DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q2 and H1 2020
PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q2 and
H1 2020
14-Jul-2020 / 09:47 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.
MMK Group trading update for q2 and PJSC Magnitogorsk Iron &
h1 2020 Steel Works ("MMK", or the
"Group") (MICEX-RTS: MAGN;
LSE: MMK), one of the
world's largest steel
producers, is pleased to
announce its Trading Update
for Q2 and H1 2020.
14 july 2020
Magnitogorsk, Russia
HIGHLIGHTS
· Pig iron output decreased by
11.3% quarter-on-quarter
Q2 2020 (q-o-q) to 2,089 thousand
tonnes, driven by a slowdown in
steel demand and a major
overhaul of Blast Furnace No.
VS Q1 2020 2, which was completed in June.
The overhaul will improve MMK's
environmental performance
thanks to a series of dust
exhausting unit projects at
cast and stock houses.
· Steel output was down 22%
q-o-q at 2,358 thousand tonnes
due to the scheduled
reconstruction of Hot-Rolling
Mill 2500 and a drop in demand
for metal products from key
consuming industries amid the
spread of the coronavirus
pandemic.
· MMK Group's total sales of
finished products amounted to
2,223 thousand tonnes, down
19.0% q-o-q.
· MMK Group's sales of HVA
products totalled 1,151
thousand tonnes, down 12.0%
q-o-q. The share of HVA
products in total sales
amounted to 51.8%. The decline
in HVA product sales in Q2 was
driven by the slowdown in
Russian and global business
activity.
· MMK Coal's coal concentrate
production totalled 687
thousand tonnes, down 15.6%
q-o-q, due to weaker demand for
concentrate at MMK, in turn
driven by lower steel output.
HIGHLIGHTS
· Pig iron output decreased by
8.3% year-on-year (y-o-y) to
H1 2020 4,444 thousand tonnes amid the
coronavirus pandemic and a
longer period of scheduled
maintenance at blast furnace
VS H1 2019 facilities as compared to the
previous year.
· Steel output in H1 2020 was
down 13.2% y-o-y to 5,381
thousand tonnes, due to a lower
consumption of steel during
scheduled reconstruction of
Hot-Rolling Mill 2500, as well
as weaker demand.
· MMK Group's total sales of
finished products fell by 11.9%
y-o-y to 4,968 thousand tones.
· HVA product sales dropped by
11.0% y-o-y to 2,459 thousand
tonnes. The share of HVA
products in total sales
increased to 49.5%.
· MMK Coal's concentrate output
in H1 2020 amounted to 1,501
thousand tonnes, up by 18.8%
y-o-y, due to the completion of
a beneficiation plant upgrade,
which took place throughout
2019.
MARKET OVERVIEW Global steel products market: The
lifting of lockdown in China in
late Q1 and early Q2, paired with
the government stimulus package,
led to a stronger pricing
environment. The restart of
steel-intensive industries was
supported by a government stimulus
of infrastructure projects, along
with pent-up demand for rolled
steel after a period of lockdown.
As a result, prices in China's
domestic market demonstrated robust
growth throughout the whole of Q2
2020. Coupled with the lifting of
restrictions in other countries,
this had a positive impact on
hot-rolled product prices in the
Black Sea region in mid-to-late Q2.
Russian steel products market: In
Q2, steel product prices in Russia
were challenged by the slowdown in
the domestic market on the back of
the national lockdown. Prices in
the Russian market came under
additional pressure from the
delayed effect of a drop in global
rolled steel prices at the end of
Q1.
Global iron ore market: Iron ore
prices are faring rather well for
the second year in a row as China's
pig iron and steel output continued
to grow in 2020. On the supply
side, Brazil's iron ore exports
have been disrupted by bad weather
and short-term shutdowns at some
plants in line with lockdown
measures introduced to combat the
coronavirus.
Russian iron ore market: Supply is
a bit ahead of demand as Russian
iron ore producers maintained high
levels of capacity utilisation. In
Q2, suppliers significantly ramped
up iron ore shipments to China due
to a major decline in exports to
Europe and weaker domestic demand
for iron ore. Base prices in Russia
are following Chinese indices
adjusted for changes in the USD/RUB
rate, albeit with higher discounts
offered to domestic consumers.
Global coking coal market: In Q2
2020, coking coal exporters were
challenged by a sharp drop in
steelmaking capacity utilisation
rates in the developed economies
and India. Following a period of
robust demand in early 2020,
China's coal import was limited by
annual coal import quotas. In Q2
2020, spot prices were down to USD
100-120 per tonne as compared to
USD 150-160 per tonne in Q1, with
limited growth potential in Q3 due
to extremely low demand.
Russian coking coal market: Russia
is a buyer's market, in which
limited export potential has been
consistently putting downward
pressure on prices since mid-2019.
Russia's coal producers have
started to make production cuts but
the impact of their actions on the
market balance has been marginal so
far as coal surplus remains
relatively high.
Russian metal scrap market:
Lockdown measures designed to curb
the spread of COVID-19 caused
significant volatility in scrap
collection and demand throughout Q2
with scrap prices showing no
inclination to trend in either
direction. The market should return
to balance in Q3 2020 with rising
demand for feedstock expected to
push scrap prices up.
MMK GROUP'S
CONSOLIDATED RESULTS
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
thousand tonnes
Crude steel 2,358 3,022 -22.0 5,381 6,198 -13.2
production
Pig iron 2,089 2,355 -11.3 4,444 4,849 -8.3
production
Coal concentrate 687 814 -15.6 1,501 1,263 18.8
production
Iron ore 787 658 19.7 1,445 1,445 0.0
production
Finished product 2,223 2,745 -19.0 4,968 5,638 -11.9
sales,
including:
Semi-finished 20 0 - 20 0 -
products
Long products 272 357 -23.8 628 700 -10.2
Flat hot-rolled 781 1,080 -27.7 1,861 2,175 -14.4
products
HVA products, 1,151 1,308 -12.0 2,459 2,764 -11.0
including:
Thick plate 213 231 -7.5 444 574 -22.6
(Mill 5000)
Flat cold-rolled 192 245 -21.6 437 498 -12.4
products
Downstream 745 833 -10.5 1,578 1,692 -6.7
products,
including:
Tin plate 45 42 7.3 86 75 14.7
Galvanised steel 377 443 -14.9 821 898 -8.6
Polymer-coated 157 140 11.8 297 332 -10.7
steel
Band 28 32 -13.4 59 60 -0.3
Formed section 23 44 -48.1 67 79 -15.2
Pipe 18 13 43.4 31 22 40.7
Metalware 90 108 -16.3 198 199 -0.4
Other metal 8 11 -32.0 19 27 -29.4
products
Share of HVA 51.8% 47.7% 49.5% 49.0%
products
CONSOLIDATED PRICES
FOR METAL PRODUCTS
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
USD/tonne
Average price 522 591 -11.7 560 639 -12.4
per tonne:
Semi-finished 255 0 - 255 0 -
products
Long products 439 497 -11.7 472 535 -11.8
Flat hot-rolled 414 520 -20.4 475 544 -12.7
products
HVA products, 618 675 -8.4 648 740 -12.4
including:
Thick plate 536 688 -22.1 615 727 -15.4
(Mill 5000)
Flat cold-rolled 535 602 -11.1 572 622 -8.0
products
Downstream 664 692 -4.0 679 779 -12.8
products,
including:
Tin plate 702 773 -9.2 736 800 -8.0
Galvanised steel 630 651 -3.2 641 740 -13.4
Polymer-coated 790 827 -4.5 808 908 -11.0
steel
Band 593 663 -10.6 631 691 -8.7
Formed section 600 760 -21.1 706 791 -10.7
Pipe 514 555 -7.4 531 588 -9.7
Metalware 637 659 -3.3 649 768 -15.5
Other metal 668 692 -3.5 682 809 -15.7
products
The average selling price in US dollars decreased by 11.7%
q-o-q in Q2 2020 to USD 522 per tonne.
The primary driver was the rouble devaluation, the
pandemic-induced slowdown in business activity and declines in
global hot-rolled prices. The 12.4% y-o-y fall in the average
selling price in H1 2020 was caused by a drop in global steel
prices.
MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
thousand tonnes
Crude steel 2,358 3,022 -22.0 5 381 6,198 -13.2
production
Pig iron 2,089 2,355 -11.3 4 444 4,849 -8.3
production
Finished product 2,122 2,597 -18.3 4 719 5,461 -1.,6
sales,
including:
Semi-finished 20 0 - 20 0 -
products
Long products 272 357 -23.8 628 695 -10.2
Flat hot-rolled 831 1,095 -24.2 1 926 2,359 -18.3
products
HVA products, 1,000 1,145 -12.7 2 145 2,407 -10.8
including:
Thick plate 213 231 -7.5 444 574 -22.6
(Mill 5000)
Flat cold-rolled 192 245 -21.6 437 495 -11.9
products
Downstream 594 670 -11.3 1 264 1,339 -5.3
products,
including:
Tin plate 45 42 7.3 86 75 14.7
Galvanised steel 265 311 -14.9 576 609 -5.3
Polymer-coated 118 109 8.1 227 264 -14.1
steel
Band 28 32 -13.4 59 64 -0.3
Formed section 23 44 -48.1 67 79 -15.2
Pipe 18 13 43.4 31 22 40.7
Metalware 90 108 -16.3 198 199 -0.4
Other metal 8 11 -32.4 19 27 -29.5
products
Share of HVA 47.1% 44.1% 45,4% 44.0%
products
Sales of finished products in Q2 2020 dropped by 18.3% q-o-q to
2,122 thousand tonnes, mostly due to scheduled reconstruction
of Hot-Rolling Mill 2500. The decrease in product sales in H1
2020 by 13.6% y-o-y to 4,719 thousand tonnes was driven by
longer period of scheduled maintenance and a more complex
product mix at Mill 5000.
The 23.8% q-o-q fall in long product sales in Q2 2020 to 272
thousand tonnes was primarily driven by lower demand from the
construction industry. Year-on-year, sales were down 10.2% to
628 thousand tonnes in H1 2020, reflecting the slowdown in
business activity.
The volume of sales of hot-rolled products in Q2 2020 declined
by 24.2% q-o-q to 831 thousand tonnes. This was mostly due to
the scheduled reconstruction of Hot-Rolling Mill 2500 as part
of the current investment programme. Year-on-year, sales of
hot-rolled products dropped by 18.3% to 1,926 thousand tonnes
in H1 2020, affected by longer period of scheduled maintenance.
In Q2 2020, sales of HVA products were down by 12.7% to 1,000
thousand tonnes, while their share of total sales grew to
47.1%. Despite the slowdown in business activity, Group sales
to automotive industry remained flat q-o-q. Year-on-year, sales
of HVA products were down 10.8% to 2,145 thousand tonnes in H1
2020, while their share of total sales grew to 45.4%. The major
drivers of the change were a decline in sales of Mill 5000
thick plate and slowdown in world business activity.
The 7.5% decrease in sales volumes of Mill 5000 products q-o-q
to 213 thousand tonnes was due to a more complex product mix.
The 22.6% y-o-y decline in Mill 5000 thick plate sales to 444
thousand tonnes in H1 2020 was mainly due to a more complex
product mix amid a 100% capacity utilisation rate.
Sales of cold-rolled products in Q2 2020 were down 21.6% q-o-q
to 192 thousand tonnes, impacted by lower demand from the
metalworking and rerolling manufactures. Year-on-year, sales
were down 11.9% to 437 thousand tonnes in H1 2020, due to the
major slowdown in business activity along with an accident at
the Cold-Rolling Mill 1700 this February.
In Q2 2020, tin plate sales grew by 7.3% to 45 thousand tonnes,
reflecting a higher demand from the food industry.
Year-on-year, sales of tin plate grew by 14.7% to 86 thousand
tonnes in H1 2020.
Sales of galvanised steel in Q2 2020 contracted by 14.9% q-o-q
to 265 thousand tonnes due to the deterioration of market
conditions. Year-on-year, sales declined by 5.3% to 576
thousand tonnes in H1 2020.
In Q2 2020, sales of polymer-coated steel grew by 8.1% q-o-q to
118 thousand tonnes, driven by pent-up seasonal demand.
Year-on-year, sales of polymer-coated steel declined by 14.1%
to 227 thousand tonnes in H1 2020, reflecting the difficult
market environment.
STEEL SEGMENT TURKEY
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
thousand tonnes
Finished product 154 167 -7.8 322 373 -13.7
sales,
including:
Flat hot-rolled 3 4 -22.8 7 11 -34.9
products
HVA products, 151 163 -7.5 314 362 -13.0
including:
Flat cold-rolled - - - - 4 -
products
Downstream 151 163 -7.5 314 358 -12.1
products,
including:
Galvanised steel 112 132 -15.0 244 289 -15.5
Polymer-coated 39 31 24.8 70 68 2.2
steel
Share of HVA 97.9% 97.5% 97.7% 97.0%
products
Intersegment 53 19 172.5 72 196 -63.2
sales from Steel
segment Russia
The Turkish steel segment's sales of finished products in Q2
2020 were down 7.8% q-o-q at 154 thousand tonnes, reflecting
the sharp slowdown in business activity that started in Q1 on
the back of the pandemic and subsequent lockdown. In Q2 2020,
the Turkish steel segment saw a 24.8% growth in high-margin
polymer-coated steel sales to 39 thousand tonnes in spite of
the difficult market environment.
The 13.7% y-o-y decline in H1 2020 sales to 322 thousand tonnes
was due to the spread of the pandemic and the EU import quotas
imposed on rolled products from Turkey. At the same time
polymer-coated steel sales increased by 2.2% y-o-y to 70
thousand tonnes in H1 2020, reflecting the Turkish steel
segment's strategy to boost sales of high-margin products in a
highly volatile and uncertain market environment seen in
Turkey.
COAL MINING SEGMENT
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
thousand tonnes
Coking coal 909 1,238 -26.3 2,143 2,442 -11.2
mining
Coking coal 1,202 1,442 -16.6 2,644 2,337 -13.1
processing
Mined 1,061 1,358 -21.9 2,419 2,188 10.6
Purchased 141 84 67.2 225 135 66.8
Toll - - - - 14 -
Coking coal 687 814 -15.6 1,501 1,263 18.8
concentrate
Coking coal production in Q2 2020 amounted to 909 thousand
tonnes, a decrease of 26.3% q-o-q, due to face transfer
operations. Year-on-year, coking coal production was down 11.2%
to 2,143 thousand tonnes in H1 2020, due to the challenging
geological conditions at the Chertinskaya-Koksovaya mine.
Coal concentrate production in Q2 2020 declined by 15.6% q-o-q
to 687 thousand tonnes, driven by the lower demand for
concentrate at MMK. The 18.8% y-o-y growth in coal concentrate
output to 1,501 thousand tonnes in H1 2020 was driven by the
completion of a beneficiation plant upgrade, which took place
throughout 2019.
MMK GROUP'S
SUSTAINABILITY PERFORMANCE (ESG)
· On 8 July 2020, MMK published a corporate
Sustainability Report prepared under the Global
HIGHLIGHTS Reporting Initiative (GRI) standards. The
publication of this Report reflects MMK's
commitment to its mission and core principles of
sustainable development, including the achievement
of the UN's Sustainable Development Goals.
· Following the reconstruction, Blast Furnace No. 2
with advanced dust exhausting units at cast and
stock houses, was put into operation in June, which
will significantly reduce future dust emissions.
· In February 2020, an appraisal audit was
successfully conducted for compliance with the
international standard ISO 45001:2018.
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
LTIFR 0.29 1.09 -73.4 0.69 0.99 -30.3
Gross 38.7 42.8 -10.6 81.5 98.5 -17,3
atmospheric
emissions,
thousand tonnes
Specific 17.83 16.78 6.3 17.28 18.04 -4,2
atmospheric
emissions,
kg/tonne
In H1 2020, lost-time-injury frequency rate (LTIFR) decreased
year-on-year by 30.3% to 0.69, reflecting a decrease in the
number of accidents as part of the implementation of measures
to improve the production safety culture and eliminate the root
causes of accidents.
The construction and launch of Sinter Plant No. 5 in mid-2019,
which boasts an advanced gas-cleaning system, coupled with the
subsequent decommissioning of Sinter Plant No. 4 delivered
improved environmental performance for the Group. As a result,
specific air emissions in H1 2020 decreased by 4.2% y-o-y to
17.28 kg/tonne.
In Q2 2020, specific atmospheric emissions increased by 6.3%
q-o-q to 17.83 kg/tonne on the back of lower metal products
production while the sinter production remained flat.
· MMK Group's divisions are taking
active measures to prevent the
MMK GROUP'S MANAGEMENT spread and reduce the risk of
POLICIES IN RESPONSE TO coronavirus infection. Employees
COVID-19 have their body temperature measured
daily by contactless thermometers.
Dispensers with antiseptic solution
have been placed in administrative
buildings and in public areas, while
specialised disinfecting equipment
has been put in place and sanitary
treatments are being carried out
regularly.
· Office employees have been shifted
to work remotely, while the number
of personnel at production sites has
been reduced. Shifts are being
separated by pauses in order to
minimise contact between employees.
· Victor F. Rashnikov, Chairman of
the Board of Directors of PJSC MMK,
donated RUB 500 mln for
anti-pandemic and social support
measures at Magnitogorsk.
· The funds have been used to
purchase ventilators and make orders
for bedside monitors, infusion
systems and perfusors. The funds
were also channelled into hazard
allowance to compensate healthcare
professionals operating in COVID-19
risk environments.
· Tablets and laptops were purchased
for schoolchildren from low-income
families. Newly-qualified teachers
from Magnitogorsk schools also
received laptops to aid remote
learning. Overall, more than 7,000
laptops and tablets were distributed
to schoolchildren and 500 laptops to
teachers.
· Special germicidal air purifiers
were distributed to, and installed
at, Magnitogorsk nurseries, which
are now open as normal. Magnitogorsk
orphanages and boarding schools
received contactless thermometers.
· Specially-prepared, certified food
parcels and PPE packs are already
being delivered to targeted groups
in the city: pensioners living
alone, especially disadvantaged
people and low-income residents.
· «We Stand Together» is a special
charity bank account used to raise
funds for especially disadvantaged
residents, who were hit hardest by
the pandemic. As of the middle of
July, RUB 143 mln had been donated
to the charity account.
OUTLOOK
· The recovery of domestic demand
that emerged in late Q2 will
continue into Q3 2020.
· The launch of Hot-Rolling Mill
2500 in mid-July following its
reconstruction, underway since Q1,
will increase the Group's hot-rolled
production capacity and boost Q3
sales volumes.
· Group performance will be further
bolstered once the utilisation of
high-margin production units is
maximised.
· The recovery of hot-rolled coil
prices in the Black Sea region in
late Q2 will have a positive impact
on domestic prices for metal
products.
· Our CAPEX for Q3 2020 will be
slightly higher q-o-q due to the
postponement of the launch of
Hot-Rolling Mill 2500 and the
ongoing construction of the
foundations for a new coke oven
battery. All projects are
implemented as part of the Group's
strategy and are aimed at improving
both operational and environmental
performance.
· Operational excellence initiatives
under the Evolution Business System
will boost Group performance in Q3
2020.
ABOUT MMK Subscribe to our official MMK
channel on Telegram [1] to be
the first to know about key MMK
news.
MMK is one of the world's
largest steel producers and a
leading Russian metals
company. The Group'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, MMK 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
margins. Group revenue in 2019
totalled USD 7,566 mln, with
an EBITDA of USD 1,797 mln.
MMK boasts the industry's
lowest debt burden. Net
debt/EBITDA ratio was -0.13?
at the end of 2019. The
Group's investment-grade
rating is confirmed by the
leading global rating agencies
Fitch, Moody's and S&P.
MMK's ordinary shares are
traded on the Moscow Exchange,
while its depositary receipts
are traded on the London Stock
Exchange. Free float amounts
to 15.7%.
KEY UPCOMING EVENTS IN 2020
INVESTOR RELATIONS
DEPARTMENT
FINANCIAL CALENDAR [2]
Veronika Kryachko
+7 (915) 380-62-66
kryachko.vs@mmk.ru 29 July Q2 and 6M 2020 IFRS financials
13 October Q3 and 9M 2020 Trading Update
22 October Q3 and 9M 2020 IFRS financials
COMMUNICATIONS
DEPARTMENT
Dmitry Kuchumov
+7 (499) 238-26-13
kuchumov.do@mmk.ru
Oleg Egorov
+7 (499) 238-26-13
egorov.oa@mmk.ru
ISIN: US5591892048
Category Code: TST
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 75548
EQS News ID: 1092943
End of Announcement EQS News Service
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(END) Dow Jones Newswires
July 14, 2020 03:47 ET (07:47 GMT)
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