DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q2 and H1 2020
PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q2
and H1 2020
29-Jul-2020 / 08:52 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 IFRS FINANCIAL RESULTS PJSC Magnitogorsk Iron &
for q2 and 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 financial
results for Q2 and H1 2020.
29 july 2020
Magnitogorsk, Russia
MMK GROUP FINANCIAL RESULTS
Q2 2020
USD MLN Q2 2020 Q1 2020 % H1 2020 H1 2019 %
Revenue 1,268 1,710 -25.8% 2,978 3,835 -22.3%
EBITDA 226 442 -48.9% 668 937 -28.7%
EBITDA 17.8% 25.8% -8.0 p.p. 22.4% 24.4% -2.0 p.p.
margin,
%
Profit 58 131 -55.7% 189 497 -62.0%
for the
period
Free -18 115 - 97 325 -70.2%
cash
flow
Net debt 237 30 - 237 -27 -
Net 0.16 0.02 14.0 p.p. 0.16 -0.01 17.0 p.p.
debt/EBI
TDA
Net 952 882 7.9% 952 1,231 -22.7%
working
capital
L3M Net 18.8% 12.9% 5.9 p.p. 18.8% 15.4% -3.4 p.p.
working
capital/
revenue
1 - Free cash flow is calculated as net cash from operating activities plus
interest received and proceeds from disposal of PPE and intangible assets,
net of purchase if PPE and intangible assets (CAPEX).
KEY FINANCIAL INDICATORS
· MMK Group's revenue decreased by
25.8% quarter-on-quarter (q-o-q) to
FOR Q2 2020 USD 1,268 mln, which reflects a
decline in sales volumes amid the
scheduled reconstruction of
Hot-Rolling Mill 2500, and the
IN COMPARISON TO Q1 2020 correction in steel prices due to
negative market trends in Russia and
globally.
· EBITDA fell 48.9% q-o-q to USD 226
mln, reflecting the difficult market
environment in Q2 and the impact of
one-off factors. EBITDA margin
decreased by 8.0 p.p. to 17.8%.
· Net profit for Q2 2020 amounted to
USD 58 mln, down 55.7% q-o-q.
· Free cash flow (FCF) totalled
negative USD 18 mln. The FCF change
was mainly driven by lower margins
and the working capital build up due
to higher export sales amid a
deteriorating domestic market
environment.
KEY FINANCIAL INDICATORS
· MMK Group's revenue declined by
22.3% year-on-year (y-o-y) to USD
FOR H1 2020 2,978 mln, due to the slowdown in
business activity amid the correction
in global steel prices.
IN COMPARISON TO H1 2019 · EBITDA decreased by 28.7% y-o-y to
USD 668 mln following negative market
trends driven by the spread of the
pandemic. EBITDA margin was down by
2.0 p.p. to 22.4%.
· Net profit declined by 62.0% y-o-y
to USD 189 mln, mainly due to
worsening market conditions and
increase in foreign exchange loss due
to the rouble devaluation.
· FCF amounted to USD 97 mln, down
70.2% y-o-y, due to the worsening
market environment.
COMMENT BY MMK'S CEO
CEO « Dear shareholders and colleagues,
PAVEL SHILYAEV Over the last three months, PJSC
MMK has been faced with an
unrelenting pandemic. Nonetheless,
the Group has consistently taken
all the necessary measures to
protect the health of its people.
For more details on MMK's efforts
to combat the pandemic see the
special STOP COVID section of our
corporate website at
http://mmk.ru/press_center/covid/.
In my brief overview of our quarterly performance, I would
like to highlight that May and June have probably been the
most challenging months over the last decade, both for the
Russian and the wider global economy. However, we have taken
advantage of our flexible business model to rapidly redirect
about 40% of our sales, including high value-added (HVA) and
hot-rolled products (a total of 26% for Q2), to MMK's
traditional export markets, such as Southeast Asia, the Middle
East and North Africa. In May, we shipped our first HVA
products to Europe, confirming the highly competitive quality
of MMK's rolled products.
Since mid-May, we have witnessed a gradual recovery in demand
from the automotive and pipe industries, as well as an upsurge
in the activity of metal traders. At the same time, we see a
phased but steady recovery in demand and prices for steel in
the Russian market, leading to a decline in MMK's exports, as
more profitable domestic sales grow, which is in line with our
corporate strategy.
Financial stability remains a top priority for the Group.
MMK's debt leverage remains among the industry's lowest at
0.16x Net Debt/EBITDA as of the end of Q2, and the Group's
high level of available liquidity (USD 2 bn) provides it with
a strong cushion.
The economic recovery trend that emerged in late Q2 has beaten
expectations. We have adjusted the construction schedule for
the new coke-oven battery and will partially construct the
foundation and pile field during the summer and autumn of
2020. As a result, our CAPEX target for 2020 will be around
USD 800 mln.
MMK consistently generates a
sufficient cash flow and reiterates
its commitment to its dividend
policy. Dividend payout is a key
element of our operations, aimed at
creating more value for all
shareholders in the Group.
Considering the H1 2020 results,
coupled with our confidence in the
MMK's financial position amid the
gradual economic recovery in
Russia, the Board of Directors can
recommend that MMK shareholders
approve a dividend of RUB 0.607 per
ordinary share (100% of FCF for the
six months) for H1 2020.
»
MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
USD MLN
Revenue 1,180 1,602 -26.3% 2,782 3,649 -23.8%
EBITDA 236 421 -43.9% 657 898 -26.8%
EBITDA 20.0% 26.3% -6.3 p.p. 23.6% 24.6% -1.0 p.p.
margin,
%
?ash 255 267 -4.5% 261 312 -16.3%
cost of
slab,
USD/t
The Russian steel segment's revenue for Q2 2020 amounted to
USD 1,180 mln, down 26.3% q-o-q, resulting from a decrease in
sales volumes amid the scheduled reconstruction of Hot-Rolling
Mill 2500 and the decline in steel prices on the back of
negative market trends. Revenue fell 23.8% y-o-y to USD 2,782
mln, due to the slowdown in business activity following the
correction in global steel prices.
The segment's EBITDA for Q2 2020 amounted to USD 236 mln, down
43.9% q-o-q, due to a worsening macroeconomic situation and
switching to the lower margin export sales. EBITDA declined by
26.8% y-o-y to USD 657 mln as a result of the slowdown in
economic activity and the correction in global steel prices.
The Group's Q2 2020 profitability saw a positive boost to the
sum of USD 20 mln for the quarter from the operational
efficiency and cost optimisation programmes within the
Evolution Business System.
The slab cash-cost in Q2 2020 amounted to USD 255 per tonne,
down 4.5% q-o-q, driven by the rouble devaluation and the
correction in coal concentrate prices, coupled with the
improved structure of the blast furnace and steelmaking
charge. The slab cash-cost declined 16.3% y-o-y to USD 261 per
tonne, reflecting the impact of the rouble devaluation,
decline in prices for raw materials, and improved structure of
the blast furnace and steelmaking charge.
STEEL SEGMENT TURKEY
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
USD MLN
Revenue 103 113 -8.8% 216 274 -21.2%
EBITDA -1 3 - 2 -8 -
EBITDA -1.0% 2.7% -3.7 p.p. 0.9% -2.9% +3.8 p.p.
margin,
%
The Turkish steel segment's revenue for Q2 2020 decreased by
8.8% q-o-q to USD 103 mln, reflecting the slowdown in business
activity in Turkey on the back of the pandemic. Revenue
declined by 21.2% y-o-y to USD 216 mln, due to the
unfavourable market environment and the EU import quotas
imposed on rolled products from Turkey.
The segment's EBITDA declined to negative USD 1 mln in Q2 2020
due to the unfavourable market situation. Year-on-year, the
Turkish steel segment's EBITDA grew by USD 10 mln up to USD 2
mln as the strategy to boost sales margins was successfully
implemented and prices for purchased hot-rolled metal declined
faster than prices for the segment's products amid the
correction in global steel prices.
COAL MINING SEGMENT
Q2 2020 Q1 2020 % H1 2020 H1 2019 %
USD MLN
Revenue 43 54 -20.4% 97 128 -24.2%
EBITDA -10 16 - 6 44 -86.4%
EBITDA -23.3% 29.6% -52.9 6.2% 34.4% -28.2
margin, % p.p. p.p.
The coal mining segment's revenue for Q2 2020 amounted to USD
43 mln, a decrease of 20.4% q-o-q, due to lower demand for
coking coal concentrate at MMK and the continued correction in
coal concentrate prices. Revenue for H1 2020 decreased by
24.2% y-o-y to USD 97 mln following a significant correction
in coal concentrate prices.
The challenging environment in the coking coal market and
one-off factors such as the accrual of provisions drove a
decline in the segment's EBITDA to negative USD 10 mln. EBITDA
for H1 2020 decreased by 86.4% y-o-y to USD 6 mln, due to a
significant correction in coal concentrate prices and the
accrual of provisions.
CASH FLOW AND FINANCIAL POSITION
OF MMK GROUP
· In Q2 2020, CAPEX grew by 35.4% q-o-q to
USD 176 mln due the active phase of the
CAPEX and cash flow reconstruction of Hot-Rolling Mill 2500
and the overhaul of blast furnace No. 2.
Over H1 2020, CAPEX decreased by 25.7% to
USD 306 mln, fully in line with the
Group's investment programme schedule
under the Group's strategy.
· The deterioration in market conditions
in Q2 2020 led to an increase in exports
with longer delivery lead time. As a
result, the working capital build up in Q2
was USD 33 mln, with the net working
capital to revenue ratio up to 18.8% in Q2
2020 on the back of a substantial decline
in revenue.
· Higher CAPEX and a worsening
macroeconomic situation in Q2 2020
resulted in a decline in free cash flow
for Q2 2020 to negative USD 18 mln. Free
cash flow for H1 2020 decreased by 70.2%
y-o-y to USD 97 mln due to market
headwinds.
· The Group's total debt for Q2 2020 was USD 894 mln,
down from USD 899 mln in Q1 2020. The debt grew
DEBT insignificantly y-o-y from USD 880 mln in H1 2019.
· As of the end of Q2 2020, the Group had USD 657 mln in
cash and deposits in its accounts.
· The Group's net debt as of the end of Q2 2020 totalled
USD 237 mln, while its net debt/EBITDA ratio was 0.16?,
which is among the lowest in the global steelmaking
industry.
Dividends
· Considering the fact that the targets set by the
Chairman of the Board of Directors have been
achieved over H1 2020, coupled with our confidence
in gradual business recovery in Russia and globally,
the Board of Directors is convinced that the Group
sits in a stable position and can recommend the
shareholders to approve the payment of a dividend of
RUB 0.607 per share (100% of FCF for the six months)
for H1 2020.
· The Board of Directors has proposed to set the H1
2020 dividend record date for the close of business
on 23 September 2020.
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, started in Q1, will
increase the Group's hot-rolled production capacity
and boost Q3 sales volumes.
· Group performance will be further supported by the
high capacity utilisation of high-margin production
units.
· 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.
CONFERENCE CALL MMK Management will hold a conference call to
discuss its financial results
· Date:
29 July 2020
· Time:
4:30 pm Moscow time
2:30 pm London time
9:30 am New York time
Russia UK USA
Local access +7 495 646 9190 +44 330 336 9411 +1 323 794 2588
Toll free 8 10 800 2867 0800 279 7204 888 220 8451
5011
· Conference ID:
9109134
· Webcast:
To register for the webcast please use the following link
[1].
The call recording will be available for seven days on the
following numbers:
Call recording ID: 9109134
Russia UK USA
Local access 8 10 800 2702 +44 207 660 0134 +1 719 457 0820
1012
· A presentation of the financial results and the IFRS
financial statements can be found at:
http://eng.mmk.ru/for_investor/financial_statements/ [2]
ABOUT MMK Subscribe to our official MMK
channel on Telegram [3] 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.
??K 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 affirmed 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 [4]
Veronika Kryachko
+7 351 925 7501
kryachko.vs@mmk.ru 13 October Q3 and 9M 2020 Trading Update
22 October Q3 and 9M 2020 IFRS financials
COMMUNICATIONS
DEPARTMENT
Dmitry Kuchumov
+7 499 238 2613
kuchumov.do@mmk.ru
Oleg Egorov
+7 499 238 2613
egorov.oa@mmk.ru
ISIN: US5591892048
Category Code: IR
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 78556
EQS News ID: 1104371
End of Announcement EQS News Service
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(END) Dow Jones Newswires
July 29, 2020 02:52 ET (06:52 GMT)
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