Trading update for the first quarter of 2012

Metinvest B.V., a parent company of the international vertically integrated steel and mining group of companies (jointly referred to as “Metinvest”), today published a trading update¹ for the first quarter of 2012 ended 31 March 2012.

FINANCIAL HIGHLIGHTS 

• Consolidated revenues were US$3,216 million
• Adjusted EBITDA² was US$538 million with a margin of 16.7%
• Net Profit was US$170 million with a margin of 5.3%
• Total loans and borrowings as of 31 March 2012 were US$3,556 million, comprising US$2,563 of long-term borrowings and US$993 million of their current portion
• Seller’s Notes were US$319 million as of 31 March 2012
• Cash and cash equivalents were US$401 million at the end of the period
• Capital expenditures were US$168 million

OPERATIONAL HIGHLIGHTS

• Crude steel production was 3,296 thousand tonnes
• Coking coal output was 2,970 thousand tonnes
• Production of iron ore concentrate was 9,189 thousand tonnes

STEEL

Despite the seasonal slowdown in demand over Q1 2012, the Group's revenue increased marginally by 0.9% year-on-year to US$3,216 million, primarily driven by a 9.7% growth in sales of coal and iron ore products. The Steel segment accounted for 70.7% (compared with 73.0% in Q1 2011) of external sales, with the Mining segment accounting for 29.3% (compared with 27.0% in Q1 2011).

In Q1 2012, sales of the Steel segment saw a marginal decrease of 2.3% year-on-year to US$2,273 million, whereas sales of the Mining segment increased by 9.7% up to US$943 million.

Sales of semi-finished products saw a decline of 16.3% (US$152 million) in Q1, primarily driven by weaker demand for slabs, and resulted in a reduction in sales of 238 thousand tonnes year-on-year.

Sales volumes of finished steel products remained relatively unchanged year-on-year and totalled 2,278 thousand tonnes in Q1. Whilst sales volumes of flat products were down by 13.1% (209 thousand tonnes) compared to the same period last year, sales volumes of long, railway and tubular products increased noticeably by 20.7%, 73.5% and 40.7% respectively. This was primarily due to an increase in orders from the CIS countries for long and railway products, as well as the continued implementation of a number of long-term pipeline projects such as the Beyneu-Shymkent project (Kazakhstan) and the East-West project (Turkmenistan).

MINING

In Q1 2012, sales volumes of iron ore products increased by 514 thousand tonnes (10.8%) year-on-year to 5,254 thousand tonnes due to an increase in salable pellets by 530 thousand tonnes, resulting primarily from the redistribution of sales volumes of pellets to third parties (338 thousand tonnes), as well as the overall redistribution of production volumes from iron ore concentrate to pellets (84 thousand tonnes).

Sales of coking coal concentrate totalled US$138 million in Q1 2012, an increase of 50.0% year-on-year, driven by an equal increase in coal price and sales volumes.

In Q1 2012, sales volumes of steam coal concentrate saw a decrease of 163 thousand tonnes year-on-year as a result of low demand for steam coal in the US, due to which the mining of steam coal was reduced by 266 thousand tonnes at the US operations.

SALES BY PRODUCTS³

CAPITAL EXPENDITURES

Major capex projects for Steel and Mining segments remained on schedule and within the budget. Among key strategic projects there were PCI unit construction for blast furnaces (‘BF’) and construction of a new turbine air blower for blast furnaces at Ilyich Steel, construction of a new turbine air blower for BF No. 3 and No. 5 at Yenakiieve Steel, construction of an accelerated cooling system at the plate mill of Azovstal, reconstruction of the pelletizing machine LURGI 278-B and construction of a rock crushing transferring complex at Northern GOK, as well as construction of the coal mining complex Roaring Creek at United Coal.

_{¹ - The information in this press release has been prepared in accordance with management accounting policies. Inter-company transactions have been eliminated in consolidation. This announcement does not contain sufficient information to constitute an interim financial report as defined in International Auditing Standards 34, “Interim Financial Reporting”. The following results may differ from financial statement 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 statement prepared in accordance with IFRS for the six months ended 30 June and for the year ended 31 December, in each year.}

_{²  - Adjusted EBITDA is calculated as profits before income tax, financial income and costs, depreciation and amortization, impairment and devaluation of property, plant and equipment, sponsorship and other charity payments, share of results of associates and other non-core expenses.}

_{³ - The total volumes of products exclude intra-group sales and internal consumption.
Flat products include hot rolled quarto plates and hot rolled heavy plates, hot rolled, cold rolled and hot-dip galvanized sheets and coils
Long products include hot rolled sections (light, medium, heavy), rebars, merchant bars and wire rods
Railway products include light and heavy rails, rail fasteners
Tubular products include LSAW (longitudinal submerged arc welded) large diameter pipes and ERW (electric resistance welded) pipes and seamless pipes
Other coke products include coke, coke breeze, coke nut and chemical products}