DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q4 and 12M 2020
PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q4 and 12M 2020
02-Feb-2021 / 07:56 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.
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MMK Group IFRS FINANCIAL PJSC Magnitogorsk Iron & Steel Works ("MMK", or the "Group") (MICEX-RTS: MAGN; LSE: MMK),
RESULTS for q4 and 12M one of the world's largest steel producers, is pleased to announce its financial results for
2020 Q4 and 12M 2020.
2 february 2021
Magnitogorsk, Russia
MMK GROUP FINANCIAL RESULTS
Q4 2020
USD mln
Q4 2020 Q3 2020 % 12M 2020 12M 2019 %
Revenue 1,852 1,565 18.3% 6,395 7,566 - 15.5%
EBITDA 474 350 35.4% 1,492 1,797 - 17.0%
EBITDA margin, % 25.6% 22.4% 3.2 p.p. 23.3% 23.8% - 0.5 p.p.
Profit for the period 313 102 206.9% 604 856 - 29.4%
Free cash flow1 125 335 - 62.9% 557 883 - 36.9%
Net debt - 88 - 34 - - 88 - 235 -
Net debt/EBITDA - 0.06x - 0.03x - - 0.06x - 0.13x -
Net working capital 745 672 10.9% 745 953 - 21.8%
L3M Net working capital/revenue 10.1% 10.7% - 0.6 p.p. 10.1% 13.8% - 3.7 p.p.
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 of PPE and intangible assets (CAPEX).
- MMK Group's revenue increased by 18.3% quarter-on-quarter (q-o-q) to USD 1,852 mln, which reflects a
growth in sales volumes and a rise in steel prices in Russia and globally.
KEY FINANCIAL - EBITDA for Q4 2020 grew to USD 474 mln, up 35.4% q-o-q, driven by higher margins resulting from
INDICATORS stronger sales and steel prices trending upwards in key sales markets. EBITDA margin increased by 3.2
p.p. to 25.6%.
FOR Q4 2020
VS Q3 2020
- Net profit more than tripled q-o-q to USD 313 mln, mainly due to higher margins and foreign exchange
gains.
- FCF for the quarter amounted to USD 125 mln, down 62.9% q-o-q, due to higher CAPEX and the seasonal
build-up of raw materials amid growing purchase prices.
- MMK Group's revenue declined by 15.5% year-on-year (y-o-y) to USD 6,395 mln due to worsening market
conditions and the scheduled reconstruction of Hot-Rolling Mill 2500.
KEY FINANCIAL - EBITDA decreased by 17.0% y-o-y to USD 1,492 mln due to the impact of the pandemic on business
INDICATORS activity and global steel prices. EBITDA margin was down by 0.5 p.p. to 23.3%.
FOR 12M 2020
VS 12M 2019 - Net profit declined by 29.4% y-o-y to USD 604 mln, mainly due to worsening market conditions amid the
global pandemic.
- FCF amounted to USD 557 mln, down 36.9% y-o-y, reflecting the worsening global macroeconomic
environment.
COMMENT BY MMK'S CEO
Dear shareholders and colleagues,
CEO
In 2020, the Russian and global economies were hit by the one-two punch of the COVID-19 pandemic and
PAVEL « falling oil prices, with the biggest blow to the Russian economy coming in the second quarter.
SHILYAEV Nevertheless, as early as in June, when lockdown restrictions were partially lifted and support
measures were increased, the trends in GDP and real household income started to reverse. Despite the
new wave of the pandemic in the second half of the year, the Russian economy embarked on a path to
recovery, which had a positive impact on our fourth quarter performance.
The launch of a large-scale vaccination programme throughout the country in Q1 2021 has provided the necessary impetus
to further stabilise the epidemiological situation. The COVID-19 response centre that I am heading up continues to
operate across MMK. Protecting the health of the Group's workers and employees while ensuring the continuity of all
business processes remains our top priority.
In the fourth quarter, the traditional impact of seasonal factors on demand for metal products in the Russian market
was almost completely offset by predominantly milder weather, as well as the continuing tailwind from the pent-up
demand built up during the second quarter. While in November and December our stocks of premium products traditionally
increase, ready to be sold typically at the beginning of the following year, the reporting quarter saw a trend reversal
due to the continuing recovery in demand from the automotive industry and a strong pipeline of orders from the
construction industry. Sales volumes and sales mix in the fourth quarter were also given a serious boost after
Hot-Rolling Mill 2500 ramped up to its design capacity. As a result, domestic sales in the fourth quarter (Russia and
CIS) amounted to 76%, while the share of premium products in total sales was 44%. In absolute terms, our sales of
premium products stayed flat quarter-on-quarter, aligned with our strategic priorities.
In the fourth quarter, we continued realization of the project on a new coke-oven battery construction. In accordance
with the project schedule, a number of winter-specific preparatory operations were completed during the quarter. We
expect total CAPEX to reach about USD 1 bn in 2021, with the construction period for some parts of the facility
postponing from 2020.
Financial stability remains a key focus for the Company. MMK's debt leverage remains among the industry's lowest at
-0.06x Net Debt/EBITDA as of the end of the fourth quarter. The Group's high level of available liquidity (USD 2.6 bn)
provides it with a strong cushion to successfully meet its strategic commitments.
MMK consistently generates sufficient cash flow and reiterates its commitment to our dividend policy.
Reliable dividend payouts are a key element of our operations, aimed at creating more value for all
shareholders of the Company. Considering the Q4 2020 results, coupled with our confidence in our
financial outlook amid the further economic recovery both in Russia and globally, the Board of
Directors can recommend that MMK shareholders approve a dividend of RUB 0.945 per ordinary share (114%
of FCF) for Q4 2020, in line with the Company's strategic commitment to maximise TSR.
»
MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
USD mln Q4 2020 Q3 2020 % 12M 2020 12M 2019 %
Revenue 1,734 1,456 19.1% 5,972 7,226 - 17.4%
EBITDA 447 336 33.0% 1,440 1,744 - 17.4%
EBITDA margin, % 25.8% 23.1% 2.7 p.p. 24.1% 24.1% 0.0 p.p.
Cash cost of slab, USD/t 285 263 8.4% 269 305 - 11.8%
+ 19.1% Q-o-Q
REVENUE The Russian steel segment's revenue for Q4 2020 totalled USD 1,734 mln, up 19.1% q-o-q driven by sales
growth due to strong global demand for steel amid a more favourable pricing environment in key sales
markets. The y-o-y decline in revenue by 17.4% to USD 5,972 mln was driven by a significant downturn in
market conditions as a result of the pandemic's spread in Russia and globally.
The segment's EBITDA for Q4 2020 amounted to USD 447 mln, up 33.0% q-o-q, as a result of growing sales
and sales margins. EBITDA declined by 17.4% y-o-y to USD 1,440 mln, reflecting the pandemic's negative
+ 33.0% Q-o-Q impact on business activity and global steel prices.
EBITDA The Group's Q4 2020 profitability saw a positive boost to the sum of USD 23 mln for the quarter from the
operational efficiency and cost optimisation programmes under our updated strategic initiatives. The
annual effect of the programmes amounted to USD 83 mln.
The slab cash cost in Q4 2020 amounted to USD 285 per tonne, up 8.4% q-o-q, driven mainly by growing iron
ore and scrap prices and the higher share of pellets and scrap in the steelmaking charge. The slab cash
+ 8.4% Q-o-Q cost declined 11.8% y-o-y to USD 269 per tonne, primarily reflecting the impact of the rouble
depreciation and decline in prices for coal concentrate.
SLAB CASH
COST
STEEL SEGMENT TURKEY
USD mln Q4 2020 Q3 2020 % 12M 2020 12M 2019 %
Revenue 165 137 20.4% 518 520 - 0.4%
EBITDA 21 11 90.9% 34 - 12 -
EBITDA margin, % 12.7% 8.0% 4.7 p.p. 6.6% - 2.3% 8.9 p.p.
+ 20.4% Q-o-Q
REVENUE The Turkish steel segment's revenue for Q4 2020 increased by 20.4% q-o-q to USD 165 mln, reflecting
stronger demand from Turkish and European consumers amid a rise in global steel prices. Revenue for 12M
2020 totalled USD 518 mln, slightly down y-o-y.
The favourable environment in the market and the growing exports of galvanised steel almost doubled the
segment's EBITDA to USD 21 mln in Q4 2020. Year-on-year, the Turkish steel segment's EBITDA grew to USD
34 mln due to sales growth as the strategy to diversify and boost sales margins was successfully
implemented.
USD mln Q4 2020 Q3 2020 % 12M 2020 12M 2019 %
Revenue 46 36 27.8% 179 246 - 27.2%
EBITDA 7 0 - 13 68 - 80.1%
EBITDA margin, % 15.2% 0.0% 15.2 p.p. 7.3% 27.6% - 20.3 p.p.
+ 27.8% Q-o-Q
The coal mining segment's revenue for Q4 2020 increased by 27.8% q-o-q to USD 46 mln as a result of
REVENUE growing sales and prices for coal concentrate amid favourable market conditions. Revenue for 12M 2020
decreased by 27.2% y-o-y to USD 179 mln following a significant correction in coal concentrate prices.
Supported by the favourable market environment, the segment's EBITDA in Q4 2020 rose to USD 7 mln. EBITDA
for 12M 2020 decreased by 80.1% y-o-y to USD 13 mln, due to a significant correction in coal concentrate
prices and the accrual of provisions.
CASH FLOW AND FINANCIAL POSITION
OF MMK GROUP
- In Q4 2020, CAPEX increased by 44.0% q-o-q to USD 229 mln, keeping pace with the project
implementation schedule. Over 12M 2020, CAPEX decreased by 19.0% y-o-y to USD 694 mln, driven by the
rouble depreciation and COVID-related delays to the construction of the new coke-oven battery.
- Rising prices for key steelmaking raw materials amid the seasonal inventory stockpiling led to a USD
CAPEX AND 50 mln working capital build-up in Q4 2020. The Group management team's effective efforts improved
CASH FLOW net working capital to revenue ratio of 10.1% in Q4 2020, an 0.6 p.p. decrease q-o-q.
- FCF for Q4 2020 decreased by 62.9% q-o-q to USD 125 mln, following an increase in CAPEX and working
capital. FCF for 12M 2020 decreased by 36.9% y-o-y to USD 557 mln, reflecting the pandemic's impact
in Q2 2020 and the associated market headwinds.
- The Group's total debt for Q4 2020 was USD 970 mln, up from USD 946 mln in Q3 2020 (USD 870 mln for
12M 2019).
DEBT BURDEN - As of the end of Q4 2020, the Group held USD 1,058 mln in cash and deposits in its accounts.
- The Group's net debt as of the end of Q4 2020 totalled negative USD 88 mln, while its net debt/EBITDA
ratio was -0.06?, the lowest among leading global steelmakers.
DIVIDENDS - The Group remains committed to its dividend policy. Considering our high margins, paired with our
confidence in further business recovery in Russia and globally, the Board of Directors is convinced
OF MMK GROUP that the Group sits in a stable position and recommends shareholders to approve the payment of a
dividend of RUB 0.945 per share (114% of FCF for the quarter) for Q4 2020.
- The stable demand in the domestic and international markets will support sales in Q1 2021. The
premium product capacity utilisation rate will remain at the maximum level.
- The major increase in metallurgical raw material prices and positive dynamics of global prices for
metal products will support the growth of prices for MMK Group's metal products in Q1 2021.
OUTLOOK
- CAPEX for Q1 2021 is expected to grow q-o-q, in line with the implementation schedule for projects
pursued under the Group's strategy.
- Operational excellence initiatives under the updated strategic initiatives will further boost the
Group's profitability in Q1 2021.
MMK Management will hold a conference call to discuss these financial results
- Date:
CONFERENCE CALL 2 February 2021
- Time:
4:30 pm Moscow time
1:30 pm London time
8:30 am New York time
Russia UK USA
Local access +7 495 646 9190 +44 3303 369411 +1 323 794 2588
Toll free 8 10 800 2867 5011 0800 279 7204 888 394 8218
- Conference ID:
in Russian - 8965121
in English - 1397890
- Webcast:
To register for the webcast, please use this link.
The call recording will be available for seven days on the following numbers:
Call recording ID:
in Russian - 8965121
in English - 1397890
Russia UK USA
Local access 8 10 800 2702 1012 +44 2076 600134 +1 719 457 0820
- A presentation of the financial results and the IFRS financial statements can be found at: http://
eng.mmk.ru/for_investor/financial_statements/
ABOUT MMK
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 Subscribe to our official MMK
rolled steel. MMK turns out a broad range of steel products, with a predominant share of channel on Telegram to be the
premium products. In 2020, MMK produced 11.6 mln tonnes of crude steel and sold 10.8 mln first to know about key MMK
tonnes of commercial steel products. news.
??? is an industry leader in terms of production costs and margins. Group revenue in 2020
totalled USD 6,395 mln, with an EBITDA of USD 1,492 mln. MMK boasts the industry's lowest
debt burden. Net debt/EBITDA ratio was -0.06? at the end of 2020. 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 2021
INVESTOR RELATIONS DEPARTMENT
Veronika Kryachko Financial calendar
+7 915 380 6266 kryachko.vs@mmk.ru
10 February Citi virtual Russia Credit Investor Day
ESG DEPARTMENT
25 February Video conference for retail investors, Smart-lab
Yaroslava Vrubel vrubel.ys@mmk.ru COMMUNICATIONS DEPARTMENT Dmitry Kuchumov +7 985 219 2874 kuchumov.do@mmk.ru Oleg Egorov +7 903 971 8837 egorov.oa@mmk.ru -----------------------------------------------------------------------------------------------------------------------
ISIN: US5591892048
Category Code: ACS
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 92679
EQS News ID: 1165013
End of Announcement EQS News Service
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(END) Dow Jones Newswires
February 02, 2021 01:57 ET (06:57 GMT)
