DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group Posts Q2 and H1 2018 IFRS Results
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PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group Posts Q2 and H1 2018 IFRS
Results
02-Aug-2018 / 08:00 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
MMK Group financial statements
Key consolidated results for Q2 and H1 2018
(USD mln)
Q2 Q1 % H1 2018 H1 %
2018 2018 2017
Revenue 2,106 2,055 2.5% 4,161 3,586 16.0%
Cost of sales -1,384 -1,422 -2.7% -2,806 -2,560 9.6%
Operating profit 507 414 22.5% 921 618 49.0%
EBITDA, of which 650 560 16.1% 1,210 907 33.4%
Steel segment 617 521 18.4% 1,138 839 35.6%
(Russia)
Steel segment 1 5 -80.0% 6 20 -70.0%
(Turkey)
Coal segment 33 29 13.8% 62 50 24.0%
Consolidation effect -1 5 - 4 -2 -
EBITDA margin 30.9% 27.3% 29.1% 25.3%
Profit for the period 392 279 40.5% 671 538 24.7%
Free cash flow 281 145 93.8% 426 218 95.4%
Record operating EBITDA
Doubled free cash flow
Dividend at 100% of FCF
- EBITDA for Q2 2018 amounted to USD 650 mln, up 16.1% quarter-on-quarter
(q-o-q), - the highest in the Company's post-crisis history. The EBITDA
margin grew to 30.9%.
- Free cash flow (FCF) for Q2 2018 almost doubled q-o-q and amounted to USD
281 mln.
- Strong financial results allowed the Board of Directors to recommend
payment of USD 281 mln in dividends for Q2 2018 (100% of FCF for the
quarter).
Q2 2018 highlights vs Q1 2018
Revenue increased in Q2 2018 due to growth of sales volumes of finished
products, an improved sales mix and higher prices.
Cost of sales in Q2 2018 decreased q-o-q as prices for key raw materials
stabilised amid rouble weakening against the US dollar.
As a result, EBITDA increased by 16.1% on the previous quarter, delivering
an EBITDA margin of 30.9%.
Quarterly profit amounted to USD 392 mln. One-off factors that had an impact
on profit include a positive FX effect of USD 16 mln.
FCF amounted to USD 281 mln. The growth on the previous quarter was due to
cash inflow from working capital of USD 29 mln as compared to cash outflow
to working capital of USD 86 mln in Q1 2018.
H1 2018 highlights vs H1 2017
Revenue grew 16.0% y-o-y. This was due to an increase in sales volumes of
117 ths tonnes, or 2.1%, and an increase in average sales prices of USD 86
per tonne, or 15.3%.
In H1 2018, EBITDA grew 33.4% y-o-y. This significant growth was due to
finished product prices growing faster than raw materials prices, as well as
an improved sales mix.
FCF for the period almost doubled y-o-y, which reflects both improved
conditions in the Company's key markets and increased operational
efficiency.
Balance-sheet and cash-flow highlights
Debt
As of the end of H1 2018, MMK Group's total debt amounted to USD 521 mln,
slightly below the level as of the end of 2017 and fully in line with its
conservative leverage policy.
As of 30 June 2018, the Company had USD 601 mln on its accounts. The
increase from the end of Q1 2018 was due to accumulation of funds during the
second quarter to pay dividends for Q1 2018.
Due to the increase in cash liquidity on its balance sheet, the Company's
net debt as of the end of H1 2018 was negative and stood at USD -80 mln.
Capital expenditure and cash flow
In Q2 2018, capital expenditure amounted to USD 273 mln, up 23.5% q-o-q.
This growth was due to a number of advance payments for deliveries of
equipment for sinter plant No. 5.
Capital expenditure for FY 2018 is expected to total around USD 800 mln (at
current RUB-USD exchange rates). Of this, USD 494 mln was invested in H1
2018. Thus, a reduction in the capex run-rate can be expected in H2 2018
compared to H1 2018.
The principal driver of capital expenditure growth in 2018 against the
original plan is due to investments for part of the project being brought
forward due to an acceleration of the Company's investment programme
(including sinter plant No. 5 construction).
In Q2 2018, cash inflow from working capital was USD 29 mln (compared to
cash outflow to working capital of USD 86 mln in Q1 2018), including due to
an USD 82 mln reduction in inventory of raw materials and finished products.
Accounts receivable increased by USD 66 mln during the period, as a result
of higher sales volumes and higher prices. As a result share of net working
capital to revenue decreased to 14,7% only.
Strong profitability along with effective working capital management enabled
the Company to almost double its FCF q-o-q to USD 281 mln in Q2 2018.
MMK Group highlights by segments
Steel segment (Russia)
The steel segment's total revenue for Q2 2018 was USD 2,049 mln, up 7.7%
q-o-q. Higher revenue is a result of an increase in finished products sales
volume amid improvements in the structure of sales mix and recovery in the
steel prices.
Segment EBITDA in Q2 2018 amounted to USD 617 mln, up 18.4% q-o-q. This
EBITDA increase was mainly due to the decline in traders' stock as well as
an increase in sales of the Lysvensky Metallurgical Plant products.
The cash cost for a tonne of slab in Q2 2018 amounted to USD 290, compared
to USD 300 in Q1 2018. This decline is linked to the stabilisation of prices
for key raw materials amid a weaker rouble against US dollar.
The Company's margins were positively affected by the results of a programme
aimed at increasing operational efficiency and optimising costs, which
enabled the Company to reduce costs by USD 16 mln in Q2 2018. Overall since
the start of the year, the Company reduced costs by USD 41 mln.
Steel segment (Turkey)
MMK Metalurji's revenue for Q2 2018 amounted to USD 162 mln, down 14.3%
q-o-q. This decline was due to the decrease in finished product sales by
14.3% q-o-q.
EBITDA for Q2 2018 amounted to USD 1 mln, down q-o-q.
The decline in EBITDA was due to an overall downturn in the Turkish economy
amid political instability and depreciation of local currency, resulting in
the postponement of orders.
Coal segment
The revenue generated by the coal segment in Q2 2018 amounted to USD 85 mln,
flat q-o-q.
At the same time, the segment's EBITDA increased 13.8% q-o-q and amounted to
USD 33 mln, driven by an increase in operational efficiency of the business
and by an increase in production and processing of own coking coal amid a
decrease in procurement of coal through third parties.
The Company plans to significantly increase its own coal production in FY
2018 (on the back of asset development programme in the previous years),
which should have a positive impact on the segment's financial performance.
Dividends
The strong financial position and impressive profitability enable the
Company to regularly distribute profit among shareholders.
On 1 August 2018, MMK's Board of Directors recommended that the
Extraordinary General Meeting of Shareholders (scheduled for 28 September
2018) pay dividends for Q2 2018 of RUB 1.589 per share (before tax).
Thus, the dividends recommended to be paid for Q2 2018 would amount to
approximately USD 281 mln (based on the current exchange rate) or 100% of
FCF for the period.
The Board of Directors also recommended to set the Q2 2018 dividend record
date as the close of trading on 9 October 2018.
Comments on the market situation
The Company currently sees healthy demand for metal on its sales markets,
which ensures full capacity utilization and supports the price premium on
domestic market.
The Company's financial performance in Q3 2018 will be affected by some
correction in the price of steel amid lower business activity on sales
markets and stabilisation in prices for key raw materials.
MMK management will hold a conference call on these financial statements on
2 August 2018 at 3 pm Moscow time (1 pm London time, 8 am New York time).
The conference call dial-in numbers are:
UK
+44 (0) 330 336 9439 (Local access) / 0800 279 7204 (Toll free)
Russia
+7 495 646 9190 (Local access) / 8 800 286 75011 (Toll free)
US
+1 929-477-0402 (Local access) / 866-575-6539 (Toll free)
Conference ID: 5737943
The call recording will be available for seven days via the following
numbers:
UK
+44 (0) 207 660 0134 (Local access) / 0 808 101 1153 (Toll free)
Russia
8 10 800 2702 1012 (Toll free)
US
+1 719-457-0820 (Local access) / 888-203-1112 (Toll free)
Conference ID: 5737943
A presentation of the financial results and the IFRS financial statements
can be found at: http://eng.mmk.ru/for_investor/financial_statements/ [1]
OJSC MMK is one of the world's largest steel producers and a leading Russian
metals company. The company's operations in Russia include a large steel
producing complex encompassing the entire production chain, from preparation
of iron ore to downstream processing of rolled steel. MMK turns out a broad
range of steel products with a predominant share of high-value-added
products.
Contacts
Investor Relations Department
Andrey Serov
+7 3519 24-52-97
serov.ae@mmk.ru
Communications Department
Dmitry Kuchumov Dmitry Bulin
+7 499 238-26-13 +7 499 238-26-13
kuchumov.do@mmk.ru bulin.dn@mmk.ru
ISIN: US5591892048
Category Code: IR
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 5824
EQS News ID: 710323
End of Announcement EQS News Service
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(END) Dow Jones Newswires
August 02, 2018 02:00 ET (06:00 GMT)
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