Severstal expects a deterioration in domestic demand in Q2 2020 due to Russian GDP contraction and the introduction of stricter measures to combat COVID-19. The company indicated it hopes to retain acceptable margins until the markets return to normal later in the year because of its low-cost position.
The company’s Russian Steel Division (RSD) steel sales increased by 4pc to 2.76mn mt in Q1 2020 compared to 2.66mn mt in Q4 2019. RSD’s share of steel export shipments rose to 45pc during the quarter compared to Q4 2019 when it was 41pc responding to a seasonal slowdown in domestic demand. The share of high value-added (HVA) products within the sales portfolio declined slightly to 42pc during the quarter from 45pc in Q4 2019 due to increased shipments of hot rolled coil and long steel products.
In Q1 2020, hot rolled strip and plate revenue declined by 2.6pc to $675mn from the same quarter last year and contributed 34pc of total revenue for Q1 2020. Galvanized coated sheet, metalware products, pellets and iron ore, cold rolled sheet contributed about 7-8pc each to total revenue for a total of $516mn or 29pc of total contribution to revenue. Tubes, pipes and other long product sales totaled $213mn in Q1 2020 or 12pc of total revenue. Semi-finished products and color-coated sheet each contributed approximately 4pc to revenue.
The group’s revenue declined by 12.5pc to $1.777bn in Q1 2020 compared to $2.031bn in Q1 2019 due to weaker pricing for steel products and lower volumes in comparison. Revenue decreased 3.3pc compared to $1.838bn achieved in Q4 2019.
Broken down by destination, revenue from the Russian Federation totaled $1.047bn or 59pc followed by the EU with $524mn or 29pc, and CIS with $131mn or 7pc.
Severstal’s EBITDA was 16.3pc lower at $555mn in Q1 2020 compared to $663mn in Q1 2019, primarily reflecting lower revenues partially offset by a reduction in cost of sales. The Group’s EBITDA margin remained strong at 31.2pc in Q1 2020 against 32.6pc in Q1 2019. Severstal reported it encountered a large foreign exchange loss of $378mn in Q1 2020 that resulted in a 91pc decrease in profit before income tax to $51mn from $552mn in the same quarter a year ago.