DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group IFRS financial results for Q2 and H1 2021
PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group IFRS financial results for Q2 and H1 2021
22-Jul-2021 / 08:04 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
RESULTS for q2 and h1 2021 PJSC Magnitogorsk Iron & 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 2021.
22 july 2021
Magnitogorsk, Russia
MMK GROUP FINANCIAL RESULTS
Q2 2021
USD mln
Q2 2021 Q1 2021 % H1 2021 H1 2020 %
Revenue 3,255 2,185 49.0% 5,440 2,978 82.7%
EBITDA 1,435 726 97.7% 2,161 668 223.5%
EBITDA margin, % 44.1% 33.2% 10.9 p.p. 39.7% 22.4% 17.3 p.p.
Profit for the period 1,031 477 116.1% 1,508 189 697.9%
Free cash flow1 545 125 336.0% 670 97 590.7%
Net debt 6 145 - 6 237 -
Net debt/EBITDA 0.00x 0.08x - 0.00x 0.16 -
Net working capital 1,361 1,050 29.6% 1,361 952 43.0%
L3M Net working capital/revenue 10.5% 12.0% - 1.5 p.p. 10.5% 18.8% - 8.3 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 49.0% quarter-on-quarter (q-o-q) to USD 3,255 mln, which reflects a
growth in sales volumes amid higher global steel prices.
KEY FINANCIAL - EBITDA for Q2 2021 almost doubled q-o-q to USD 1,435 mln, reflecting revenue growth fuelled by
INDICATORS favourable market developments. EBITDA margin increased by 10.9 p.p. to 44.1%.
FOR Q2 2021
VS Q1 2021 - Net profit was USD 1,031 mln, more than double q-o-q as a result of higher margins on the back of
favourable market conditions.
- FCF for the quarter amounted to USD 545 mln, more than quadrupling on the back of positive dynamics
in global markets and last quarter's low base. At the same time, the growth was partially offset by
working capital build-up amid upward movements in global prices for raw materials and metal products
throughout the quarter and higher sales volumes.
- MMK Group's revenue increased by 82.7% year-on-year (y-o-y) to USD 5,440 mln, reflecting higher sales
due to the completion of Hot-Rolling Mill 2500's modernisation and an upward trend in market prices
for metal products.
KEY FINANCIAL - EBITDA more than tripled y-o-y to USD2,161 mln due to revenue growth and last year's low base. EBITDA
INDICATORS margin was up 17.3 p.p. to 39.7%.
FOR h1 2021
VS h1 2020 - Net profit increased significantly y-o-y to USD 1,508 mln, mainly reflecting increased business
margins amid the recovering global markets.
- FCF for the quarter increased to USD 670 mln amid positive market developments.
COMMENT BY MMK'S CEO
CEO Dear shareholders and colleagues,
PAVEL «
SHILYAEV
In the second quarter, the Russian economy maintained the trend of rapid recovery, what positively
affected apparent consumption of rolled metal and unlocked strong results for MMK.
Protecting the health of our people remains a top priority for us. Throughout the quarter, we continued raising
awareness about the importance of vaccination among MMK employees and contractors. The share of our employees immune to
COVID-19 currently stands at over 60%. Looking at our environmental responsibility, specific air emissions fell 4.9%
quarter-on-quarter to 13.7 kg per tonne, driven by an increase in the share of scrap in the charge on the back of
increased EAF steel output. I would also like to highlight that we have received a BSI verification certificate for the
Group's GHG emissions. In a move that confirms our commitment to Russia's sustainable development and the social
well-being of our people, we joined the Russian Union of Industrialists and Entrepreneurs' (RSPP's) Social Charter of
Russian Business in Q2 2021.
The growing seasonal demand in the construction industry, ongoing national projects and easing of pandemic-related
restrictions were the key drivers for the Russian steel products market. As for our sales mix, during the quarter,
domestic sales (Russia and the CIS) were 78% and sales of premium products stood at 42% of total sales. We expect our
sales of premium products to grow by the year-end, driven by the successful launch of Reverse Cold-Rolling Mill 1700.
In the second quarter, Russia's Main Department of State Expertise greenlit the construction of a coke-oven battery.
The new facility will boast an annual capacity of 2.5 mln tonnes of dry coke, which will allow us to shut down five
obsolete and worn-out batteries, all while reducing gross greenhouse gas emissions. The ensuing reduction in CO2
emissions will amount to over 1.1 mln tonnes, cutting our carbon footprint by 0.21 tonnes of CO2 per tonne of coke
(-21%), which will further align us with our decarbonisation goals.
I am pleased to report that in late June, we signed a contract for the construction of Blast Furnace No. 11 with an
annual capacity of 3.7 mln tonnes. We aim to reduce our annual CO2 emissions by 1.1 mln tonnes by 2025 using best
available technologies to construct and decommission obsolete furnaces.
Financial stability remains a top priority for the Company. MMK's debt leverage remains among the industry's lowest at
0.00x Net Debt/EBITDA as of the end of the second quarter, while the Group's high level of available liquidity (USD 2.3
bn) provides it with a strong cushion to successfully meet its strategic commitments.
MMK consistently generates sufficient cash flow and reiterates its commitment to its 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 Q2 2021 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 3.530 per ordinary share (100%
of FCF) for Q2 2021, in line with the Company's strategic commitment to maximise TSR.
»
MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
USD mln Q2 2021 Q1 2021 % H1 2021 H1 2020 %
Revenue 3,179 2,105 51.0% 5,284 2,782 89.9%
EBITDA 1,403 707 98.4% 2,110 657 221.2%
EBITDA margin, % 44.1% 33.6% 10.5 p.p. 39.9% 23.6% 16.3 p.p.
Cash cost of slab, USD/t 391 340 15.0% 365 261 39.8%
+ 51.0% Q-o-Q
REVENUE
The Russian steel segment's revenue for Q2 2021 increased by 51.0% to USD 3,179 mln, reflecting strong
demand and positive global price trends. The increase in revenue by 89.9% y-o-y to USD 5,284 mln was
+ 98.4% Q-o-Q caused by the global recovery of business activity and favourable pricing.
EBITDA The segment's EBITDA for Q2 2021 nearly doubled q-o-q to USD 1,403 million due to higher sales volumes
and favourable pricing. EBITDA more than tripled y-o-y to USD 2,110 million, reflecting favourable market
developments against last year's low base.
The Group's Q2 2021 profitability saw a positive boost to the sum of USD 25 mln for the quarter from the
operational efficiency and cost optimisation programmes under our updated strategic initiatives.
The slab cash cost in Q2 2021 increased by 15.0% to USD 391 per tonne, reflecting a significant increase
+ 15.0% Q-o-Q in prices for key raw materials. The slab cash cost grew by 39.8% y-o-y to USD 365 per tonne.
SLAB CASH
COST
STEEL SEGMENT TURKEY
USD mln Q2 2021 Q1 2021 % H1 2021 H1 2020 %
Revenue 236 166 42.2% 402 216 86.1%
EBITDA 50 27 85.2% 77 2 38.5x
EBITDA margin, % 21.2% 16.3% 4.9 p.p. 19.2% 0.9% 18.3 p.p.
+ 42.2% Q-o-Q
REVENUE
The Turkish steel segment's revenue for Q2 2021 increased by 42.2% q-o-q to USD 236 mln, reflecting
higher sales volumes and steel prices. Revenue grew by 86.1% y-o-y to USD 402 mln, reflecting higher
sales volumes and a favourable market environment amid the stabilisation of the COVID-19 situation.
The segment's EBITDA in Q2 2021 grew by 85.2% to USD 50 mln driven by higher sales volumes and margins.
Year-on-year, the Turkish steel segment's EBITDA grew considerably to USD 77 mln thanks to last year's
low-base effect caused by the pandemic and higher demand for steel amid an upward trend in global market
prices for metal products.
USD mln Q2 2021 Q1 2021 % H1 2021 H1 2020 %
Revenue 77 60 28.3% 137 97 41.2%
EBITDA 30 25 20.0% 55 6 816.7%
EBITDA margin, % 39.0% 41.7% - 2.7 p.p. 40.1% 6.2% 33.9 p.p.
+ 28.3% Q-o-Q
REVENUE The coal mining segment's revenue for Q2 2021 increased by 28.3% q-o-q to USD 77 mln as a result of
sustainably growing prices for coal concentrate amid favourable market dynamics. The segment's revenue
grew 41.2% y-o-y to USD 137 mln.
Supported by higher prices for coal concentrate, the segment's EBITDA for Q2 2021 grew by 20.0% to USD 30
mln. EBITDA for H1 2021 increased to USD 55 mln due to higher sales volumes and prices for coal
concentrate.
CASH FLOW AND FINANCIAL POSITION
OF MMK GROUP
- In Q2 2021, CAPEX increased by 137.3% q-o-q to USD 337 mln, following the implementation and
financing schedule for projects pursued under the Group's strategy. CAPEX grew 56.5% y-o-y to USD 479
mln.
- Sales growth amid high global prices for steel and key raw materials drove working capital build-up
CAPEX AND amounting to USD 324 mln in Q2. The net working capital to revenue ratio declined by 1.5 p.p. q-o-q
CASH FLOW to 10.5%.
- FCF for Q2 2021 more than quadrupled to USD 545 mln. At the same time, the growth was partially
offset by working capital build-up. Year-on-year, FCF grew more than six-fold to USD 670 mln.
- The Group's total debt for Q2 2021 was USD 996 mln, up from USD 955 mln in Q1 2021. Year-on-year, the
debt burden also increased (from USD 894 mln in H1 2020).
DEBT - As of the end of Q2 2021, the Group held USD 990 mln in cash and deposits in its accounts.
BURDEN
- The Group's net debt as of the end of Q2 2021 totalled USD 6 mln, while its net debt/EBITDA ratio was
0.00?, which is one of the best results among global peers.
Dividends - The Group remains committed to its dividend policy and previous statements. Considering our high
margins, the Board of Directors is convinced that the Group sits in a stable position and can
OF MMK GROUP recommend the shareholders to approve the payment of a dividend of RUB 3.530 per share (100% of FCF
for the quarter) for Q2 2021.
- Seasonal recovery of demand in Russia and continued favourable conditions in global markets will
positively impact the Group's sales in Q3. Sales will be additionally supported by the start of hot
tests at the electric arc furnace facility with a casting and rolling module at the Turkish asset.
- Completion of the reconstruction of Reverse Cold-Rolling Mill 1700 and 100% utilisation of premium
products equipment will positively impact the structure of the Group's sales portfolio.
OUTLOOK
- CAPEX for Q3 2021 will reflect the implementation schedule for projects pursued under the Group's
strategy.
- Operational excellence measures implemented under MMK's updated strategic initiatives will further
boost the Group's profitability in Q3 2021.
MMK Management will hold a conference call to discuss these financial results
- Date:
CONFERENCE CALL 22 June 2021
- 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 9434 +1 646 828 8143
Toll free 8 10 8002 867 5011 0800 279 7209 800 263 0877
- Conference ID:
in Russian - 6926579
in English - 2525738
- 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 - 6926579
in English - 2525738
Russia UK USA
Local access 8 10 800 2702 1012 +44 207 660 0134 +1 719 457 0820
- A presentation of the financial results and the IFRS financial statements can be found at: http://
mmk.ru/for_investor/financial_statements/
ABOUT MMK
Please
MMK is one of the world's largest steel producers and a leading Russian metals company. The Group's subscribe to
operations in Russia include a large steel-producing unit encompassing the entire production chain, from our
the preparation of iron ore to downstream processing of rolled steel. MMK turns out a broad range of steel official MMK
products, with a predominant share of premium products. In 2020, MMK produced 11.6 mln tonnes of crude channel on
steel and sold 10.8 mln tonnes of commercial steel products. Telegram
to be the
??K is an industry leader in terms of production costs and margins. Group revenue in 2020 totalled USD first to
6,395 mln, with an EBITDA of USD 1,492 mln. MMK boasts the industry's lowest debt burden. Net debt/EBITDA know
ratio was -0.06? at the end of 2020. The Group's investment-grade rating is confirmed by the leading about key
global rating agencies Fitch, Moody's and S&P. MMK news.
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%.
INVESTOR RELATIONS
KEY UPCOMING EVENTS IN 2021
Veronika Kryachko
+7 915 380 6266 Financial calendar
kryachko.vs@mmk.ru
27 July Conference for retail investors, VTB Capital, online
ESG
28-29 July Non-deal roadshow (NDR), online
DEPARTMENT Yaroslava Vrubel +7 982 282 9682 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: IR
TIDM: MMK
LEI Code: 253400XSJ4C01YMCXG44
Sequence No.: 118187
EQS News ID: 1220855
End of Announcement EQS News Service
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