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PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group Posts Q1 2019 IFRS Results
30-Apr-2019 / 08:02 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 Q1 2019
(USD mln)
Q1 2019 Q4 2018 % Q1 2019 Q1 2018 %
Revenue 1,836 1,962 -6.4% 1,836 2,055 -10.7%
Cost of sales -1,321 -1,387 -4.8% -1,321 -1,422 -7.1%
Operating profit 320 384 -16.7% 320 414 -22.7%
EBITDA, of which 440 537 -18.1% 440 560 -21.4%
Steel segment 418 516 -19.0% 418 521 -19.8%
(Russia)
Steel segment -7 -15 - -7 5 -
(Turkey)
Coal segment 32 32 0.0% 32 29 10.3%
Consolidation -3 4 - -3 5 -
effect
EBITDA margin 24.0% 27.4% 24.0% 27.3%
Profit for the 225 245 -8.2% 225 279 -19.4%
period
Free cash flow 260 239 8.8% 260 145 79.3%
Growth in free cash flow (FCF) and
100% dividend payout ratio
- EBITDA for Q1 2019 amounted to USD 440 mln, down 18.1% quarter-on-quarter
(q-o-q). The EBITDA margin amounted to healthy 24.0%.
- Net profit for Q1 2019 amounted to USD 225 mln, down 8.2% q-o-q.
- Free cash flow for Q1 2019 was up 8.8% q-o-q and amounted to USD 260 mln.
- Strong cash flow generation and low debt allowed the management of the
Company to propose to the Board of Directors to recommend AGM a divided
payment of RUB 1.488 per ordinary share for Q1 2019. The total dividend
payout for the quarter in this case will amount to USD 260 mln (100% of FCF
for Q1 2019). The Board of directors will pass this decision today - on
April 30th.
Q1 2019 highlights vs Q4 2018
In Q1 2019, revenue declined due to the seasonal decline in sales of
finished products amid steel prices correction.
In Q1 2019, the cost of sales declined q-o-q at slower rate than revenue,
mainly due to higher prices of key raw materials on the global markets.
As a result, EBITDA decreased by 18.1% on the previous quarter. But EBITDA
margin amounted to healthy 24.0%.
Quarterly net profit amounted to USD 225 mln. Among the one-off factors that
had an impact on profit is an FX loss of USD 14 mln.
FCF amounted to USD 260 mln, up 8.8% q-o-q.
Q1 2019 highlights vs Q1 2018
In Q1 2019, revenue declined compared to Q1 2018 due to the decline in sales
of finished products against the backdrop of correction in average sales
prices (by USD 69 per tonne, or by 10.7%).
EBITDA decreased by 21.4% year-on-year (y-o-y) and was affected by lower
production volumes, higher prices for raw materials and the rouble
depreciation against the US dollar. At the same time, the margin was
supported by an increase of share of HVA products in the overall sales
structure up to 48.2%.
FCF increased 79.3% y-o-y thanks to the effective working capital management
and continued growth in operational efficiency.
Balance-sheet and cash-flow highlights
Debt
As of the end of Q1 2019, MMK Group's total debt amounted to USD 510 mln,
slightly below the level as of the end of 2018 and fully in line with its
conservative leverage policy.
As of 31 March 2019, the Company had USD 710 mln in cash and deposits on its
accounts. This high level of funds on the Company's accounts was due to the
inflow from working capital and accumulation of funds for the payment of
dividends for Q4 2018 and Q1 2019 following the AGM.
As a result of high cash liquidity on its balance sheet, the Company's net
debt as of the end of Q1 2019 was negative and stood at USD -200 mln.
Capital expenditure and cash flow
In Q1 2019, capital expenditure amounted to USD 158 mln, down 22.5% q-o-q
and in line with the investment programme's schedule. This decline q-o-q was
due to seasonality and commissioning of the first phase of sinter plant No.
5.
The Company expects that CAPEX in 2019 will fully comply with earlier
declared investment schedule, meaning major investment projects are being
implemented at a faster pace than envisioned in the initial plan.
In Q1 2019, cash inflow from working capital was USD 59 mln (compared to
cash inflow from working capital of USD 11 mln in Q4 2018), mainly due to a
decrease in accounts receivable (following a decrease in sales volumes amid
stable steel prices). At the same time, net working capital to revenue ratio
amounted to 15.4% as of the end of Q1 2019.
Strong profitability along with effective working capital management and
lower operational costs enabled the Company to increase its FCF by 8.8%
q-o-q to USD 260 mln in Q1 2019.
MMK Group highlights by segments
Steel segment (Russia)
Revenue for Q1 2019 amounted to USD 1,783 mln, down 3.6% q-o-q. This decline
was due to lower sales volumes amid market prices for metal correction.
These factors were partly offset by improved sales mix.
The segment's EBITDA for Q1 2019 amounted to USD 418 mln, down 19.0% q-o-q.
The main factor that influenced this was the growth in the cost of sales
(due to more expensive key raw materials) amid a decrease in revenue.
The cost of sales for a tonne of slab in Q1 2019 amounted to USD 304
(compared to USD 298 per tonne in Q4 2018) due to growth of key raw
materials prices.
The Company's profitability was positively affected by the results of a
programme aimed at increasing operational efficiency and optimising costs,
which enabled the Company to reduce costs by approximately USD 18 mln in Q1
2019.
Steel segment (Turkey)
MMK Metalurji's revenue for Q1 2019 amounted to USD 130 mln, down 17.7%
q-o-q. This decline was due to a decrease in the volume of sales of finished
products by 12.9% q-o-q and the continued impact of external unfavourable
factors, such as the challenging political and economic situation in Turkey.
In this scenario, buyers prefer to wait for more certainty in the market and
not to force the purchase to ensure summer seasonal demand.
Nevertheless, gradual stabilisation on the Turkish market allowed the
Company to decrease the loss at EBITDA level for the quarter to USD 7 mln,
while in March this indicator already reached zero level.
Coal segment
Revenue of the coal segment for Q1 2019 was down 4.8% q-o-q due to slightly
lower production volume of finished coal concentrate.
In Q1 2019, the segment's EBITDA was flat q-o-q and amounted to USD 32 mln.
This was due to an increase in the operational efficiency of the business,
an increase in the production and processing of MMK's own coking coal and a
decrease in the purchase of coal.
Comments on the market situation
At the moment, the Company's management sees that seasonal demand for metal
in the domestic market is starting to recover. This should positively
influence capacity utilisation rates of key production units and the sales
volumes for MMK Group's finished products, as well as help to decrease the
impact of productivity restrictions linked to the reconstruction of
hot-rolling Mill 2500.
Recovery in steel prices from the minimum levels at the beginning of the
year, sales of warehouse stocks of long-term storage products, and a maximum
capacity utilisation rate for high-margin production units (including
thick-plate Mill 5000) should support the financial performance of MMK Group
in Q2 2019.
MMK management will hold a conference call on these financial statements on
30 April 2019 at 4 pm Moscow time (2 pm London time, 9 am New York time).
The conference call dial-in numbers are:
UK
+44 207 194 3759 (Local access) / 0800 376 6183 (Toll free)
Russia
+7 495 646 9315 (Local access) / 8 800 500 9863 (Toll free)
USA
+1 646 722 49 16 (Local access) / 1 844 286 06 43 (Toll free)
Conference ID: 54579599#
The call recording will be available for seven days via the following
numbers:
UK
+44 20 3364 5147
Russia
+7 (495) 249-16-71
USA
+1 (646) 722-4969
Conference ID: 418848268#
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 [2]. [2]ae [2]@ [2]mmk [2]. [2]ru [2]
Communications Department
Dmitry Kuchumov Dmitry Bulin
+7 499 238-26-13 +7 499 238-26-13
kuchumov [3]. [3]do [3]@ [3]mmk [3]. [3]ru [3] bulin.dn@mmk.ru
ISIN: US5591892048
Category Code: QRF
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 8427
EQS News ID: 805101
End of Announcement EQS News Service
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=fb556ed334b6273bb58091ea2e7a3e6a&application_id=805101&site_id=vwd&application_name=news
2: mailto:serov.ae@mmk.ru
3: mailto:kuchumov.do@mmk.ru
(END) Dow Jones Newswires
April 30, 2019 02:02 ET (06:02 GMT)
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