- Steelmaker sold $68 million stake in Australian iron ore miner
- Company reports $157 million net profit on sale, steel price
Magnitogorsk Iron & Steel OJSC confirmed it sold part of its stake in Australian iron ore miner Fortescue Metals Group Ltd., helping Russia’s third-largest steelmaker return to profit and reduce debt.
MMK, as the producer is known, sold Fortescue shares in the first quarter for $68 million, it said in an earnings statement on Friday. That helped the company report a $157 million net profit in the three months ended March 31, compared with a $125 million loss in the previous quarter, and reduce net debt by 17 percent.
The Russian producer, which began building a holding in Fortescue in 2006, sold the shares as iron ore rebounded this year. The material rose 38 percent since the end of December, surprising many forecasters who had expected a fourth year of losses driven by a global glut and slowing demand for steel in China, the largest user.
Before the first-quarter sale, the MMK had held a stake of about 5 percent in the world’s fourth-largest iron ore producer, a holding valued at about $300 million. MMK sold some shares to the market in March, people familiar with the matter said at the time.
The company’s net debt fell to $929 million at the end of March and its ratio of net debt to earnings before interest, taxes, depreciation and amortization was at 0.6, it said.
MMK’s earnings were also helped by higher steel prices and a weaker ruble, which cuts domestic costs and increases export income. While revenue fell 11 percent from the previous quarter to $1.05 billion, Ebitda rose 4.4 percent to $287 million.
"Early signs of a recovery in domestic demand and a gradual increase in ruble prices on the domestic market towards parity with export prices enable the company to expect an improvement in its financial metrics in the second quarter," it said.
MMK said it plans to review its dividend policy to pay at least 30 percent of annual free cash flow to shareholders and make the payments on a semi-annual basis.
The shares rose 0.5 percent to 22.32 rubles by 10:24 a.m. in Moscow. The stock is up 18 percent this year.