DJ PJSC Magnitogorsk Iron and Steel Works: Q4 and FY 2019 financial results
PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: Q4 and FY 2019 financial results
05-Feb-2020 / 08:02 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
5 February 2020
Magnitogorsk, Russia
MMK Group financial results for Q4 and FY 2019
PJSC Magnitogorsk Iron & Steel Works' ("MMK", or "the Company") (MICEX-RTS:
MAGN; LSE: MMK), one of the world's largest steel producers, announces its
financial results for Q4 and FY 2019.
MMK GROUP KEY FINANCIAL RESULTS FOR Q4 AND FY 2019
(USD mln)
Q4 Q3 2019 % FY FY 2018 %
2019 2019
Revenue 1,722 2,009 -14.3% 7,566 8,214 -7.9%
EBITDA 335 525 -36.2% 1,797 2,418 -25.7%
EBITDA margin, % 19.5% 26.1% -6.6 p.p. 23.8% 29.4% -5.6 p.p.
Profit for the 88 271 -67.5% 856 1,317 -35.0%
period
Free cash flow 272 289 -5.9% 882 1,027 -14.1%
Net debt -235 -70 - -235 -203 -
Net debt/EBITDA -0.13 -0.04 - -0.13 -0.08 -
Net working 953 1,165 -18.2% 953 1,149 -17.1%
capital
Net working 13.8% 14.5% -0.7 p.p. 13.8% 14.6% -0.8 p.p.
capital/Revenue
L3m
GROUP KEY FINANCIAL INDICATORS FOR Q4 2019
? MMK Group's revenue declined by 14.3% quarter-on-quarter (q-o-q) and
amounted to $1,722 mln amid seasonal weakening of business activity and
decline in prices on the global steel markets.
? EBITDA amounted to $335 mln, down 36.2% q-o-q. As a result, EBITDA
margin declined by 6.6 p.p. to 19.5%.
? Net profit for Q4 2019 amounted to $88 mln, down 67.5% q-o-q. The
decline was due to seasonal weakening of business activity and other
negative market factors.
? Despite the significant decline in profit, free cash flow (FCF),
amounted to $272 mln. Efficient maintenance of working capital allowed the
Company to offset the negative effect from adverse market environment in
Q4 2019.
GROUP KEY FINANCIAL INDICATORS FOR FY 2019
? MMK Group's revenue declined by 7.9% year-on-year (y-o-y) and amounted
to $7,566 mln, which was partly due to lower sales as a result of the
reconstruction of hot-rolling Mill 2500 during 2019.
? EBITDA amounted to $1,797 mln, down 25.7% y-o-y. This decline was due to
lower revenue, as well as negative trends on the global steel market.
EBITDA margin declined by 5.6 p.p. to 23.8%.
? Net profit amounted to $856 mln, down 35.0% y-o-y.
? Free cash flow was down 14.1% y-o-y and amounted to $882 mln.
MMK Group KEY FINANCIAL INDICATORS by segments
Steel segment (Russia)
(USD mln)
Q4 Q3 % FY FY %
2019
2019 2019 2018
Revenue 1,660 1,917 -13.4% 7,226 7,826 -7.7%
EBITDA 327 518 -36.9% 1,744 2,282 -23.6%
EBITDA margin, % 19.7% 27.0% -7.3 p.p. 24.1% 29.2% -5.1
p.p.
Slab cash-cost, 283 313 -9.6% 305 291 +4.8%
$/tonne
? Revenue for Q4 2019 amounted to $1,660 mln, down 13.4% q-o-q amid a
decrease in sales volumes as a result of seasonally weak business activity
and the significant correction in global steel prices. Revenue for FY 2019
declined by 7.7% y-o-y to $7,226 mln due to lower metal products prices.
? The segment's EBITDA for Q4 2019 amounted to $327 mln, down 36.9% q-o-q
due to lower revenue. In FY 2019, EBITDA amounted to $1,744 mln, down
23.6% y-o-y, which reflected negative factors on the global steel markets.
? The cost of sales for a tonne of slab in Q4 2019 amounted to $283, down
9.6% q-o-q. Key factors for this decline were higher pig iron production
amid lower volumes of steel production at the electric-furnace melting
shop and lower shares of pellets and scrap in the blast furnace charge. It
was also positively influenced by the correction in prices for iron ore
and coal concentrate. In FY 2019, the cost of sales for a tonne of slab
increased by 4.8% y-o-y to $305, reflecting growth in global indices for
iron ore during the year.
Steel segment (Turkey)
(USD mln)
Q4 Q3 % FY 2019 FY %
2019 2019 2018
Revenue 110 136 -19.1% 520 620 -16.1%
EBITDA 1 -5 - -12 -9 -33.3%
EBITDA margin, % 0.9% -3.7% +4.6 p.p. -2.3% -1.5% -0.8 p.p.
? The segment's revenue for Q4 2019 amounted to $110 mln, down 19.1%
q-o-q. This decline was due to a decrease in the volume of domestic and
exports sales of galvanized steel. In FY 2019, the segment's revenue
amounted to $520 mln, down 16.1 y-o-y amid the challenging economic
situation on the Turkish market. The Company managed to partly offset the
decline in domestic demand by relocating sales towards Europe and the
Middle East, which resulted in a growth in export sales by one-third
compared to 2018.
? The management's efforts to improve efficiency allowed the segment to
demonstrate positive EBITDA in Q4 2019. Loss for FY 2019 increased to $12
mln amid the challenging economic situation in Turkey and external
headwinds, which resulted in a significant decline in demand for
construction steel products and continued to affect this segment's
performance.
Coal segment
(USD mln)
Q4 Q3 % FY FY %
2019 2019 2019 2018
Revenue 59 59 0.0% 246 340 -27.6%
EBITDA 10 14 -28.6% 68 137 -50.4%
EBITDA margin, % 17.0% 23.7% -6.7 p.p. 27.6% 40.3% -12.7 p.p.
? Revenue of the segment in Q4 2019 was flat q-o-q and amounted to $59
mln. The decline in revenue for FY 2019 by 27.6% y-o-y to $246 mln was due
to lower prices for coal concentrate amid the negative market situation,
and lower sales of concentrate as a result of the reconstruction of the
beneficiation plant.
? The segment's EBITDA for Q4 2019 was $10 mln, down 28.6% q-o-q, mainly
due to lower market prices for coal concentrate, which was partly offset
by stronger sales volumes. In FY 2019, EBITDA declined by 50.4% to $68 mln
due to lower revenue.
CASH FLOW AND FINANCIAL POSITION
Capital expenditure and cash flow
? In Q4 2019, capital expenditure increased by 28.2% q-o-q and amounted to
$241 mln, which is in line with the Company's investment programme
schedule.
? In FY 2019, MMK Group's capital expenditure amounted to $833 mln, down
3.1% y-o-y. Key investments in 2019 included the launch of new sinter
plant No.5 and reconstruction of the roughing train at hot-rolling Mill
2500.
? In Q4 2019, cash inflow from working capital was $256 mln (compared to
cash inflow of $51 mln in Q3 2019), mainly due to a decrease in accounts
receivable and an increase in advance payments from the customers. In FY
2019, cash inflow from working capital amounted to $287 mln. At the same
time, the net working capital to revenue ratio declined to 13.8%, the
lowest level for the last several years.
? Efficient maintenance of working capital, measures focused on improving
operational efficiency and lower CAPEX y-o-y allowed the Company to
largely offset the negative effect from the EBITDA decline. As a result,
FCF for FY 2019 amounted to $882 mln, down 14.1% y-o-y (while EBITDA
declined by 25.7% y-o-y).
Debt
? As of the end of 2019, MMK Group's total debt increased to $870 mln, up
from the end of 2018 ($536 mln). The Company returned to the international
debt market after more than 15 years with a successful placement of
five-year Eurobonds in June 2019. Proceeds from the issue have been used
to refinance more expensive loans and finance the investment programme,
executed in line with Company's strategy.
? As of the end of 2019, the Company had $1,105 mln in cash and deposits
on its accounts. The positive generation of free cash flow allowed the
Company to accumulate funds sufficient to fully cover its debt and to pay
dividends.
? As a result, the Company's net debt as of the end of 2019 was negative
and stood at $-235 mln, while the Net debt/EBITDA ratio was -0.13? - one
of the lowest debt loads among global steelmakers.
DIVIDENDS
? Stable generation of positive FCF and a sustainable financial position
allow the Company to distribute its profit among its shareholders on a
regular basis.
? On 4 February 2020, the Board of Directors recommended the Annual
General Meeting of Shareholders to approve the payment of dividends for Q4
2019 of RUB 1.507 per share (100% of FCF for the quarter).
? The Q4 2019 dividend record date will be set by the Board of Directors
after the decision on convocation of the Annual General Meeting is made.
The dividend record date will be announced by separate press release.
OUTLOOK
? The Company expects its metal production to decline in Q1 2020 due to
the maintenance of blast furnace and converter facilities, as well as
suspension of operations at hot-rolling Mill 2500 due to its planned
reconstruction in March.
? Capital expenditure in Q1 2020 is expected to be unchanged from Q4 2019,
which is fully in line with the investment programme being implemented as
part of the Company's strategy.
? The Company's performance should be supported by the favourable price
environment on the domestic market and price stabilisation for key raw
materials.
? The Company's performance should be further supported by measures aimed
at operational efficiency increase and high capacity utilisation of
high-margin production units.
CONFERENCE CALL
(MORE TO FOLLOW) Dow Jones Newswires
February 05, 2020 02:02 ET (07:02 GMT)
MMK management will hold a conference call on Q4 and 12M 2019 IFRS financial
results on 5 February 2020 at 4 pm Moscow time (1 pm London time, 8 am New
York time).
The conference call dial-in numbers are:
Russia
+7 495 646 9315 (Local access) / 8 800 500 9863 (Toll free)
UK
+44 207 194 3759 (Local access) / 0800 376 6183 (Toll free)
US
+1 646 722 49 16 (Local access) / 1 844 286 06 43 (Toll free)
Conference ID: 32737593
The call recording will be available for seven days via the following
numbers:
Russia
+7 (495) 249-16-71
UK
+44 20 3364 5147
US
+1 (646) 722-4969
Call recording ID: 418901577
A presentation of the financial results and the IFRS financial statements
can be found at: http://eng.mmk.ru/for_investor/financial_statements/ [1]
Key events in 2020 (Financial [2] calendar)
14 April Publication of operational results
for Q1 2020
29 April Publication of financial IFRS results
for Q1 2020
14 July Publication of operational results
for Q2 and H1 2020
29 July Publication of financial IFRS results
for Q2 and H1 2020
13 October Publication of operational results
for Q3 and 9M 2020
22 October Publication of financial IFRS results
for Q3 and 9M 2020
About MMK
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 unit encompassing the entire production chain, from the
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. In 2019, the Company produced 12.5 mln tonnes of
crude steel and 11.3 mln tonnes of commercial steel products.
??? is an industry leader in terms of production costs and margin. MMK Group
had revenue in 2019 of $7,566 mln and EBITDA of $1,797 mln. MMK's debt load
is the lowest for the industry. Net debt/EBITDA ratio was -0.13? at the end
of 2019. The Company's investment-grade rating is confirmed by the leading
global rating agencies Fitch, Moody's, S&P.
MMK's ordinary shares are traded on Moscow Exchange, while its depositary
receipts are traded on the London Stock Exchange. Free float amounts to
15.7%.
Contacts
Investor Relations Department
Veronika Kryachko
Tel.: +7 (3519) 25-75-01
E-mail: kryachko.vs@mmk.ru
Communications Department
Dmitriy Kuchumov Oleg Egorov
Tel.: +7 (499) 238-26-13 Tel.: +7 (499) 238-26-13
E-mail: kuchumov.do@mmk.ru E-mail: egorov.oa@mmk.ru
ISIN: US5591892048
Category Code: ACS
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 44723
EQS News ID: 968265
End of Announcement EQS News Service
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2: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=f19ee4d8455febdae47734f3baadfb59&application_id=968265&site_id=vwd&application_name=news
(END) Dow Jones Newswires
February 05, 2020 02:02 ET (07:02 GMT)
