1. Revenue

NLMK Group’s Q2 2012 revenue increased to USD 3,257 million. The Steel, Foreign Rolled Product and Long Product segments accounted for 56%, 32% and 10% of the overall revenue.

Revenue increased, driven by higher HVA product sales and an increase in domestic sales, with prices remaining relatively stable.

The Mining segment accounted for around 3% of revenue supported by an increase in deliveries to third parties.

2. Production costs (COGS)

Q2 production costs were in line with Q1 at USD 2,205 million, attributable to
a). An insignificant decrease in Group sales
b). An increase in downstream capacity utilisation rates
c). Weaker RUB FX rate against USD
d). Changes prices for input materials
e). Changes in the input structure (an increase in pellet consumption and imported high-quality coal by the Steel segment).

3. Depreciation and amortisation

Amortisation charges in Q2 amounted to around USD 171 million largely determined by FX changes.

4. SG&A

SG&A expenses remained in line with Q1 at USD 456 million. Commercial expenses increased to USD 312 million as a result of changes in the geography of sales and increased NLMK slab deliveries to the Group’s international assets.

The 21% increase in taxes to USD 44 million, excluding income tax, is mostly associated with an increase in NLMK’s property tax payments due to the Technical Upgrade Programme implementation.

5. Interest payments

Part of the interest payments were capitalised under US GAAP standards. USD 14 million were recognised in the P&L statement in Q2 due to the gradual commissioning of new equipment.

6. Operating profit

Operational profit increased by 67%QoQ to USD 425 million, supported by an improved sales structure and stable production costs. Sales of iron ore concentrate produced in Q1 2012 external customers doubled QOq also contributing to an increase in operational profit.

7. Net profit

Net profit increased by 61%QoQ to USD 278 million, with a net profit margin of 8.5%.

8. Working capital

The Group total accounts receivable, inventory and accounts payable decreased by 8%, 6% and 11%, respectively, impacted mainly by the RUB and EUR FX rate weakening against USD.

9. Cash flow from operations

Cash flow from operations decreased by 39%QoQ to USD 304 million due to a slight increase in the working capital, determined, among other factors, by restocking following the end of the winter period and an increase in slab deliveries to the Group’s international rolling assets.

Source - NLMK

(www.steelguru.com)