EquityStory.RS, LLC-News: Industrial Metallurgical Holding / Key word(s):
Half Year Results
IMH ANNOUNCES IFRS CONSOLIDATED FINANCIAL RESULTS FOR 1H 2019 (news with
additional features)
2019-08-28 / 15:32 CET/CEST
The issuer is solely responsible for the content of this announcement.
*IMH ANNOUNCES IFRS CONSOLIDATED FINANCIAL RESULTS FOR 1H 2019*
_28.08.2019_
*Industrial Metallurgical Holding (IMH), one of the largest global suppliers
of merchant pig iron and Russia's biggest merchant coke exporter, announces
its IFRS financial results for 1H 2019.*
*IMH key financial indicators:*
+----------------------------+---------+---------+-------------+
|*RUB mln* |*1H 2019*|*1H 2018*|* Change, % *|
+----------------------------+---------+---------+-------------+
|*Revenue* |*46,448* |*43,184 *| *8* |
+----------------------------+---------+---------+-------------+
|COGS |(35,194) |(30,522) | 15 |
+----------------------------+---------+---------+-------------+
|*Gross profit* |*11,254* |*12,662* | *(11)* |
+----------------------------+---------+---------+-------------+
|*Operating profit* | *4,860* |*7,932 * | *(39)* |
+----------------------------+---------+---------+-------------+
|*Operating profit margin, %*| *10* | *18* | *-* |
+----------------------------+---------+---------+-------------+
|*EBITDA* | *6,833* |*9,024 * | *(24)* |
+----------------------------+---------+---------+-------------+
|EBITDA margin, % | 15 | 21 | - |
+----------------------------+---------+---------+-------------+
|*Adjusted EBITDA, LTM[1]* |*17,344* |*18,754* | *(8)* |
+----------------------------+---------+---------+-------------+
|*Net income* | *4,466* |*2,063 * | *+116* |
+----------------------------+---------+---------+-------------+
|*Net cash from operating | | | |
|activities* | *7038* |*10,552 *| *(33)* |
+----------------------------+---------+---------+-------------+
|*Total debt* |*70,137* |*73,228**| *(4)* |
+----------------------------+---------+---------+-------------+
|Cash and cash equivalents | 7,604 | 11,522* | (34) |
+----------------------------+---------+---------+-------------+
|*Net debt* |*62,533* |*61,706**| *1* |
+----------------------------+---------+---------+-------------+
*IFRS data as of 31.12.2018
*Financial results*
? In 1H 2019, IMH consolidated revenue exceeded RUB 46.4 bln (up 8% up
y-o-y), driven by an increase in output and sales of coke and pig iron, as
well as favourable exchange rates, which gave boost to export revenues.
? The cost of goods sold went up 15% y-o-y to RUB 35.2 bln, while the cost
of raw materials increased 17% driven by the growth of global iron ore
prices and purchase of additional coal concentrate volumes from
third-party capacities to produce coke providing 13% growth of coke
output.
? Gross profit shrank by 11% as the cost of raw materials was on an upward
trend.
? Operating profit decreased by 39% y-o-y as a result of the growth in
selling and other operating expenses. Operating profit margin reached 10%.
? Net income rose by 116% y-o-y to RUB 4.5 bln on the back of foreign
exchange gains pushing up the Company's finance income.
? Adjusted EBITDA LTM went down by 8% y-o-y to RUB 17.3 bln.
*Key segments operational results*
+----------------------+-----------+-----------+---------------+
|*Production, '000 |* 1H 2019 *|* 1H 2018 *|* Change y-o-y,|
|tonnes* | | |% * |
+----------------------+-----------+-----------+---------------+
|Pig iron | 1,223 | 1,201 | 2 |
+----------------------+-----------+-----------+---------------+
|Coal | 948 | 1,379 | (31) |
+----------------------+-----------+-----------+---------------+
|Coal concentrate | 1,213 | 1,202 | 1 |
+----------------------+-----------+-----------+---------------+
|Coke (6% moisture | 1,373 | 1,219 | 13 |
|content) | | | |
+----------------------+-----------+-----------+---------------+
|Iron ore | 2,412 | 2,476 | (3) |
+----------------------+-----------+-----------+---------------+
|Iron ore concentrate | 1,065 | 1,101 | (3) |
+----------------------+-----------+-----------+---------------+
*Production and sale of merchant products:*
In 1H 2019, the Company hit yet another record in the production and
shipments of merchant pig iron. Output went up with unit consumption of
charge simultaneously decreasing.
Coke production and sales expanded significantly resulting from improvements
in the finished goods delivery and entering into long-term export contracts
for substantial supplies.
*Production of raw materials:*
In 1H 2019, the Company's facilities involved in underground coal mining
faced significant deterioration in subsurface conditions combined with
unpredictable gas generation resulting in coal production decrease by more
than 30%. At the moment, measures are being taken to ensure early gas
drainage and output volume on the production targets. The Uchastok Koksovy
open pit owned by the Company operates at very high rates. Concentrate yield
at Berezovskaya washing plant increased by 6 percent on the back of improved
quality of sourced coal.
Kombinat KMAruda, the operating underground ore mining facility, also faced
tough subsurface conditions due to the development of reserves in flank
areas (areas on the deposit edge). This affected iron ore and iron ore
concentrate production which shrank by 3%.
*Key segments financial results*
*Coal segment*
+----------------+-----------+-----------+-------------------+
|*RUB mln* |* 1H 2019 *|* 1H 2018 *|* Change y-o-y, % *|
+----------------+-----------+-----------+-------------------+
|Segment revenue | 4,970| 5,659| (12)|
+----------------+-----------+-----------+-------------------+
|EBITDA | 1,293| 2010| (36)|
+----------------+-----------+-----------+-------------------+
|EBITDA margin, %| 26| 36| -|
+----------------+-----------+-----------+-------------------+
? In 1H 2019, the Coal Division's revenue reduced by 12% as a result of
decrease in coal production and sales by Butovskaya and Tikhova mines.
? EBITDA and EBITDA margin went down as production of own coal shrank.
*Coke segment*
+----------------+-----------+-----------+-------------------+
|*RUB mln* |* 1H 2019 *|* 1H 2018 *|* Change y-o-y, % *|
+----------------+-----------+-----------+-------------------+
|Segment revenue | 23,748| 19,438| 22|
+----------------+-----------+-----------+-------------------+
|EBITDA | 3,243| 2,107| 54|
+----------------+-----------+-----------+-------------------+
|EBITDA margin, %| 14| 11| -|
+----------------+-----------+-----------+-------------------+
? The revenue of the Coke segment increased by 22% y-o-y due to the growth
in production and sales, and driven by FX gains, which ensured an increase
in the margin of the segment's export sales.
? EBITDA grew by 54%, while EBITDA margin increased to 14% amid revenue
growth.
*Ore & Pig Iron segment*
+----------------+-----------+-----------+------------------+
|*RUB mln* |* 1H 2019 *|* 1H 2018 *|*Change y-o-y, % *|
+----------------+-----------+-----------+------------------+
|Segment revenue | 28,982| 29,702| (2)|
+----------------+-----------+-----------+------------------+
|EBITDA | 1,996| 4,739| (58)|
+----------------+-----------+-----------+------------------+
|EBITDA margin, %| 7| 16| -|
+----------------+-----------+-----------+------------------+
? In 1H 2019, the Ore & Pig Iron segment revenue fell by 2% y-o-y to RUB
28.98 bln. The downward trend was mainly triggered by lower global prices
for pig iron in the reporting period partially offset by record-high
production and sales of finished goods coupled with favourable FX rates.
? Segment EBITDA decreased by 58% to RUB 2 bln, with EBITDA margin also
going down to 7%. The segment's margin was affected by lower prices for
merchant products combined with a rise in prices for iron ore raw
materials not fully sufficient for the Company.
*Debt portfolio management*
The Company's debt portfolio did not see any substantial changes over the
reporting period. Total debt decreased by 4% due to scheduled repayments.
Net debt remained largely flat. Eurobonds and series BO-05 bonds represent a
considerable share (43%) of the debt portfolio. Other loans and borrowings
have been provided by major Russian and international banks.
*Production asset development*
_August 2019. _A railway track from the Tikhova mine was launched.
Infrastructure expenses amounted to c. RUB 1 bln, including refurbishment of
the Proyektnaya station located at the public tracks of the West Siberian
Railway, construction of a non-public railway and Tikhova station directly
at the mine. The railway including the stub tracks is 8.8 km long. The new
infrastructure will enable the Company to ship some 1.2 million tonnes of
coal by rail annually. In future, the railway capacity is slated to expand
so as to increase coal shipments to 2 million tonnes and more. The
proprietary railway will reduce the mine's transportation expenses and
eliminate dependency on third-party railway coal shippers.
*August 2019.* Koks commissioned the second phase of the condensation power
plant (CPP) with the capacity of 12 MW. This ramped up the CPP's total
capacity to 24 MW making it capable of matching the facility's power
requirements. The power plant's two operating stages will help Koks save RUB
230 mln annually.
*June 2019**. *Uchastok Koksovy signed a contract for the supply of dump
trucks worth about RUB 3bln. Under the contract, the facility will receive
31 90-tonne vehicles within a year. The new machines will completely upgrade
the ?ompany's fleet of lifting equipment and will enable it not to use
contractor services by the end of 2019.
*Sergey Frolov, Vice President for Strategy and Communications of IMH
Management Company, commented on the 1H 2019 financial and operating
performance:*
"In the reporting period, the Company faced several market and
technology-driven challenges, and developed an adequate response to each of
those. Our financials are stable, while some of them, such as revenue and
net income, are growing steadily.
The reporting period once again highlighted advantages of our vertically
integrated structure which includes our own feedstock portfolio, as well as
the Company's capability of manoeuvring effectively, powered by switching
between sales markets and focusing on the highest-margin areas.
The main challenge of the first half of the year was the decline in global
pig iron prices amid rising iron ore prices. There are no fundamentals that
would support significant price changes in both cases. The volatility was
temporary and speculative in nature. With regard to the pig iron, the price
decrease in spring 2019 was instigated by expectations of full-scale trade
wars. Iron ore prices grew on the back of a short-term decline in
inventories after the dam accident suffered by Vale, the world's largest
iron ore producer, and speculations which followed the accident. The pig
iron price trend reversed upwards by mid-summer due to the launch of major
infrastructure projects in China and increased demand from the United
States. At the same time, Vale was granted permission to resume operation of
several suspended assets helping the feedstock deficit to subside. We expect
all these developments to stabilise the market and have a positive impact on
our performance.
Complex subsurface conditions at the Butovskaya and Tikhova mines emerged as
a technological challenge for us. In order to enhance performance of these
assets, we keep consulting with specialist companies and implement dedicated
technical solutions, such as advance drilling of gas drainage wells. In
addition, the Company has increased the design capacity of the Uchastok
Koksovy open pit and is upgrading the mining machinery fleet. Thanks to
these measures, we plan to reach a coal production level comparable to that
of 2018.Launch of the Tula Steel partnership project was an important event
outside the reporting period. This is a cutting-edge cast and roll mill that
supplies high-quality steel products to the Central Federal District and has
a strong potential for sales growth, including in the foreign markets. In
our opinion, Tula Steel's ramp-up to the design capacity will guarantee the
annual sales of 1.5 million tonnes of pig iron - almost 70% of the total
production at the existing Tulachermet facilities. We assume that a new
major consumer entering the market will bring about a shortage of supply and
create conditions for reducing the volatility of pig iron prices.
Importantly, the construction of Tula Steel was partially financed by
Tulachermet loans. The successful launch of production means that these
loans and related interest can be expected to be repaid in the nearest
future, which will further contribute to the IMH's financial stability. Tula
Steel successfully expands its product mix and increases output, generating
a substantial cash flow.
The Company's investment policy is unchanged. Our priority remains to
commission the underlying horizon at KMAruda's iron ore asset, which is
necessary to meet our own demand for high-quality iron ore concentrate. On
top of that, we are considering an early launch of blast furnace No.1 at
Tulachermet to meet Tula Steel's liquid iron requirements, facilitate an
overhaul of blast furnace No.2 and maintain sales of pig merchant iron on
the market.
The debt portfolio policy also remains unchanged. Our strategic goal is to
reduce net debt/EBITDA ratio to below 2x. In addition, we are on the lookout
for opportunities to reduce the interest rate."
*****
*Industrial Metallurgical Holding (IMH)* is a Russian vertically integrated
company specialising in production of pig iron, extraction and processing of
coking coal and iron ore, foundry castling and powder metallurgy. IMH is one
of the world's largest suppliers of merchant pig iron and Russia's biggest
producer of merchant coke. The Group's key production facilities are located
in the Kemerovo, Belgorod, Tula and Kaluga regions of the Russian
Federation.
*****
Ekaterina Popova
Head of Strategic Communications
?.: +7 495 725 56 82, ext. 654
Email: popova_ea@metholding.com
www.metholding.ru [1]
[1] EBITDA calculated in accordance with the Eurobond loan agreement (LPN,
Reg S / 144A)
Additional features:
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Document title: IMH ANNOUNCES IFRS CONSOLIDATED FINANCIAL RESULTS FOR 1H
2019
2019-08-28 CET/CEST Dissemination of a Corporate News, transmitted by
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Language: English
Company: Industrial Metallurgical Holding
2nd Verkhniy Mikhailovskiy proezd, 9
115419 Moscow
Russia
Phone: +7 495 725 56 80
Fax: +7 495 633 13 12
E-mail: popova@metholding.com
Internet: www.metholding.ru
ISIN: XS1255387976
EQS News ID: 864785
End of News EquityStory.RS, LLC News Service
864785 2019-08-28 CET/CEST
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August 28, 2019 09:32 ET (13:32 GMT)
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