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

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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)
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