EquityStory.RS, LLC-News: Industrial Metallurgical Holding / Key word(s):
Half Year Results
Industrial Metallurgical Holding: IMH ANNOUNCES IFRS CONSOLIDATED FINANCIAL
RESULTS FOR 1H 2020
2020-08-24 / 13:10 CET/CEST
The issuer is solely responsible for the content of this announcement.
PRESS RELEASE
IMH announces IFRS consolidated financial results for 1H 2020
24 August 2020
Industrial Metallurgical Holding (IMH), one of the largest global suppliers
of merchant pig iron and Russia's biggest merchant coke exporter, announces
IFRS financial results for 1H 2020.
IMH key financial indicators:
RUB mln 1H 2020 1H 2019 Change, %
Revenue 40,131 46,448 (14)
COGS (28,446) (35,194) (19)
Gross profit 11,685 11,254 4
Operating profit 5,109 4,860 5
Operating profit margin, % 13 10 -
EBITDA 8,433 6,833 23
EBITDA margin, % 21 15 -
Adjusted LTM EBITDA[1] 18,243 17,344 5
(Loss) / net income (952) 4,466 (121)
Net cash from operating activities 5,533 7,038 (21)
Total debt 72,496 69,470* 4
Cash and cash equivalents 9,002 9,851* (9)
Net debt 63,494 59,619* 6
*IFRS data as of 31.12.2019
Financial results
? In 1H 2020, IMH consolidated revenue shrank by 14% y-o-y to RUB 40.1 bln
driven mainly by lower sales prices for the Group's key merchant products
and a decrease in the output and sales of coke and pig iron. Pig iron
output decreased on the back of blast furnace #3 maintenance in March and
April 2020. The effect of lower prices and a decrease in output and sales
was partially offset by favourable exchange rates, which gave boost to
export revenues, and a significant uptick in the sales of scrap by the
Group's IMH-Vtormet.
? The cost of goods sold decreased 19% y-o-y to RUB 28.4 bln, mainly as a
result of the cost of raw materials and supplies going down 20% on the
back of several factors. The main drivers were lower coal and iron ore
prices and a 39% growth in coal production in 2020. On top of that, IMH
saw a major reduction of transportation expenses (down 58%) due to strong
pig iron sales to Tula Steel located in close proximity to the producer,
Tulachermet.
? Gross profit expanded by 4% on the back of a sizeable decrease in COGS.
? Operating profit went up 5% y-o-y as a result of lower selling expenses.
IMH cut the cost of transportation services, the key item, by allocating
the bulk of pig iron sales to the nearby Tula Steel site. Operating profit
margin reached 13%, up 3 pp y-o-y.
? In 1H 2020, the Group had a net loss of RUB 952 mln mainly driven by FX
differences which caused an increase in the cost of Eurobonds, a foreign
currency loan and accrued interest. The Group's total finance expenses
went up 128% y-o-y to RUB 6,287 mln, with the impairment of a deferred tax
asset in the amount of RUB 793 mln also impacting the 1H financial result.
? Adjusted LTM EBITDA came in at RUB 18.2 bln, up 5% y-o-y.
? In the reporting period, the Group's free cash flow stood at RUB 2.47
bln, marginally down y-o-y (-10%).
Key segments operational results
Production, '000 tonnes 1H 2020 1H 2019 Change, % y-o-y
Pig iron 1,170 1,223 (4)
Coal 1,320 948 39
Coal concentrate 1,129 1,213 (7)
Coke (6% moisture content) 1,347 1,373 (2)
Iron ore 2,427 2,412 1
Iron ore concentrate 1,045 1,065 (2)
Production and sale of merchant products:
In 1H 2020, pig iron output and sales declined by 4% y-o-y due to the
overhaul of blast furnace No. 3 in March and April 2020, which helped
enhance the furnace's capacity and reliability.
Coke output and shipments decreased by 2% and 6%, respectively, as a result
of weaker demand following the introduction of COVID-19 restrictions across
the globe, including the suspension of operations at some of the production
sites of coke consumers. Coke sales were also affected by a drop in
intra-Group consumption caused by a blast furnace overhaul at Tulachermet.
The waning demand in export markets was partially offset by increased sales
to Tula Steel.
Production of raw materials:
In 1H 2020, coal production rose by 39% thanks to the stable performance of
the Group's mining assets.
The output of coal concentrate in 1H 2020 slid by 7% y-o-y due to a higher
ash content in processed coal.
The output of iron ore concentrate in the reporting period declined by 2%
y-o-y as a result of weaker demand from Tulachermet due to the overhaul of
blast furnace No. 3.
Key segments financial results
Coal segment
RUB mln 1H 2020 1H 2019 Change,
% y-o-y
Segment revenue 4,310 4,970 (13)
EBITDA 12 1,293 (99)
EBITDA margin, % 0.3 26 _-
? The Coal segment revenue in 1H 2020 dropped by 13% due to a significant
decline in market prices for coal.
? Profitability metrics also followed a downward path amid a hostile
market environment.
Coke segment
RUB mln 1H 2020 1H 2019 Change,
% y-o-y
Segment revenue 16,854 23,748 (29)
EBITDA 3,755 3,243 16
EBITDA margin, % 22 14 -
? The Coke segment revenue slid by 29% y-o-y on the back of lower coke
prices both in the internal and external markets and a drop in production
and sales volumes.
? EBITDA increased by 16% and EBITDA margin rose to 22% in response to a
significant decline in prices for raw materials sourced for coke
production.
Ore & Pig Iron segment
RUB mln 1H 2020 1H 2019 Change, % y-o-y
Segment revenue 28,052 28,982 (3)
EBITDA 4,657 1,996 133
EBITDA margin, % 17 7 _-
? In 1H 2020, the Ore & Pig Iron segment revenue fell by 3% y-o-y to RUB
28.052 bln. The decline came on the back of lower pig iron prices both in
the internal and external markets and a drop in production and sales
volumes. On the upside, the segment's revenue saw a positive impact from
favourable exchange rates and a significant increase in the sales of scrap
by the Group's IMH-Vtormet.
? The segment's EBITDA soured by 133% close to RUB 4.7 bln. EBITDA margin
increased to 17%. The metrics were driven by lower prices of coke and iron
ore raw materials, as well as reduced consumption of inputs that came as a
result of consumption rate improvements following the successful overhaul
of blast furnace No. 3 at Tulachermet. The segment's profitability was
further boosted by a decline in transportation costs, with finished goods
shipped directly to the nearby Tula Steel plant.
Debt portfolio management
As at 30 June 2020, the Group had RUB 9,002 mln of cash and cash
equivalents, which is 9% below the level of 31 December 2019. Undrawn
confirmed limits under existing credit facilities came close to RUB 43 bln.
These amounts comfortably cover the Group's short-term debt and other
current liabilities.
The Group's total and net debt was up by 4% and 6% respectively, impacted by
FX differences which caused an increase in the cost of Eurobonds and the RUB
equivalent of the accrued interest. Net debt / EBITDA ratio went down as
compared to 31 December 2019 and stood at 3.48x.
Almost half of the debt portfolio (46%) is represented by Eurobonds and
series BO-05 Russian rouble bonds. Other loans have been provided by major
Russian banks.
Development of production assets
February 2020. Uchastok Koksovy obtained the permission to put into
operation a total of 2,513 metres of new non-public railway lines at the
Vostochnaya station of the Kiselyovsk Loading and Transportation Company.
Each of the new tracks at the Vostochnaya station is capable of holding at
least 70 rail cars to make departure trains. Total costs of the project
amounted to RUB 165 mln.
March 2020. KMAruda passed an integrated management system audit and was
certified to ISO 45001:2018 (Occupational Health and Safety Management
Systems) and ISO 50001:2018 (Energy Management Systems). ISO 45001:2018
replaced OHSAS 18001:2007. The main difference of the new standard is a
risk-oriented approach to analysing health and safety threats to both
employees and all the stakeholders.
Sergey Frolov, Vice President for Strategy and Communications of IMH
Management Company, commented on the 1H 2020 financial and operating
performance:
"Amid the global pandemic, the Group prioritised the safety of its
employees. Since mid-March, we have been implementing an action plan to
prevent the spread of infectious diseases and ensure stable operation of our
assets. All employees who are not directly involved in the production
process work remotely. The staff have been provided with personal protective
equipment, while premises and high-touch surfaces have been subject to
intensive disinfection protocols. Temperature checks are applied to all
people entering our facilities. The compliance with sanitary rules and
regulations is closely monitored. We are proud to state that we have managed
to prevent a massive spread of COVID-19 and maintain uninterrupted operation
of our assets.
Commenting on our financial performance, I am happy to note that despite a
turbulent environment and suspension of some of our traditional markets, the
Group increased its operating profit and EBITDA. In early 2020, a
significant share of our pig iron export was redirected to China, which saw
its consumption grow on the back of a number of fundamental factors,
including quick economic recovery after the pandemic and environmental
policy that facilitates the replacement of obsolete blast-furnace
steelmaking with greener electric arc furnaces using merchant pig iron.
The return on sales grew due to a notable increase in coal production.
Combined with lower coal and iron ore prices, this increase significantly
reduced the cost of merchant products.
Higher sales to Tula Steel, a facility situated in the immediate vicinity of
Tulachermet, made a substantial contribution to the growth of operating
profit. These shipments helped achieve significant savings because of lower
transportation costs. In addition, this new customer accounted for 41% of
all Tulachermet's pig iron sales in 1H 2020, helping to balance the market
and increase return on our third-party sales.
Thanks to our prudent financial policy, we improved our net debt / EBITDA
ratio compared to the previous reporting period to 3.48x. A moderate debt
increase was driven by RUB/USD rate fluctuations causing an increase in the
cost of Eurobonds and accrued interest.
The Group significantly increased its general market and financial
stability. We are moving on with our production process optimisation and
labour productivity improvement programmes
and keep our investment programme unchanged. Our priority is to commission
the underlying horizon at KMAruda's iron ore asset, which will allow us to
meet internal demand for high-quality iron ore concentrate. On top of that,
we are considering the launch of blast furnace No. 1 at Tulachermet to
increase our pig iron output.
Our debt portfolio policy also remains unchanged. Our strategic goal is to
reduce net debt/EBITDA ratio to below 2x. Furthermore, we keep implementing
our deleveraging programme."
***
Industrial Metallurgical Holding (IMH) is a Russian vertically integrated
group of companies 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
Phone: +7 495 725 56 82, ext. 654
Email: popova_ea@metholding.com
www.metholding.ru [1]
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[1] EBITDA calculated in accordance with the Eurobond loan agreement (LPN,
Reg S / 144A)
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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: 1122335
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