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PJSC Magnitogorsk Iron and Steel Works: MMK Group -2-

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DJ PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q3 and 9M 2020



PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q3
and 9M 2020

22-Oct-2020 / 08:56 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.

MMK Group IFRS FINANCIAL RESULTS PJSC Magnitogorsk Iron &
for q3 and 9M 2020 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 Q3 and 9M 2020.

22 OCTOBER 2020

Magnitogorsk, Russia

MMK GROUP FINANCIAL RESULTS

Q3 2020

USD mln Q3 2020 Q2 2020 % 9M 2020 9M 2019 %

Revenue 1,565 1,268 23.4% 4,543 5,844 -22.3%
EBITDA 350 226 54.9% 1,018 1,462 -30.4%
EBITDA 22.4% 17.8% 4.6 p.p. 22.4% 25.0% -2.6 p.p.
margin, %
Profit for 102 58 75.9% 291 768 -62.1%
the period
Free cash 335 -18 - 432 617 -30.0%
flow1
Net debt -34 237 - -34 -70 -
Net -0.03 0.16 -19.0 p.p. -0.03 -0.04 0.01 p.p.
debt/EBITDA
Net working 672 952 -29.4% 672 1,165 -42.3%
capital
L3M Net 10.7% 18.8% -8.1 p.p. 10.7% 14.5% -3.8 p.p.
working
capital/rev
enue

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).

KEY FINANCIAL INDICATORS

· MMK Group's revenue increased by
23.4% quarter-on-quarter (q-o-q) to
FOR Q3 2020 USD 1,565 mln, which reflects a
growth in sales volumes thanks to a
recovery in business activity and a
rise in steel prices due to positive
VS Q2 2020 market trends in Russia and globally.

· EBITDA for Q3 2020 amounted to USD
350 mln, up 54.9% q-o-q, reflecting
the improving market environment in
Q3 and a significant growth in the
share of higher-margin domestic
sales. EBITDA margin increased by 4.6
p.p. to 22.4%.

· Despite a rouble devaluation in Q3,
net profit was up by 75.9% q-o-q to
USD 102 mln.

· Free cash flow (FCF) significantly
increased, totalling USD 335 mln in
Q3. FCF growth was driven by higher
sales and margins, and the management
team's effective efforts to reduce
working capital amid a favourable
domestic market environment.

KEY FINANCIAL INDICATORS

· MMK Group's revenue declined by
22.3% year-on-year (y-o-y) to USD
FOR 9M 2020 4,543 mln due to the challenging
market situation and the
reconstruction of Hot-Rolling Mill
2500.
VS 9M 2019

· EBITDA decreased by 30.4% y-o-y to
USD 1,018 mln following the overall
slowdown in business activity and
correction in global steel prices
driven by the spread of the pandemic.
EBITDA margin was down by 2.6 p.p. to
22.4%.

· Net profit declined by 62.1% y-o-y
to USD 291 mln, mainly due to
worsening market conditions and the
growing foreign exchange losses
driven by rouble devaluation.

· FCF amounted to USD 432 mln, down
30.0% y-o-y, due to the worsening
market environment.

COMMENT BY MMK'S CEO

CEO « Dear shareholders and colleagues,

PAVEL SHILYAEV

The gradual global economic
recovery trend that emerged in
mid-Q2 continued into Q3 amid
vigorous efforts by national
authorities around the globe. In
Russia, for instance, the
government quickly provided
assistance to the sectors of
economy most affected by the
pandemic, as well as introduced
measures to support real disposable
household income to give the
necessary impetus for further
economic recovery despite the still
looming threat of the COVID-19
pandemic.

In this respect, I would like to
stress that MMK maintains a strong
focus on taking all necessary
measures to protect the health of
the Group's workers and employees
and ensuring the continuity of all
business processes.
I would also highlight the positive impact on the Russian
steel market of the pent-up demand that built during Q2.
Apparent steel consumption trended higher in Q3, driven by the
built-up backlog of demand for metal products, coupled with a
strong demand for steel from the construction and automotive
industry during the quarter. However, trends in demand for
steel products still vary across other metal-consuming
sectors. As a result, we managed to grow our sales in the
domestic market (Russia and CIS) to 84% while maintaining a
high share of HVA products in sales (49%), which is in line
with our strategic priorities.

In Q3, we launched Hot-Rolling Mill 2500 and blast furnace No.
2 after scheduled reconstruction and continued the
construction of the new coke-oven battery. Overall, we expect
that our CAPEX for the full year will total about USD 700 mln.
This correction vs previously stated targets is primarily
caused by the new coke-oven battery and other projects
construction period postponing and by the rouble depreciation,
as most of our CAPEX is rouble-denominated.

Financial stability remains a key focus for the Company. MMK's
debt leverage remains among the industry's lowest at 0.03x Net
Debt/EBITDA as of the end of Q3, and the Group's high level of
available liquidity (USD 2.4 bn) provides it with a strong
cushion to successfully meet its strategic commitments.

MMK consistently generates a
sufficient cash flow and reiterates
its commitment to its dividend
policy. Dividend payout is a key
element of our operations, aimed at
creating more value for all
shareholders in the Company.
Considering the Q3 2020 results,
coupled with our confidence in our
outlook amid the further economic
recovery in Russia and globally,
the Board of Directors can
recommend that MMK shareholders
approve a dividend of RUB 2.391 per
ordinary share (100% of FCF for Q3)
for Q3 2020.

»

MMK GROUP'S PERFORMANCE

ACROSS CORE SEGMENTS

STEEL SEGMENT RUSSIA

Q3 2020 Q2 2020 % 9M 2020 9M 2019 %

USD mln

Revenue 1,456 1,180 23.4% 4,238 5,566 -23.9%
EBITDA 336 236 42.4% 993 1,417 -29.9%
EBITDA 23.1% 20.0% 3.1 p.p. 23.4% 25.4% -2.0 p.p.
margin, %
Cash cost of 263 255 3.1% 262 312 -16.0%
slab, USD/t

+23.4% Q-o-Q The Russian steel segment's revenue for Q3 2020
totalled USD 1,456 mln, up 23.4% q-o-q due to
higher sales and steel prices amid a recovery in
business activity. The y-o-y decline in revenue
REVENUE by 23.9% to USD 4,238 mln was driven by a
significant slowdown in business activity and the
correction in global steel prices as a result of
the pandemic's spread in Russia and globally.

The segment's EBITDA for Q3 2020 amounted to USD
+42.4% Q-o-Q 336 mln, up 42.4% q-o-q, due to a better
macroeconomic situation and a significant growth
in the share of higher-margin domestic sales by
39%. EBITDA declined by 29.9% y-o-y to USD 993
EBITDA mln as a result of the slowdown in economic
activity and the correction in global steel
prices.

The Group's Q3 2020 profitability saw a positive
boost to the sum of USD 16 mln for the quarter

(MORE TO FOLLOW) Dow Jones Newswires

October 22, 2020 02:56 ET ( 06:56 GMT)


from the operational efficiency and cost
optimisation programmes within the Evolution
Business System.

The slab cash cost in Q3 2020 amounted to USD 263
per tonne, up 3.1% q-o-q, driven mainly by
growing iron ore and scrap prices, and the higher
+3.1% Q-o-Q share of scrap in steelmaking charge. The slab
cash cost declined 16.0% y-o-y to USD 262 per
tonne, reflecting the impact of the rouble
devaluation, decline in prices for raw materials
SLAB CASH COST and improved structure of the blast furnace and
steelmaking charge.

STEEL SEGMENT TURKEY

Q3 2020 Q2 2020 % 9M 9M 2019 %
2020

USD mln

Revenue 137 103 33.0% 353 410 -13.9%
EBITDA 11 -1 - 13 -13 -
EBITDA margin, 8.0% -1.0% 9.0 p.p. 3.7% -2.9% 3.9 p.p.
%

+33.0% Q-o-Q The Turkish steel segment's revenue for Q3 2020
increased by 33.0% q-o-q to USD 137 mln, reflecting
the removal of lockdown restrictions and a recovery
in business activity in the Republic of Turkey.
REVENUE Revenue declined by 13.9% y-o-y to USD 353 mln, due
to the unfavourable market environment and the EU
import quotas imposed on rolled products from
Turkey.

The favourable environment in the market and the
growing share of higher margin sales of
polymer-coated steel drove an increase in the
segment's EBITDA to USD 11 mln in Q3 2020.
Year-on-year, the Turkish steel segment's EBITDA
grew to USD 13 mln as the strategy to boost sales
margins was successfully implemented and prices for
purchased hot-rolled metal declined faster than
prices for the segment's products amid the
correction in global steel prices.

COAL MINING SEGMENT

Q3 2020 Q2 2020 % 9M 2020 9M 2019 %

USD mln

Revenue 36 43 -16.3% 133 187 -28.9%
EBITDA 0 -10 - 6 58 -89.7%
EBITDA 0.0% -23.3% 23.3 p.p. 4.5% 34.4% -29.9 p.p.
margin, %

-16.3% Q-o-Q The coal mining segment's revenue for Q3 2020
amounted to USD 36 mln, a decrease of 16.3% q-o-q,
due to the continued correction in coal concentrate
prices and rouble devaluation. Revenue for 9M 2020
REVENUE decreased by 28.9% y-o-y to USD 133 mln following a
significant correction in coal concentrate prices.

Due to the challenging environment in the coking
coal market, the segment's EBITDA in Q3 2020 was
USD 0 mln. EBITDA for 9M 2020 decreased by 89.7%
y-o-y to USD 6 mln, due to a significant correction
in coal concentrate prices and the accrual of
provisions.

CASH FLOW AND FINANCIAL POSITION

OF MMK GROUP

· In Q3 2020, CAPEX decreased by 9.7%
q-o-q to USD 159 mln, following the
CAPEX and cash flow project implementation schedule. Over 9M
2020, CAPEX decreased by 22.9% y-o-y to
USD 465 mln, fully in line with the
Group's investment programme schedule
under the Group's strategy.

· Working capital was positively impacted
by the recovery in economic activity in Q3
2020 and the Group management team's
effective efforts to increase sales
margins and win a greater share of the
domestic market. As a result, the inflow
from working capital in Q3 was USD 190
mln, with an improved net working capital
to revenue ratio of 10.7% in Q3 2020, an
8.1 p.p. decrease q-o-q.

· The improving market environment,
coupled with working capital reduction and
lower CAPEX in Q3 2020, resulted in a
significant growth in free cash flow for
Q3 2020 to USD 335 mln. FCF for 9M 2020
decreased by 30.0% y-o-y to USD 432 mln,
reflecting the pandemic's impact in Q2
2020 and negative market trends.

· The Group's total debt for Q3 2020 was USD 946
mln, up from USD 894 mln in Q2 2020 (USD 866 mln
DEBT burden for 9M 2019).

· As of the end of Q3 2020, the Group had USD 980
mln in cash and deposits in its accounts.

· The Group's net debt as of the end of Q3 2020
totalled minus USD 34 mln, while its net
debt/EBITDA ratio was -0.03? - one of the lowest
among the leading global steelmakers.

Dividends

· The Group remains committed to its dividend
policy. Considering our high margins, paired with
OF MMK GROUP our confidence in further business recovery in
Russia and globally, the Board of Directors is
convinced that the Group sits in a stable
position and recommends shareholders to approve
the payment of a dividend of RUB 2.391 per share
(100% of FCF for the quarter) for Q3 2020.

· The Board of Directors has proposed to set the
Q3 2020 dividend record date for the close of
business on 14 January 2021.

OUTLOOK

· The pent-up demand from the construction industry
along with government economic stimulus packages are
expected to bolster sales in Q4 2020.

· Higher utilisation of Hot-Rolling Mill 2500's
capacity in Q4 2020 will additionally support MMK
Group sales.

· The Group will continue its strategy to maximise
utilisation of high-margin production units.

· Amid the stabilisation of hot-rolled coil prices in
the Black Sea region, domestic prices in Q4 are
expected to remain flat from the previous quarter.

· CAPEX for Q4 2020 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
Evolution Business System will boost Group
performance in Q4 2020.

CONFERENCE CALL MMK Management will hold a conference call to
discuss its financial results

· Date:
22 October 2020

· 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 9411 +1 323 794 2590
Toll free 8 10 800 2867 0800 279 7204 888 394 8218
5011

· Conference ID:

in Russian - 7139677

in English - 9608380

· Webcast:
To register for the webcast please use the following link
[1].

The call recording will be available for seven days on the
following numbers:

Call recording ID:

in Russian - 7139677

in English - 9608380

Russia UK USA

Local access 8 10 800 2702 +44 207 660 0134 +1 719 457 0820
1012

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 Subscribe to our official MMK
channel on Telegram to be the
first to know about key MMK
news.
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
rolled steel. MMK turns out a
broad range of steel products,
with a predominant share of
high-value-added products. In
2019, MMK produced 12.5 mln
tonnes of crude steel and 11.3
mln tonnes of commercial steel
products.

??? is an industry leader in
terms of production costs and
margins. Group revenue in 2019
totalled USD 7,566 mln, with
an EBITDA of USD 1,797 mln.
MMK boasts the industry's
lowest debt burden. Net
debt/EBITDA ratio was -0.13?
at the end of 2019. 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%.

INVESTOR RELATIONS
DEPARTMENT

KEY UPCOMING EVENTS IN 2020

Veronika Kryachko
+7 915 380 6266
kryachko.vs@mmk.ru Financial calendar [2]

26-27 October Non-deal roadshow (NDR), online
29 October- Moscow Exchange Forum, online
3 November
ESG DEPARTMENT 9-11 November Investor conference, Goldman Sachs,
online
9-13 November Investor Conference, Renaissance
Capital, online
Yaroslava Vrubel 23-24 November Non-deal roadshow (NDR), online
+7 982 282 9682
vrubel.ys@mmk.ru

COMMUNICATIONS
DEPARTMENT

Dmitry Kuchumov
+7 985 219 2874

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