PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q1 2020

PJSC Magnitogorsk Iron and Steel Works (MMK) PJSC Magnitogorsk Iron and Steel Works: MMK Group Trading Update for Q1 2020 14-Apr-2020 / 10:04 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.                      14April 2020 Magnitogorsk, Russia     MMK Group Trading Update for Q1 2020   PJSC Magnitogorsk Iron & Steel Works ("MMK", or "the Company") (MICEX-RTS: MAGN; LSE: MMK), one of the world's largest steel producers, is pleased to announce its Trading Update for Q1 2020.   Q1 2020 key operating resultsin comparison to Q4 2019 Pig iron output decreased by 9.6% quarter-on-quarter (q-o-q) andamounted to 2,355 thousand tonnes amid thesuspension of blast furnace ?2 production due to a capital overhaul in February.The overhaul will allow to improve environmental performancethrough constructingdust exhausting unitsat castinghouse and stock house. Steel output was down by 1.6% q-o-q and amounted to 3,022 thousand tonnes due to maintenance work at converter facilities and scheduled reconstruction of hot rolled Mill 2500. MMK Group's total sales of finished products totalled 2,745 thousand tonnes, down 1.3%q-o-q. MMK Group's sale of HVA products amounted to 1,308 thousand tonnes, up 1.0% q-o-q. The share of HVA products in total sales amounted to 47.7%. This growth was due to higher demand for coated metal products. MMK Coal's coal concentrate production totalled 814 thousand tonnes, up 12.9% q-o-q due to higher demand for concentrate at MMK.   Q1 2020 key operating results in comparison to Q1 2019 Pig iron output decreased by 1.7% year-on-year (y-o-y) amid longer maintenance workscheduled at blast furnace facilities compared to the previous year. Steel output was down by 2.7% y-o-ydue to lower steel demand amid scheduled maintenance work at rolling facilities. MMK Group's total sales of finished products declined by 1.3% y-o-y. MMK Group's sale of HVA products declined by 2.5% y-o-y. The share of HVA products in total sales was down to 47.7%. MMK Coal's coal concentrate production increased by 4.8% y-o-y.   MARKET OVERVIEW Following the partial recovery of global prices for rolled metal products at the end of Q4 2019, the global market conditions sharply deteriorated in mid-Q1 2020 due to widespread quarantine measures and weaker economic activity amid the coronavirus pandemic outbreak. In the beginning of Q1 2020, price dynamics on the Russian market reflected the global quotes growth initiated in Q4 2019. At the end of Q1 2020, prices for rolled metal products were supported by a significant rouble devaluation. Global iron ore market:in Q1 2020, iron ore quotes were high and ranged from $80-90/tonne CFR China. Despite the active development of the coronavirus pandemic, the blast furnace capacity utilization in China was nearly the same as in early 2019 - demand and end consumption of iron ore was stable. In addition, high prices were also a result of a weak supplyat the global iron ore market. Shipments from Brazil were quite low during almost all of Q1 2020 due to heavy rain season.At the end of the quarter a number of other countries such as South Africa, India, and others decreased iron ore exports due to restrictions aimed at preventing the spread of coronavirus. Russian iron ore market:at the beginning of Q1 2020 iron ore exports to EU countries increased.In April 2020 the pace of exports declined sharply, following the pandemic outbreak in Europe. Russian iron ore suppliersredirect export volumes to China amid phased economic recovery in the region.However, the challenging situation for metal producers around the world and logistic issues of iron ore exports from Russia may have a negative impact on the sales volumes of Russian suppliers. Base prices in Russia are following Chinese indices adjusted for changes in USD/RUB rate. Global coking coal market:in January-February, quotes demonstrated growth due to high sales volumes in China. However, in March, demand from China declined asthe local mining volumes resumed to normal levels, while a sharp decline in capacity utilisation at metal facilities in the EU, US, India and other countries started to accelerate on the back of pandemic. As a result, all unclaimed volumes were redirected to China, leading tospot prices declining by $20-25/tonne within the month. Russian coking coal market:the volume of raw materials supply in Russia continue toexceed demand; exports slightly increased in Q1 2020prior to the pandemic, but external demand is quite limited in the current environment. While Russian coal producers have started to reduce mining rates, this has not significantly affected the market balance so far.Prices in Russia slightly declined in Q1 2020, following a sharp decline throughoutthe whole of 2019, however theyare remained flat in Q2 asprices in Russia are already close to cash costs levels formany coal companies. Russian metal scrap market:the increase in scrap prices in Russia in early 2020, which occurred amid aperiod of low scrap collection dynamics, supported the supply volume. However, starting from February 2020, steel companieshave been reducing purchasing prices, due to lower exports quotesfor scrap. At the end of Q1 2020, prices continued to dropamid potential decline in capacity utilisation of steel companies due to unfavourable macroeconomic conditions.   MMK GROUP: CONSOLIDATED RESULTS (thousand tonnes)   Q1 2020 Q4 2019 % Q1 2020 Q1 2019 % Crude steel production 3,022 3,070 -1.6% 3,022 3,107 -2.7% Pig iron production 2,355 2,604 -9.6% 2,355 2,396 -1.7% Coal concentrate production 814 721 12.9% 814 777 4.8% Iron ore production 658 678 -3.0% 658 716 -8.2% Finished products sales, including: 2,745 2,781 -1.3% 2,745 2,782 -1.3% Long products 357 313 14.1% 357 329 8.3% Flat hot-rolled products 1,080 1,173 -7.9% 1,080 1,111 -2.7% HVA products, including: 1,308 1,296 1.0% 1,308 1,342 -2.5% Thick plate (Mill 5000) 231 211 9.1% 231 293 -21.1% Flat cold-rolled products 245 260 -6.1% 245 257 -4.8% Downstream products, including: 833 824 1.1% 833 793 5.1% Tin plate 42 30 39.1% 42 32 29.0% Galvanised steel 443 426 4.1% 443 414 7.2% Polymer-coated steel 140 150 -6.4% 140 156 -10.4% Band 32 33 -3.4% 32 35 -8.0% Formed section 44 39 11.9% 44 41 8.5% Pipes 13 16 -20.6% 13 11 12.5% Metalware 108 117 -7.7% 108 93 16.3% Other metal products 11 13 -13.4% 11 11 3.4% Share of HVA products 47.7% 46.6%   47.7% 48.2%     Consolidated prices for metal products (USD / tonne)   Q1 2020 Q4 2019 % Q1 2020 Q1 2019 %  Average price per tonne: 591 577 2.3% 591 619 -4.5% Long products 497 498 -0.2% 497 517 -3.8% Flat hot-rolled products 520 469 10.7% 520 528 -1.6% HVA products, including: 675 694 -2.7% 675 719 -6.1% Thick plate (Mill 5000) 688 710 -3.1% 688 708 -2.8% Flat cold-rolled products 602 603 -0.2% 602 601 0.0% Downstream products, including: 692 719 -3.7% 692 762 -9.1% Tin plate 773 816 -5.3% 773 783 -1.3% Galvanised steel 651 688 -5.3% 651 728 -10.5% Polymer-coated steel 827 848 -2.4% 827 871 -5.1% Band 663 680 -2.5% 663 675 -1.7% Formed section 760 739 2.8% 760 762 -0.3% Pipes 555 531 4.6% 555 579 -4.0% Metalware 659 668 -1.3% 659 769 -14.4% Other metal products 692 773 -10.5% 692 765 -9.6%   The average selling price, expressed in US dollars, for Q1 2020 increased by 2.3% q-o-q and amounted to $591 per tonne. The increase was mainly driven by recovery in global prices for hot-rolled steel in Q4 2019, which had a positive impact on the prices of the domestic market in Q1 2020, despite of the rouble devaluation at the end of Q1 2020. The average selling price for Q1 2020 decreased by 4.5% compared to Q1 2019 amid lower global steel prices.  MMK GROUP HIGHLIGHTS BY KEY SEGMENTS Steel segmentRussia (thousand tonnes)   Q1 2020 Q4 2019 % Q1 2020 Q1 2019 % Crude steel production 3,022 3,070 -1.6% 3,022 3,107 -2.7% Pig iron production 2,355 2,604 -9.6% 2,355 2,396 -1.7% Sales of finished products, including: 2,597 2,740 -5.3% 2,597 2,779 -6.6% Long products 357 313, 14.1% 357 329 8.3% Flat hot-rolled products 1,095 1,292 -15.2% 1,095 1,279 -14.3% HVA products, including: 1,145 1,139 0.6% 1,145 1,172 -2.3%       Thick plate (Mill 5000) 231 211 9.1% 231 293 -21.1% Flat cold-rolled products 245 260 -6.0% 245 255 -4.1% Downstream products, including: 670 667 0.4% 670 624 7.3% Tin plate 42 30 39.1% 42 32 29.0% Galvanised steel 311 305 2.2% 311 285 9.4% Polymer-coated steel 109 114 -4.3% 109 117 -6.8% Band 32 33 -3.4% 32 35 -8.0% Formed section 44 39 11.9% 44 41 8.5% Pipes 13 16 -20.6% 13 11 12.5% Metalware 108 117 -7.7% 108 93 16.3% Other metal products 11 13 -13.0% 11 11 3.5% Share of HVA products 44.2% 41.6%   44.2% 42.1%     Sales of finished products in Q1 2020declined by 5.3% q-o-q and amounted to 2,597thousand tonnesmainly due to scheduled maintenance work at rolling facilities. Sales declined by 6.6%compared to Q12019. In addition to the abovementioned factor, the sales declinewas significantly impacted bya more complex production mix at thick-plate Mill 5000. The volume of sales of long products in Q1 2020 increased by 14.1% q-o-q and amounted to 357 thousand tonnes, mainly due to zerocapital overhauls at long product facilities during the quarter and due to stable demand prior to the beginning of the construction season. Sales of long products in Q1 2020 increased by 8.3% compared to Q1 2019. The volume of sales of hot-rolled products for Q1 2020 declined by 15.2% q-o-q and amounted to 1,095 thousand tonnes, which was due to the launch of the second stage of the reconstruction of Mill 2500 as part of the current investment programme. The volume of sales of hot-rolled products declined by 14.3% compared to Q1 2019. The volume of sales of HVA products for Q1 2020 was flat q-o-q and amounted to 1,145 thousand tonnes, while the share of HVA products in total sales volumes increased to 44.2%. The decline in sales of HVA products by 2.3% compared toQ1 2019 was due to lower sales of Mill 5000's thick plate. The volume of sales of cold-rolled products in Q1 2020 declined by 6.0% q-o-q to 245 thousand tonnes, mainly due to a fire outbreak at the reverse cold-rolling Mill 1700 in February 2020. Sales declined by 4.1% compared to Q1 2019. The increase in the sales volume of Mill 5000 products by 9.1% q-o-q to 231 thousand tonnes was due to higher equipment productivity.A decline of 21.1% compared to Q1 2019 was mainly tiedto the more complex production mix amid an100% capacity utilisation rate. The volume of sales of tin plate in Q1 2020 increased by 39.1% q-o-q and amounted to 42thousand tonnesdue to higher demand from the food industry amid the threat of the coronavirus outbreak. Sales grew by 29.0% compared to Q1 2019. The increase in the sales volume of galvanised steel by 2.2% q-o-q to 311 thousand tonnes was due to higher seasonaldemand amid the introduction of restrictive measures against imports of galvanised steel from China and Ukraine by the Eurasian Economic Union starting from 1 January 2020. Sales of galvanised steel grew 9.4% compared to Q1 2019. The volume of sales of polymer-coated steel in Q1 2020 decreased by 4.3% q-o-q and amounted to109thousand tonnesdue to higher sales margins for galvanised rolled steel. Polymer-coated steel sales declined by 6.8% compared to Q1 2019. Steel segmentTurkey (thousand tonnes)   Q1 2020 Q4 2019 % Q1 2020 Q1 2019 % Sales of finished products, including: 167 159 5.1% 167 176 -4.9% Flat hot-rolled products 4 2 116.2% 4 5 -20.9% Flat cold-rolled products - - - - 2 - HVA products, including: 163 157 3.9% 163 169 -3.0% Galvanised steel 132 121 8.9% 132 129 2.4% Polymer-coated steel 31 36 -13.0% 31 39 -20.8% Intersegment sales from Steel segment Russia 19 122 -84.1% 19 173 -88.8%   Sales of finished products in Q1 2020 grew by 5.1% q-o-q and totalled 167 thousand tonnes due totheexpansion and diversification of the product mix in the domestic market. At the same time, a decline in sales by 4.9% compared to Q1 2019 was due to theearly termination of EU imports quotas for polymer-coated metal from Turkey.Spread of coronavirus infection put additional pressure on the market demand during the quarter.   Coal mining segment (thousand tonnes)   Q1 2020 Q4 2019 % Q1 2020 Q1 2019 % Coking coal mining 1,238 1,337 -7.4% 1,238 1,464 -15.4% Coking coal processing 1,442 1,281 12.6% 1,442 1,422 1.4% Mined 1,358 1,267 7.2% 1,358 1,403 -3.2% Purchased 84 14 503.1% 84 19 343.2% Coking coal concentrate 814 721 12.9% 814 777 4.8%   Coking coal production in Q1 2020 decreased by 7.4% q-o-q and amounted to 1,238 thousand tonnes due to the complex geological conditions during the quarter. Thedecline compared to Q1 2019amounted to 15.4%. At the same time, coal concentrate production in Q1 2020 increased by 12.9% q-o-q to 814 thousand tonnes driven by the higher demandfor concentrate at MMK. An increase in coal concentrate production was achieved on the back of raw coal warehouse stocks consumption declining. Coal concentrate output increased by 4.8% compared to Q1 2019 thanks to higher yields for coking coal.  OUTLOOK The unfavourable pandemic environment globally and the introduction of quarantine measures in Russia to fight coronavirus create uncertainty in terms of demand for metal products from key consuming industries. As a result, the Company's management sees risks of declining sales volumes in Q2 2020. During the peak period of the coronavirus outbreak and weaker business activity, the Company has been conducting maintenance work leading to a planned decline in production volumes. Market uncertainty and reduced business activity amid the coronavirus pandemic will significantly affect global prices for metal products in Q2 2020. Due to the rouble devaluation in March, in Q2 2020 iron ore prices are expected to stay the same, with a moderate correction towards the end of the quarter. Prices for coal concentrate in Russia should remain at the current levels, since indices are close to cash costsfora number of coal companies. Prices for metal scrap will decline in Q2, reflecting the negative impact of the pandemic on business activity. The Company continues to closely monitor the coronavirus situation. Active measures taken by the Company's managementto avoid the spread of the virus are helping to minimise risks both for its employees and the business. Improving operational efficiency is one of the main priorities of the Company as it works to support its financial performance despite economic headwinds.   About MMK 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 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, the Company 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 margin. MMK Group had revenue in 2019 of USD 7,566 mln and EBITDA of USD 1,797 mln. MMK's debt load is the lowest for the industry. Net debt/EBITDA ratio was -0.13? at the end of 2019. The Company's investment-grade rating is confirmed by the leading global rating agencies Fitch, Moody's, S&P. MMK's ordinary shares are traded on Moscow Exchange, while its depositary receipts are traded on the London Stock Exchange. Free float amounts to 15.7%.   Key upcoming events in 2020 (Financial calendar) 29 April Q1 2020 IFRS financials 29 May AGM 14 July Q2 and 6M 2020 Trading Update 29 July Q2 and 6M 2020 IFRS financials 13 October Q3 and 9M 2020 Trading Update 22 October Q3 and 9M 2020 IFRS financials     Investor contacts Veronika Kryachko tel.: [phone]  E-mail: [e-mail]   Media contacts Dmitry Kuchumov tel.: [phone]  E-mail: [e-mail] Oleg Egorov tel.: [phone]  E-mail: [e-mail]

ISIN:	US5591892048
Category Code:	TST
TIDM:	MMK
LEI Code:	253400XSJ4C01YMCXG44
Sequence No.:	58044
EQS News ID:	1020921

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