WOOD Flash – EVRAZ: 2Q19 trading update – good performance on volumes and price moves in line with expectations
EVRAZ released its 2Q19 trading update this morning (31 July), with steel sales volumes up 7.7% qoq (with a slightly stronger mix: semis were up 4.5% vs. a 10% qoq increase in finished product sales), due to seasonal demand strength for construction products in Russia and higher railway product sales in North America. CIS prices were up 7% qoq vs. 6-8% qoq price growth for its Russian peers. With the 7% increase in integrated slab cash costs, CIS steel margins should increase c.USD 21/t qoq. Coal mining volumes were up 2% qoq, but concentrate output was up 21% qoq, due to greater processing volumes and reduced ash content. EBITDA/t fell USD 21/t qoq, however, with prices falling 20% qoq vs. cash costs that fell only 6%. Vanadium sales volumes rose 30% qoq and benchmark vanadium prices fell 46% qoq, largely returning to our long-term price assumptions after the spike in prices in 2018. Overall, we see these results as neutral for the stock, with the increase in volumes and prices largely expected.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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