PJSC Magnitogorsk Iron and Steel Works (MMK)
PJSC Magnitogorsk Iron and Steel Works: MMK Group financial results for Q1 2021
21-Apr-2021 / 09:05 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.
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MMK Group IFRS FINANCIAL
RESULTS for q1 2021 PJSC Magnitogorsk Iron & 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 Q1
2021.
21 APRIL 2021
Magnitogorsk, Russia MMK GROUP FINANCIAL RESULTS
Q1 2021
USD mln
Q1 2021 Q4 2020 % Q1 2021 Q1 2020 %
Revenue 2,185 1,852 18.0% 2,185 1,710 27.8%
EBITDA 726 474 53.2% 726 442 64.3%
EBITDA margin, % 33.2% 25.6% 7.6 p.p. 33.2% 25.8% 7.4 p.p.
Profit for the period 477 313 52.4% 477 131 264.1%
Free cash flow1 125 125 0.0% 125 115 8.7%
Net debt 145 -88 - 145 30 -
Net debt/EBITDA 0.08x - 0.06x - 0.08x 0.02x -
Net working capital 1,050 745 40.9% 1,050 882 19.0%
L3M Net working capital/revenue 12.0% 10.1% 1.9 p.p. 12.0% 12.9% - 0.9 p.p. 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).
? MMK Group's revenue increased by 18.0% quarter-on-quarter (q-o-q) to USD 2,185 mln, which reflects a
growth in steel prices in Russia and globally.
KEY FINANCIAL
INDICATORS ? EBITDA for Q1 2021 grew to USD 726 mln, up 53.2% q-o-q, reflecting revenue growth fuelled by
favourable market developments. EBITDA margin increased by 7.6 p.p. to 33.2%.
FOR Q1 2021
VS Q4 2020
? Net profit was USD 477 mln, up 52.4% q-o-q as a result of higher margins.
? FCF for the quarter remained flat at USD 125 mln, driven by working capital build-up amid higher
prices for metal products and an increase in the share of export sales with longer sales realisation
period, as well as restocking ahead of the construction season.
? MMK Group's revenue increased by 27.8% year-on-year (y-o-y), driven by higher sales due to the
completion of the modernisation at Hot-Rolling Mill 2500 and an upward trend in market prices for
metal products.
KEY FINANCIAL
INDICATORS ? EBITDA increased by 64.3% y-o-y reflecting higher revenues. EBITDA margin was up 7.4 p.p. to 33.2%.
FOR Q1 2021
VS Q1 2020 ? Net profit for Q1 2021 more than tripled year-on-year reflecting the increased business margins amid
the recovering global markets.
? FCF for the quarter increased by 8.7% year-on-year and amounted to USD 125 mln. COMMENT BY MMK'S CEO
Dear shareholders and colleagues,
CEO
PAVEL
SHILYAEV « The gradual recovery of Russia's economy that took shape at the end of the last year continued into the
first quarter of 2021. The government's stimulus package launched last year continued to support all
sectors of the economy, which in turn had a positive impact on apparent steel use and helped us
demonstrate strong financial performance, corroborating once again that we are on a right track in our
strategic development.
Ensuring a safe working environment remains our top priority. For instance, our LTISR substantially decreased in the
first quarter year-on-year, witnessing a notable decline in the injury rate. I am pleased to note that our efforts to
foster and improve our sustainability practices are recognised by wider community. In March 2021, the ISS international
rating agency changed its ESG Corporate Rating outlook for MMK from "D+" to "C". The rating upgrade reflects our
continued strong performance and commitment to UN corporate responsibility and sustainability initiatives.
In the first quarter, demand for steel was significantly driven by the continuing effect of the pent-up demand
generated last year and supported by economic stimulus packages launched by governments around the world. In Russia,
key steel consumers during the first quarter included the automotive industry and the construction sector. As for our
sales structure, during the first quarter our domestic sales (Russia and CIS) were 73% and sales of premium products -
40% of total sales.
During the first quarter, we continued working on the new coke-oven battery project as well as performing preparatory
works for the Cold-Rolling Mill 1700 start-up. The launch of the mill is tentatively slated for May. The revamped mill
will boost our annual output of premium products by 0.8 mln tonnes. Previously announced plans for CAPEX expected in
2021 remain unchanged at USD 1 bn.
Financial stability remains a top priority for the Company. MMK's debt leverage remains among the industry's lowest at
0.08x Net Debt/EBITDA as of the end of the first quarter. The Group's high level of available liquidity (USD 1.4 bn)
provides it with a strong cushion to successfully meet its strategic commitments.
MMK consistently generates sufficient cash flow and reiterates its commitment to our dividend policy.
Reliable dividend payouts are a key element of our operations, aimed at creating more value for all
shareholders of the Company. Considering the Q1 2021 results, coupled with our confidence in our
financial outlook amid the further economic recovery both in Russia and globally, the Board of
Directors can recommend that MMK shareholders approve a dividend of RUB 1.795 per ordinary share (212%
of FCF) for Q1 2021, in line with the Company's strategic commitment to maximize TSR.
» MMK GROUP'S PERFORMANCE
ACROSS CORE SEGMENTS
STEEL SEGMENT RUSSIA
USD mln Q1 2021 Q4 2020 % Q1 2021 Q1 2020 %
Revenue 2,105 1,734 21.4% 2,105 1,602 31.2%
EBITDA 707 447 58.2% 707 421 67.9%
EBITDA margin, % 33.6% 25.8% 7.8 p.p. 33.6% 26.3% 7.3 p.p.
Cash cost of slab, USD/t 340 285 19.3% 340 267 27.3%
+ 21.4% Q-o-Q
REVENUE
The Russian steel segment's revenue for Q1 2021 increased by 21.4% to USD 2,105 mln driven by the growth
in global prices for metal products and the continuing strong demand. The increase in revenue by 31.2%
+ 58.2% Q-o-Q y-o-y was caused by the global business recovery and favourable pricing.
EBITDA
The segment's EBITDA for Q1 2021 grew by 58.2% q-o-q to USD 707 mln, as a result of growing sales margins
amid an increase in global prices for metal products. EBITDA grew by 67.9% y-o-y, following the increase
in revenue.
The Group's Q1 2021 profitability saw a positive boost to the sum of USD 11 mln for the quarter from the
operational efficiency and cost optimisation programmes under our updated strategic initiatives.
The slab cash cost in Q1 2021 increased by 19.3% to USD 340 per tonne, mainly reflecting the rising
+ 19.3% Q-o-Q prices for key raw materials. The slab cash cost grew by 27.3% y-o-y.
SLAB CASH
COST
STEEL SEGMENT TURKEY
USD mln Q1 2021 Q4 2020 % Q1 2021 Q1 2020 %
Revenue 166 165 0.6% 166 113 46.9%
EBITDA 27 21 28.6% 27 3 9x
EBITDA margin, % 16.3% 12.7% 3.6 p.p. 16.3% 2.7% 13.6 p.p.
+ 0.6% Q-o-Q
REVENUE The Turkish steel segment's revenue for Q1 2021 almost remained flat q-o-q to USD 166 mln, as higher
steel prices fully offset lower sales. Revenue grew by 46.9% y-o-y, reflecting higher sales volumes and a
favourable market environment.
The favourable environment coupled with measures to improve business efficiency increased the segment's
EBITDA for Q1 2021 by 28.6% to USD 27 mln. Year-on-year, the Turkish steel segment's EBITDA grew ninefold
to USD 27 mln due to the last year's low base caused by the pandemic and lockdown restrictions.
COAL MINING SEGMENT
USD mln Q1 2021 Q4 2020 % Q1 2021 Q1 2020 %
Revenue 60 46 30.4% 60 54 11.1%
EBITDA 25 7 257.1% 25 16 56.3%
EBITDA margin, % 41.7% 15.2% 26.5 p.p. 41.7% 29.6% 12.1 p.p.
+ 30.4% Q-o-Q
The coal mining segment's revenue for Q1 2021 increased by 30.4% q-o-q to USD 60 mln as a result of
REVENUE growing sales and prices for coal concentrate amid favourable market conditions. The segment's revenue
grew 11.1% y-o-y.
Supported by higher prices for coal concentrate, the segment's EBITDA for Q1 2021 more than tripled to
USD 25 mln. The segment's EBITDA grew 56.3% y-o-y.
CASH FLOW AND FINANCIAL POSITION
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