MMK Announces Q3 Result

Release time：Nov 06, 2019 From：admin

Russian steel maker MMK said “In Q3 2019, revenue grew 0.5% QoQ thanks to growth in sales volumes amid a decline in average sales prices that reflected a price correction on the global steel market. In Q3 2019, the cost of sales declined 2.3% QoQ and amounted to USD 1,418 million. EBITDA increased by 5.6% QoQ, which provided an increase of the EBITDA margin to 26.1%. Efforts to improve operational efficiency amid stable sales volumes of high-margin products allowed the Company to increase its EBITDA per tonne of steel products to USD 177 (up 5.4% QoQ). Net profit for Q3 2019 amounted to USD 271 million, flat QoQ. One off factors affecting net profit included the creation of additional provisions for site restoration, as well as FX gain.”

It added “In 9M 2019, revenue declined by 6.5% YoY due to lower sales volumes as a result of maintenance work at the blast furnace, converter and rolling production units amid the decline in prices by USD 28 per tonne, or by 4.2%. EBITDA declined by 22.3% YoY and amounted to USD 1,462 million. This was due to lower production volumes, lower steel prices and higher iron ore prices as a result of negative trends on the global steel market. At the same time, the company’s results were supported by an increase in HVA products as a share of the overall sales mix to 49.0% and a reorientation of sales to the domestic market where margins are higher. The Company’s profitability over the period saw a positive effect from the operational efficiency and cost optimization program of USD 55 million in 9M 2019 (including USD 15 million in Q3 2019).”

Steel segment (Russia) - Revenue for Q3 2019 amounted to USD 1,917 million, up 2.7% QoQ. This growth was due to an increase in sales volumes by 1.4% QoQ and a reorientation of sales to the domestic market where margins are higher, amid the correction in metal prices. The segment’s EBITDA for Q3 2019 amounted to USD 518 million, up 7.7% QoQ. This growth was due to higher sales volumes due to sustainably high demand on the Company’s key markets. The Company’s profitability over the period saw a positive effect from the operational efficiency and cost optimization program of USD 15 in Q3 2019. The cost of sales for a tonne of slab in Q3 2019 amounted to USD 313, down 2.2% QoQ. Key factors for this decline were lower share of pellets in the blast furnace charge and lower scrap share in the steel production process. It was also influenced by the correction in prices for coal concentrate and scrap.

Steel segment (Turkey) - MMK Metalurji’s revenue for Q3 2019 amounted to USD 136 million, down 5.6% QoQ. This decline was due to a decrease in the sales volumes by 4.3% QoQ amid the negative correction in prices on the Turkish market. Despite external negative headwinds, MMK Metalurji continues its efforts to improve efficiency and increase sales margins by increasing the share of HVA products and relocating sales towards markets where margins are higher. External unfavourable factors and the persistently challenging economic situation in Turkey have resulted in a significant decline in demand for construction steel products and continue to affect this segment’s performance.

Coal segment - The volume of coking coal production in Q3 2019 increased by 11.6% QoQ and amounted to 1,092 thousand tonnes, as there were no maintenance works during this quarter. Revenue of the coal segment for Q3 2019 was up 22.9% QoQ due to a 29.2% increase in sales volumes of coking coal concentrate. In Q3 2019, the segment’s EBITDA increased by 16.7% QoQ and amounted to USD 14 million. The key factors included an increase in the production and processing of MMK’s own coking coal amid the process of ramping up of the beneficiation plant towards full capacity.