-31% yoy). The overall LTIFR among employees and contractors was 0.58 (-33% yoy).

• In 9m 2022 LTIFR among employees amounted to 0.77 (+13% yoy). The overall LTIFR among employees and contractors was 0.74 (+1% yoy).

• In Q3 one fatality involving Severstal’s employee occurred. We conducted an internal investigation for the case and took measures to eliminate the causes of fatality, which was falling from height due to OHS requirements violation.

Alexander Shevelev, CEO of Severstal Managment, commented:

“This year we have faced a number of challenges: the closure of our traditional export markets, disruption of supply chains, increased competition on the domestic market. A serious obstacle for us in the 3rd quarter was also an abnormally strong ruble. Our priorities in this situation are as follows: to maintain production, retain our key personnel and fulfill obligations to partners.

Despite difficult conditions in Q3 2022, we managed to partially reconfigure our sales shipments and redirect growing volumes to alternative markets. In addition, the Russian economy has shown solid resistance to external pressures and in Q3 we registered an increase in apparent demand for steel products domestically. This supported our sales volumes. Hence, sales of steel products increased by 2% YoY to 8.1 mln tonnes in 9m 2022. Shipments of semi-finished products significantly increased (+20% YoY).

Nevertheless, the change in the product mix of the sales portfolio with an increase of semi-finished products, coupled with a decrease in steel prices and rising costs in transport and tariffs put pressure on our financial results.

Unfortunately, due to the ongoing restructuring of the company's business processes, we have taken a difficult decision not to disclose our financial results for the 9 months of 2022. We hope to return to this practice in the future as soon as conditions allow.

Despite the challenges, we continue to implement a number of investment projects. In Q3 2022, we overhauled equipment in the casting shop of one of the converters. The repair was completed with the replacement of sections at the continuous steel casting unit no. 3. Modernization has increased durability of the equipment and, as a result, overall reliability of the unit.

We have also started regular maintenance at our most powerful blast furnace No. 5 "Severyanka". The repair will increase its operational efficiency and reliability.

The company also undertakes projects aimed at improving our environmental performance. In Q3 2022, the construction of a local aspiration unit in the sinter shop in Cherepovets was completed. The aim of the project is to reduce emissions into the atmosphere and improve the air quality in the workplace. The cost of the investment project reached 30 million rubles."

• Steel sales grew by 38% qoq and amounted to 3.13 mln tonnes, mainly due to higher sales of pig iron and slabs as well as increased demand for hot-rolled steel. Semis sales increased to 0.64 mln tonnes (vs Q2 2022: 0.18 mln tonnes). Commercial steel sales increased by 22% qoq to 1.24 mln tonnes. HVA product sales also increased by 17% to 1.26 mln tonnes.
  

• Total share of high value-added (HVA) products amounted to 40% (-7 ppts qoq).

• Steel sales were up by 2% yoy to 8.15 mln tonnes. Semis increased to 1.28 mln tonnes (+20% yoy). But commercial and HVA steel sales decreased by 1% yoy and 2% yoy respectively, due to decline in export sales, which was partially compensated by reallocation of sales to the domestic market.
  

• Total share of high value-added (HVA) products decreased to 44% (-2 ppts yoy).

Q3 2022 results

• Iron ore sales increased by 8% qoq to 4.52 mln tonnes. Pellets sales increased by 6% due to increase of demand for pellets in export markets and increase of supplies to Cherepovets. Iron ore concentrate sales increased by 10% qoq to 2 mln tonnes on the back of improved denam in the domestic market.

• Iron ore sales decreased to 12.81 mln tonnes (-4% yoy) due to the stop of pellets export to the EU in March 2022. Iron ore concentrate sales on the contrary increased by 13% yoy to 5.51 mln tonnes due to stable demand in the Russian market.

Consolidates sales by product