NLMK Consolidated Results for 1Q 2015

During Q1, NLMK Group's steelmaking capacity was operating at 96 percent. Net income rose 39 percent on a quarterly basis and 85 percent on an annualized basis to $ 321 million.

In Q1 2015, steel production declined to 3.87 million tonnes, down 6 percent qoq and 1 percent year-on-year. This is due to the planned repairs of the blast furnace and converter shop at the Lipetsk site, as well as equipment repairs at NLMK USA's EAF, specially timed to coincide with the low demand season. This drop was partially offset by an increase in NLMK's long bar segment production.

Group sales increased to 4 million tonnes, up 3 percent qoq and 2 percent annualized, driven by higher export sales. Export sales in Q1 2015 increased by 13 percent QoQ and 10 percent YoY, reaching 2.55 million tonnes, representing a 64 percent share of the group's total sales. This growth was 5 percent qoq and 4 percent yoy and was driven by an increase in demand for semi-finished products and boards, which were stockpiled at the Group's overseas assets in 2014. The key export markets of NLMK Group were North and South America, Europe, the Middle East and the Southeast Asia region.

Due to weak seasonal demand in Russia, sales on the domestic market decreased by 11 percent compared to the corresponding quarter of the previous year and amounted to 1.4 million tonnes, which is mainly due to a decrease in sales at the Lipetsk site. Average prices for flat and long products in Russia decreased in dollar terms by 10-13 percent in quarterly comparison. The Group's export prices for base grades of flat products fell 15-20 percent QoQ, in line with global market trends amid falling raw material prices.

In Europe, dollar-denominated prices declined 6-11 percent qoq, driven primarily by the devaluation of the euro against the dollar. In the US, high imports, lower scrap prices and weak seasonal demand generally contributed to a 9-11 percent decline in prices qoq.