OJSC Magnitogorsk MMK MMK Posts 3Q and 9M 2012 Financial Results

  OJSC Magnitogorsk (MMK) - MMK Posts 3Q and 9M 2012 Financial Results

RNS Number : 8654R
OJSC Magnitogorsk Iron &Steel Works
23 November 2012
 

23 November 2012

 

                    Magnitogorsk Iron & Steel Works (MMK)

  announces its IFRS financial statements for Q3 and first 9 months of 2012

Highlights 

Ø MMK Group sales in Q3 2012 was USD 2,319 million, down 8% q-o-q.

Ø Cost of sales in Q3 2012 was USD 1,911 million, more than 9% down q-o-q.

Ø MMK Group operating profit for Q3 2012 was USD 147 million, up 55% q-o-q.

Ø EBITDA in Q3 2012 was USD 398  million, up 8% q-o-q. This was due mainly  to 
EBITDA growth of 7% in  the Russian steel segment and  more than 5x growth  in 
the coal segment. 

Ø Net profit for Q3 2012 was USD 82 million, compared to a net loss of USD  49 
million in Q2 2012.

 MMK GROUP CONSOLIDATED INCOME STATEMENT HIGHLIGHTS (USD MLN) 

                       Q3 2012 Q2 2012    %    9M 2012 9M 2011    %
Revenue                 2,319   2,516   -7.8%   7,260   7,063   2.8%
Cost of sales           1,911   2,111   -9.5%   6,130   5,769   6.3%
Operating profit         147     95     54.7%    275     412   -33.3%
EBITDA*, of which        398     369    7.9%    1,060   1,133   -6.4%
Steel segment (Russia)   400     373    7.2%    1,040    960    8.3%
Steel segment (Turkey)  - 31     - 8     n/a    - 57      1      n/a
          Coal segment   27       5     x5.4     74      176   -58.0%
  Consolidation effect    2      - 1     n/a      3      - 4     n/a
EBITDA margin           17.2%   14.7%  +2.5 pp  14.6%   16.0%  -1.4 pp
Profit for the period    82     - 49     n/a     47     - 58     n/a

* The EBITDA calculation  is presented in the  Notes to MMK Group's  Condensed 
Consolidated Financial Statements

Ø The 8% q-o-q  decline in revenues for  Q3 2012 was due  to lower prices  for 
products sold in Q3 2012 as a result of unfavourable conditions on world steel
markets. 

Ø Cost of sales for Q3  2012 was more than 9%  lower q-o-q, and was USD  1,911 
million.

Ø Cost of sales declined at a  faster rate than revenues, due to lower  prices 
for key raw materials. As a result,  operating profit for Q3 2012 was USD  147 
million, up 55% q-o-q.

Ø Production expenses fell due to  favourable prices for key raw materials  in 
Q3 2012. The cash cost of slab in Q3 2012 was USD 385 per ton, down more  than 
7% q-o-q.

Ø MMK Group  EBITDA in  Q3 2012  was USD 398  million. The  EBITDA margin  was 
17.2%, the highest margin reported by the Group since Q1 2011.

Ø The 8%  q-o-q rise in  MMK Group's EBITDA  in Q3 2012  was driven by  higher 
profitability in the Russian  steel segment (up 7%)  and a better result  from 
the mining segment. Belon's  EBITDA for Q3 2012  increased more than 5x  q-o-q 
due to higher sales of coking  coal concentrate (up 29%) following  completion 
of mine maintenance work in Q2 2012.  

Ø Net profit for Q3 2012 was USD 82 million, compared to a net loss of USD  49 
million in the second quarter. One-time factors affecting net profit  included 
an FX gain of USD 32 million.

Ø Net profit for the first 9 months of 2012 was USD 47 million.

 

BALANCE SHEET AND CASH-FLOW HIGHLIGHTS

Ø Property, plant & equipment (PP&E) stood at USD 11,829 million at the end of
the period, slightly higher than at the end of 2011, despite the launch of new
facilities during the period. This was due primarily to the stronger ruble  on 
the reporting date and PP&E revaluation at the new exchange rate.

Ø Reserves  at the  end of  Q3  2012 were  slightly higher  q-o-q due  to  the 
accumulation of winter reserves of key raw materials.

Ø MMK Group undertook no major debt market transactions in Q3 2012. Total debt
at the end of the quarter was USD 3,883 million. The increase q-o-q is due  to 
the strengthening of the  ruble and revaluation of  the company's debt at  the 
new exchange rate.

Ø Total debt/EBITDA (for  the previous 12  months) at the end  of Q3 2012  was 
almost unchanged, due to EBITDA growth in the period, despite the increase  in 
debt, and remains at about 3x.

Ø As of 30 September 2012, cash and cash equivalents stood at USD 221  million 
(up 13% from the end of Q2 2012) and liquid assets totalled more than USD  600 
million.

Ø Total capital expenditure  (capex) during Q3 2012  was USD 156 million.  The 
main investment projects of 2012 the completion of the 2000 Cold Mill Complex,
upgrading of the 2500 Hot Mill and the investment programme for Belon.

Ø Free cash flow for the first 9 months of 2012 was USD 366 million.

 

 MMK GROUP OPERATIONAL HIGHLIGHTS

Ø Crude steel output in Q3 2012 was 3.4 million tons (up 2% q-o-q).

Ø Finished steel output in Q3 2012 was 3.07 million tons (up 0.3% q-o-q).

Ø MMK Group's total output of high  value added (HVA) products in Q3 2012  was 
1,276 thousand tons (up 6% q-o-q).

(thousand tons)                      Q3 2012 Q2 2012  %   9M 2012 9M 2011  %
MMK Group crude steel                  3,357   3,294   2%  10,068   9,087  11%
   MMK steel                           3,187   3,012   6%   9,316   8,899   5%
   MMK Metalurji steel                   170     282 -40%     752     188   4x
MMK Group finished steel products      3,072   3,062 0.3%   9,154   8,299  10%
   MMK finished steel products         2,858   2,776   3%   8,400   8,023   5%
   MMK-Metiz finished steel              129     142  -9%     380     362   5%
products*
   MMK Metalurji finished steel          211     284 -26%     748     272 2.7x
products
                       HVA products,
                                       1,276   1,209   6%   3,668   3,035  21%
                  MMK Group (volume)
                       HVA products,
                                         40%     39%          40%     37%
   MMK Group (% of total production)
Coal concentrate (Belon)                 985     761  29%   2,521   2,334   8%
Iron ore                               1,021   1,107  -8%   3,176   3,680 -14%

* - including processing of MMK products

MMK steel operations in Russia

Ø Finished steel products  output in Q3  2012 was 2,858  thousand tons, up  3% 
q-o-q, driven by higher production volumes of long products, flat  cold-rolled 
products and galvanized steel.

Ø HVA steel products output in Q3  2012 was 1,276 thousand tons, up 6%  q-o-q, 
mainly due to higher shipments of cold-rolled and galvanized products from the
Magnitogorsk plant.

Ø Domestic shipments in 9M  2012 are up 17% y-o-y,  due to more stable  demand 
for steel in the domestic market than from export markets. Domestic  shipments 
accounted for 77% of MMK's total shipments during the period.

Ø MMK's domestic sales are highly diversified. No one client accounts for more
than 5% of sales on  the domestic market, and the  top 10 clients account  for 
about 25% of sales.

Ø Shipment volumes from  Metiz have increased  5% y-o-y in 9M  2012, due to  a 
general recovery in the construction industry in 2012.

Ø MMK export shipments in 9M 2012 contracted by 22% y-o-y, and stand at  1,967 
thousand tons.

MMK steel operations in Turkey

Ø MMK Metalurji finished products output in 9M 2012 was 748 thousand tons,  up 
2.7x y-o-y. Production in Q3 2012 totalled 211 thousand tons.

Ø Revenue from the Turkish steel segment  for 9M 2012 was USD 637 million,  up 
117% y-o-y. Revenue in Q3 2012 was USD 187 million.

Ø EBITDA for the  Turkish steel segment  in Q3 2012 was  negative, at USD  -31 
million.

Ø Due to continued unfavourable market conditions on the Turkish steel market,
specifically high  prices  for  scrap  metal and  low  prices  for  hot-rolled 
products, in November 2012 MMK halted steel smelting and the hot roll mill for
a period of  90 days.  MMK believes this  action will  reduce MMK  Metalurji's 
losses and help it attain profitability.

 

BELON OPERATIONAL HIGHLIGHTS - ÌÌÊ GROUP COAL SEGMENT

Ø Production of coking coal concentrate in 9M 2012 was 2,521 thousand tons, up
8% y-o-y.

Ø Production of coking coal concentrate in  Q3 2012 was 985 thousand tons,  up 
29% q-o-q. This was due to the completion of mine maintenance work in Q2  2012 
and the enterprise starting to operate at near full production capacity.

Ø Revenue from  the coal  segment in  9M 2012 was  USD 364  million, down  26% 
y-o-y. This  was due  to a  decline  in global  coal prices  throughout  2012. 
Revenues from the coal segment in Q3 2012 were USD 128 million.

Ø EBITDA for the coal segment in Q3  2012 was USD 27 million, up more than  5x 
q-o-q.

Ø MMK expects the continuing decline in coking coal prices to have a  negative 
impact on profit in Q4 2012.

 

market outlook

MMK expects volumes of finished steel products in Q4 2012 will be affected  by 
the seasonal slowdown in business activity on the domestic market.

At present, world steel prices are close  to their lowest level, and MMK  does 
not expect a recovery in prices sooner  than early 2013 with the beginning  of 
the construction season and inventory restocking.

However, the Company's  efforts to  improve its product  mix, as  well as  its 
strong position on the domestic market and the continued decline in prices for
key raw materials should mitigate the  negative impact of low steel prices  on 
the Company's financial results.

 

*  *  *

MMK management  will  hold conference  call  on the  financial  statements  on 
November 23, 2012, at 4:00 pm Moscow Time (12:00 noon London Time, 7:00 am New
York Time).

Conference dial-in number: +7 3519 24 93 05.  Password: 1234

A presentation  of the  results and  IFRS financial  statements are  available 
online at: http://eng.mmk.ru/for_investor/financial_statements/

 

*  *  *

MMK is one of the world's largest steel producers and a leading Russian metals
company. The company's operations  in Russia include  a large steel  producing 
complex encompassing the entire production chain, from preparation of iron ore
to downstream processing of rolled steel. MMK turns out a broad range of steel
products with a predominant share of higher-value-added products. In 2011  the 
company produced 12.2  million tons of  crude steel and  11.2 million tons  of 
commercial steel products. MMK  Group had sales in  2011 of USD 9,306  million 
and EBITDA of USD 1,336 million

 

Contacts:

Investor Relations Department:
Andrey Serov
phone: +7 (3519) 24-52-97
e-mail: serov.ae@mmk.ru

 

Communications Department:

 Kirill Golubkov           Polina Rudyaeva           Alexander Proskurov
 phone: +7 (916) 675-30-81 phone: +7 (916) 810-89-18 phone: +7 (3519) 24-63-03
 e-mail: kgolubkov@mmk.ru  rudyaeva.pi@mmk.ru        e-mail: proskurov@mmk.ru

 

                     This information is provided by RNS
           The company news service from the London Stock Exchange
 
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QRTEAXFDAEEAFEF -0- Nov/23/2012 07:03 GMT