DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group IFRS financial results for Q3 and 9M 2021
PJSC Magnitogorsk Iron and Steel Works (MMK) PJSC Magnitogorsk Iron and Steel Works: MMK Group IFRS financial results for Q3 and 9M 2021 25-Oct-2021 / 09:00 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 q3 and 9M 2021 one of the world's largest steel producers, is pleased to announce its financial results for
Q3 and 9M 2021.
25 october 2021
Magnitogorsk, Russia
MMK GROUP FINANCIAL RESULTS
Q3 2021
USD mln
Q3 2021 Q2 2021 % 9M 2021 9M 2020 %
Revenue 3,031 3,255 - 6.9% 8,471 4,543 86.5%
EBITDA 1,157 1,435 - 19.4% 3,318 1,018 225.9%
EBITDA margin, % 38.2% 44.1% - 5.9 p.p. 39.2% 22.4% 16.8 p.p.
Profit for the period 819 1,031 - 20.6% 2,327 291 699.7%
Free cash flow1 409 545 - 25.0% 1,079 432 149.8%
Net debt 141 6 - 141 - 34 -
Net debt/EBITDA 0.04x 0.00x - 0.04x - 0.03x -
Net working capital 1,643 1,361 20.7% 1,643 672 144.5%
L3M Net working capital/revenue 13.6% 10.5% 3.1 p.p. 13.6% 10.7% 2.9 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 decreased by 6.9% quarter-on-quarter (q-o-q) to USD 3,031 mln, which
reflects a decline in sales volumes partially offset by higher global steel prices.
-- EBITDA declined by 19.4% q-o-q to USD 1,157 mln, mainly due to lower revenue and the impact
KEY FINANCIAL of export duties. EBITDA margin decreased by 5.9 p.p. to 38.2%.
INDICATORS
FOR Q3 2021
-- Net profit was USD 819 mln, down 20.6% q-o-q as a result of lower margins.
VS Q2 2021
-- FCF decreased by 25.0% q-o-q to USD 409 mln, reflecting EBITDA adjustments and working
capital build-up due to higher export sales with longer lead times amid higher average prices.
-- MMK Group's revenue for 9M 2021 increased by 86.5% year-on-year (y-o-y) to USD 8,471 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 year-on-year to USD 3,318 mln due to revenue growth and last
INDICATORS year's low base. EBITDA margin was up 16.8 p.p. to 39.2%.
FOR 9M 2021
VS 9M 2020 -- Net profit increased significantly year-on-year to USD 2,327 mln, mainly reflecting
increased business margins amid positive trends in global markets.
-- FCF for 9M 2021 increased to USD 1,079 mln amid positive market dynamics.
COMMENT BY MMK'S CEO
CEO Dear shareholders and colleagues,
PAVEL
SHILYAEV «
The health and safety of our people remains our top priority amid continuing COVID-19 outbreak. Our
strong awareness campaign on the importance of vaccination for MMK employees and contractors has proved
successful. Close to 80% of Group employees were vaccinated by the end of Q3 2021.
We continue to implement initiatives to address the root causes of accidents and improve the production safety culture.
For example, despite the 16.4% increase in LTIFR over 9M 2021 amid an increase in the number of minor industrial
accidents in the spring-winter period, the injury rate continued to decline in the third quarter, down 47.4%
quarter-on-quarter.
Looking at our environmental responsibility, specific air emissions fell 5.1% for 9M 2021 to 14.1 kg per tonne, driven
by an increase in the share of scrap in the charge on the back of increased EAF steel output. I am proud to report that
in August 2021, MMK's sustainability report made it into the top 5 among global steelmakers. The ESG Reporting Awards
2021 by ESG Investing recognised MMK Group's non-financial reporting among the world's best in the Metals & Mining
category.
Provisional export duties introduced in early August, coupled with a slowdown in business activity in the domestic
market, led to a downward price trend in the Russian rolled steel market, which was reflected in our sales mix. During
the reporting period, domestic sales (Russia and the CIS) were 70% of total sales and sales of premium products stood
at 44%. We expect that our sales of premium products at the end of the year will be supported by an increase in orders
pipeline for a thick plate Mill 5000 driven by a stronger demand from the pipe industry.
In Q3 2021, we continued 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.
In the third quarter, MMK and SMS group GmbH signed a Memorandum of Understanding that states both companies' intention
to cooperate in order to further reduce - potentially to zero - CO2 emissions.
Financial stability remains a top priority for the Company. MMK's debt leverage remains among the industry's lowest at
0.04x Net Debt/EBITDA as of the end of the third quarter, while the Group's high level of available liquidity (USD 2.2
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 Q3 2021 results, coupled with our confidence in our
financial outlook, the Board of Directors can recommend that MMK shareholders approve a dividend of RUB
2.663 per ordinary share (100% of FCF) for Q3 2021, in line with the Company's strategic commitment to
maximise TSR.
»
MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
USD mln Q3 2021 Q2 2021 % 9M 2021 9M 2020 %
Revenue 2,860 3,179 - 10.0% 8,144 4,238 92.2%
EBITDA 1,050 1,403 - 25.2% 3,160 993 218.2%
EBITDA margin, % 36.7% 44.1% - 7.4 p.p. 38.8% 23.4% 15.4 p.p.
Cash cost of slab, USD/t 437 391 11.8% 389 262 48.5%
- 10.0% Q-o-Q
REVENUE The Russian steel segment's revenue for Q3 2021 declined by 10.0% to USD 2,860 mln, reflecting higher
export sales with longer lead times amid slowing demand in Russia. The increase in revenue for 9M 2021 by
92.2% y-o-y to USD 8,144 mln was driven by the global recovery in business activity and favourable
pricing.
- 25.2% Q-o-Q
The segment's EBITDA for Q3 2021 declined by 25.2% q-o-q to USD 1,050 mln due to lower sales volumes
EBITDA and the impact of export duties. EBITDA for 9M 2021 more than tripled y-o-y to USD 3,160 mln from last
year's low base, reflecting favourable market conditions.
The Group's Q3 2021 profitability saw a positive boost from the operational efficiency and cost
optimisation programmes under our updated strategic initiatives. In Q3 2021, the impact of these
programmes totalled USD 26 mln.
+ 11.8% Q-o-Q The slab cash cost in Q3 2021 increased by 11.8% to USD 437 per tonne, reflecting a significant increase
in prices for key raw materials driven by global market trends. In 9M 2021, the slab cash cost grew by
SLAB CASH 48.5% y-o-y to USD 389 per tonne.
COST
STEEL SEGMENT TURKEY
USD mln Q3 2021 Q2 2021 % 9M 2021 9M 2020 %
Revenue 330 236 39.8% 732 353 107.4%
EBITDA 67 50 34.0% 144 13 11.1x
EBITDA margin, % 20.3% 21.2% - 0.9 p.p. 19.7% 3.7% 16.0 p.p.
+ 39.8% Q-o-Q
The Turkish steel segment's revenue for Q3 2021 increased by 39.8% q-o-q to USD 330 mln, reflecting
REVENUE higher sales volumes and steel prices. Revenue for 9M 2021 more than doubled y-o-y to USD 732 mln due to
higher sales volumes and a favourable market environment amid the stabilisation of the COVID-19
situation.
The segment's EBITDA grew by 34.0% to USD 67 mln in Q3 2021, driven by higher sales volumes and margins.
Year-on-year, the Turkish steel segment's EBITDA for 9M 2021 grew more than 11 times to USD 144 mln
off last year's low base during the pandemic, reflecting a higher demand for steel amid an upward trend
in global prices for metal products.
USD mln Q3 2021 Q2 2021 % 9M 2021 9M 2020 %
Revenue 116 77 50.6% 253 133 90.2%
EBITDA 62 30 106.7% 117 6 19.5x
EBITDA margin, % 53.4% 39.0% 14.4 p.p. 46.2% 4.5% 41.7 p.p.
+ 50.6% Q-o-Q
The coal mining segment's revenue for Q3 2021 increased by 50.6% q-o-q to USD 116 mln as a result of
REVENUE higher coal concentrate prices amid favourable market dynamics. Revenue for 9M 2021 grew by 90.2% y-o-y
to USD 253 mln.
The segment's EBITDA for Q3 2021 more than doubled to USD 62 mln, supported by current positive dynamics
in coal concentrate prices in global markets. EBITDA for 9M 2021 increased to USD 117 mln, driven by
higher prices and sales volumes of coal concentrate.
CASH FLOW AND FINANCIAL POSITION
OF MMK GROUP
-- In Q3 2021, CAPEX decreased by 30.3% q-o-q to USD 235 mln, reflecting the implementation
and financing schedule for projects pursued under the Group's strategy. Year-on-year, CAPEX grew
53.5% to USD 714 mln.
-- An increase in export sales with longer lead times amid high global prices for steel and
CAPEX AND key raw materials, along with the launch of a casting and rolling module at our Turkish asset,
CASH FLOW resulted in a USD 209 mln working capital build-up in Q3 2021.The net working capital to
revenue ratio increased by 3.1 p.p. q-o-q in Q3 2021 to 13.6%.
-- FCF for Q3 2021 decreased by 25.0% q-o-q to USD 409 mln. Year-on-year, FCF grew by almost
2.5 times to USD 1,079 mln in 9M 2021.
-- The Group's total debt at the end of Q3 2021 was USD 1,040 mln, up from USD 996 mln in Q2
2021. Year-on-year, the debt burden for 9M 2021 also increased (from USD 946 mln in 9M 2020).
DEBT -- As at the end of Q3 2021, the Group held USD 899 mln in cash and deposits in its accounts.
BURDEN
-- The Group's net debt as at the end of Q3 2021 totalled USD 141 mln while its net debt/
EBITDA ratio was 0.04x, one of the lowest among leading global steelmakers.
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 2.663 per share (100% of FCF
for the quarter) for Q3 2021.
-- A retracement in the global market coupled with the seasonal business slowdown in Russia,
will exert pressure on the Group's sales in the fourth quarter. However, the increase in output by
the Turkish asset will support sales.
-- High utilisation of equipment that manufactures premium products will be beneficial for the
Group's sales portfolio, including an increase in capacity utilisation rate of Mill 5000 amid higher
demand from pipe industry.
OUTLOOK
-- CAPEX for Q4 2021 is expected to grow q-o-q, in line with 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 Q4 2021.
MMK Management will hold a conference call to discuss these financial results
-- Date:
CONFERENCE CALL 25 October 2021
-- Time:
4:30 pm Moscow time
2:30 pm London time
9:30 am New York time
Russia UK USA
Local access +7 495 213 1767 +44 (0) 330 336 9125 +1 929-477-0324
Toll free 8 800 500 9283 0800 358 6377 800-458-4121
-- Conference ID:
in Russian - 6442628
in English - 8216043
-- 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 - 6442628
in English - 8216043
Russia UK USA
Local access 8 10 800 2702 1012 +44 (0) 207 660 0134 +1 719-457-0820
-- A presentation of the financial results and the IFRS financial statements can be found at:
https://mmk.ru/en/investor/results-and-reports/financial-results/
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 20.2%.
INVESTOR RELATIONS
DEPARTMENT
Veronika Kryachko KEY UPCOMING EVENTS IN 2021
+7 915 380 6266
kryachko.vs@mmk.ru Financial calendar
ESG 26-28 October Non-deal roadshow (NDR), online
DEPARTMENT 8-9 November GS 13th Annual CEEMEA 1x1 Conference, online
Yaroslava Vrubel 8-9 November 10th Global Natural Resources Conference, online
+7 982 282 9682 COMMUNICATIONS DEPARTMENT Dmitry Kuchumov +7 985 219 2874 kuchumov.do@mmk.ru Oleg Egorov +7 903 971 8837 egorov.oa@mmk.ru
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ISIN: US5591892048 Category Code: QRT TIDM: MMK LEI Code: 253400XSJ4C01YMCXG44 Sequence No.: 125054 EQS News ID: 1243062 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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