Q3 2020 output and sales breakdown

· Steel output* grew by 3% yoy to 3.9 m t driven by higher steel output by NLMK's Russian facilities (flat qoq). The qoq decline in steel output in the Russia Flat Products segment, related to the start of the second stage of large-scale capital repairs at NLMK Lipetsk BF and BOF operations, was offset by the recovery in utilization rates in the Russia Long Products and NLMK USA segments.

· Sales grew by 2% qoq to 4.4 m t, the share of finished products in the sales portfolio increased amid the launch of overhauls at NLMK Lipetsk hot-end operations (see above). Year-on-year, sales volumes grew by 11% to 4.4 m t due mainly to increased demand for pig iron.

· Sales of semi-finished products to third parties increased by 61% yoy, due to the growth of pig iron export sales. Quarter-on-quarter, sales of semi-finished products to third parties decreased by 5% to 1.4 m t with the start of overhauls at NLMK Lipetsk hot-end operations. Slab deliveries to NBH decreased by 35% qoq to 0.3 m t (-28% yoy).

· Sales of finished products grew by 14% qoq to 2.8 m t against the backdrop of a recovery in demand for steel products on the Russian market. Year-on-year, sales of finished products grew by 1% due to higher demand for long and hot-rolled products from the construction sector in Russia.

· Sales on 'home' markets grew by 19% qoqdue to a gradual recovery in demand on the markets where NLMK Group operates.

9M 2020 output and sales breakdown

· Steel output* remained flat year-on-year.

· Sales increased by 3% yoy to 13.3 m t with increased demand for pig iron. Sales of semis to third parties increased by 28% yoy to 3.9 m t, due to increased export sales of pig iron. Slab sales to NBH decreased by 4% yoy to 1.5 m t.

· Sales of finished products decreased by 5% yoy to 7.9 m t amid weak demand in April-May 2020 and sales redistribution to semi-finished products. Sales on 'home' markets reduced by 4% yoy to 8.1 m t, due to the slowdown in the US and EU sales during the economic crisis amid the COVID-19 pandemic.

* Hereinafter NLMK Group steel output and sales on home markets include NBH. Consolidated sales are given without NBH. Sales to home markets mean sales of the Group's companies in the regions, where production capacities are located in Russia, Europe, and the US.

NLMK GROUP KEY FINANCIALS

Q3 2020 revenue

· Revenue grew by 3% qoq to $2.2 bn as sales of steel products grew by 2% qoq reaching 4.4 m t. Year-on-year, revenue was down by 13% due to a drop in prices for steel products and an increase in the share of semi-finished products in the sales mix.

· The share of finished products increased by 5 p.p. qoq to 66%, while the share of high value-added products increased by 3 p.p. to 37%. The share of semi-finished products in the revenue decreased by 4 p.p. qoq to 29% due to reduced slab sales associated with planned overhauls and a recovery in demand for finished products in Russia.

· The share of the Russian market in the revenue recovered to 46% (+9 p.p. qoq; +1 p.p. yoy). The share of Asian countries was 14% (-1 p.p. qoq; +13 p.p. yoy), while the EU share was down to 11% (-5 p.p. qoq; -3 p.p. yoy), and the US share was down to 14% (-1 p.p. qoq; -3 p.p. yoy).

9M 2020 revenue

· Revenue decreased by 17% yoy to $6.9 bn, due to lower steel product prices, a higher share of semi-finished products in the sales portfolio, and low demand in the US and EU amid the pandemic.

· The share of semi-finished products in the revenue increased by 4 p.p. yoy to 30% as a result of growing pig iron sales to third parties; the share of finished products decreased by 4 p.p. yoy to 64%. The share of revenue from high value-added products totalled 37% (-1 p.p. yoy).

· The Russian market share in the revenue increased to 41% (+1 p.p. yoy). The US and EU shares in the consolidated revenue reduced by 3 p.p. yoy to 16% and 16%, respectively.

Q3 2020 EBITDA

· EBITDA* went down by 1% qoq to $579 m (-11% yoy). Widening spreads and ruble depreciation enabled offsetting the negative impact of the incident at Stoilensky in September ($60 m) that resulted in a decrease in the share of captive iron ore in NLMK's consumption and reduced iron ore sales to third parties. Excluding this one-off effect, Q3'20 EBITDA would be $639 m.

· Commercial expenses went down by 8% qoq (+3% yoy) to $208 m, due to lower transport costs associated with the normalization of the share of export sales for the Group's Russian companies.

· General and administrative expenses grew by $2 m (+2% qoq; -8% yoy).

9M 2020 EBITDA

· EBITDA went down by 16% yoy to $1.8 bn amid narrowing steel/raw material price spreads, which was partially offset by operational efficiency gains and the ruble depreciation.

· Commercial expenses increased by 3% yoy to $647 m due to higher exports.

· General and administrative expenses decreased by 3% yoy to $252 m.

Net profit**

· Q3 2020 net profit recovered to $312 m (4x growth qoq; -9% yoy) due to the low base of the previous quarter, associated with the recognition of the impairment of a $120 m investment in NBH. 9M 2020 net profit decreased by 40% yoy to $678 m due to lower operating profit and impairment of the NBH investment.

*EBITDA used in NLMK's financial releases is calculated as operating profit before equity share in net losses of associates and other companies accounted for using the equity method of accounting, impairment and write-off of assets, adjusted to depreciation and amortization. EBITDA is not an indicator of operating profit, operating activity or liquidity under IFRS, and NLMK discloses it because equivalent indicators could be used by investors and analysts. That said, NLMK's EBITDA should not be viewed on a standalone basis, or in place of profit before tax, or cash flows from operations, as defined by IFRS, or as an indicator of operational efficiency, or as the sum of free cash funds that NLMK can invest into business development. NLMK's EBITDA margin and EBITDA might not be comparable to similar indicators disclosed by other companies as there are no commonly accepted rules for calculating them. For instance, NLMK's EBITDA is calculated similar to what is termed as 'Adjusted EBITDA' in other companies, as NLMK's EBITDA excludes other profit/loss items in addition to interest payments, income tax, depreciation and amortization.

**Profit for the period, attributable to NLMK shareholders.

Q3 2020 free cash flow

· Free cash flow went down by 21% qoq to $239 m with higher capex after the start of the active stage of NLMK Lipetsk large-scale capital repairs and amid active execution of Strategy 2022 projects. Year-on-year, free cash flow was 4% lower amid the reduction in EBITDA, which was partially offset by cash inflows from working capital.

· Operating cash flow grew by 8% qoq to $591 m due to cash inflows from working capital.

· Cash inflow from working capital totalled $98 m due to:

o  - $37 m: an increase in receivables due to higher sales prices of steel products;

o  + $49 m: slab inventory reduction at NLMK USA, as well as finished products inventory, against the backdrop of strong demand in Russia and a shorter transport leg with a decrease in the export share;

o  + $93 m: an increase in payables due to increased purchases of third-party raw materials.

9M 2020 free cash flow

· Free cash flow declined by 26% yoy to $874 m due mainly to lower EBITDA and an 18% yoy increase in investment, which was partially offset by cash inflows from working capital.

· Cash inflow from working capital totalled $240 m due to:

o  + $28 m: reduction of receivables due to declining steel product prices;

o  + $198 m: decrease in inventory amid lower cost of raw materials and steel products, and improved efficiency of working capital management;

o  + $18 m: increase in payables in Q3 2020.

NLMK Russia Flat Products

Q3 2020 highlights

· Sales went down by 4% qoq to 3.3 m t, following the decrease in output due to major repairs at NLMK Lipetsk. Year-on-year, sales grew by 18% due to the sale of additional pig iron volumes.

· Revenue in the Segment decreased slightly by 1% qoq to $1.6 bn (-8% yoy) following the drop in sales, which was partially offset by an increase in average sales prices and an improvement in the product portfolio mix.

· EBITDA went up by 1% qoq to $306 m. Improved sales mix and a weaker ruble offset the impact from the growth of the share of third party iron ore used in production.

9M 2020 highlights

· Sales grew by 10% yoy to 10.2 m t due to strong Q1 2020 performance and a quick recovery of demand in Russia in Q3 2020.

· Revenue was down by 11% yoy to $5 bn as steel product prices decreased, which was partially offset by higher sales.

· EBITDA decreased by 22% yoy to $964 m amid narrowing spreads.

NLMK Russia Long Products

Q3 2020 highlights

· Sales grew by 35% qoq to 0.8 m t (+16% yoy), supported by the significant growth of the Russian long products market, associated with the previous quarter's low base effect amid the COVID-19 pandemic, and the shift in the start of the construction season.

· Revenue went up by 39% qoq to $452 m following the growth in sales. Year-on-year, revenue was down by 7% due to long product and billet prices decreasing by 18% and 13% yoy, respectively.

· EBITDA in the Segment totalled $37 m, with higher sales and a lower share of billet in the sales mix, and wider rebar/scrap price spread.

9M 2020 highlights

· Sales went down by 10% yoy to 2 m t amid lower demand for long products in 2020.

· Revenue decreased by 20% yoy to $1.1 bn, following lower sales and prices.

· EBITDA totalled $61 m (-33% yoy) due to lower sales and the change in the sales mix, and narrower rebar/scrap spreads, which was partially offset by operational efficiency programme gains.

Mining and Processing of Raw Materials

Q3 2020 highlights

· Sales were down by 16% qoq to 4.1 m t (-14 % yoy) due to the accident that led to a collapse of an ore supply conveyor gallery on 7 September, 2020. On 22 September, 2020 Stoilensky resumed production of iron ore products.

· Revenue decreased by 2% qoq to $330 m (-19% yoy) following sales, which was partially offset by ruble-denominated prices for pellets and concentrate increasing by 12% and 23% qoq, respectively.

· EBITDA went up by 1% qoq to $250 m, driven by higher prices and operational efficiency programmes, as well as capex projects. The accident (see above) has the key constraining factor.

9M 2020 highlights

· Sales were down by 2% yoy to 13.6 m t due to the accident (see above), which was partially offset by the growth of equipment productivity.

· Revenue decreased to $978 m (-2% yoy) following lower sales.

· EBITDA totalled $725 m (-1% yoy).

NLMK USA

Q3 2020 highlights

· Sales increased by 11% qoq to 0.37 m t due to higher HRC shipments, supported by the completion of planned repairs at the NLMK Indiana plant and the gradual recovery of business activity on the US market. Year-on-year, sales were 33% lower due to low NLMK Pennsylvania capacity utilization rates amid the strike.

· Revenue went down by 6% qoq to $223 m (-43% yoy) as the share of HRC in the sales mix increased and average sales prices slumped.

· EBITDA totalled -$12 m (vs. $3 m the previous quarter) amid narrower slab/rolled steel spreads. The negative trend was partially offset by higher sales and operational efficiency programme gains.

9M 2020 highlights

· Sales stood at 1.2 m t (-29% yoy) as steel consumption decreased in the US, pressured by the consequences of the COVID-19 pandemic.

· Revenue dropped by 40% yoy to $838 m due to a steel price adjustment and lower sales, which was partially offset by a 3 p.p. increase in the share of high value-added products, which reached 49%.

· EBITDA decreased to -$31 m vs. $0 m the previous year due to narrower price spreads and rolled product price adjustments.

NLMK DanSteel*

Q3 2020 highlights

· Sales of plate were down by 21% qoq to 0.1 m t (-18% yoy) due to weak demand amid the COVID-19 pandemic.

· Revenue decreased by 16% qoq to $80 m. Lower sales were partially offset by plate prices growing by 4% qoq.

· EBITDA totalled -$3 m (flat qoq).

9M 2020 highlights

· Sales stood at 0.38 m t (-4% yoy) as plate consumption decreased in Q2-Q3 2020 due to the pandemic.

· Revenue was down by 20% yoy to $305 m, mainly due to the plate price adjustment.

· EBITDA totalled $0 m (vs. $7 m the previous year) due to narrower plate/slab spreads.

* NLMK DanSteel and plate distribution network.

JV performance (NBH)

Q3 2020 highlights

· NBH sales remained almost flat qoq at 0.5 m t. Year-on-year, sales decreased by 14% amid weak demand on the European market.

· Revenue was down by 3% qoq to $299 m, following a price adjustment by an average 2% qoq.

· EBITDA decreased to -$32 m vs. -$14 m the previous quarter due to lower finished product prices and reduced average capacity utilization rates.

9M 2020 highlights

· NBH sales decreased by 8% yoy to 1.5 m t due to lower demand for steel products in Q2 2020 amid the COVID-19 pandemic.

· Revenue dropped by 18% yoy to $989 m due to lower steel product sales prices and a decrease in sales.

· EBITDA totalled -$65 m vs. -$107 m the previous year. Losses in the Segment were due to unfavourable market conditions amid low prices. The relative decrease in losses vs. the previous year was due, among other factors, to last year's accrual of non-operating provisions for NLMK Clabecq restructuring.