OREANDA-NEWS. Metinvest B.V., the parent company of a vertically integrated group of steel and mining companies (jointly referred to as “Metinvest” or “the Group”), today published a trading update for the first quarter ended 31 March 2014.

The information in this press release has been prepared based on preliminary financial results. Intragroup transactions have been eliminated in consolidation. This announcement does not contain sufficient information to constitute a full set of financial statements. The following preliminary results may differ from financial statements prepared in accordance with International Financial Reporting Standards (IFRS). The numbers in this press release have not been audited or reviewed.

Metinvest B.V. publishes consolidated financial statements prepared in accordance with IFRS for the six months ending 30 June and for the year ending 31 December.

Revenues

In 1Q 2014, Metinvest's consolidated revenues decreased by 8% y-o-y. This was primarily due to a fall in sales of iron ore (USD 185 million), coking coal concentrate (USD 35 million) and flat (USD 141 million) and long (USD 80 million) products, which was partly compensated by an increase in sales of pellets (USD 121 million), pig iron (USD 77 million) and billets (USD 27 million). The Metallurgical division accounted for 76% of external sales (74% in 1Q 2013) and the Mining division for 24% (26% in 1Q 2013).

Revenues in Ukraine totalled USD 736 million in 1Q 2014, down 11% y-o-y. Despite steady sales of iron ore products on the domestic market, sales of steel products declined amid lower demand in the major steel consuming sectors (construction, machine-building and pipeline infrastructure).

The share of international sales stood at 75% in 1Q 2014, up 1 percentage point (pp) y-o-y. The proportion of sales to the Middle East and North Africa (MENA) rose by 6 pp y-o-y to 20%, driven by greater volumes of semi-finished and flat products. The share of sales to the Commonwealth of Independent States (CIS, excluding Ukraine) was down 4 pp to 7% due to lower volumes of finished steel products, mainly to Russia. The proportion of sales to Southeast Asia dropped by 4 pp to 15% amid a decline in volumes of iron ore concentrate, semi-finished and flat steel products, which was partly compensated by greater sales of pellets to the region.

Metallurgical division

Revenues in the Metallurgical division come from sales of steel and coke products. In 1Q 2014, the division's top line fell by 6% y-o-y to USD 2,220 million, of which steel sales accounted for 90%. The drop was attributable to lower volumes of slabs, flat, long and railway products, offset by higher volumes of pig iron, billets and pipes.

Sales of semi-finished products totalled USD 412 million in 1Q 2014, up 27% y-o-y. The rise was due to an increase in volumes of pig iron of 188 thousand tonnes - mainly to the US, Europe and MENA - and billets of 64 thousand tonnes, mainly to MENA. Sales of slabs decreased by 10% y-o-y due to a lower volumes, although average slab prices were up 3%.

Sales of finished products declined by 12% y-o-y to USD 1,593 million in 1Q 2014, mainly due to lower volumes and average prices of flat and long products.

Sales of flat products totalled USD 1,196 million in 1Q 2014, down 11% y-o-y, of which 8 pp was attributable to declining volumes and 3 pp to lower average prices. Volumes of flat products decreased by 266 thousand tonnes y-o-y due to reduced shipments to Ukraine, Europe, the CIS and Southeast Asia, although the fall was offset by a redistribution of 77 thousand tonnes from those markets to MENA.

Sales of long products amounted to USD 314 million in 1Q 2014, down by 20% y-o-y, of which 14 pp was attributable to a fall in sales volumes in Ukraine, Russia and MENA, and 6 pp to lower average prices. Volumes in Ukraine dropped by 36 thousand tonnes, caused by a 12% decrease y-o-y4 in consumption of long products, primarily in the construction sector. Exports to Russia and MENA fell by a total of 119 thousand tonnes, which was partly compensated by a rise of 50 thousand tonnes in volumes to Europe.

In 1Q 2014, sales of tubular products soared by 115% y-o-y to USD 28 million, driven mainly by an increase in volumes of 12 thousand tonnes as a result of orders from new pipeline projects.

Sales of railway products decreased by 25% y-o-y to USD 55 million in 1Q 2014, as volumes in the CIS fell by 36 thousand tonnes, offset by an increase in sales to Ukraine of 13 thousand tonnes.

Sales of coke products - which include coke, coke breeze, nut coke and chemical products - remained stable y-o-y at USD 126 million.

Mining division

Revenues in the Mining division come from sales of iron ore products and coking coal concentrate. In 1Q 2014, the division's top line dropped by 14% y-o-y to USD 708 million, as sales of iron ore and coking coal concentrate slumped.

Sales of iron ore concentrate totalled USD 304 million in 1Q 2014, down 38% y-o-y. Of this, 34 pp was attributable to a slump in volumes, as overall production dropped y-o-y following the adverse weather conditions in January-February 2014 and a shift in the iron ore product mix: an additional 1,048 thousand tonnes of pellets were sold to China instead of concentrate. As a result, shipments of concentrate to China decreased by 1,390 thousand tonnes y-o-y, while average selling prices in the region fell by 12%. Domestic sales of concentrate grew by 11% y-o-y, driven by a 19% rise in average selling prices, which was offset by a decrease in shipments of 123 thousand tonnes.

At the same time, sales of pellets grew by 58% y-o-y to USD 328 million in 1Q 2014, primarily attributable to a rise in volumes to China. In addition, sales of pellets to Ukrainian customers increased by 6% y-o-y, supported by a positive price dynamic, although volumes declined by 58 thousand tonnes. Sales of pellets to Europe decreased by USD 25 million y-o-y due to a fall in volumes of 189 thousand tonnes.

Sales of coking coal concentrate totalled USD 46 million in 1Q 2014, down 43% y-o-y, of which 24 pp was attributable to lower average prices and 19 pp to declining volumes. Prices in the US fell more sharply than in Ukraine. As a result, sales of concentrate to Ukraine grew by 23%, supported by higher volumes, while sales volumes in the US decreased by 89 thousand tonnes.