Alchevsk Steel posts negative EBIT in 2012

Alchevsk Steel (ALMK UK) reported its full 2012 financials on April 16, having posted negative EBIT of USD 50 mln in 2012, compared to a USD 75 mln gain the year before. The company’s revenue fell 24% yoy to USD 1.787 bln. Alchevsk Steel reported that it has launched PCI units at blast furnaces No.3 and No.4 in 2012.

Roman Topolyuk: Production volumes played only a small role in the company’s revenue decline as steel output fell only 4.6% yoy. The rest of the 23% yoy plunge was rooted in falling steel prices and the negative market climate will persist in 2013 (1Q13 average market prices are 5-12% lower yoy).

Despite the expected cost savings from the launched PCI units, that won’t allow the company to break even in 2013, given the steel market remains as weak as in 2012. We estimate that the two newly PCI-equipped facilities at Alchevsk, working at full capacity, will bring USD 80 mln in cost savings, as compared to Alchevsk’ 2012 loss was USD 127 mln. Moreover, the positive effect will be much smaller than USD 80 mln, as out of the two newly equipped facilities, only blast furnace No.4 is operating now.