DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group Posts Q2 and H1 2019 IFRS Results
PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group Posts Q2 and H1 2019 IFRS
Results
01-Aug-2019 / 08:04 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 2019
(USD mln)
Q2 2019 Q1 2019 % H1 H1 %
2019 2018
Revenue 1,999 1,836 8.9% 3,835 4,161 -7.8%
Cost of sales -1,451 -1,321 9.8% -2,772 -2,806 -1.2%
Operating profit 376 320 17.5% 696 921 -24.4%
EBITDA, of which 497 440 13.0% 937 1,210 -22.6%
Steel segment 481 418 15.1% 899 1,138 -21.0%
(Russia)
Steel segment -1 -7 - -8 6 -
(Turkey)
Coal segment 12 32 -62.5% 44 62 -29.0%
Consolidation effect 5 -3 - 2 4 -
EBITDA margin 24.9% 24.0% 24.4% 29.1%
Profit for the 272 225 20.9% 497 671 -25.9%
period
Free cash flow 61 260 -76.5% 321 426 -24.6%
Positive free cash flow (FCF) and
200% dividend payout ratio
? EBITDA for Q2 2019 amounted to USD 497 mln, up 13.0% quarter-on-quarter
(q-o-q). The EBITDA margin amounted to 24.9%.
? Net profit for Q2 2019 amounted to USD 272 mln, up 20.9% q-o-q.
? Free cash flow for Q2 2019 was down 76.5% q-o-q and amounted to USD 61
mln.
? Given the Company's low debt, positive FCF and robust financial
position, the Board of Directors at a meeting on 31 July 2019 recommended
a dividend for Q2 2019 of RUB 0.690 per share, equivalent to 200% of FCF
for the quarter. The dividend is subject to approval by an Extraordinary
General Meeting of shareholders.
Q2 2019 highlights vs Q1 2019
In Q2 2019, revenue grew 8.9% q-o-q thanks to seasonal growth in sales of
finished products, improvements to the sales mix and growth of prices on the
domestic market.
In Q2 2019, the cost of sales grew 9.8% q-o-q, faster than revenue, mainly
due to higher iron ore prices on global markets.
EBITDA increased by 13.0% q-o-q. The EBITDA margin amounted to 24.9%.
Growth of prices for steel products on the domestic market exceeded growth
of cost of sales; as a result, EBITDA per tonne of steel products increased
to USD 168 (up 13.5% q-o-q).
The net profit for Q2 2019 amounted to USD 272 mln, up 20.9% q-o-q. One-off
factors affecting net profit included an FX loss of USD 6 mln.
FCF amounted to USD 61 mln, down 76.5% q-o-q. This was due to cash outflow
to working capital as a result of higher prices for steel products and raw
materials, higher sales volumes, and increased capex.
H1 2019 highlights vs H1 2018
In H1 2019, revenue declined by 7.8% year-on-year (y-o-y) due to lower sales
volumes as a result of maintenance work at blast furnace No. 7 and the
converter, as well as the reconstruction of hot-rolling Mill 2500 and lower
prices (down USD 40 per tonne, or by 5.1%).
EBITDA declined by 22.6% y-o-y and amounted to USD 937 mln. This was due to
lower production volumes amid a decline in global prices for steel products,
an increase in prices for raw materials, and the weaker ruble. At the same
time, the margin was supported by an increase in share of HVA products of
the overall sales mix to 49.0% and growth of domestic sales (including the
CIS region) by 7.4% y-o-y.
The Company's profitability over the period saw a positive effect from the
operational efficiency and cost optimisation programme of USD 40 mln in H1
2019 (including USD 22 mln in Q2 2019).
FCF amounted to USD 321 mln, down 24.6% y-o-y due to lower EBITDA.
Balance-sheet and cash-flow highlights
Debt
As of the end of H1 2019, MMK Group's total debt amounted to USD 880 mln, up
from the end of 2018.
The Company returned to the international debt market after more than 15
years with a successful placement of USD 500 million of five-year Eurobonds
with an annual coupon rate of 4.375% payable every six months.
Proceeds from the issue will be used to refinance more expensive loans and
finance the investment programme being implemented as part of the Company's
strategy.
As of 30 June 2019, the Company had USD 907 mln in cash and deposits on its
accounts. This high level of funds on the Company's accounts was due to the
accumulation of funds for the payment of dividends for Q1 2019 in line with
the AGM decision.
As a result of high level of cash liquidity on its balance sheet, the
Company's net debt as of the end of H1 2019 was negative and stood at USD
-27 mln.
Capital expenditure and cash flow
In Q2 2019, capital expenditure amounted to USD 246 mln, up 55.7% q-o-q and
in line with the investment programme schedule. This growth q-o-q was due to
payment for equipment to be used at the new coke battery.
The Company expects that capex for 2019 as a whole will be in line with the
investment programme, with major investment projects are being implemented
at a faster pace than envisioned in the initial plan. MMK Group's capex in
H1 2019 amounted to USD 404 mln, down 18.2% y-o-y.
In Q2 2019, cash outflow to working capital was USD 79 mln (compared to cash
inflow from working capital of USD 59 mln in Q1 2019), mainly due to an
increase in accounts receivable (following an increase in sales volumes amid
positive price trends). At the same time, the net working capital to revenue
ratio amounted to 15.4%, flat q-o-q.
FCF for the period was USD 321 million, down 24.6% year-on-year as a result
of the decrease in EBITDA.
MMK Group highlights by segments
Steel segment (Russia)
Revenue for Q2 2019 amounted to USD 1,866 mln, up 4.6% q-o-q. This growth
was due to higher sales volumes and positive price trends. It was also
supported by improvements to the sales mix and higher sales in the domestic
market.
The segment's EBITDA for Q2 2019 amounted to USD 481 mln, up 15.1% q-o-q.
Key factors affecting EBITDA included growth of production volumes amid
higher prices and volumes in the domestic market.
The Company's profitability over the period saw a positive effect from the
operational efficiency and cost optimisation programme of USD 40 million in
H1 2019 (including USD 22 mln in Q2 2019).
The cost of sales for a tonne of slab in Q2 2019 amounted to USD 320
(compared to USD 304 per tonne in Q1 2019). Key factors for this growth were
higher prices for iron ore amid a higher share of pellets used in the blast
furnace charge, as well as the strengthening of the ruble.
Steel segment (Turkey)
MMK Metalurji's revenue for Q2 2019 amounted to USD 144 mln, up 10.8% q-o-q.
This growth was due to an increase in the volume of sales of finished
products by 11.8% q-o-q thanks to higher export sales.
Sales of finished products in H1 2019 declined by 13% y-o-y due to lower
sales of hot-rolled steel sheet amid high volatility in prices for these
products and low margins. HVA products accounted for 97% of the total, up
from 91% in H1 2018. External unfavourable factors and the persistently
challenging economic situation in Turkey have resulted in a significant
decline in demand for construction steel products.
MMK Metalurji's efforts to reduce costs and relocate sales among markets
helped limit the EBITDA loss in Q2 2019.
Coal segment
The volume of coking coal production in Q2 2019 decreased by 33.2% q-o-q and
amounted to 978 thousand tonnes. This decrease was due to maintenance works
during the quarter. Coking coal production in H1 2019 increased by 11.6%
y-o-y to 2,442 thousand tonnes.
The decrease in revenue for 2Q 2019 of 40% q-o-q to USD 48 mln was due to a
reduction in concentrate output. This in turn was due to the ramp-up of the
beneficiation plant towards full capacity following reconstruction. The
facility is expected to reach full capacity in 4Q of this year.
In Q2 2019, the segment's EBITDA declined and amounted to USD 12 mln. This
was due to a decrease in the production and processing of Group's own coking
coal.
Dividends
On 31 May 2019, the Annual General Meeting of Shareholders approved the
payment of dividends for Q1 2019 of RUB 1.488 per share, or USD 260 mln in
total (100% of FCF for the period).
On 31 July 2019 the Board of Directors recommended that shareholders approve
a dividend for 2Q 2019 of RUB 0.690 per share, equivalent to 200% of FCF for
the quarter.
The Board of Directors also recommended that the Q2 2019 dividend record
date be set as the close of business on 15 October 2019.
The Company has continued implementing its investment strategy, and partly
funded the investments by funds raised from Eurobond placement.
Comments on the market situation
Currently, the Company's management is seeing a seasonal recovery in demand
for metal products in the domestic market, which should positively impact
capacity utilisation of its production facilities and sales of the Group's
products, and also support the domestic market premium in Q3 2019.
The Company's financial results for Q3 2019 will be influenced by the
continuation of positive trends in the Russian market in the first half of
the year, predominantly the high growth rate of metal consumption, which
should contribute to the stability of prices in the Russian market. The end
of acute shortages on the iron ore market should have a positive impact on
the correction of prices for raw materials by Q4 2019.
MMK management will hold a conference call on these financial statements on
1 August 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: 66636325#
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: 418868066#
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
Yaroslava Vrubel Ilya Nechaev
+7 3519 25-30-29 +7 3519 25-24-48
ir@mmk.ru ir@mmk.ru
Communications Department
Kirill Golubkov
+7 919 306-10-06
golubkov.kv@mmk.ru
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.: 15352
EQS News ID: 850135
End of Announcement EQS News Service
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=fb556ed334b6273bb58091ea2e7a3e6a&application_id=850135&site_id=vwd&application_name=news
(END) Dow Jones Newswires
August 01, 2019 02:04 ET (06:04 GMT)
