Severstal reports Q4 2022 and 12m 2022 operational results

PAO Severstal (MOEX: CHMF) announces that in Q4 2022 crude steel production increased to 2.7 mln tonnes (+3% qoq). Crude steel production for 2022 totalled 10.7 mln tonnes, 8% lower yoy, although hot metal output was flat yoy. Consolidated steel sales fell 11% to 2.8 mln tonnes qoq in Q4 2022 and just 2% yoy to 10.9 mln tonnes in 12m 2022.

KEY CONSOLIDATED OPERATIONAL RESULTS*

* Hereinafter, the total amount may differ slightly from the sum of each line due to rounding.

Q4 2022 consolidated operational results highlights:

• Production: Hot metal output continued to recover, increasing 1% qoq to 2.85 min tonnes. Crude steel production increased for the second quarter in a row and amounted to 2.7 mln tonnes, which is 3% higher than in the previous quarter.
• Steel sales normalized at 2.8 mln tonnes (-11% qoq) after a massive stock sale in Q3 2022 and against the backdrop of the seasonal slowdown in demand for Russian steel.
• Sales of high value-added (HVA) products declined by 9% qoq to 1.15 mln tonnes. However, the total share of HVA products in the product mix increased to 41% (+1 ppt qoq).
• Raw material sales: Iron ore sales to third parties decreased to 0.49 mln tonnes (-43% qoq), due to the redistribution of sales to the Company’s own assets on the back of an increase in hot metal output.

12m 2022 consolidated operational results highlights:

• Production: Hot metal production was flat yoy at 10.97 mln tonnes. Crude steel output decreased by 8% yoy to 10.69    mln tonnes, mainly due to converter repairs in Q2 2022 and a reduced EAF utilization rate due to an increase in scrap prices in 3Q 2022.
• Steel sales slipped to 10.92 mln tonnes (-2% yoy). Semi sales rose to 1.57 mln tonnes (+11% yoy). Commercial steel sales were flat at 4.59 mln tonnes due to the redirection of sales to the Russian market and relatively strong steel demand in Russia.
• Sales of high-value-added products decreased by 6% yoy to 4.76 mln tonnes, mainly due to a decline in the sales of hot-rolled high-value-added products, galvanized steel and metalware. The total share of HVA products in the portfolio totalled 44% (-2 ppts yoy).
• Raw material sales: Iron ore sales to third parties declined by 46% yoy to 2.34 mln tonnes due to the redistribution of sales to the Cherepovets Steel Mill.

ESG AND GHG EMISSIONS

• In 2022, total emissions of air pollutants decreased by 21% yoy to 370 kilotonnes mainly due to a decrease in Severstal’s Resources Division (-41% yoy to 123 kilotonnes) stemming from the Company’s disposal of Vorkutaugol on 29 April 2022. However, total emissions produced by the Russian Steel Division were also down, by 5% yoy to 247 kilotonnes, due to the implementation of a number of projects in line with the federal Clean Air programme.
• Unfortunately, the pollutants emissions intensity in the Severstal Russian Steel division increased by 3% to 22.6 kg per tonne of steel in 2022 due to the non-optimal loading of steel-producing technological units as a result of a forced output reduction due to changing market conditions.

HEALTH AND SAFETY PERFORMANCE

• We continue transforming our management system for industrial safety. As a result, we improved our overall LTIFR indicator and expect better results going forward:
• The Q4 2022 LTIFR for our employees and contractors declined by 30% and reached 0.48 qoq.
• The 12m 2022 LTIFR for employees and contractors was down 6% yoy and totalled 0.68.
• Despite improvements, we, unfortunately, registered three deaths in 2022 (one of our own employees and two contractors), including one fatal accident with a contractor in Q4 2022 due to a violation by the contracted company of the procedure for dismantling the equipment involved in the accident. We conducted a thorough investigation of each case and took measures to eliminate the causes of the incidents in order to avoid similar ones in the future. Thus, based on the results of the investigations, we changed our approach to admitting employees of high-risk contractors, introduced an electronic work permit system and also incorporated a number of other organizational and technical procedures.

ALEXANDER SHEVELEV, CEO OF SEVERSTAL MANAGEMENT, COMMENTED:

“The year 2022 was a serious test for our Company. The ban on steel and raw material exports to European markets, the disruption of supply chains, growing competition in domestic markets, the global economic slowdown and declining steel prices, resilience of demand for Russian steel and rouble volatility required quick and proactive decision-making, and a readiness to take risks and to operate with limited visibility and reduced budgets. I am proud of the fact that, in this environment, our vertically integrated business model combined with a relentless focus on operational enhancements and cost reduction as well as our strong corporate culture helped us navigate a challenging year while achieving decent results.

Despite the fact that we had to make seriously changes to our sales strategy, we were able to keep hot metal output at the same level as in 2021, at 10.97 mln tonnes. Though crude steel production declined by 8% yoy to 10.69 mln tonnes, consolidated sales of steel products decreased just 2% yoy to 10.92 mln tonnes.

Amid volatility we continued our sustainability programmes and adopted a sustainability strategy until 2030 which reinforces our commitment to ESG and expands our list of publicly stated goals. We maintain our focus on reducing our climate footprint, emissions and discharges of pollutants, and ensuring zero fatalities among employees and contractors. We have also undertaken new commitments to reduce waste and improve employee satisfaction.

I would like to thank my colleagues at Severstal for their loyalty and dedication.”

The full version of the press release is available here.