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6 August 2014

Severstal Distribution Network increases EBITDA by 76% in H1 2014

During the first six months of 2014 (the “period”), the Distribution Network of Severstal’s Russian Steel Division, increased EBITDA by 9% year on year to USD 19 mln (H1 2013: USD 11 mln) driven by increased sales volumes and higher revenue.

During the first six months of 2014, the Distribution Network of the Severstal Russian Steel Division, comprising marketing units spread across five countries, increased revenue from sales of steel products to USD 418 mln, representing a 9.2% increase was against H1 2013 revenue of USD 383 mln. Sales volumes for the period also increased by 9% to 617 thousand tonnes (from 530 thousand tonnes in the first half of 2013).

During the period the Distribution Network witnessed various pricing dynamics across its key markets. The price of a hot rolled coil in Europe reduced by 9% from H1 2013 while the domestic prices in rubles of hot rolled material in Russia increased by 4%, and export prices in USD terms reduced by 3-4%.

Andrey Alexeyev, CEO of the Distribution Network, commented: “The Distribution Network operates in five countries in the EU and CIS, providing steel for customers across various industries and sectors of 15 countreis. Our companies provide metal working services and sell products with high added value. This strategic focus allowed us to increase sales volume and revenue, even with in an overall softer pricing environment.” 

The Distribution Network increased EBITDA by 76% to USD 19.3 mln (H1 2013: USD 11.0 mln). This result was driven by increased sales volumes in combination with reduced costs and enhanced efficiency through efforts to optimize the organizational structures of regional branches.

The Severstallat Group, the Distribution Network’s operations in European Union markets increased revenue by 25% to USD 169 mln and increased EBITDA by 29% to USD 8.7 mln.

During the reporting period, the revenue of ZAO Trade House Severstal-Invest, a Russian business within the Distribution Network, increased by 2% year on year to USD 207 mln, while EBITDA almost tripled year on year to reach USD 9.8 mln. 

Andrey Alexeyev commented: “A primary focus is on improving customer service and developing attractive offers for them. More than 11% of steel products produced by the Severstal Russian Steel Division are being sold through the Distribution Network. Our goal is to provide efficient delivery of our shipments and therefore cost control is a key priority”. 

During the period the Distribution Network reduced selling, general and administrative (SG&A) expenses by 21% versus the first half of the previous year. In the same period, the business delivered an increase in average monthly sales per employee by 69%.