WOOD Flash – EVRAZ: 1Q19 trading update - higher steel volumes, but lower margins qoq
EVRAZ released its 1Q19 trading update this morning, with steel sales volumes up 8% qoq (albeit with a weaker mix: semis were up 29% vs. a 3% qoq fall in finished products), following completion of maintenance at BF #3 at ZSMK. CIS prices were down 5% qoq, slightly worse than the 4% qoq decline reported by Severstal, largely due to the weaker mix. With the 14% increase in integrated slab cash costs, CIS steel margins should fall c.USD 50/t qoq. Coal mining volumes were flat but concentrate output was down 13% qoq due to lower high levels of accumulated inventory at year end. EBITDA/t remained broadly flat qoq, however, with prices rising by a similar amount to cash costs. The 12% qoq reduction in iron ore cash costs, due to the 8% qoq increase in volumes, is a small positive. Vanadium sales volumes declined 5% qoq and benchmark vanadium prices fell 32% qoq, but prices still remain much higher than our existing forecasts. Overall, we see these results as neutral for the stock.Evraz engages in the production and distribution of steel and related products and coal and iron ore mining. Co. also produces vanadium products. Co. has four segments: Steel, which includes production of steel and related products at all mills except for those in North America, and includes the extraction of vanadium ore and production of vanadium products, iron ore mining and enrichment and certain energy-generating companies; Steel, North America, which includes production of steel and related products in the U.S. and Canada; Coal, which includes coal mining and enrichment; and Other operations, which includes energy-generating companies, shipping and railway transportation companies.
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