Annual report 2015

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Annual report 2015

Four success factors

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Results
overview

Despite the drop in global iron ore prices, the Company’s EBITDA margin remains consistently high

Despite the drop in global iron ore prices, the Company’s EBITDA margin remains consistently high

Operating performance

Production

In 2015, the Company increased output of key products y-o-y:

Core products, million tonnes

Mining segment

Both Lebedinsky GOK and Mikhailovsky GOK increased concentrate production. At Lebedinsky GOK, this was due to higher magnetic iron content in the ore and its recovery into concentrate. At Mikhailovsky GOK, the results came on the back of shorter repair times and higher production rates driven by a change in the physical, mechanical and technological properties of the ore mixture. In 2015, concentrate production at Mikhailovsky GOK grew by 0.6% to 16.8 million tonnes.

The launch of Pellet Plant #3 and the scheduled reduction in repair time significantly increased pellet production at Mikhailovsky GOK (up 10.3% y-o-y). Pellet production at Lebedinsky GOK increased by 0.3% due to optimisation works at the pellet plants.

Production at Lebedinsky GOK in 2011–2015, million tonnes

Production at Mikhailovsky GOK in 2011–2015, million tonnes

Annual HBI production at Lebedinsky GOK increased by 8.1% y-o-y (in 2014, the enterprise was undergoing longterm renovation and partial upgrade of HBI-2 Plant).

Steel segment

Pellet production at OEMK reached 3.8 million tonnes (up 2.4% y-o-y) on the back of shorter repair times and the improved performance of the pellet plant.

OEMK saw a record growth in steel production: up 2.6% y-o-y to 3.5 million tonnes due to improved productivity at its electric arc furnaces. Steel production at Ural Steel dropped by 8.1% y-o-y, down to 1.0 million tonnes following changes in the demand structure.

Scheduled renovation of metallisation units led to a minor drop in OEMK’s DRI production by 1.1% y-o-y.

Improved blast furnace processes resulted in higher output at the blast furnace shop at Ural Steel, thus boosting pig iron production by 7.6%.

Production volumes at OEMK in 2011–2015, million tonnes

Production volumes at OEMK in 2011–2015, million tonnes


Shipments

Iron ore product shipments

In 2015, pellets accounted for the majority of iron ore products shipped by Metalloinvest (52.2% of the total volume), with iron ore (concentrate and sintering ore), HBI/DRI and other products making up 39.1%, 8.6% and 0.1%1, respectively.

In 2015, the share of domestic iron ore shipments grew to 66% (59% in 2014). These changes are attributable to an increase in shipments to Russian consumers (MMK, NLMK, Evraz and Severstal). Shipments to European and Asian customers decreased on a pro-rata basis by 4 p.p. and 1 p.p., respectively, amounting to 19% and 10%. Shipments to the Middle East and North Africa (MENA) remained flat y-o-y.

Iron ore product shipments, billion tonnes

Iron ore product shipments in 2011–2015, billion tonnes

Shipments from Lebedinsky GOK in 2011–20 152, billion tonnes

Shipments from Mikhailovsky GOK in 2011–20153, billion tonnes

Iron ore product shipments by region in 2 011–2015, billion tonnes

Empty
2011
2012
2013
2014
2015
2015 vs 2014
Russia
9.1
14.8
16.2
16.2
18.3
+13.0%
Europe
7
6.6
5.4
6.3
5.2
-17.5%
Asia
10.9
6.9
4.7
3.1
2.7
-12.9%
MENA
1.1
0.6
0.7
1.1
1.0
-9.1%
Other
0.9
0.3
0.3
0.7
0.4
-42.9%

Shipments of pig iron and steel products

Steel products still account for 70% of steel segment shipments. In 2015, this figure fell slightly with a proportional increase in pig iron shipments.

Pig iron and steel product shipments in 2011–2015, %

Pig iron and steel product shipments in 2011–2015, million tonnes

Over the last four years, pig iron shipments have consistently grown, while steel product shipments have decreased. High-margin product shipments remain largely unchanged since 2012.

Shipments from OEMK and Ural Steel in 2011-2015, million tonnes

In 2015, domestic steel product shipments iIncreased by 12.9%, while shipments to european customers dropped by 17.4%

Domestic shipments accounted for 28% of the total volume of steel product shipments (down 4 p.p. y-o-y). At the same time, shipments to European customers grew to 20% (up 8 p.p.), mainly driven by increased shipments to Italy. In 2015, an increase in shipments to Algeria, Tunisia and Turkey triggered a 3 p.p. y-o-y growth to 29% in the share of shipments to the MENA region.

Starting from 2014, the share of pig iron shipments from Ural Steel as a proportion of the total grew substantially. In 2014, it amounted to 28% and 1.8 million tonnes, remaining unchanged in 2015.

Domestic shipments of steel products have substantially declined over the last five years. In 2015, they declined by 10%. At the same time, 2015 shipments to the MENA region grew by 13%.

Steel product shipments by r egion in 2011–2015, million tonnes

Empty
2011
2012
2013
2014
2015
2015 vs 2014
Russia
2.4
2.3
2
1.9
1.7
–-10.5%
Europe
0.6
0.4
0.6
0.7
1.2
+71.60%
Asia
0.5
0.6
0.2
0.2
0.2
0.0%
MENA
1.6
1.4
1.6
1.5
1.7
-13.0%
Other
1.2
1.2
1.4
1.6
1.3
–-18.7%

1 HBI and pellet fines.

2 Including intra-group shipments.

3 Including intra-group shipments.

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